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Home > Business Strategy Finance Library > Balanced Scorecard: Translating Strategy into Action

Business Strategy Finance Library

Balanced Scorecard: Translating Strategy into Action

Robert S. Kaplan and David P. Norton (1996)


Why Read It?

  • The originators of the Balanced Scorecard present this innovative methodology, and show how managers can use it to maximize the potential of their companies.

  • Details how to build a Balanced Scorecard specifically tailored to an organization, and provides the practical tools needed for implementation.

  • Describes the impact of using a Balanced Scorecard as a strategic management system, and how it helps clarify both vision and strategy and translate them into action.

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Getting Started

Balanced Scorecard focuses on how to successfully execute business strategy using this management model, and provides a guide to building a Balanced Scorecard. It puts in place a new management system for companies to re-focus on the long term for customers, employees, new product development, and systems, rather than concentrating just on short-term profit. It bridges the gap between strategic goals and performance monitoring, and has been implemented by over 300 major organizations.

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Authors

Robert S. Kaplan (b. 1940) is professor of leadership development at Harvard Business School, and chairman of the Balanced Scorecard Collaborative. He has previously been on the faculty and dean of the business school at Carnegie Mellon University, and has received numerous awards.

David P. Norton is cofounder and president of Palladium Group. He has also been president of Renaissance Solutions, cofounded and served as president and CEO of the Balanced Scorecard Collaborative, and cofounded and was president of Nolan, Norton & Co.

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Context

  • Shows how the Balanced Scorecard works as a measurement and management system for channeling the potential, skills, and knowledge of people towards realizable long-term goals.

  • Emphasizes financial results and the human issues that drive them, by integrating a customer perspective, an internal perspective, and a learning and growth perspective.

  • Examines the importance of employee learning and growth, internal business processes, and customer knowledge, rather than just short-term financial gain.

  • Considers how the scorecard facilitates management processes such as individual and team goal setting, compensation, resource allocation, budgeting and planning, and strategic feedback and learning.

  • Analyzes how the scorecard has innovated some of the concepts of previous management models such as Total Quality Management.

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Impact

  • Demonstrates how senior executives are using the Balanced Scorecard to guide current business performance and putting in place targets for future performance.

  • Focuses on the vision and strategy of a business, and provides managers with a comprehensive overview of financial performance.

  • Shows how to use measures for financial performance, customer knowledge, internal business processes, and learning and growth.

  • Considers how the Balanced Scorecard evolves with the organization, unlike many other business models.

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Quotations

The Balanced Scorecard…provides managers with the instrumentation they need to navigate to future competitive success.

The Balanced Scorecard complements financial measures of past performance with measures of the drivers of future performance.

The Balanced Scorecard fills the void that exists in most management systems—the lack of a systematic process to implement and obtain feedback about strategy.

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Further reading

Books:

  • Kaplan, Robert S., and David P. Norton. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Boston, MA: Harvard Business School Press, 2001. Explains how companies have used the Balanced Scorecard approach over nearly 10 years, and shows how others can implement it successfully.
  • Niven, Paul R. Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results. New York: Wiley, 2002. Provides practical insight on how best to implement the Balanced Scorecard, based on the author’s experience in many organizations.
  • Olve, Nils-Göran, Jan Roy, and Magnus Wetter. Performance Drivers: A Practical Guide to Using the Balanced Scorecard. Chichester, UK: Wiley, 1999. An overview of Balanced Scorecard practice.

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