The Balanced Scorecard performance management system has gained fame around the globe, starting with a higher concentration in the West and gradually spreading to other parts of the world.
The systematic spread of the tool has been made possible by the rare mix of its simplicity and effectiveness. Its adaptive nature has enabled all kinds of organisations to adopt it, be they large, medium, small; private or public; or even non-governmental.
In 2008, creators of the Balanced Scorecard Robert Kaplan and David Norton were voted among the 12 most influential thinkers in the world under the Thinkers 50 world ranking of management ideas. That was because of the breakthrough that the tool had registered by then.
The Harvard Business Review once referred to the Balanced Scorecard as “one of the most influential management ideas of the past 75 years”.
Why such a huge recognition? Those who have applied the tool describe it as practical, adaptable and powerful, yet so germane, clear and simple once understood.
A Balanced Scorecard is a set of quantifiable measures by which to manage an organisation’s progress towards its strategic goals. It breaks down the organisation’s strategy into manageable elements that fit like jigsaws towards solving the organisation’s big mission and vision puzzles.
It is a communication tool by which executives deliver crucial strategic directions to employees about what must be achieved. It is a measurement tool by which executives measure progress of the organisation towards achieving its strategic objectives. It is a strategy management tool by which to perform all that is necessary to ensure that the organisation’s performance is on track. These three functions make what can be described as the outer ring of the Balanced Scorecard components. To complete the picture, there is an inner ring, made up of four performance focus areas: customer focus, internal processes, employee capability, and financial health.
The Balanced Scorecard monitors and manages an organisations performance via these perspectives. Thus, for an organisation to claim to be in good health, its internal processes must be efficient and effective. The customers must be satisfied at the very least. Employees should be learning and growing in skill and productivity. The financials must send positive signals.
Through the assessment of these perspectives, the Balanced Scorecard provides readings that enable organisational executives to evaluate performance and communicate to the rest of the team on what must be done to stay on track in all the areas that matter – customers, internal processes, employees and money.
In a nutshell, these four perspectives are the buttons to press correctly to deliver an organisation’s strategy. The Balanced Scorecard measures them all in one sweep, and that is after establishing the alignment that is necessary in setting up clear objectives, targets and key success measures. In so doing, it covers their interconnectedness in painting a holistic picture of the health of the organisation, making the driving of the organisation as an aligned whole practical.
For instance, if the financials are weak, the internal processes cannot be effective, and chances are that employees won’t learn and grow. Where that leaves the customer is obvious.
Similarly, when the internal processes don’t amount to much, the customer won’t be impressed and the financials will be injured. Where would that leave employees? The interconnectedness of these perspectives can be described in endless ways.
The point is, the Balanced Scorecard is so called because it is designed to appreciate and balance out the mutual relationships between and among the crucial performance focus areas that form the pillars for designing and pursuing strategy in any kind of organisation. This little detail is what makes the Balanced Scorecard effective in strategy execution.
Organisations that have realised this are relishing the fruits. Naturally, a majority of them are domiciled in the West from where the Balanced Scorecard originators first popularised it. A number of organisations in African countries have in recent years turned to the Balanced Scorecard as performance management solution of choice. It is time many more did to place themselves on good level for impressive market competition at the global stage.
With Kaplan having made his first trip to Africa in 2014 to conduct training on the Balanced Scorecard and help popularise it, this, by his own prediction, signalled the beginning of wider application of the tool in Africa.