MANAGING FOR THE LONG TERM | BEST OF HBR | January–February 1996

Using the Balanced Scorecard

as a Strategic Management System
by Robert S. Kaplan and David P.
Norton
Editor’s Note: In 1992, Robert S. Kaplan
and David P. Norton’s concept of the
balanced scorecard revolutionized
conventional thinking about
performance metrics. By going
beyond traditional measures of S COMPANIES AROUND THE WORLD transform

A
financial performance, the concept themselves for competition that is based on
has given a generation of managers a information, their abil- ity to exploit intangible assets
better understanding of how their has become far more decisive than their ability to
companies are really doing. invest in and manage
These nonfinancial metrics are so physical assets. Several years ago, in recognition of this
valu- able mainly because they change, we introduced a concept we called the balanced
predict future financial performance
scorecard. The balanced scorecard supplemented traditional
rather than simply report what’s
financial measures with criteria that measured performance
already happened. This article, first
from three additional perspectives – those of customers,
published in 1996, describes how the
internal business processes, and learning and growth. (See the
balanced scorecard can help senior
exhibit “Translating Vision and Strategy: Four Perspectives.”)
managers systematically link current
It therefore enabled compa- nies to track financial results while
Meganck

actions with tomorrow’s goals,

Robert

focusing
simultaneously monitoring progress in building the capabilities
on that place where, in the words of and acquiring the intangible assets they would need for future
the authors, “the rubber meets the growth. The scorecard wasn’t
sky.”
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MANAGING FOR THE LONG TERM | BEST OF HBR | Using the Balanced Scorecard as a Strategic
Management System

a replacement for financial measures;

operational terms that provide useful Existing feedback and review processes
it was their complement.
guides to action at the local level. For focus on whether the company, its de-
Recently, we have seen some
people to act on the words in vision partments, or its individual employ-
compa- nies move beyond our early
and strategy statements, those ees have met their budgeted financial
vision for the scorecard to discover its
statements must be expressed as an goals. With the balanced scorecard at
value as the cornerstone of a new
integrated set of objectives and the center of its management systems,
strategic manage- ment system. Used
measures, agreed upon by all senior a company can monitor short-term re-
this way, the score- card addresses a
executives, that de- scribe the long- sults from the three additional perspec-
serious deficiency in traditional
term drivers of success. tives – customers, internal business pro-
management systems: their inability to
The second process – cesses, and learning and growth – and
link a company’s long-term strategy
communicating and linking – lets evaluate strategy in the light of recent
with its short-term actions.
managers communi- cate their strategy performance. The scorecard thus en-
Most companies’ operational and
up and down the or- ganization and ables companies to modify strategies
management control systems are built
link it to departmental and individual to reflect real-time learning.
around financial measures and targets,
objectives. Traditionally, departments None of the more than 100 organi-
which bear little relation to the com-
are evaluated by their fi- nancial zations that we have studied or with
pany’s progress in achieving long-
performance, and individual in- which we have worked implemented
term strategic objectives. Thus the
centives are tied to short-term their first balanced scorecard with the
emphasis most companies place on
financial goals. The scorecard gives intention of developing a new strate-
short-term fi- nancial measures leaves
managers a way of ensuring that all gic management system. But in each
a gap between the development of a
levels of the organization understand one, the senior executives discovered
strategy and its implementation.
the long-term strategy and that both that the scorecard supplied a frame-
Managers using the balanced score-
departmental and individual work and thus a focus for many
card do not have to rely on short-term
objectives are aligned with it. critical management processes:
financial measures as the sole indica-
departmental and individual goal
tors of the company’s performance.
setting, business planning, capital
The scorecard lets them introduce four Lofty vision and allocations, strategic initiatives, and
new management processes that, strategy statements feedback and learn- ing. Previously,
separately and in combination,
don’t translate easily those processes were uncoordinated
contribute to link- ing long-term
into action at the local and often directed at short-term
strategic objectives with short-term
operational goals. By build- ing the
actions. (See the exhibit “Managing level. scorecard, the senior executives started
Strategy: Four Processes.”)
a process of change that has gone well
The first new process – translating the
The third process – business planning – beyond the original idea of simply
vision – helps managers build a
enables companies to integrate their broadening the company’s per-
consen- sus around the organization’s
business and financial plans. Almost formance measures.
vision and strategy. Despite the best
all organizations today are For example, one insurance com-
intentions of those at the top, lofty
implementing a variety of change pany – let’s call it National Insurance
statements about becoming “best in
programs, each with its own – developed its first balanced
class,” “the number one supplier,” or
champions, gurus, and consul- tants, scorecard to create a new vision for
an “empowered or- ganization” don’t
and each competing for senior itself as an
translate easily into
executives’ time, energy, and
resources. Managers find it difficult to
integrate
those diverse initiatives to achieve their underwriting specialist. But once Na-
Robert S. Kaplan is the Marvin Bower Balanced Scorecard to Create Corporate strategic goals – a situation that leads to
Professor of Leadership Development at Synergies (Harvard Business School Pub- frequent disappointments with the
Harvard Business School, in Boston, lishing, 2006).
programs’ results. But when manag- ers
and the chairman and a cofounder of
use the ambitious goals set for bal- anced
Balanced Scorecard Collaborative, in
scorecard measures as the basis for
Lincoln, Mas- sachusetts. David P.
allocating resources and setting priorities,
Norton is the CEO and a cofounder of
they can undertake and coor- dinate only
Balanced Scorecard Col- laborative. They
those initiatives that move them toward
are the coauthors of four books about
their long-term strategic objectives.
the balanced scorecard, the most
recent of which is Alignment: Using the
The fourth process – feedback and
learning – gives companies the capac- tional started to use it, the subsequently told employees in a letter
ity for what we call strategic learning. scorecard al- lowed the CEO and addressed to the whole organization
the senior manage- ment team not that National would thenceforth use
only to introduce a new strategy the balanced scorecard and the
for the organization but also to philosophy that it represented to
overhaul the company’s manage- manage the business.
ment system. The CEO National built its new strategic man-
agement system step-by-step over 30

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 Translating Vision and Strategy: Four Perspectives

months, with each step representing

to act in accordance with the mission search had revealed five basic market
an incremental improvement. (See the
statement. I’m here with my customer. segments among existing and potential
exhibit “How One Company Built a
What am I supposed to do?” customers, each with different needs.
Strategic Management System…”)
The mission statement, like those While formulating the measures for
The iterative sequence of actions
of many other organizations, had de- the customer-perspective portion of
enabled the company to reconsider
clared an intention to “use high- their balanced scorecard, however, it
each of the four new management
quality employees to provide services became apparent that although the 25
processes two or three times before
that sur- pass customers’ needs.” But senior executives agreed on the words
the system stabi- lized and became an
the project manager in the field with of the strategy, each one had a
established part of National’s overall
his employ- ees and his customer did different defi- nition of superior service
management system. Thus the CEO
not know how to translate those and a different image of the targeted
was able to transform the company so
words into the appropriate actions. customers.
that everyone could focus on achieving
The phone call convinced the CEO The exercise of developing opera-
long-term strategic objectives –
that a large gap existed between the tional measures for the four perspec-
something that no purely financial
mission statement and employees’ tives on the bank’s scorecard forced
framework could do.
knowledge of how their day-to-day the 25 executives to clarify the
actions could contribute to realizing meaning of the strategy statement.
Translating the Vision
the company’s vision. Ultimately, they agreed to stimulate
The CEO of an engineering construc-
Metro Bank (not its real name), the revenue growth through new products
tion company, after working with his
result of a merger of two competitors, and services and also agreed on the
senior management team for several
encountered a similar gap while build- three most desirable customer
months to develop a mission
ing its balanced scorecard. The senior segments. They developed scorecard
statement, got a phone call from a
executive group thought it had reached measures for the specific products and
project man- ager in the field. “I want
agreement on the new organization’s services that should be delivered to
you to know,” the distraught manager
overall strategy: “to provide superior customers in the targeted segments as
said, “that I be- lieve in the mission
service to targeted customers.” Re- well as for the relationship the bank
statement. I want
should build with customers
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MANAGING FOR THE LONG TERM | BEST OF HBR | Using the Balanced Scorecard as a Strategic
Management System

in each segment. The scorecard also head-

tion builds a stronger commitment to
highlighted gaps in employees’ skills
achieving those goals. But getting
and in information systems that the
man- agers to buy into the scorecard is
bank would have to close in order to
only a first step in linking individual
deliver the selected value propositions
actions to corporate goals.
to the targeted customers. Thus, cre-
The balanced scorecard signals to
ating a balanced scorecard forced the
everyone what the organization is try-
bank’s senior managers to arrive at a
ing to achieve for shareholders and
consensus and then to translate their
cus- tomers alike. But to align employees’
vi- sion into terms that had meaning to
in- dividual performances with the
the people who would realize the
overall strategy, scorecard users
vision.
generally en- gage in three activities:
communicating and educating, setting
Communicating and Linking goals, and link- ing rewards to
“The top ten people in the business
performance measures.
now understand the strategy better
Communicating and
than ever before. It’s too bad,” a senior
educating. Implementing a
execu- tive of a major oil company
strategy begins with educating those
complained, “that we can’t put this in a
who have to execute it. Whereas some
bottle so that everyone could share it.”
organizations opt to hold their
With the bal- anced scorecard, he can.
strategy close to the vest,
One company we have worked with
deliberately involved three layers of
management in the creation of its bal-
The personal scorecard
anced scorecard. The senior executive
group formulated the financial and helps to communicate
customer objectives. It then mobilized corporate and unit
the talent and information in the next objectives to the people
two levels of managers by having
and teams performing
them formulate the internal-business-
process and learning-and-growth the work.
objectives that would drive the
achievement of the financial and
customer goals. For example, knowing most believe that they should dissem-
the importance of satisfying inate it from top to bottom. A broad-
customers’ expectations of on-time based communication program shares
delivery, the broader group identified with all employees the strategy and the
several internal business processes – critical objectives they have to meet
such as order processing, scheduling, if the strategy is to succeed. Onetime
and fulfillment – in which the events such as the distribution of bro-
company had to excel. To do so, the chures or newsletters and the holding
company would have to retrain front- of “town meetings” might kick off the
line employees and improve the infor- program. Some organizations post bul-
mation systems available to them. The letin boards that illustrate and explain
group developed performance mea- the balanced scorecard measures, then
sures for those critical processes and update them with monthly results.
for staff and systems capabilities. Oth- ers use groupware and electronic
Broad participation in creating a bul- letin boards to distribute the
scorecard takes longer, but it offers scorecard to the desktops of all
several advantages: Information from employees and to encourage dialogue
a larger number of managers is incor- about the mea- sures. The same media
porated into the internal objectives; allow employees to make suggestions for
the managers gain a better understand- achieving or ex- ceeding the targets.
ing of the company’s long-term stra- The balanced scorecard, as the em-
tegic goals; and such broad participa- bodiment of business unit strategy,
should also be communicated upward
in the organization – to corporate
quarters and to the corporate board Should the balanced scorecard the future and thereby stimulate
of directors. With the scorecard, be communicated beyond the renewal and development.” The
business units can quantify and boardroom to external supplement de- scribes Skandia’s
communicate their long-term shareholders? We believe that as strategy and the strate- gic measures the
strategies to senior executives senior executives gain confi- company uses to com- municate and
using a comprehensive set of dence in the ability of the evaluate the strategy. It also provides a
linked financial and nonfinancial scorecard measures to monitor report on the company’s performance
measures. Such communication in- strategic perfor- mance and along those measures dur- ing the
forms the executives and the board predict future financial per- year. The measures are custom- ized
in specific terms that long-term formance, they will find ways to for each operating unit and include, for
strategies designed for competitive inform outside investors about example, market share, customer
success are in place. The measures those measures without disclosing satisfaction and retention, employee
also provide the basis for feedback competitively sensi- tive competence, employee empowerment,
and accountabil- ity. Meeting information. and technology deployment.
short-term financial tar- gets Skandia, an insurance and Communicating the balanced score-
should not constitute satisfactory financial services company based card promotes commitment and ac-
performance when other measures in Sweden, is- sues a supplement countability to the business’s long-term
indicate that the long-term strategy to its annual report called “The strategy. As one executive at Metro
is either not working or not being Business Navigator” – “an Bank declared,“The balanced scorecard
imple- mented well. instrument to help us navigate into is both motivating and obligating.”

154 Harvard Business Review | July–August 2007 | hbr.org

 Setting goals. Mere awareness of
cor- porate goals, however, is not Managing Strategy: Four Processes
enough to change many people’s
behavior. Some- how, the
organization’s high-level stra- tegic
objectives and measures must be
translated into objectives and
measures for operating units and
individuals.
The exploration group of a large oil
company developed a technique to en-
able and encourage individuals to set
goals for themselves that were consis-
tent with the organization’s. It created
a small, fold-up, personal scorecard that
people could carry in their shirt pock-
ets or wallets. (See the exhibit “The
Personal Scorecard.”) The scorecard
contains three levels of information.
The first describes corporate objectives,
measures, and targets. The second
leaves room for translating corporate
targets into targets for each business
unit. For the third level, the company
asks both individuals and teams to ar-
ticulate which of their own objectives
would be consistent with the business
unit and corporate objectives, as well
as what initiatives they would take to weighted average of four financial indicators: return on capital,
achieve their objectives. It also asks profitability, cash flow, and operating cost.
them to define up to five performance It bases the remaining 40% on in- dicators
measures for their objectives and to set of customer satisfaction, dealer satisfaction,
targets for each measure. The personal employee satisfaction, and environmental
scorecard helps to communicate responsibility (such as a percentage
corpo- rate and business unit change in the level of emissions to water
objectives to the people and teams and air). Pioneer’s CEO says that linking
performing the work, enabling them to compensation to the scorecard has helped
translate the objec- tives into to align the company with its strategy. “I
meaningful tasks and targets for know of no competitor,” he says, “who has
themselves. It also lets them keep that this degree of alignment. It is producing re-
information close at hand – in their sults for us.”
pockets. As attractive and as powerful as such
Linking rewards to linkage is, it nonetheless carries risks. For
performance measures. instance, does the company have the right
Should compensation sys- tems be measures on the scorecard? Does it have
linked to balanced scorecard valid and reliable data for the selected
measures? Some companies, believing measures? Could un- intended or
that tying financial compensation to unexpected consequences arise from the
performance is a powerful lever, have way the targets for the measures are
moved quickly to establish such a achieved? Those are ques- tions that
link- age. For example, an oil companies should ask.
company that we’ll call Pioneer Furthermore, companies tradition- ally
Petroleum uses its scorecard as the handle multiple objectives in a
sole basis for comput- ing incentive compensation formula by assigning
compensation. The com- pany ties 60%
of its executives’ bonuses to their
achievement of ambitious targets for a
weights to each objective and thresh- old levels for a critical have reduced their emphasis on short-
calculat- ing incentive subset of the strategic measures. term, formula-based incentive
compensation by the ex- tent to Individuals would earn no systems as a result of introducing the
which each weighted objective incentive compensation if per- balanced scorecard. They have
was achieved. This practice permits formance in a given period fell discovered that dialogue among
sub- stantial incentive short of any threshold. This executives and man- agers about the
compensation to be paid if the requirement should motivate scorecard – both the formulation of the
business unit overachieves on a people to achieve a more bal- measures and ob- jectives and the
few objectives even if it falls far anced performance across short- explanation of actual versus targeted
short on others. A better approach and long-term objectives. results – provides a
would be to establish minimum Some organizations, however,

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MANAGING FOR THE LONG TERM | BEST OF HBR | Using the Balanced Scorecard as a Strategic
Management System

How One Company Built a Strategic Management System...

better opportunity to observe man-

become clearer as more companies ex- lating where the company expects (or
agers’ performance and abilities. In-
periment with linking rewards to hopes or prays) to be in three, five,
creased knowledge of their managers’
score- card measures. and ten years. Typically, such plans
abilities makes it easier for executives
then sit on executives’ bookshelves for
to set incentive rewards subjectively Business Planning
the next 12 months.
and to defend those subjective evalu- “Where the rubber meets the sky”: That’s
Meanwhile, a separate resource-
ations – a process that is less suscepti- how one senior executive describes his
allocation and budgeting process run
ble to the game playing and distortions company’s long-range-planning pro-
by the finance staff sets financial tar-
associated with explicit, formula- cess. He might have said the same of
gets for revenues, expenses, profits,
based rules. many other companies because their and investments for the next fiscal
One company we have studied takes financially based management systems
year. The budget it produces consists
an intermediate position. It bases bo- fail to link change programs and re-
almost en- tirely of financial numbers
nuses for business unit managers on two source allocation to long-term that gener- ally bear little relation to
equally weighted criteria: their achieve- strategic priorities.
the targets in the strategic plan.
ment of a financial objective – eco- The problem is that most organiza- Which document do corporate man-
nomic value added – over a three-year tions have separate procedures and
agers discuss in their monthly and
period and a subjective assessment of organizational units for strategic plan-
quar- terly meetings during the
their performance on measures drawn ning and for resource allocation and
following year? Usually only the
from the customer, internal-business- budgeting. To formulate their strategic
budget, because the periodic reviews
process, and learning-and-growth per- plans, senior executives go off-site an-
focus on a compar- ison of actual and
spectives of the balanced scorecard. nually and engage for several days in budgeted results for every line item.
That the balanced scorecard has a active discussions facilitated by senior
When is the strategic plan next
role to play in the determination of in- planning and development managers
discussed? Probably during the next
centive compensation is not in doubt. or external consultants. The outcome
annual off-site meeting, when the
Precisely what that role should be will of this exercise is a strategic plan articu- senior managers draw up a new set of
three-, five-, and ten-year plans.

156 Harvard Business Review | July–August 2007 | hbr.org

 The very exercise of creating a bal-
this objective. The division’s manag- The process of building a balanced
anced scorecard forces companies to
ers, after considering various scorecard – clarifying the strategic ob-
integrate their strategic planning and
scenarios, agreed to specific increases jectives and then identifying the few
budgeting processes and therefore
in five dif- ferent performance drivers: critical drivers – also creates a frame-
helps to ensure that their budgets sup-
the num- ber of new stores opened, the work for managing an organization’s
port their strategies. Scorecard users
number of new customers attracted various change programs. These ini-
se- lect measures of progress from all
into new and existing stores, the tiatives – reengineering, employee em-
four scorecard perspectives and set
percentage of powerment, time-based management,
targets for each of them. Then they
and total quality management, among
determine which actions will drive
others – promise to deliver results but
them toward their targets, identify the
Building a scorecard also compete with one another for
measures they will apply to those
scarce resources, including the
drivers from the four perspectives, and enables a company to
scarcest resource of all: senior
establish the short- term milestones link its financial managers’ time and attention.
that will mark their progress along the budgets with its Shortly after the merger that created
strategic paths they have selected.
strategic goals. it, Metro Bank, for example, launched
Building a scorecard thus enables a
more than 70 different initiatives. The
company to link its financial budgets
initiatives were intended to produce
with its strategic goals.
shoppers in each store converted into a more competitive and successful in-
For example, one division of the Style
actual purchasers, the portion of exist- stitution, but they were inadequately
Company (not its real name) commit-
ing customers retained, and average integrated into the overall strategy. Af-
ted to achieving a seemingly impossible
sales per customer. ter building their balanced scorecard,
goal articulated by the CEO: to double
By helping to define the key drivers of Metro Bank’s managers dropped many
revenues in five years. The forecasts
revenue growth and by committing to of those programs – such as a market-
built into the organization’s existing
targets for each of them, the division’s ing effort directed at individuals with
strategic plan fell $1 billion short of
managers eventually grew
comfortable with the CEO’s
ambitious goal.
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Management System

...Around the Balanced Scorecard they would like to achieve in all four
scorecard perspectives; they should
have identified the strategic initiatives
required and allocated the necessary
resources to those initiatives; and they
should have established milestones for
the measures that mark progress to-
ward achieving their strategic goals.

Feedback and Learning

“With the balanced scorecard,” a CEO
of an engineering company told us, “I
can continually test my strategy. It’s like
performing real-time research.” That
is exactly the capability that the
scorecard should give senior managers:
the ability to know at any point in its
implemen- tation whether the strategy
they have formulated is, in fact,
working, and if not, why.
The first three management pro-
cesses – translating the vision, com-
municating and linking, and business
planning – are vital for implementing
strategy, but they are not sufficient in
an unpredictable world. Together they
form an important single-loop-learning
very high net worth – and consolidated anced scorecard measures. Milestones process – single-loop in the sense that
others into initiatives that were better are tangible expressions of managers’ the objective remains constant, and any
aligned with the company’s strategic beliefs about when and to what degree departure from the planned trajectory
objectives. For example, the managers their current programs will affect those is seen as a defect to be remedied.
replaced a program aimed at enhanc- measures. This single-loop process does not
ing existing low-level selling skills In establishing milestones, require or even facilitate
with a major initiative aimed at managers are expanding the traditional reexamination of either the strategy or
retraining salespersons to become budget- ing process to incorporate the techniques used to implement it in
trusted finan- cial advisers, capable of strategic as well as financial goals. light of current conditions.
selling a broad range of newly Detailed finan- cial planning remains Most companies today operate in a
introduced products to the three important, but financial goals taken by turbulent environment with complex
selected customer segments. The bank themselves ig- nore the three other strategies that, though valid when they
made both changes because the balanced scorecard perspectives. In an were launched, may lose their valid-
scorecard enabled it to gain a better integrated planning and budgeting ity as business conditions change. In
understanding of the programs process, executives con- tinue to this kind of environment, where new
required to achieve its strategic budget for short-term financial threats and opportunities arise con-
objectives. performance, but they also introduce stantly, companies must become capa-
Once the strategy is defined and the short-term targets for measures in the ble of what Chris Argyris calls double-
drivers are identified, the scorecard customer, internal-business-process, loop learning – learning that produces
influences managers to concentrate and learning-and-growth perspectives. a change in people’s assumptions and
on improving or reengineering those With those milestones established, theories about cause-and-effect rela-
processes most critical to the organiza- managers can continually test both the tionships. (See “Teaching Smart People
tion’s strategic success. That is how theory underlying the strategy and the How to Learn,” HBR May–June
the scorecard most clearly links and strategy’s implementation. 1991.)
aligns action with strategy. At the end of the business-planning Budget reviews and other
The final step in linking strategy to process, managers should have set financially based management tools
actions is to establish specific short- targets for the long-term objectives cannot en- gage senior executives in
term targets, or milestones, for the bal- double-loop
158 Harvard Business Review | July–August 2007 | hbr.org
 The Personal Scorecard

learning – first, because these tools

modify the hypotheses embedded in a the Four Perspectives.”) The company
address performance from only one
business unit’s strategy. By found significant correlations between
perspective, and second, because they
establishing short-term goals, or employees’ morale, a measure in the
don’t involve strategic learning.
milestones, within the business- learning-and-growth perspective, and
Strate- gic learning consists of
planning process, execu- tives are customer satisfaction, an important cus-
gathering feed- back, testing the
forecasting the relationship between tomer perspective measure. Customer
hypotheses on which strategy was
changes in performance driv- ers and satisfaction, in turn, was correlated
based, and making the necessary
the associated changes in one or more with faster payment of invoices – a
adjustments.
specified goals. For example, ex- rela- tionship that led to a substantial
The balanced scorecard supplies
ecutives at Metro Bank estimated the reduc- tion in accounts receivable and
three elements that are essential to
amount of time it would take for im- hence a higher return on capital
stra- tegic learning. First, it articulates
provements in training and in the employed. The company also found
the company’s shared vision, defining
avail- ability of information systems correlations be- tween employees’
in clear and operational terms the
before employees could sell multiple morale and the num- ber of
results that the company, as a team, is
financial products effectively to suggestions made by employees (two
trying to achieve. The scorecard
existing and new customers. They also learning-and-growth measures) as well
communicates a holistic model that
estimated how great the effect of that as between an increased number of
links individual efforts and
selling capabil- ity would be. suggestions and lower rework (an
accomplishments to busi- ness unit
Another organization attempted to internal-business-process measure).
objectives.
validate its hypothesized cause-and-ef- Evidence of such strong correlations
Second, the scorecard supplies the
fect relationships in the balanced help to confirm the organization’s
essential strategic feedback system. A
score- card by measuring the strength busi- ness strategy. If, however, the
business strategy can be viewed as a
of the linkages among measures in the expected correlations are not found
set of hypotheses about cause-and-
differ- ent perspectives. (See the over time, it should be an indication to
effect relationships. A strategic
exhibit “How One Company Linked executives that the theory underlying
feedback sys- tem should be able to
Measures from the unit’s
test, validate, and
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MANAGING FOR THE LONG TERM | BEST OF HBR | Using the Balanced Scorecard as a Strategic
Management System

strategy may not be working as they

had anticipated. How One Company Linked
Especially in large organizations, Measures from the Four
ac- cumulating sufficient data to
Perspectives
document significant correlations and
causation among balanced scorecard
measures can take a long time –
months or years. Over the short term,
managers’ assess- ment of strategic
impact may have to rest on subjective
and qualitative judg- ments. Eventually,
however, as more ev- idence
accumulates, organizations may be
able to provide more objectively
grounded estimates of cause-and-
effect relationships. But just getting
manag- ers to think systematically
about the assumptions underlying their
strategy is an improvement over the
current practice of making decisions
based on short-term operational
results.
Third, the scorecard facilitates the
strategy review that is essential to stra-
tegic learning. Traditionally, companies
use the monthly or quarterly meetings
between corporate and division execu-
tives to analyze the most recent peri-
od’s financial results. Discussions focus
on past performance and on explana-
tions of why financial objectives were
not achieved. The balanced scorecard,
with its specification of the causal
rela- tionships between performance
drivers and objectives, allows
corporate and business unit executives
to use their pe- riodic review sessions
to evaluate the validity of the unit’s
strategy and the quality of its
execution. If the unit’s em- ployees and
managers have delivered on the
performance drivers (retraining
of employees, availability of informa- and internal capabilities. The result of This capacity for en-
tion systems, and new financial prod- such a review may be a decision to
ucts and services, for instance), then reaf- firm their belief in the current
their failure to achieve the expected strategy but to adjust the quantitative
outcomes (higher sales to targeted cus- relation- ship among the strategic
tomers, for example) signals that the measures on the balanced scorecard.
theory underlying the strategy may not But they also might conclude that the
be valid. The disappointing sales figures unit needs a different strategy (an
are an early warning. example of double-loop learning) in
Managers should take such discon- light of new knowledge about market
firming evidence seriously and recon- conditions and internal capabilities. In
sider their shared conclusions about any case, the scorecard will have
market conditions, customer value stimulated key executives to learn
propositions, competitors’ behavior, about the viability of their strategy.
abling organizational learning at to create a strategic manage- Many companies adopted early bal-
the executive level – strategic ment system. anced scorecard concepts to improve
learning – is what distinguishes their performance measurement sys-
the balanced score- card, making Toward a New Strategic tems. They achieved tangible but nar-
it invaluable for those who wish Management System row results. Adopting those concepts

160 Harvard Business Review | July–August 2007 | hbr.org

provided clarification, consensus, and
focus on the desired improvements in
performance. More recently, we have
seen companies expand their use of
the balanced scorecard, employing it
as the foundation of an integrated and
iterative strategic management system.
Companies are using the scorecard to
• clarify and update strategy;

Because what’s
• communicate strategy throughout
the company;
• align unit and individual goals

vacation time for

with the strategy;
• link strategic objectives to long-term
targets and annual budgets;
• identify and align strategic initiatives;
and
• conduct periodic performance
reviews to learn about and
anyway?
improve strategy.
The balanced scorecard enables a
company to align its management
processes and focuses the entire orga-
nization on implementing long-term
strategy. At National Insurance, the
scorecard provided the CEO and his
managers with a central framework
around which they could redesign each WHARTON EXECUTIVE EDUCATION We’re all business.®
piece of the company’s management
system. And because of the cause-and-
Introducing the Wharton Learning Continuum. From the pre-program
effect linkages inherent in the score-
card framework, changes in one com- coursework to the post-program follow-up, it’s the ultimate
ponent of the system reinforced earlier getaway. For more insight, download our FREE article series
changes made elsewhere. Therefore, “Wharton on Career Management” at
every change made over the 30-month executiveeducation.wharton.upenn.edu. For more information, e-
period added to the momentum that
mail [email protected]. Call 800.255.3932 (U.S. or
kept the organization moving forward
in the agreed-upon direction.
Canada) or
Without a balanced scorecard, most +1.215.898.1776 (worldwide), and reference HBR.
organizations are unable to achieve a
similar consistency of vision and ac-
tion as they attempt to change direc- STRATEGIC PERSUASION: THE ART AND SCIENCE OF SELLING IDEAS
tion and introduce new strategies and > November 4–7, 2007 March 9–12, 2008
processes. The balanced scorecard EXECUTIVE NEGOTIATION WORKSHOP: BARGAINING FOR ADVANTAGE®
pro- vides a framework for managing > November 11–16, 2007 March 2–7, 2008
the implementation of strategy while
also allowing the strategy itself to BUILDING RELATIONSHIPS THAT WORK
evolve in response to changes in the > November 12–15, 2007 May 19–22, 2008
company’s competitive, market, and
technological environments. STRATEGIC ALLIANCES: CREATING GROWTH OPPORTUNITIES
> November 26–29, 2007 June 16–19, 2008
Reprint R0707M
To order, see page 195.
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Pour vous aider dans l’analyse, répondez aux questions suivantes en vous appuyant sur le texte :

1. Mettre en contraste et comparer le BSC «Gestion de la stratégie: quatre processus» et le «Processus de planification
stratégique du marketing - Circuit» vu lors de la première séance

2. Concentrez-vous sur la partie «Client» et «Processus de gestion interne» du BSC: Selon la vision et la stratégie que
vous avez déjà développées pour l'organisation sur laquelle vous réalisez un projet, entrez les objectifs, mesures,
cibles et initiatives SMART.