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 are organizational and individual performance management tools. The purpose of a balanced scorecard 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.
Simplified Example Balanced Scorecard
We’ve created the fictional, highly simplified example below to help bring the idea of balances scorecards to life. The example relates to a fictional corporate division of a major US bank. You can see that our example considers strategic drivers, goals, targets, measures and actions.
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, balanced scorecards are often not as effective as they should be 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, and 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 on the basis of the assumption that they are using these already, or similar tools.
Sources and further reading
Where possible we always recommend that people read up on the original sources of information and ideas.
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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