Balanced Scorecard Basics

The balanced scorecard (BSC) is a management system that organizations use to:
Communicate what they are trying to accomplish
Align the day-to-day work that everyone is doing with strategy
Prioritize projects, products, and services
Measure and monitor progress towards strategic targets

The system connects the dots between big picture strategy elements such as mission (our
purpose), vision (what we aspire for), core values (what we believe in), strategic focus areas
(themes, results and/or goals) and the more operational elements such as objectives
(continuous improvement activities), measures (or key performance indicators, or KPIs, which
track strategic performance), targets (our desired level of performance), and initiatives (projects
that help you reach your targets).
Who Uses the Balanced Scorecard (BSC)?

BSCs are used extensively in business and industry, government, and nonprofit organizations
worldwide. Gartner Group suggests that over 50% of large US firms have adopted the BSC.
More than half of major companies in the US, Europe, and Asia are using the BSC, with use
growing in those areas as well as in the Middle East and Africa. A recent global study by Bain &
Co listed balanced scorecard fifth on its top ten most widely used management tools around the
world, a list that includes closely-related strategic planning at number one. BSC has also been
selected by the editors of Harvard Business Review as one of the most influential business
ideas of the past 75 years.

BSC Terminology: Perspectives

The BSC suggests that we view the organization from four perspectives, and to develop
objectives, measures (KPIs), targets, and initiatives (actions) relative to each of these points of
view:

Financial: often renamed Stewardship or other more appropriate name in the public
sector, this perspective views organizational financial performance and the use of financial
resources
Customer/Stakeholder: this perspective views organizational performance from the
point of view the customer or other key stakeholders that the organization is designed to
serve
Internal Process: views organizational performance through the lenses of the quality
and efficiency related to our product or services or other key business processes
Organizational Capacity (originally called Learning and Growth): views
organizational performance through the lenses of human capital, infrastructure, technology,
culture and other capacities that are key to breakthrough performance

BSC Terminology: Strategic Objectives

Strategic Objectives are the continuous improvement activities that we must do to implement
strategy. The break down the more abstract concepts like mission and vision into actionable
steps. Actions that your organization take should be helping you achieve your strategic
objectives. Examples might include: Increase Revenue, Improve the Customer or Stakeholder
Experience, or Improve the Cost-Effectiveness of Our Programs.
BSC Terminology: Strategy Mapping

One of the most powerful elements in the BSC methodology is the use of strategy mapping to
visualize and communicate how value is created by the organization. A strategy map is a simple
graphic that shows a logical, cause-and-effect connection between strategic objectives (shown
as ovals on the map). Generally speaking, improving performance in the objectives found in the
Organizational Capacity perspective (the bottom row) enables the organization to improve its
Internal Process perspective (the next row up), which, in turn, enables the organization to create
desirable results in the Customer and Financial perspectives (the top two rows).
BSC Terminology: Measures (Key Performance Indicators)
For each objective on the strategy map, at least one measure or Key Performance Indicator
(KPI) will be identified and tracked over time. KPIs indicate progress toward a desirable
outcome. Strategic KPIs monitor the implementation and effectiveness of an organization's
strategies, determine the gap between actual and targeted performance and determine
organization effectiveness and operational efficiency.
Good KPIs:

Provide an objective way to see if strategy is working

Offer a comparison that gauges the degree of performance change over time
Focus employees' attention on what matters most to success
Allow measurement of accomplishments, not just of the work that is performed
Provide a common language for communication
Help reduce intangible uncertainty