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This site provides more detailed information about Balanced Scorecard approach, together plus a range of articles.
Cascading Balanced Scorecard
A cascading balanced scorecard process is an essential tool for clarifying and deploying strategy. It is a means of linking long-term vision and strategy with day-to-day operational management of the business. When deployed well, the process transforms strategic and tactical planning from an academic exercise into the nerve centre of an enterprise.
A real-life example of the use of Scorecards to deploy strategy can be found in the Case Studies.
The Balanced Scorecard was developed in 1992 by Drs Robert S. Kaplan and David P. Norton, although similar concepts like the French Tableau de Bord have been around since the early 20th Century.
The balanced scorecard process provides a framework for:
- Focusing the whole organization on the few key things needed to create outstanding performance.
- Translating the strategy into a series of concrete and measurable objectives so that everyone is clear about what performance is required from them.
- Integrating various corporate programs, such as quality, re-engineering, and customer service initiatives.
There are three basic principles for the effective use of scorecards:
- What gets measured gets done - so companies must establish performance measurement and management systems that support their strategies.
- Performance measurement must focus both on financial and non-financial indicators of performance, and must include both leading and lagging metrics. Financial metrics tend to be lagging - they tell the story of past events. Leading indicators give you an insight into future success, giving you the opportunity to react in a timely way.
- You must cascade down strategic measures to each level of organisation so that every unit manager and employee can see what's required at their level to support the business strategy.
Kaplan and Norton recommend viewing the organization from four perspectives, and developing metrics relative to each of these perspectives:
- Financial Perspective: To succeed financially, how should we appear to our shareholders?
- Customer Perspective: To achieve our vision, how should we appear to our customers?
- Internal Business Process Perspective: To satisfy our shareholder and customers, what business processes must we excel at?
- Learning and Growth Perspective: To achieve our vision, how will we sustain our ability to change and improve.
This allows the monitoring of present performance, while also capturing information about how well the organization is positioned to perform in the future.