The balanced scorecard identifies and integrates four different ways of looking at performance (financial, customer, internal business, and innovation and learning perspectives) (Neely, 2002, p.148). The Balanced Scorecard (BSC) was first devised by Kaplan and Norton (1992) as a measurement framework that was expected to overcome some of the deficiencies of traditional performance systems. It gives a holistic view of the organization by simultaneously looking at four important perspectives (financial, customer, internal processes, innovation and learning). Apart from being a measurement framework, the BSC achieved recognition as a strategic management system (Kanji, 2002, p.153).
The BSC is distinct from other strategic measurement systems in that it contains outcome measures and the performance drivers of outcomes, linked together in cause-and-effect relationship (Kaplan and Norton, 1996, cited in Kanji, 2002, p. 156). One of the reasons the BSC is such a powerful tool is precisely that it stresses the linkages for achieving outstanding performance in related measures, rather than concentrating on isolated measures. As some people suggest, ‘the added value of the balanced scorecard is in the drawing together of all the key business areas and identifying the linkages that deliver success’. Thus, the scorecard helps to fight sub-optimization by forcing managers to consider all key measures that collectively are critical for the success of the organization and highlighting the need to analyze trade-offs (Kanji, 2002, p.156).
Balanced Scorecard in a Service Firm
The organization is a service firm that provides its customers with managed business solutions such as integrating outsourcing options with systems design and support. The company has developed a customized information system that effectively integrate various outsourcing options with the client’s existing internal support systems. The management had helped the highly skilled, highly trained, and highly independent staff of consultants to become an exceptional team of experts, capable of handling the most difficult customer demands. Development of strong interpersonal relationships had become the defining characteristic of the organization. Thus, the company’s success depended on the internal relationships the staff maintained among themselves as much as the external relationships they built with customers. The management and the staff had created a vibrant, knowledge sharing, collaborative work community that thrived on the lifelong-learning and personal growth initiatives that had become so familiar to anyone involved in the company. The company’s growth called for a more effective measurement system that will not harm what the management and the staff have worked for. The main concern of the management is to protect the company’s autonomous, collaborative work environment while continuing to grow the customer base and the staff. When the company was just starting out, the management had no difficulty assessing the progress of the employees through individual observation and the related company results. However, the number of the employees has grown and the one-on-one type of performance measurement that the management used to employ is not effective and efficient anymore. Now that the company’s corporate intellectual assets (the employees’ collective knowledge and strengths) were well established as the company’s primary competitive advantage, the management was searching for a way to measure and guide the process of sutaining that advantage.
The company uses a customer-intimacy strategy, which emphasizes the value of long-standing customer relationships. This strategy seeks to create and maintain customer loyalty by continually tailoring services to the precise needs of the customer. Customer-intimacy requires flexible and responsive business processes and a highly educated, capable and empowered, staff who partner closely with customers to develop and implement solutions that work. The company’s effective and efficient development and implementation of system solutions for customers depended on knowledge sharing among employees. The management developed four specific strategic objectives:
1. Company growth
2. Understand customers’ needs
3. Promotion of knowledge sharing
4. Maintain an open and collaborative culture in order to attract and retain employees
Balanced Scorecard Alignment
Balanced scorecard could be used to align an organization’s strategy with key performance measures, providing forward-looking performance management with adequate consideration of employee contributions to corporate success. The balanced scorecard can be used to address the performance criteria typical of organizations competing with intellectual assets.
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