Balanced scorecard is a measurement based management system developed by Kaplan & Norton. These describe it as follows:

"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers,suppliers, employees, processes, technology, and innovation. "

Ok, so balanced scorecard is a management system that goes beyond just the financial measures and introduces measurements in other areas, such as, learning and growth, customer focus and business processes.

But how can we introduce this system? Here's a good 8 step guide I have adapted from an article at BetterManagement.com:

1. Senior Management Team Training (SMT). - The first step is to train and motivate the SMT so they drive it through the organisation. Unless they have the necessary commitment to the project this will most definitely fail. A good idea is to visit organisations that have introduced the system already.
2. Focus on the Critical Success Factors. - These are the areas "that determine the organisational health and vitality". In the first stages, don't spend too much time debating the different perspectives and just choose at least one CSF from each of the following areas: financial, customer, internal business processes, learning and growth, staff satisfaction and community. Further down the road you will be in a much better position to fine tune this.
3. Follow the 10-80-10 rule. - You should have three sets of indicators: key results indicators (KRI) that give you a clear overall picture and tells you when things are going wrong, but don't tell you where. To achieve this we introduce the performance indicators (PI) and the key performance indicators (KPI). We must be selective and only have 10 KRIs, 10 KPIs and anything upto 80 PIs.
4. Select a small KPI team.- look for young talent that have excellent presentation and communication skills, good knowledge of the organisation and the sector and then team them up with an external facilitator.
5. Just do it!- It's never going to be right the first time, so avoid the search for excellence and work on introducing the system quickly. There will be time in the future for improvements.
6. Use existing systems in the first year. - There will be a lot of chopping and changing in the initial stages and there is much that can be done without introducing expensive software. So, leave the sophisticated IT systems until you know what you are looking for.
7. Make available indicators to all. - A resource that makes it easy to access the performance indicators will aid the quest for efficiency.
8. Rename the system. - Balanced scorecard is not the most appropriate name, scorecard has negative connotations. Look for a more encouraging name such as General Performance System (GPS) or even a name that has no real meaning but makes it more personal to your company.

In our now very dynamic and changing world, the balanced scorecard management system allows companies to be warned promptly of problems and where they are occurring. This aids companies to react quickly, which is becoming more vital to achieve success everyday.

What are the most important critical success factors for your company?

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