ISSN 1822-8011 (print)
ISSN 1822-8038 (online)
INTELEKTINË EKONOMIKA
INTELLECTUAL ECONOMICS
2008, No. 1(3), p. 18–28
THE BALANCED SCORECARD METHOD:
FROM THEORY TO PRACTICE
Margarita IŠORAITĖ
Mykolas Romeris Universitety
Ateities str. 20, LT – 08303 Vilnius, Lithuania
El. paštas svk@mruni.lt
Abstract. Performance management has become a legislative requirement for the private and local sectors.
Unfortunately, not many tools exist to measure and monitor public and private service delivery effectively. Managers
require accurate information to ensure that their decisions are not based on emotions and assumptions but that the
information with regard to service delivery is accurate and relevant. In modern business models, intangible assets such
as employee skills and knowledge levels, customer and supplier relationships, and an innovative culture are critical in
providing the much-needed cutting-edge to the organisation. This is where tools like the balanced scorecard method
hold relevance for the enterprise. Developed by Robert Kaplan and David Norton, the balanced scorecard method
translates an organisation’s strategy into performance objectives, measures, targets and initiatives. It is based on four
balanced perspectives, and links them together with the concept of cause and effect. A proper balanced scorecard can
predict the effectiveness of an organisation’s strategy through a series of linked performance measures based on four
perspectives including inance, customers, internal processes, employee learning and growth.
JEL Classiication: G390, M190.
Keywords: balanced scorecard, strategy maps, performance measurement
Reikšminiai žodžiai: subalansuoti rodikliai, strateginiai žemėlapiai, veiklos išmatavimas.
Introduction
Balanced scorecard is a management system
that enables organizations to translate the vision and
strategy into action. This system provides feedback
on internal business processes and external outcomes to continually improve organizational performance and results. Robert Kaplan and David Norton created the balanced scorecard approach in the
early 1990s. Most traditional management systems
focus on the inancial performance of an organization. According to those who support the balanced
scorecard, the inancial approach is unbalanced and
has major limitations:
1. Financial data typically relect an organization’s past performance. Therefore, they may not
accurately represent the current state of the organization or what is likely to happen to the organization
in the future.
2. It is not uncommon for the current market value of an organization to exceed the market value of
its assets. There are inancial ratios that relect the
value of a company’s assets relative to its market
value. The difference between the market value of
an organization and the current market value of the
organization’s assets is often referred to as intangible
assets.
Traditional inancial measures do not cover these intangible assets.
The main purpose of this article is to analyse the
Balanced Scorecard method theory and practice. The
article seeks to analyse the origins of the Balanced
Scorecard method, evaluate this method in private
and public sectors, and to analyse the strategy mapping process.
The Balanced Scorecard Method: from Theory to Practice
1. Origins of the Balance Scorecard
Method
The Balanced Scorecard was developed by
Robert Kaplan and David Norton (1992). In 1990,
Kaplan and Norton led a research study of a lot of
companies with the purpose of exploring the new
methods of performance measurement. The importance of the study was a growing belief that inancial measures of performance were ineffective for
the modern business enterprise. Representatives of
the study companies, along with Kaplan and Norton,
were convinced that reliance on inancial measures
of performance had an affect on their ability to create value. The group discussed a number of possible
alternatives but settled on the idea of a scorecard,
featuring performance measures capturing activities
from throughout the organization—customer issues,
internal business processes, employee activities, and
of course shareholder concerns. Kaplan and Norton
introduced the new tool the Balanced Scorecard and
later summarized the concept in the irst of three
Harvard Business Review articles, “The Balanced
Scorecard—Measures That Drive Performance.”
The Balanced Scorecard has been translated and
effectively implemented in both the nonproit and
public sectors. Success stories are beginning to accumulate and studies suggest the Balanced Scorecard
is of great beneit to both these organization types.
What is a Balanced Scorecard? The Balanced
Scorecard can be understood as a management system, which is structured according to the logic of the
management circle (“plan-do-check-act”). The Balanced Scorecard resembles a typical management
fashion. For instance, Van den Heuvel & Broekman
wrote that “a self-respecting organization apparently
can no longer do without the Balanced Scorecard”
(1998) and Hers (1998) pointed to an abundance of
congresses, seminars and publications on the theme.
In crescendo, commentators spoke of “a real trend”
(Koning & Conijn, 1997), “a fad-like impression”
(Du Mée, 1996) and “a true hype”(Hers, 1998). Such
statements suggest that the Balanced Scorecard has
become popular and brought about many changes in
a variety of organizations. If the quoted authors are
right, the Balanced Scorecard even resembles a typical management fashion.
Kaplan and Norton position the Balanced Scorecard as a tool for organisations to manage the demands of relevant stakeholders and to translate strategies into action (“from strategy to action”). Possible stakeholders that are strategically relevant could
be shareholders, customers or employees. Their demands are integrated into core management of com-
19
panies within a “inancial”, “customer” or “learning”
or “process” perspective (see Figure 1 below). So,
the frame of the Balanced Scorecard consists of four
perspectives (see Figure 1). Each perspective consists
of relevant strategic goals, indicators and measures to
achieve them. One should emphasize the fact that the
concept remains open for integrating further relevant
stakeholders or perspectives, e.g. an environmental
perspective (Kaplan and Norton 1997, pp. 33). When
conceiving the BSC, Kaplan and Norton, maintained
that companies lack sophisticated tools for the management of intangible or qualitative assets (e.g. customer satisfaction, processes quality, infrastructures,
know-how). Intangible assets, however, seem vital in
order to stay competitive in the future. So, the Balanced Scorecard provides ‘enablers’ that focus on the
achievement of strategic goals in the future (leading
indicators) as well as results (lagging indicators) to
depict the effectiveness and eficiency of measures
in the past. Strategies can be usually interpreted as
a set of hypotheses of causes and effects. So within
a BSC the relevant goals and corresponding indicators are linked to each other revealing this structure
of causal relationships. Such relationships are both
relevant within each perspective and also between
them. Objectives of the “learning” perspective, for
instance, serve as ‘enablers’ for the achievement of
goals of the other ‘overarching’ perspectives (e.g.
customers, inance).
The BSC was originally created primarily as
a measurement system and as an answer to a criticism concerning the unilateral measurement of the
performance ability of a company. It was organised
through four different perspectives:
· The inancial perspective: to succeed inancially, how should we appear to our shareholders? Examples of this perspective include inancial ratios and various cash low
measures.
· The customer perspective: to achieve our
vision, how should we appear to our customers? Examples of this perspective include
the amount of time spent on customer calls
and customer survey data.
· The internal perspective: to satisfy our shareholders and customers, what business processes must we excel at? The internal business
processes that are often classiied as mission
oriented and support oriented. Examples of
this perspective include the length of time
spent prospecting and the amount of rework
required.
· The learning perspective: to achieve our vision, how will we sustain our ability to change
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Margarita Išoraitė
and improve? Includes employee training
and organizational attitudes related to both
employee and organizational improvement.
Examples of this perspective include the
amount of revenue that comes from new ideas and measures of the types and length of
time spent training staff.
The starting point of the Balanced Scorecard is
the vision and the strategy of a company. The BSC
takes the vision and the strategy as a given - the BSC
should translate a business unit’s mission and strategy into tangible objectives and measures. The measurement focus of the BSC is used to accomplish
the following management processes: 1) clarifying
and translating vision and strategy, 2) communicating and linking strategic objectives and measures,
3) planning, setting targets and aligning strategic
initiatives and 4) enhancing strategic feedback and
learning. The measures function as a link between
the strategy and operative action. The core question
is the selection of goals and measures to monitor the
implementation of the vision and the strategy.
Kaplan and Norton recommend a nine-step process for creating and implementing the balanced scorecard in an organization.
1. Perform an overall organizational assessment.
2. Identify strategic themes.
3. Deine perspectives and strategic objectives.
4. Develop a strategy map.
5. Drive performance metrics.
6. Reine and prioritize strategic initiatives.
7. Automate and communicate.
8. Implement the balanced scorecard throughout
the organization.
9. Collect data, evaluate, and revise.
There are many beneits and challenges to the
balanced scorecard. The primary beneit is that it
helps organizations translate strategy into action. By
deining and communicating performance metrics
related to the overall strategy of the company, the
balanced scorecard brings the strategy to life. It also
enables employees at all levels of the organization to
focus on important business drivers.
The main challenge of this system is that it can
be dificult and time-consuming to implement. Kaplan and Norton originally estimated that it would
take an organization a little more than two years to
fully implement the system throughout the organization. Some organizations implement it quicker,
for some it takes longer. The bottom line is that the
balanced scorecard requires a sustained, long-term
commitment at all levels in the organization for it to
be effective.
There are many beneits and challenges to the
balanced scorecard. The primary beneit is that it
helps organizations translate strategy into action. By
deining and communicating performance metrics
related to the overall strategy of the company, the
balanced scorecard makes the strategy come alive. It
also enables employees at all levels of the organization to focus on important business drivers.
2. Comparing the Balanced Scorecard
between private and public sectors
Figure 1. The methodology of the Balanced Scorecard (Kaplan and Norton, 1997, p. 9)
Using the same performance metrics in the public
sector as the private sector is
likely to be ineffective since public sector goals differ
drastically from those of the
private sector. Private sector
focus is primarily on shareholder value: the bottom
line. Funding comes from
various sources, and as long
as shareholder inancial needs are met, the company
can function as it pleases
(see table 1). The public
sector faces a quite different
environment. Public sector funding comes, in most
cases, from the taxpayers it
is servicing. the measure of
21
The Balanced Scorecard Method: from Theory to Practice
success is not shareholder value or
proit but rather how well the agency
is meeting the mission given to them
by congressional statute or executive
order. Although the agency can oftentimes perform this mission in whatever way it sees it, it is still bound
by the directive of the mission. thus,
strategic value comes in the form of
fulilling the mission, and fulilling
the mission comes down to customer
satisfaction with the agency’s service.
however, deining customer needs is
a bit more complex. A second difference evolves through the number of
customers or stakeholders that a public sector organization must serve.
Financial measures in the BSC
relate to inancial performance, which
is a means to satisfy investors (shareholders, investment irms, bondholders). in the public sector organization, the inancial measures are just
part of what is needed to please the
“investors,” which in this case would
be the funding agencies.
Figure 2. Comparing the Scorecards for Government Versus For-Proit
Organizations (Nicholas J. Mathys, 2006)
Table 1. Comparison of Balanced Scorecards in the Private
and Public Sectors (source Nicholas J. Mathys, 2006)
Features
Private Sector
Public Sector
Shareholder
value
Proit; market
share growth;
innovation; creativity
Mission
effectiveness
Cost reduction;
eficiency; accountability to the public
Eficiency concerns of clients
Desired outcome
No
Yes
Stakeholders
Stockholders;
bondholders
taxpayers; legislators; inspectors
Who deines
budget priorities
Customer
demand
Leadership; legislators; funding
agencies
Key success
factors
Uniqueness;
advanced
technology
Sameness; economies of scale; standardized technology
Focus
Financial goals
Customer satisfac- Stakeholder satistion
faction
While private sector clients are not concerned
with an organization’s internal eficiency so long
as their product, price, and service needs are met,
internal eficiency is of great concern to the public
sector’s stakeholders, who are also its source of fun-
ding. taxpayers also require accountability that their
tax dollars are being used effectively and eficiently. Therefore, program performance, eficient use of
resources, and satisfaction with the service by the
public are additional key issues. These differences
lead to a different sort of hierarchical model for the
balanced scorecard, as seen in Figure 2. First, as increasing shareholder wealth does not have primacy
in a governmental operation, inancial performance
becomes less critical. reaching the mission of the organization is of key interest to those who fund the
organization. Hence, the government model needs
some changes in the hierarchical ordering compared
to how Kaplan and Norton arranged the hierarchical
ordering in their mapping article. Some public sector balanced scorecard advocates have put inancial
measures at the bottom of the model to indicate the
importance of having adequate funding as a precursor to developing the organization, as done in Figure
2. However, to be consistent with usage in the private sector, we look at inancial measures as output
measures that are precursors to meeting the mission,
which will in the end lead to adequate future funding. Internal process management would be similar
for government and for proit-seeking enterprises as
both relate to the key value-added processes that the
organization provides. For a car manufacturer, the
key process would be producing automobiles and
trucks. For the government agency, it is providing
the service promised through its mission. This is
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Margarita Išoraitė
why there is a direct line from internal processes to
both customer/user satisfaction and to inancial performance. In the world for-proit, the inancial ties
directly to the overall goal; in government organizations it is only one part of fulilling the mission, with
customer/user satisfaction the other part. cases, learning and growth support the development of internal
processes. in summary, the balanced scorecard is an
effective management tool that can support improvements in government sector organizations. There
needs to be some modiication in the basic strategic
mapping model provided by Kaplan and Norton to
align elements in the BSCc to correspond to the environment faced by government organizations. allows
a focus on the mission of the organization as the focal point rather than return to shareholders. We now
focus on two government organizations that have
adopted the balanced scorecard as a major part of
the management effort. First, we look at the Defense
Finance and Accounting Service and what they did
to develop the organization culture as they introduced the scorecard. the second case, the United States
Postal Service, the focus is on the dificult time they
had in enacting the scorecard and how reinforcement
systems became an important part of their process.
Both cases provide two different sorts of initial organizational cultures and environments that needed
different approaches to effect a quality scorecard introduction and deployment.
The Balanced Scorecard can be effective in the
public, if and only if, the current perspectives are rearranged (see Figure 3). The four perspectives of the
current version of the The Balanced Scorecard can
still be applied in government organizations as long
as they are rearranged according to governmental
priorities. Therefore, it is clear that above considerations seem to have considerable impact on the ability
of the the Balanced Scorecard in ensuring best customer satisfaction. These considerations, if positively
dealt with, may contribute to employee satisfaction,
Figure 3. Is it meaningful to measure perfromance in public sector?
23
The Balanced Scorecard Method: from Theory to Practice
superior employee performance, sound internal business process and in turn, may lead to eficient stewardship of taxpayers’ money.
Furthermore, the best possible use of taxpayers’
money may eventually lead to achieving the bottomline objective - absolute customer satisfaction. In the
light of the above observations, it is clear that some
modiications are needed to the current version of
the Balanced Scorecard for its use in the government
sector as an effective performance measurement and
management tool. Although signiicant research has
taken place and various modiications to the current
version of the Balanced Scorecard have been suggested by the researchers for the private sector, no
studies have been found recommending a modiied
Balanced Scorecard model for the government sector. The following diagram (Figure 3) is suggested
for the government sector, keeping in mind that
“Customer” perspective is the bottom line of government sector.
The Balanced Scorecard Institute has compared
the different strategic objectives of the public and
private Sectors. Table 2 shows the differences in
each strategic level:
Table 2. Comparison of Private and Public Sector
Strategies (Marco Ahrendt, 2006)
Strategy
Private Sector
Public Sector
common target competitive
achievement of
mission
inancial target proit, growth,
increasing market
share
cost reduction,
effectiveness
values
innovation, creativ- responsibility to the
ity, acceptance
public, equity, integrity
desired result
customer satisfaction
customer satisfaction
stakeholder
founder, market,
stockholder
tax payer, legislator,
auditor
prioritisation
of budget
customer
demand
management,
legislator
orientation
in terms of
security
securing
intellectual
property
national security
critical factors growthrate, revbest management pracfor
enue, market share, tices, consistency,
success
uniqueness, supe- standardised technolrior technology
ogy
A special requirement for adoption is needed for
the inancial perspective. Even though the Balanced
Scorecard seems to be balanced all perspectives and
measures are aligned to the inancial success and
proitability of the organisation.
The Public Sector’s inancial perspective is
mainly adjusted to budget targets, saving potentials,
securing the basis for taxes, sustainment of credit
worthiness and similar.
Some of the facts which are especially important for adoption of the Balanced Scorecard approach in public sector are:
• The closeness to political interests needs a
special thoughtfulness and sensibility.
• It is important to explain employees and representatives the Balanced Scorecard’s usefulness.
The implementation of a Balanced Scorecard
requires an effective controlling system which assembles measures, values and other signiicant reporting data. Public sector still needs to catch up
here. Accordingly from the beginning this should be
allowed for.
• A balance between a tight schedule and
adequate time for practice, communication
and feedback during strategy discussion has
to be found. To keep motivation high the
rollout should be kept short. Adoption needs
dynamics, especially in the Public Sector.
3. Strategy mapping
The strategy map has turned out to be as important an innovation as the original Balanced Scorecard itself. Executives ind the visual representation
of strategy both natural and powerful. Strategy maps
provide increased granularity for executives to describe and manage strategy at an operational level of
detail. A strategy map provides a visual framework
for an organization’s strategy – how it intends to create value. Speciically, a good strategy map will link
together:
1. The desired productivity and growth outcomes.
2. The customer value proposition which will
be needed.
3. Outstanding performance in internal processes.
4. The capabilities required from intangible assets.
In effect, a strategy map captures the organization’s strategy in visual form so that managers can
better execute their desired strategy. Strategy maps
are built around the structure of these four perspectives. They ensure that the organization’s objectives
in each of these perspectives are consistent and internally aligned. That alignment, in turn, means the
24
Margarita Išoraitė
organization is focused and performing at an optimal
level rather than having the actions of one part of
the organization impact on the results achieved by
another part. Strategy maps clarify all cause-and-effect relationships so that an effective strategy can be
developed and then optimized over time. They are
the interface between strategy and the Balanced Scorecard. Conceptually, a strategy map links the highlevel goals of the organization – its mission, values
and vision – with meaningful and actionable steps
each an employee can take. Strategy maps also provide balance between the various competing dynamics every organization faces:
_ Whether to invest in intangible assets that will
generate strong long-term revenue growth or focus
on cutting costs more aggressively so as to boost
short-term results.
_ How to differentiate your organization from
your competitors by clarifying your value strategy
– which usually involves one of the four different
approaches already mentioned:
1. Offering the lowest total cost to customers
2. Product leadership – always offering superior
products
3. Making available complete customer solutions
4. Locking-in customers so that it would be hard
to switch to other vendors:
a) Which internal processes to focus on and optimize and which to outsource.
Financial
perspective
Productivity
Customer
perspective
Internal
perspective
Learning &
growing
perspective
b) How to balance the allocation of resources
between the various internal processes in
such a way that different beneits are delivered at various points of time.
c) How to align everything the organization does
in such a way that the efforts of one part of
the company do not have a negative impact
on the results achieved elsewhere.
d) How to make good management decisions
about investments in intangible assets as the
drivers of organizational growth in the future.
A company or other organization creates value
by producing goods and services that can be sold for
proit. At one time, it was suggested that managing
these processes was the most important duty of management. In today’s competitive environment, however, operational excellence alone is not suficient
to provide a sustainable competitive edge. A strategy
map (see Figure 4) helps ensure internal processes
are well executed and properly aligned with intangible assets and the customer value proposition.
The four key internal processes by which organizations create value according to (Kaplan, Norton,
2002) are:
- Operations management processes;
- Customer management processes;
- Innovation processes;
- Regulatory and social processes;
In the operations management area, organizations are:
- Attempting to develop deeper relationships
with suppliers with the goal of lowering the total cost of procuring
Long-term
all the materials needed to proobjective
ducts the customer is offered. Generally, this involves simplifying
ordering and accounting functiGrowth
ons to lower administrative costs
as far as possible.
– Looking for new ways to
Customer value
actually produce the products and
proposition
services as eficiently as possible
through continuous improvement
Value-creating
of processes and enhanced eficiprocesses
ency initiatives.
– Attempting to lower the
costs of distribution and delivery
in any way possible.
– Trying to get a better idea
of the risks involved in doing buIntangible
siness and then inding effective
assets
ways to offset and minimize those
risks to a better effect.
Figure 4. A simpliied strategy map (source Kaplan, Norton, 2002)
The Balanced Scorecard Method: from Theory to Practice
By focusing on operations management, organizations attemp to inject key features into their value
proposition:
1. Competitive prices
2. High levels of quality
3. Speedy delivery of the goods purchased
4. A comprehensive solution to customer problems.
A well thought out and integrated strategy
map provides strategic focus to these key internal
processes. Or, put differently, a strategy map helps
link process improvement programs to important
organizational outcomes. Strategy maps help organizations improve the right things, not just the more
obvious things.
Strategy maps are also useful where organizations have embarked on quality management programs such as Total Quality Management (TQM),
Six Sigma or Activity-based Management (ABM).
The strategy map helps embed these quality management efforts within a strategic framework that will
provide cause-and-effect accountability and measurement metrics.
Many organizations are weak in one or more
of these areas. In customer management terms, organizations are:
1. Segmenting the broader market into niches or
target segments which can then be offered a speciic
and customized value proposition.
2. Attempting to acquire new customers by communicating an attractive value proposition.
3. Working to retain the present customers rather than marketing to replace those who choose competing products or services. Typically, this involves
customer loyalty incentives and other programs.
4. Trying to get existing customers to buy more
products and services in the future through cross-selling or other partnering relationships.
By focusing on customer management, organizations are attempting to inject into their value
propositions:
1. A stronger, more vibrant brand image;
2. A win-win expanding customer relationship;
3. Increased levels of customer loyalty;
Innovation requires that organizations:
1. Anticipate the customer’s future needs and
develop entirely new or next-generation products
that will meet those needs.
2. Have a portfolio of research and development
projects underway. Ideally, these will run the full
spectrum from projects that create new science and
technology through to breakthrough products, nextgeneration products, derivative products and joint
development products.
25
3. In addition to researching new products, companies also need to be designing the products, doing
prototyping and testing, running pilot production
tests and planning on how best to ramp-up the manufacture of new products in acceptable volumes. All
of these activities need to be completed within an
applicable time-frame and budget.
4. At the conclusion of the development cycle,
new products and services then need to be made available in commercial quantities. In parallel, the marketing and sales units will also launch their efforts
to sell the new products and services to customers.
Customers will also be demanding that suitable levels of quality are achieved.
Companies and organizations must continually win the right to operate in the communities and
countries within which they produce and sell their
offerings. They do this by complying with all the applicable laws and regulations, and by contributing to
the communities within which they operate. Speciically:
1. Organizations have to use energy wisely,
avoid contaminating the environment and minimize
the impact on the environment of all products produced and sold.
2. Organizations have to provide a workplace
which is safe and healthy for its employees, and to
take active measures to reduce employee exposure to
dangers wherever possible.
3. Companies need to pay workers appropriately and provide opportunities for employees to gain
new skills and competencies.
4. Corporations need to be sensitive to the needs
of the broader community and willing to make monetary contributions or allow employees to do volunteer work while still being paid.
At a minimum, these social and regulatory
internal processes are intended to inject into the customer value proposition:
1. A sense of partnership with the community.
2. An awareness of the need to be a good Citizen.
Regulatory and social processes also pave
the way for companies to enter new markets in the
future. Organizations with a strong track record in
this area are welcomed into new regions. There is
also the low-on effect in internal morale when employees take pride in their organization’s contribution to improving the communities where they live.
This, in turn, makes it easier to attract and retain talent.
Strategy maps can be used dynamically to
create an action plan rather than passively as snapshots of corporate intent. To use a strategy map and
26
Margarita Išoraitė
Balanced Scorecard together effectively in this way
is a six step process:
1. Establish and deine what the current value
gap is for shareholders – or in other words, set the inancial objectives, measures and targets. Determine
how much long-term revenue growth and short-term
productivity improvements you will work towards
achieving. These should be stretch targets that will
challenge the organization.
2. Reconcile your current value proposition – by
identifying your current target customer segments,
clarifying the value proposition you now use, selecting your measures and reconciling your customer
objectives to the goals of inancial growth. You might
also decide on a new customer proposition that will
generate the growth you desire.
3. Establish your projected time line – how quickly you anticipate your new internal processes and
themes can begin to generate the kinds of inancial
results required. This should indicate which goals
are achievable and which goals may need further
adjustment.
4. Identify your key strategic themes – those critical few internal processes which will have the greatest impact on the customer value proposition. You
also highlight which internal processes are the drivers for those targets and create some linked objectives, measures and targets.
5. Identify and align your intangible assets – by
assessing the level of strategic readiness of each intangible asset. You then set targets on how to increase each asset’s level of readiness individually.
6. Specify and fund the strategic initiatives
required to execute the strategy – so there is clarity
about the level and sources of funding required. The
cause-and-effect linkage of the strategy map, Balanced Scorecard and action plan should help visualize
the logic involved. These steps mean that passive
statements of intent are given substance and relevance. For example, a strategic objective to “Reduce
the typical product development cycle” is appealing
but also open to individual interpretation. When it is
transformed into something like “Reduce the product
development cycle from three years to nine months”,
everyone in the organization realizes this will require
some breakthrough, outside-the-box thinking rather
than minor enhancements.
Conclusions
The Balanced Scorecard was developed, between others, by Robert Kaplan and David Norton. It
was originally created primarily as a measurement
system and as an answer to criticism concerning the
unilateral measurement of the performance ability of
a company. It was organised through four different
perspectives: the inancial perspective, the customer
perspective, the internal perspective, the learning
perspective.
The Balanced Scorecard provides the cornerstone for a new strategic management system. The
scorecard enables organizations to introduce new
governance and renew process focusing on strategy.
It does not rely on short-term inancial measures as
the sole indicators of performance but it does the following additional functions (Samir Ghosh, Subrata
Mukherjee, 2006):
1. Translate strategy to action, making strategy
everyone’s job.
2. Manage the intangible assets e.g. customer
loyalty, innovation, employee capabilities.
3. Leverage cross functionality without changing the structure of the business.
4. Measure what matters the critical few vs. the
important many in real time, not just after the facts.
5. Create a daily management system for the
day-to-day navigation of the business.
A Balanced Scorecard, however, suffers from
some major drawbacks. The most important among
these are (Samir Ghosh, Subrata Mukherjee, 2006):
1. The Balanced Scorecard decomposes the
organization’s primary objectives (inancial perspective) into customer, internal process and learning and
growth objectives (operating perspectives) in a way
that is reminiscent of the way that the Dupont formula decomposed the return on capital employed metric
into front-line operational measures.
2. To make scorecard useful, it should be prepared in conformity with the overall business strategies. Thus, companies may bias their scorecards
to the dimensions that closely support their strategic
direction.
3. It is dificult to integrate a company’s scorecard into its planning, budgeting and resource allocation process; especially when scorecard metrics
are changed.
4. In order to make the scorecard more useful
and practical it is necessary to assign weights to different measures (both inancial and non-inancial)
on the basis of their importance to the organization
for specifying trade-off between inancial and noninancial measures.
5. To make the scorecard more eficient and useful it should include a large number of both inancial and non- inancial measures and these should be
continually modiied on the basis of measurement
feedback.
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The Balanced Scorecard Method: from Theory to Practice
6. There are some organizations like investment
companies to which Balanced Scorecards have little
value as they are interested in improving inancial
performance only.
7. The creditors, debenture holders and even
shareholders of an organization are interested in inancial performance rather than operating performance which compels the management to give much
emphasis on inancial perspective of the organization making the scorecard imbalanced.
Creating the balanced scorecard is a critical step
in the strategic process. So many organizations create a strategic plan and then dutifully ignore it because day-to-day issues / ireighting tends to take
precedence. The scorecard periodically reminds the
organization what the critical strategic issues are and
gives the necessary feedback on the progress toward
achieving them.
It is important that the scorecard is like a scale.
The role of the scale when you are on a diet is not
to make you lose weight. The scale merely provides
you with feedback on how you are doing. In the same
way, building a balanced scorecard will not improve
organizational performance. It will simply give you
feedback to know how well you are achieving your
strategic direction.
The real strength of the linkages between the
strategy map, Balanced Scorecard and action plan is
consistency. Instead of a fragmented approach where
one part of the organization pursues a different agenda from another part, everyone uses the same overall
strategy. The vision is consistent with the strategy to
get there. People can be inspired to act because they
see that it is feasible to get to where the management
wants to head.
References
1. Ahrendt Marco. Balanced Scorecard in Public Sector
Realising the Open Source Software Strategy with
the IT Balanced Scorecard. Diploma thesis, Faculty
Computer Science Reutlingen University, 19. January 2006, p. 55–60.
2. Biswanath Chakrabarty. Is it meaningful to measure
performance in public sector? Vidyasagar University
Journal of Commerce, Vol. 12, March 2007, p. 37
– 38.
3. Du Mée, A. F. De “Balanced Business Scorecard”:
ilosoie of modegril?, Pacioli Journaal, 9, 1996, p.
16–21.
4. Hers, F. Doe mij even een Balanced Scorecard!,
Financieel-Economisch Management, 29, 1998. p.
18–20. Koning, J.; Conijn, F. Balanced scorecard?
Nooit van gehoord!, Tijdschrift voor Administrateurs
en Controllers, 12, 1997, p. 34–38.
5. Kaplan, R. S., Norton, D. P. “The Balanced Scorecard—Measures That Drive Performance,” Harvard
Business Review, January–February 1992, p. 71–79.
6. Kaplan, R. S., Norton, D. P., The Balanced Scorecard, Boston: Harvard Business School Press, 1996.
7. Kaplan, R. S.; Norton, D. P. Balanced Scorecard:
Strategien erfolgreich umsetzen, aus dem Amerikanischen von Horváth, P., Stuttgart, 1997.
8. Kaplan, R. S.; Norton, D. P. Strategy maps. Converting Intangible Assets Into Tangible Outcomes. Harvard Business Review, 2002.
9. Nicholas J. Mathys. Using the Balanced Scorecard:
Lessons Learned from the U.S. Postal Service and
the Defense Finance and Accounting Service. 2006,
p. 9–10.
10. Samir Ghosh, Subrata Mukherjee. Measurement of
coporate performance through balanced scorecard:
an overview. Vidyasagar University Journal of CommerceVol. 11, March 2006, p. 64-67.
11. Van den Heuvel, H.; Broekman, L. 1998. Wolf in
schaapskleren 2 – Scorecard nader gebalanceerd,
Personeelbeleid, 34, p. 23–26.
SUBALANSUOTŲ RODIKLIŲ METODAS: NUO TEORIJOS PRIE PRAKTIKOS
Margarita IŠORAITĖ
Mykolo Romerio universitetas, Lietuva
Santrauka. Subalansuotų rodiklių kokybės užtikrinimo teorija išreiškia sistemišką požiūrį į organizacijos kokybės valdymą. Ji atveria galimybes organizacijos misiją ir strateginius siekius transformuoti į išsamų veiklos uždavinių,
kriterijų, rodiklių, siekinių ir procedūrų rinkinį (Kaplan, Norton, 1996; 1992). Šio rinkinio kaip kokybės užtikrinimo
instrumento paskirtis – palengvinti su kokybės tyrimu, vertinimu ir tobulinimu susijusį institucijos vadovų darbą. Tai,
R.S. Kaplano ir D.P. Nortono nuomone (1996; 1992), yra organizacijos strateginio valdymo instrumentas. Interpretuojant autorių žodžius, taikant subalansuotų rodiklių instrumentą, organizacijoje į kokybę žvelgiama iš įvairių pozicijų,
atitinkančių fundamentaliuosius organizacijos dalyvių ir jos realizuojamų produktų ar teikiamų paslaugų vartotojų
interesus. Tai reiškia, kad rengiant subalansuotų rodiklių kokybės užtikrinimo instrumentą strateginiai organizacijos
uždaviniai, kriterijai, rodikliai ir siekiniai numatomi atsižvelgiant į organizacijos inansinę, klientų, vidinių veiklos
procesų ir iniciatyvos (arba mokymosi ir augimo) perspektyvas. Jų visuma ir rodo integruotą (arba subalansuotą)
28
Margarita Išoraitė
požiūrį į kokybės užtikrinimą: tyrimą, vertinimą ir tobulinimą. Vadinasi, siekiant aukštos organizacijos veiklos kokybės apibrėžiama ne vienos, o keturių krypčių pokyčių valdymo organizacijoje eiga, grindžiama sistemišku požiūriu į
daugiamačių veiksnių kompleksus, nuo kurių ryšių priklauso aukšta organizacijos veiklos kokybė.
Margarita Išoraitė is an associated profesor, doctor of social sciences (04 S) at the Department of Strategical Management
at Mykolas Romeris University. Her research interest: Performance audit, Performance measurement methods, Social service
administration, Public administration.
Margarita Išoraitė – Mykolo Romerio universiteto Strateginio valdymo ir politikos fakulteto Strateginio valdymo katedros
docentė, socialinių mokslų daktarė. Moksliniai interesai: veiklos auditas, veiklos vertinimo metodai, socialinių paslaugų ir viešasis
administravimas.