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The balanced scorecard as a strategic management system

IN my last instalment I raised the issue of how mission statements of organisations should inform the performance objectives of all the members in the business entity.

Robert Mandeya

Quite often at front offices or in the elegant offices of company executives we are met with very elaborate statements which capture the vision and strategy of an organisation’s intent to its stakeholders.

But how sincere and honest are these broad and elaborate statements of intent in the actual running and management of these organisations’ operations?

It seems for many these have become mere rituals which have long lost their relevance in-terms of informing and guiding the operative environment of the benefactors.

Currently in Zimbabwe there seem to be a glaring disconnect between the mission statements of organisations and the actual business operation and the resultant output in terms of expected growth or profitability.

It is therefore my strong contention that any serious business engagement in today’s competitive environment must be informed and guided by a strict adherence to the mission and vision of the organisation.

In 1992, Robert Kaplan and David Norton’s concept of the balanced scorecard revolutionised conventional thinking about performance metrics.

By going beyond traditional measures of financial performance, the concept has given a generation of managers a better understanding of how their companies are really doing.

The balanced score card is a more advanced system of performance management which goes beyond simply looking at immediate performance out put.

The balanced score card enables management to predict the company’s future financial performance based on each members’ performance input.

In other words the balanced scorecard can help senior managers systematically link current actions with tomorrow’s goals.

As companies around the world transform themselves for competition that is based on information, their ability to exploit intangible assets has become far more decisive than their ability to invest in and manage physical assets.

According to Robert S. Kaplan, the balanced scorecard has supplemented traditional financial measures with criteria that measures performance from three additional perspectives—those of customers, internal business processes, and learning and growth.

The diagram which follows illustrates the inter relatedness of the four business perspectives: Financial, customer, learning and growth and internal business processes and how these are informed by the vision and strategy of the business entity.

The diagram shows how the four perspectives in the balanced score card can translate the vision and strategy to into terms that has meaning to the people who would realise the vision- management and employees.

It should be clear from the onset that the scorecard is not a replacement for financial measures; rather it is a complementary tool for assessment of the overall performance of the organisation.

If properly implemented the scorecard allows the CEO and the senior management team not only to introduce a new strategy for the organisation but also to overhaul the company’s management system.

It is however important to note that the implementation of the balanced score card management system and its resultant impact can not be realised overnight. Company management should apply the system step-by-step over 30 months or so, with each step representing an incremental improvement.

The interactive sequence of actions at every stage of implementation enables the company to reconsider each of the four new management processes two or three times before the system stabilises and become an established part of organisation’s overall management system.

Ultimately the CEO will be able to transform the company so that everyone could focus on achieving long-term strategic objectives—something that no purely financial framework can do.

More often the CEO and management team go for several months to develop a mission statement. How ever the mission statement, like those of many other organisations, simply declares an intention to “use high-quality employees to provide services that surpass customers’ needs.”

But the project manager in the field with his employees and his customer do not know how to translate those words into the appropriate actions.

This scenario points to a large gap that exists between the mission statement and employees’ knowledge of how their day-to-day actions could contribute to realising the company’s vision.

This is what the balance score card as a strategic management system seeks to address.

Robert Mandeya is a training and communication in management advisor. Email: mandeyarobert@yahoo.com, mandeyarobert@gmail.com.

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