Balanced scorecard and strategy map (Kaplan and Norton)

The balanced scorecard translates corporate goals and strategy into a defined set of measurable objectives spanning the organisation’s key functions. It has become one of the most widely used frameworks for management by objectives, while the strategy map makes the intended relationships among those objectives visible.

When to use it

• To implement and monitor a chosen strategy; the scorecard is generally stronger for execution than for developing the strategy itself.
• To align processes and employees, improve customer outcomes and connect execution to financial results.

Origins

Peter Drucker observed that management by objectives works only after the objectives themselves have been thought through—a step he believed organisations usually neglected.

The balanced scorecard drew on metric-based incentive systems, the French tableau de bord tradition of performance dashboards and a corporate scorecard pioneered by Art Schneiderman at Analog Devices. Robert Kaplan and David Norton developed the idea through research and introduced it in a 1992 article, followed by a 1996 book. Their purpose was to make strategy implementable and observable through a coherent set of measurable objectives.

What it is

The framework begins by translating strategy into explicit objectives rather than selecting measures in isolation. It balances financial results with the customer, process and organisational capabilities expected to create them.

A strategy map extends this logic by arranging the objectives into cause-and-effect relationships. It shows how investments in people, information and learning support critical processes, how those processes deliver customer value and how customer outcomes contribute to financial goals.

How to use it