Using a Balanced Scorecard Approach to Measure Performance
“The major work of the world is not done by geniuses. It is done by ordinary people, with balance in their lives, who have learned to work in an extraordinary manner.” -George B. Hinckley
Did you ever play on sports team when you were a child? What happened when your team fell behind in wins for the season or an Achilles’ heel was exposed within you team’s skill-set? I bet your coach didn’t stack hopelessly complex strategy on you, or worse focus all the attention and resources on one star player hoping they alone would save the team! If you had a great coach, my guess is that the focus was rightly on fortifying the team’s FUNDEMENTALS. Great coaches know that sustainable excellence comes from making the team more fit. In business we could learn from the sports coaches of our younger years…
How do you know how fit your organization is or how to fix it when something is broken? A method of effectively measuring strategy and the effectiveness of management in organizations was presented a little over 20 years ago by Robert S. Kaplan and David P. Norton. In their classic article, The Balanced Scorecard Measures that Drive Performance, the pair cast a new vision for the business fundamentals that drive organizations to overall fitness. By refusing to reduce the definition of an organization’s success to one lagging indicator- financial reports- as the sole measurement of the fitness, Kaplan and Norton opened up understanding of all elements of fitness in business. Out of their initial research Kaplan and Norton distilled fitness to four key perspectives.
- The customer’s perspective. Managers must know if their organization is satisfying customer needs. They must determine the answer to the question, How do customers see us?
- The internal business perspective. Managers need to focus on those critical internal operations that enable them to satisfy customer needs. They must answer the question, What must we excel at?
- The innovation and learning perspective. An organization’s ability to innovate, improve, and learn ties directly to its value as an organization. Managers must answer the question, Can we continue to improve and create value for our services?
- The financial perspective. Measuring the organization’s financial fitness, profitability and its built up reserves.
A balanced view of your organization will allow you to understand all the drivers of long-term success, but also keep you focused on just the essential elements that move your organization forward. How do you know how fit your organization is? Take this quick 10 question quiz and find out!
Shawna Beese-Bjurstrom, RN, MBA lives in Spokane, WA with her family where she is a Healthcare Executive and Business Developer. She writes on issues such as strategy, operational excellence, communication, and leadership, read her blog.