Alignment: Using the Balanced Scorecard to Create Corporate Synergies Kaplan, Robert S. and Norton, David P.

Abstract

Performance has been defined variously by researchers. One of the shortest and precise definition is offered by European Foundation for Quality Management in their EFQM Award Guidelines as "A measure of attainment achieved by an individual, team, organization, or a process." Neely ('Performance Measurement: Why, and How', Economist Books, London, 1998) explains it in a more detailed manner as 'an effective performance measurement system enables informed decisions to be made and actions to be taken because it quantifies the efficiency and effectiveness of past actions through acquisition, collection, sorting, analysis, interpretation, and dissemination of appropriate data.' Business Performance Measurement thus is fundamental to the process of management. In the ultimate analysis, performance measurement becomes an important tool for self assessment. It helps creating commitment and motivation across the organization to realize common goals. The process of evaluation of the performance assists the executives to identify the gaps between the actual performance and the targeted course; to assist the organization to formulate a proper strategy to bridge the gaps and to evolve plans for the redeployment of resources and positioning of initiatives. Any plan for improvements can result only from the measurement of performance. Performance measures and strategy go together; a non-alignment would result in wrong deployment of resources and a total chaos. The performance measurement scene over the decades has been dominated by the financial measures, accounting systems and financial ratios. In an economic environment when the supply was lagging demand, the organizations concerned themselves with only a single objective of focusing on maximizing the bottom line. The planning for the cash flow, high profitability, concern to use the assets and concentration to maximize returns on investment, earning per share, and dividends became the only legitimate objectives for an organization. In later years, market capitalization, market value added (MVA), economic value added (EVA) were included in the list of measures. However, it became increasingly recognized that financial measures were no doubt important, but only offered a postm0rtem exercise and provided limited information on performance of the future. It lacked to provide guidelines against an all important objective of achieving improvement and understanding 'how well the organization was performing against goals of satisfaction to stakeholders'. The researchers came up with alternative measures ofbusiness performance.Kaplan and Norton through their 'Balanced Scorecard' elaborated on the strategy management system in their first book 'The Balanced Scorecard: Translating Strategy into Action'. The authors introduced four perspectives of Shareholders, Customers, Internal Processes and Innovation, and Learning. The concept virtually brought revolution in thought process on performance measurement. It became an instant hit giving birth to a variety of other approaches. As a ma...

Port Authority of Cartagena: Evidence of a Sustainability Balanced Scorecard

“…The study of integrating the sustainability concept into the BSC structure and the debate regarding if it is or is not useful for this purpose started in its early stages (Epstein & Wisner, 2001), when it was not yet entirely developed by Kaplan and Norton: although the first approach to ‘strategy maps’ was released in 2000 (Kaplan & Norton, 2000), it was not until 2004 when this concept was developed in book format (Kaplan & Norton, 2004); the ‘Office of Strategy Management’ was published in 2005 (Kaplan & Norton, 2005); the development of the ‘Management System’ concept was published in 2008 (Kaplan & Norton, 2008a); and the additional two books that complete the BSC's five‐book‐set, were published in 2006 and 2008: ‘Alignment: Using the Balanced Scorecard to Create Corporate Synergies’ (Kaplan & Norton, 2006), and ‘Execution Premium: Linking Strategy to Operations for Competitive Advantage’ (Kaplan & Norton, 2008b).…”

Non‐bank financing of small and medium size firms in developing economies: Effect of management control systems including large firm affiliation

“…These synergies help the subsidiary (SME) perform higher, compared to its competitors that lack such synergies (Kaplan & Nortion, 2006; Brock, 2005). For example, the ability to link inputs to processes and to output effectively can define the effectiveness and efficiency of the firm (Ettlie & Reza, 1992).…”

How Different Are Performance Management Systems? Empirical Typology of Performance Management Systems

“…These relations are expressed in many ways. However, causality relations are preferred (Franco-Santos et al, 2012;Kaplan & Norton, 1992, 2006Speckbacher et al, 2003). The goals must be in congruence with each other (Cuguero-Escofet & Rosanas, 2013).…”