Understanding Balance Scorecard

Posted by Nia Dwi Astuti

A company is sustainable only if it delivers balanced superior value to win the heart and mind of its three most important markets i.e .: Commercial Market, Competence Market and Capital Market. (“The Value Enterprise”, J. Donovan; R. Tully; B. Wortman.)

Both large and small companies will be able to be more agile if they have a management system that can break down the establishment, and culture “talk only”. Almost all private and government organizations, profit and nonprofit, believes that build design of the strategy is relatively easy, but the biggest challenges often faced is execution strategy. (“Even Elephant Can Dance”, Suwardi L; Prima A.Bintoro and Raymond Hadisubrata)

Execution strategy has become the corporate challenge of the time. The main reason why organizations failed in optimizing their Strategy Implementation. (rank based on % survey respondent choices) Indonesia Strategy and Performance Management Survey Report, 2010 and 2011

1. Absence of an unit that facilitated strategy development and monitoring the implementation.
2. There is no learning and corrective action for implemented strategy (from review meeting).
3. Unavailability of standard process to ensure that unit strategy, target and working program align with other units and organization level strategy.
4. There is no clear and inspiring guidance for strategy ahead from Executive Management.
5. There is no clear reward (and non‐reward) system between high performance and low performance  employee.

The first step to execute strategy is create the strategy. After that we need to visualize the strategy before implement the strategy. Balance scorecard is tool to visualize the strategy. So what is balance scorecard? Balanced Scorecard is a Framework that helps organizations visualize its strategy and translate the strategy into operational objectives that drive both behavior and performance. 

There are 4 perspectives in balance scorecard, which are financial perspective, customer perspective, internal business process perspective and Learning & Growth Perspective.

Steps of Strategy Execution:

1. Build Vision and Mission, from vision and mission to destination statement.

Vision         : A desired future outcome of an organization

Mission       : The reason of organization’s existence, what we do today to achieve vision

Destination Statement : A “Snapshot” of what an organization is expected to be like 3‐5 years in the future, as a milestone along the journey in achieving the vision.

Example:

2. Build Strategy Map

Strategy Map is an interrelationship among strategy objectives in cause‐effect format that reflects the “journey” of an organization’s strategy.

3. Build Strategy Objective
Strategy Objective is a concise statement describing the major activities that an organization must do well in order to execute its strategy. A cause‐effect mapping of SO is termed as strategy map. The Strategic Objective typically uses the verb that implies improvement, such as: improve, increase, develop, attain and decrease.

           Example:

           • Enhance competency of employee

           • Improve logistic management

          Alternatively, may use noun that is accompanied by adjective that also implies improvement.

          Example:

          • Conducive working climate

          • Optimal budget spending

4. Build initiatives/action plan
Specific projects that need to be implemented in order to support the achievement of strategic objectives. A project normally has a beginning and ending points.

Component of the balanced scorecard framework

Reference:

Even Elephant Can Dance, Suwardi L; Prima A.Bintoro and Raymond Hadisubrata

The Value Enterprise, J. Donovan; R. Tully; B. Wortman.

Team-Based Strategic Planning: A Complete Guide to Structuring, Facilitating, and Implementing the Process, C. Davis Fogg

The Balanced Scorecard: Translating Strategy into Action, Robert S.Kaplan and David P. Norton

Modul Training Certified Strategy Execution Professional.