Balanced Scorecard Step-by-Step | Paul R. Niven

Summary of: Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results
By: Paul R. Niven

Introduction

The book ‘Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results’ by Paul R. Niven sheds light on one of the most effective strategic management tools: the Balanced Scorecard. The summary provides a comprehensive overview of the Balanced Scorecard, a system which helps organizations overcome common barriers and deliver outstanding performance. The Scorecard, developed by Robert Kaplan and David Norton, creates a balanced approach of financial and non-financial measures – ensuring that organizations address critical aspects such as customer satisfaction, internal processes, employee skills, and financial performance. This introduction will provide a brief glimpse into the process of creating and implementing the Balanced Scorecard, focusing on its benefits and impact on organizational success.

Overcoming Barriers with Balanced Scorecard

Organizations face challenges executing their strategies due to barriers such as the vision, people, management, and resource barriers. The Balanced Scorecard provides an ideal solution to overcome these barriers by measuring performance and implementing strategy. Developed by Robert Kaplan and David Norton, the Scorecard includes various activities throughout the organization, such as customer issues, internal business processes, employee activities, and shareholder concerns. This system has been successful in many organizations, including non-profit and public organizations. The Scorecard provides a balanced approach to combine financial measures with other drivers, leading to improved financial performance. However, building a coherent Balanced Scorecard requires the knowledge of the organization’s strategy, markets, competitors, processes, and competencies from multiple individuals within the organization, not just the CEO.

A Holistic Approach to Business Success

The Balanced Scorecard extends beyond financial measures and includes four perspectives: customer, internal process, learning and growth, and financial measures. The Customer perspective involves identifying target customers and choosing an approach to focus on operational excellence, product leadership, or customer intimacy. The Internal Process perspective focuses on key processes to add value for customers. The Learning and Growth perspective looks at employee skills and information systems to improve performance. Finally, the Financial Measures perspective evaluates how well strategy execution is reflected in improved bottom-line results.

Starting with the Balanced Scorecard

The balanced scorecard is a tool designed to help organizations with performance measurement and strategy implementation. When getting started with the process, it’s important to choose the appropriate organizational unit based on seven key criteria, including strategy and sponsorship. Once the unit is chosen, finding executive sponsorship is crucial, and a team should be assembled to implement the process. The team should include influential members of senior management as well as an organizational change expert. Each team member has specific responsibilities, such as assuming ownership and providing expert knowledge of their business unit. With the balanced scorecard, it’s important to maintain balance and avoid focusing too much on specific areas of measurement.

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