THE BALANCED  SCORECARD

The Reader’s Digest Version

The Balanced Scorecard has been a hot topic in organizations for the past several years – it’s a great way of determining the health of a company, seeing where the cancer is, and then providing a treatment plan for recovery. Successful senior managers do not measure just one performance aspect of the business. You need an assessment of multiple factors to get a balanced picture of the company. For example, I may have the goal of being healthy. If I watch my fat intake, but eat mounds of sugar, smoke Lucky Strikes, and sit in front of twelve soap operas a day, I won’t be healthy. I was only watching and changing one aspect of being healthy.

Your company’s health depends on the money it makes, but also on several customer-related levels like increasing loyalty in current customers, getting new segments of the market to become loyal customers, or exposing current customers to new products and services.

The company’s health also depends on our knowledge and ability to be innovative. You may be the world’s leading expert on beer-making, but that (probably) won’t contribute to the health of the company’s bottom line. You must figure out what you need to know today to keep your edge tomorrow. You also need to know what products and services – what new innovations – will be needed tomorrow.

Thirdly, you have to figure out what procedures or processes you need to master in order to succeed. Do you really need that monthly report, just because it’s always been done? The health of your company depends on processes that will get you to your goal – not just process to have process, but streamlined and strategic actions. If I’m trying to be healthy, one process I should put into place is to periodically learn what health is, because how can I reach my goal without knowing what it looks like.

And, yes, your company’s health depends on its bottom line. But I put this last to de-emphasize it, because it’s been the only measure used for so long, which gave a very unbalanced view of a company’s health. I may lie, cheat, and steal to get new business, and my balance sheet looks great. At first. But my lack of customer-focus means I’m quickly out of business. The annual report does not, by itself, reflect the truth about a company’s future.

The Balanced Scorecard looks at these four major areas of your business (Customer, Learning and Growth, Internal Process, and Financial) and asks you to drill down until you know what you’re doing minute by minute that brings you to your goals. You work with a purpose. It does this by taking you from the abstract to the detailed. The logical progression toward reaching your goal is:

1) Set your overall Goals for each of the four major areas;

2) Take one Goal, and ask yourself, what’s a good Objective that will get me to my Goal? They must be actionable and measurable;

3) Ask yourself, what Initiatives would have to be in place to 

obtain the Objective? They must be actionable and measurable;

4) Find (or create) the best way to Measure those Objectives 

and Initiatives; and

5) Set your Targets so you’ll know when you’ve hit your Objectives and Initiatives. Be very specific. These also must be actionable and measurable.

Now when you’re doing anything during the day, ask yourself: Is this part of a Target ... that feeds your Initiative ... helping obtain your Objective ... which allows you to reach your ultimate Goal? That's balance.

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