Balanced scorecards are performance management tools used to assign goals, measures and actions to individuals and business units. They ensure strategic alignment throughout an organization and provide a basis for measuring performance.

Summary by The World of Work Project

Balanced Scorecards

Balanced scorecards are organizational and individual performance management tools. Their purpose is to link individual and business unit performance to the organization’s overall strategy.

Balanced scorecards work by allocating specific, strategically aligned, objectives with associated goals, measures and actions to individuals or business units. The individual or business unit’s performance can then be assessed though how well they do at achieving their delegated objectives.

Balanced Scorecards increasingly include not only task related objectives, but also cultural and behavioral objectives as well.

Balanced Scorecard

We’ve created the fictional, highly simplified example below to help bring this concept to life. The example relates to a fictional corporate division of a global bank. You can see that our example considers strategic drivers, goals, targets, measures and actions.

A diagram showing a Balanced Scorecards

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Learning More

This topic crosses over with strategy, which we’ve introduced in our posts on the VMOSA framework and Strategy Management framework. You might also enjoy learning about porters five forces, the hedgehog concept and vision and mission statements. You can learn more about vision and mission statements in our podcast on them:

The World of Work Project View

Balanced scorecards are excellent, at least in theory.

They ensure that all parts of an organization are aligned with the overall organization’s strategic goals. Business units should have scorecards as should the individuals in them. For them to work effectively, the goals within them need to be at the right level for the business unit or individual.

Unfortunately, they are often not as effective as they should be. This is because leaders do not spend the time required to really identify helpful, meaningful goals, measures and actions for individuals. If individuals don’t accept their goals, cannot influence them or think they are just an administrative exercise, they will consider balanced scorecards an unfair means of assessing performance.

Our advice is that smaller and medium sized organizations should aspire towards using balanced scorecards. However, they should endeavor to spent the time needed to get them right. The activity of thinking through what should be on them is itself hugely helpful. We don’t mention larger organizations purely as we assume they are already using similar tools.

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This post is based on original work by Robert Kaplan and David Norton. You can ready more in their 1992 HBR article “The Balanced Scorecard – Measures that Drive Performance”.

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