Implementing balanced scorecards

Hi, I'm Jay Gulick, director of BNET. Today, I'm going to talk about implementing the balanced scorecard. If you're not familiar with the balanced scorecard, you can check out another video I did on understanding the balanced scorecard. But I'm going to give you a quick recap today.

Basically, Robert Kaplan and David Norton, two really smart guys came up with the concept of balanced scorecard in 1992, and what they said was, from a strategic standpoint, companies cannot and no longer afford it, just look at things in terms of financial terms. You also got to think about your customer. How do you add value, your internal business processes, so what do you excel at as a company, whether it is manufacturing, or new product introduction, and finally learning and growth. How you create a climate that is adaptable to change and can foster innovation which is what's necessary in today's economy?

Basically what Kaplan and Norton said was, there are 5 different principles when you are implementing the balanced scorecard. The first one that they talked about was mobilizing change through executive leadership. You know, this is a major undertaking in a company that requires the buying of the executive management team because this is essentially a change management exercise. You have to change the way your culture thinks about strategy. The second thing that they talked about was translating the strategy into operational terms. That really gets back to these issues right here. So how do you look at your company strategically from the standpoint of things other than just the financial objectives? The third thing is, lining your Company or organization with your strategy. So making sure that everybody in the organization understands their role in the strategic process. The fourth thing they talked about was, making strategy everybody's everyday job. Well, this is what Kaplan and Norton talked about making things like compensation tied directly to the strategy of the organization. How does, what an individual does, and an individual contributes to the company reflect the strategy of the Company overall? The fifth thing that they talked about was making strategy a continual process. So in other words, strategy is not something that is talked about one time of your at budgeting and locked up and not addressed again. Given the marketplace demands, strategy is something that needs to be revisited on a regular basis by all the people, all the stakeholders in the Company who impact it.

So implementing the balanced scorecard is by no means an easy undertaking. It requires a lot of commitment from the executive management and everybody within the organization. But the bottomline is it is really a great way to look at the management in measurement of the company from its strategic perspective.