A lot of things ended in 1992 — Johnny Carson’s run as host of The Tonight Show, the Cold War and, eventually, the popularity of acid washed jeans — but something particularly important for business leaders was just getting started. As hard as it is to believe, that was the year Drs. Robert S. Kaplan and David P. Norton introduced the concept of the Balanced Scorecard.
Today, as entrepreneurs explore the “lean startup” approach and manufacturers continue to wrestle with Six Sigma, Balanced Scorecard has managed to sustain a surprisingly loyal following in the C-suite as a strategic framework for looking at a business from multiple perspectives. As organizations continue to reap the advantages of corporate performance management (CPM) software – and Excel spreadsheets for that matter – think of Balanced Scorecard as a way of complementing such technology with highly effective management practices.
Balanced Scorecard 101
There are plenty of consultants and other resources to help organizations understand and implement Balanced Scorecard, but one of the best ways to get started might be by looking at how it has worked in practice. For that, turn back to the archives of Harvard Business Review, which in 2000 published an in-depth look of how Balanced Scorecard helped Mobile North America Marketing and Refining evolve from industry laggard to profit leader. As Kaplan and Norton explain, a bit part of the success comes down to senior-level buy-in.
Inspired and dedicated middle managers can sustain quality improvements, local process improvements, and many other change programs. Middle managers can also implement programs that have been ordered from centralized corporate staff groups . . . (but) we are skeptical that significant results can be delivered with the Balanced Scorecard without such active leadership and ongoing reinforcement.
Of course, Balanced Scorecard isn’t the only tool senior executives can use to steer their organization forward. In fact, that might be one of the challenges. This year, for example, consulting firm Bain published its 15th annual Management Tools and Trends report. While it showed Balanced Scorecard still within the top 10 frameworks and strategies used by large enterprises, it also suggested that many firms were struggling to choose between older, established approaches versus newer ones.
“Established market firms in North America and Europe are heavier users of more traditional tools,” it said, while other regions look for ways to “catapult themselves into global markets as fast followers.”
This is where hard numbers come in handy. Bain’s report says Balanced Scorecard is used by 44% of the 13,000 who responded to its survey, with one of the highest satisfaction scores.
Perhaps the best business case for this framework, however, comes from Clearpoint Strategy lead Ted S. Jackson, who published a post on Business2Community a few months ago that outlines six reasons Balanced Scorecard remains so viable. These include the way Balanced Scorecard leads to greater transparency, how it can rally an organization around a central mission, its focus on execution and the way it quantifies results.
Finance departments have long understood the value of sticking with what works — witness the longevity of financial spreadsheets — and given Balanced Scorecard is nearing the 24-year mark, it’s probably time for those who haven’t taken the plunge to start taking a closer look.