In today’s highly competitive, change-filled world, performance management is more important than ever. Are your systems for capturing, monitoring, and sharing performance information up to the task? Can you measure the “intangibles” that can also impact your organization’s performance? A Balanced Scorecard system can quantify intangible assets, support efficiencies and strengthen your business strategy.

Changing mindsets about intangibles

If a benefit is intangible, it’s immeasurable, right? Wrong. The Balanced Scorecard System offers a rigorous, calculated way to measure performance by quantifying what so many managers have dismissed as intangible assets (human capital, information, and culture). Tying these directly to corporate strategy offers a powerful means of deploying strategic direction, communicating expectations, and measuring progress toward agreed-upon objectives. Intangible assets such as employee knowledge, customer and supplier relations, and innovative cultures are key to producing value in today’s economy.

What exactly is a Balanced Scorecard?

A Balanced Scorecard is a proven and effective tool for capturing, describing, and translating intangible corporate assets into real value--value you can share with your organization’s stakeholders and employees. The information it reveals enables you and your management to successfully implement strategies that differentiate your company. The Balanced Scorecard translates an organization’s strategic objectives into a set of performance indicators distributed among four balanced perspectives: financial measures, customers, internal business processes, and learning and growth.

As the name suggests, the Balanced Scorecard is all about balance, between:

• Financial and nonfinancial indicators of success.
• Internal constituents (employees and internal processes) and external constituents (shareholders and customers), both of which are necessary to effectively implement strategy.
• Lag and lead indicators of performance.

Although the Balanced Scorecard’s four perspectives may appear simplistic, the approach is by no means simple in its impact or results. And while many organizations have used a combination of financial and nonfinancial measures in the past, the Balanced Scorecard is unique because it uses a clear cause and effect relationship.

Why keep score?

A Balanced Scoreboard is a key means of ensuring management’s focus is not only on financial returns, but also on employee alignment with overall goals, improved collaboration, and on strategy. The measures on the scorecard help to communicate the outcomes and performance-drivers by which your organization will achieve its mission and strategic objectives.

For example, by translating vision and strategy, your management team is forced to be specific. What is best in class and world-class service, and who is the target customer? With the scorecard, CEOs and top management have to truly define goals (such as, superior service means 95 percent of deliveries are on time to customers). This, in turn, helps employees focus their energies and day-to-day activities on meeting specific goals, rather than elusive, undefined goals. And rather than linking incentives and rewards to achieving short-term financial targets, departments and managers have the opportunity to tie their team, department, or business units’ rewards directly to the areas they influence.

At its most basic level, the Balanced Scorecard is the framework for translating strategy into actionables.

Your organization’s livelihood

By balancing historical financial numbers with the drivers of future value, and tying efforts to strategy, the Balanced Scorecard leads to long-term operational efficiency, productivity, and success.