The Balanced Scorecard
Motivating Employees to Deliver Your Strategy
You'll most likely have heard the saying "What you measure is what you get."
This is something that's true across many areas of management – if you set people targets, and reward them when they meet these targets, they'll often do all they can to achieve them.
This is great in principle, but can be disastrous in practice: One problem is that it's much easier to measure financial results than it is to measure progress in other essential areas (such as staff satisfaction). This leads to an over-reliance on financial measurement. A second issue is that people will, quite rightly, drop other activities to meet challenging goals – this is part of why stretch goals are set.
Taken together, this means that organizations often focus their efforts on short term financial results, at the same time that the underpinnings of their business wither away, neglected.
This is where the idea of the "Balanced Business Scorecard" is important – as a tool for improving the performance of a whole organization, a large department or a small team. The Balanced Scorecard or Weighted Scorecard helps you measure and improve performance in an integrated way.
Understanding the Theory
Developed in the early 1990s by Robert Kaplan from the Harvard Business School and David Norton, the founder of an IT consulting firm, this management system has been applied to many organizations and across many industries with great success.
The article in the Harvard Business Review ("The Balanced Scorecard – Measures that Drive Performance," Harvard Business Review, July 2005) starts with the adage we quoted at the start of this article, "What you measure is what you get". The whole system is based on this premise.
Elaborating on what we've already said, companies have historically used financial measurements to gauge their success. The problem with this narrow approach is that...