The Balanced Scorecard The Balanced Scorecard continues to grow in popularity as a tool for supporting the implementation of strategy. “The Hackett Group found that of the nearly 2000 global companies it surveyed had implemented, or planned to implement, the Balanced Scorecard. The real issue though isn’t how many companies are using this approach but, rather, whether they are using it properly” (Norton and Russell, 2005, p. 3). To design the Balanced Scorecard for your small business you need to have first crafted your vision, mission, values, and strategic objectives. The Balanced Scorecard is the set of measures you created to measure the achievement of the vision and strategic objectives as you serve your mission. The Balanced Scorecard is often seen in two different formats. The first format (which is the one you will use for this week) is a table that includes the measures in the four primary categories of the Scorecard: 1. Financial (representing the increase in shareholder value). 2. Customer (representing the increase in customer value). 3. Operations or process (representing the increase in the value of internal processes. 4. Learning and Growth (representing the increase in employee and organization value). In this format there is always a measure which is defined (e.g., “profit margin”), and then there is a metric that is identified to assess the measure (e.g., “percentage of profit margin” or “percentage increase in profit margin”). Finally, there is a target set for the metric (e.g., “a 20% profit margin” or “an increase of 5% in profit margin”). The Balanced Scorecard shows the targets for the metrics for each calendar year during the plan. For example, the year one profit margin may be 18%, year two could be 20%, year three at 22%, year 4 at 26%, and year 6 at 30%. A sample Balanced Scorecard is shown below. Sample Balanced Scorecard Scorecard Four Balanced Areas for Measures Strategic Objective Measure Metric Targets Year 1 Year 2 Year 3 Financial Improve profitability Improve return on capital investments ROIC ↑5% ↑5% ↑5% Improve the overall profit margin of the company Margin ↑4% ↑5% ↑6% Customer Grow the business by focusing on customers Bring in more revenues from each customer Revenue/ customer ↑5% ↑5% ↑5% Increase in number of customers served in current markets Market share ↑2% ↑3% ↑5% Operation or Process Improves productivity in product areas Reduce the time to bring new products to markets Product development cycle time ↓5% ↓10% ↓5% Improve the sales process to add value to the customer Improve the effectiveness of the sales process New process developed and in place In 6 months NA NA Learning and growth Improve capabilities needed to improve productivity Retain people at top 50% of performance curve Retention rate of top tale ...

1. The Balanced Scorecard
The Balanced Scorecard continues to grow in popularity as a
tool for supporting the
implementation of strategy. “The Hackett Group found that of
the nearly 2000 global companies
it surveyed had implemented, or planned to implement, the
Balanced Scorecard. The real issue
though isn’t how many companies are using this approach but,
rather, whether they are using it
properly” (Norton and Russell, 2005, p. 3).
To design the Balanced Scorecard for your small business you
need to have first crafted your
vision, mission, values, and strategic objectives. The Balanced
Scorecard is the set of
measures you created to measure the achievement of the vision
and strategic objectives as you
serve your mission.
The Balanced Scorecard is often seen in two different formats.
The first format (which is the one
you will use for this week) is a table that includes the measures
in the four primary categories of
the Scorecard:
1. Financial (representing the increase in shareholder value).
2. Customer (representing the increase in customer value).
3. Operations or process (representing the increase in the
value of internal processes.

2. 4. Learning and Growth (representing the increase in
employee and organization value).
In this format there is always a measure which is defined (e.g.,
“profit margin”), and then there is
a metric that is identified to assess the measure (e.g.,
“percentage of profit margin” or
“percentage increase in profit margin”). Finally, there is a
target set for the metric (e.g., “a 20%
profit margin” or “an increase of 5% in profit margin”). The
Balanced Scorecard shows the
targets for the metrics for each calendar year during the plan.
For example, the year one profit
margin may be 18%, year two could be 20%, year three at 22%,
year 4 at 26%, and year 6 at
30%. A sample Balanced Scorecard is shown below.
Sample Balanced Scorecard
Scorecard
Four

3. Balanced
Areas for
Measures
Strategic
Objective Measure Metric
Targets
Year 1 Year 2
Year
3
Financial
Improve
profitability
Improve return on
capital investments
ROIC ↑5% ↑5% ↑5%
Improve the overall
profit margin of the
company
Margin ↑4% ↑5% ↑6%
Customer
Grow the
business by
focusing on
customers

4. Bring in more
revenues from
each customer
Revenue/
customer
↑5% ↑5% ↑5%
Increase in number
of customers
served in current
markets
Market share ↑2% ↑3% ↑5%
Operation
or
Process
Improves
productivity in
product areas
Reduce the time to
bring new products
to markets
Product
development
cycle time
↓5% ↓10% ↓5%

5. Improve the
sales process to
add value to the
customer
Improve the
effectiveness of the
sales process
New process
developed
and in place
In 6
months
NA NA
Learning
and
growth
Improve
capabilities
needed to
improve
productivity
Retain people at
top 50% of
performance curve
Retention
rate of top
talent

6. >90% >90% >90%
Change the
behaviors of
leaders and
employees to
those need to
support the new
Begin to change
culture to realize
new plan
Climate
survey
question
results on
target
100% 100% 100%
strategy
In some cases there are perspectives other than the four areas
shown above. Others might
include measures for the community, the government, or even
the environment. The important
point is that there should be a set of measures for any
stakeholder that is essential to the
realization of the plan.

7. Reference
Norton, D. & Russell, R. (2005). Balanced scorecard report.
Harvard Business School
Publishing. Retrieved from
http://reporting.talent20.co.za/Harvard/HMM10/strategy_execut
ion/resources/b0505a.pdf
1
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