Balanced Scorecard: Strategic Management Model

The Kaplan and Norton methodology has evolved since its creation, allowing us to improve the way we plan and manage organizations from different economic sectors and using specialized management software.

The Balanced Scorecard, has become a tool that is helping several companies to focus their organization on their strategy. The BSC was born in the early 1990s as a result of a study carried out in different high-level organizations: Bellsouth Corporation, General Electric, Du Pont, Hewlett Packard, Shell, Mobil and others.

The creators of this methodology, Robert Kaplan and David Norton, published a series of articles from the year 1990 until the publication of the book “The Balance Scorecard: Traslating strategy into action”, in 1996, which reports the experience of implementing BSC in companies cited and their excellent results.

What does the Balanced Scorecard present?

The BSC has the ability to replace the old methods of measurement and control, which are based on objectives and financial indicators that only report the state of health of the company in previous periods and do not allow to establish new ways of acting in the future. Not to mention that they do not allow us to understand the state of relations with customers and, also, with suppliers. Anyway, the old methods gave us a limited and outdated panorama of the company.

On the other hand, the Balanced Scorecard presents us with a new way of directing and monitoring our organizations. It offers a complete focus, not only internally, through the Perspective of Internal Processes and Learning and Growth, but also, it allows us to know the level of relations with our clients and their results from the Financial Perspective.

But in reality, what is the Balanced Scorecard?

The creators of the methodology define it in their own way “[…] the BSC translates the strategy and mission of an organization into a wide range of action measures, which provide the necessary structure for a management and strategic measurement system”.

Another definition that can be cited is that of Professor Alberto Fernández of IESE in Spain, who defines the BSC as “[…] a management model that translates the strategy into related objectives, measured through indicators and linked to some action plans that allow to align the behavior of the members of the organization ”.

Likewise, Professor Ricardo Martínez Rivadeneira of Universidad de la Sabana, Colombia, defines BSC as an “[…] integrated, balanced and strategic way of measuring current progress and providing the company’s future direction, which will allow it to convert the vision in action, through a coherent set of objectives, indicators and initiatives grouped in perspective. ”

However, what is the success of the BSC based on?

The success of the BSC is due to the ability to connect the Vision and Strategic Objectives closely with the operational and routine work, through the correct application of the organizational strategy.

The BSC bases its utility on a practical and simple structure, which bases its scheme on four perspectives, or we can call it critical dimensions in organizations, namely: Financial, that of (external) Clients, Internal Processes and that of learning and (internal) growth.

Considerations

The true purpose of BSC is to use it as a management system for organizational strategy, not only considering it as a system for monitoring the achievement of goals, but also a model that allows, in the first place, to clearly establish the direction in which if you want to go (vision and mission); establish which situation we are in (SWOT, Diagnosis, FCP); what we are doing, how we are going and where we want to go (Strategic Initiatives and Tactical-Operative Action Plans, Hoshin Kanri); and finally, to obtain comprehensive feedback, which allows us to know how we are doing our work and make the appropriate corrections in order to improve our position in the market.

The BSC is undoubtedly one of the cutting edge tools with clear successful results. However, we cannot rule out that these new techniques are implemented by people-led organizations, where the critical and powerful factor will always be Human Resources. So don’t be mistaken when it comes to looking for improvements in results and planning changes. We must ask ourselves: what actions can we take so that our employees can achieve their commitment and motivation in the face of the next improvements?

No new management tool, however complete, can be successful in its implementation if it does not provide a correct place and real value to the key factor of the entire organization: us (the people), its creators and operators.

Fernando Estrada

Director of Interact Latam

Have you participated in any BSC implementation project in your company? Share your experience with us by leaving a comment..

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