The Balanced Score Card Management Tool

The balanced score card is an organizational management and planning methodology that helps companies, nonprofits and governmental agencies to coordinate their strategic vision with their business functions ("Balanced Scorecard"). The method also helps organizations to strengthen their intercommunication with customers, employees and partners. Finally, the balanced score card system helps businesses to audit and assess their success. The balanced score card allows the business to measure both financial and non-financial key performance indicators giving management the ability to get a more balanced perspective on the enterprise. The system has been embraced by more than half of the biggest businesses worldwide, including the United States, the European Union, and countries in Asia. The process is spreading to Africa and the Middle East. The balanced scorecard is number five on the list of most used and useful global management tools, and is a complete procedure for planning and management. A balanced score card is the way to shift the organization’s strategy from a bland document to an active, living, dynamic set of instructions. The strategy gives managers the ability to measure organizational performance, in addition to helping them determine what needs to be done and what needs to be measured. The balanced score card gives executives a tool with which to actively implement strategy.

The balance score card approach aids organizations in the quest to recreate their mission, vision and strategy into action steps that staff and employees can understand and execute. The score card ensures that executives, managers and employees receive useful feedback that focuses on organizational processes enacted and consequent outcomes so that processes and outcomes evolved in a continuously positive trajectory. The score card is not a just something that organizations do, but it is something that drives organizations.

The Origins of the Balanced Score Card

Art Schneiderman, of Analog Devices, developed what could be referred to as balanced score card 1.0 in 1987 (Schneiderman). He attended an unrelated study hosted by Robert Kaplan in 1990. Schneiderman spoke about his findings on the performance tool during this study. Kaplan and his associate, David Norton, wrote an article about balanced score card in 1992 (Kaplan and Norton), which included some aspects of Schneiderman’s disclosures (Schneiderman). Others, including Kaplan and Norton wrote articles on the score card concept the same year, also. Yet Kaplan and Norton’s article garnered the most attention. In 1993, Kaplan and Norton wrote a follow up article on the score card concept ("Putting the Balanced Scorecard to Work"). A book followed in 1996 (Kaplan and Norton 2). Consequently, Kaplan and Norton have been recognized as the originators of the balanced score card concept. 

The Kaplan and Norton first book, The Balanced Scorecard is a dominant player in the performance management field (Kaplan and Norton 2). Their second book The Strategy Focused Organization, takes the fundamental score card concepts and takes it steps further establishing the value of visual linkages in the form of strategy maps (Kaplan and Norton 3). The model moved from the academic creation of score cards, to the use of score cards as the focal point for organizational strategic management methodologies. In their later iterations of the balanced score card books, Kaplan and Norton have further distilled the model to include its many uses and conceptual enhancements (Kaplan and Norton 4). 

The Balanced Score Card Objectives

The importance of the balance score card for businesses is its ability to give executives and others a more graphic representation of both financial and non-financial business aspects in alignment with their overall strategy targets ("Putting the Balanced Scorecard”). Most reports focus on the financial components and fail to quantify the more intangible components, the non-financial. Yet the intangibles play a huge part in the success of most organizations. In the case of Apple, Inc., the company shifted from being a technology company to becoming one that was customer-centric. They were not just building computers, they were building computers and technology devices that wowed their customers and the world. So instead of just measuring the fiscal components, they used the balanced score card to measure whether or not the company was achieving their strategic vision, that of wowing their customers. In wowing the customer, Apple knew that it would win far beyond any levels it had previously achieved. While addressing the four balanced score card perspectives, the financial, the customer, internal processes, and innovation and improvement, the company used these perspectives to ensure that the customer’s happiness, or wow factor, was at the core of everything they did. For example, when looking at customer satisfaction, they had originally used a survey provided by the customer survey company, J.D. Power & Associates ("Putting the Balanced Scorecard”). But they began to realize that they had customers around the world, and that standard surveys were simply not enough to assess and measure the perspectives of their uniquely heterogeneous customer base. So the company developed its own surveys that addressed and answered the questions that they needed to know. The balanced score card was used, not to end the use of financial reports, or other reports like those that measure the company’s operations, but the purpose of Apple’s score card was to convert and measure performance goals that matched their strategic goal of being customer-centric and wowing the customer. Assembling and reviewing the numbers is an easy thing for the executives to do, but to stay on top of the customer’s temperature was their strategy to measure how effective they were in each area. If the customer was wowed, the financials would reflect it, if the customer was wowed, the customer assessments would reflect it, if the customer was wowed, the innovation and improvement measurements would reflect it ("Putting the Balanced Scorecard”). It was a revolutionary shift for Apple, who has become the world’s most admired company ("World's Most Admired Companies"), and the most profitable (Kell).

But How Does a Company Design its Score Card?

Companies formulate their balanced score card management system by starting at the top ("How Does All of This Terminology”). The first component to examine is the company mission. At this point, the company will assess or reconfirm the company’s purpose. Next, the company will review its vision, its view of its plans for the future. The next consideration is its core values, those aspects most central to fundamental concepts that the company holds true. In the case of Apple, Inc., its mission statement has evolved over time, and has changed from that of its founder Steve Jobs to its current CEO Tim Cook (Rowland). The company’s current mission statement is:

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App store, and is defining the future of mobile media and computing devices with iPad (Rowland).

When Apple creates its balanced score card, it must evaluate the key components of its mission statement in order to translate it into creating its strategic results. Key concepts that can be pulled from Apple’s mission statement are, 1. that its PCs are the best, 2. that it leads the music revolution, 3. that it has reinvented cell phones, 4. and it is leading the way in the area of mobile devices. Each of the four components of its mission statement demonstrate that it is Apple’s mission to be the best in the world and the most innovative. It is important to note that it is not their desire to be a manufacturer of computers, their desire is to be the best and most innovative in their core products. The first job of the balanced score card designers would be to identify the core strategies needed to ensure that Apple mission, to be the best and most innovative are properly expressed in words that executives and managers can utilize to drive the organization forward. An example of what strategies Apple might employ to be the most innovative company in the world, from the perspective of the human resources department might be to ensure that the engineers that the company hires are not only good at what they do, but that they can also demonstrate a history of innovation on their resume. In addition, during interviews, they might ask questions that cause the candidate to express their views on innovation and how they might innovate a product that Apple already has in existence. So the score card for the human resources department, for example, would focus on recruiting individuals who think outside the box.

Apple’s vision statement is the following: We believe that we are on the face of the earth to make great products and that’s not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot. And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self- honesty to admit when we’re wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well (Rowland).

A masterful vision statement, certainly one that must be inspiring to those who work within the company, the key concepts that emerge from the company’s vision are, 1. the best products, 2. innovation, 3. simplicity, 4. ownership of the technologies that drive their products, 5. participation only in markets they can dominate, 6. deep collaboration within their internal groups and external supply chain, 7. excellence is fundamental (also a core value), and, 8. self-honesty (also a core value). The designer of a balanced score card would review the eight key components that comprise Apple’s vision and translate those into strategic marching orders for their various departments. Not only would the vision be translated by the designers would also have to develop methods to measure performance and ensure that the eight strategic goals turn into eight strategic results.

Works Cited

"Balanced Scorecard." Investopedia. Investopedia, LLC. n. d. Web. 10 July 2016. <http://www.investopedia.com/terms/b/balancedscorecard.asp>.

Kaplan, Robert S,Norton, D. P.. "The Balanced Scorecard - Measures That Drive Performance". Harvard Business Review. January–February 1992. Web. 11 July 2016. <http://www.csus.edu/indiv/s/sablynskic/documents/balancedscorecard1992kaplanandnorton.pdf>.

"How does all of this terminology fit together logically?" The Balanced Scorecard Institute. Balanced Scorecard Institute, a Strategy Management Group company. n. d. Web. 11 July 2016. <https://balancedscorecard.org/Resources/The-Nine-Steps-to-Success>.

Kaplan, Robert S,Norton, D. P. 2. The Balanced Scorecard: Translating Strategy into Action. Boston: Harvard Business Review Press, 1996 Print.

Kaplan, Robert S,Norton, D. P. 3. The Strategy Focused Organization. Boston: Harvard Business Review Press, 2000 Print.

Kaplan, Robert S,Norton, D. P. 4. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Boston: Harvard Business Review Press, 2004 Print.

Kell, John. "The 10 most profitable companies of the Fortune 500." Fortune. Time, Inc. 11 June 2015. Web. 11 July 2016. <http://fortune.com/2015/06/11/fortune-500-most-profitable-companies/>.

"Putting the Balanced Scorecard to Work." Harvard Business Review. September–October 1993. Web. 11 July 2016. <https://hbr.org/1993/09/putting-the-balanced-scorecard-to-work>.

Rowland, Christine. "Apple’s Vision Statement & Mission Statement." Panmore Institute. 3 September 2015. Web. 11 July 2016. <http://panmore.com/apple-mission-statement-vision-statement>.

Schneiderman, Arthur M. "Analog Devices: 1986-1992: The First Balanced Scorecard." Arthur M. Schneiderman. n. d. Web. 11 July 2016. <http://www.schneiderman.com/Concepts/The_First_Balanced_Scorecard/BSC_INTRO_AND_CONTENTS.htm>.

"World's Most Admired Companies." Fortune. Time, Inc. n. d. Web. 11 July 2016. <http://fortune.com/worlds-most-admired-companies/>.