Taking the scorecard deeper

The newest book by Kaplan and Norton demonstrates how organizations can cascade the Balanced Scorecard through all of their operations — and beyond

A review of Alignment: Using the Balanced Scorecard to Create Corporate Synergies, by Robert S. Kaplan and David P. Norton. Published by Harvard Business School Press, 2006.

Reviewed by Robert Colman

Since its introduction back in 1992, Robert Kaplan and David Norton’s Balanced Scorecard has gained much enthusiastic support from management experts who believe that business can benefit from a strong performance management framework. In this issue of CMA Management, for instance, Cam Scholey, CMA, explains how the Scorecard can support risk management efforts. And the framework is an important element of CMA Canada’s Management Accounting Guideline, Measuring and Improving the Performance of Corporate Boards.

But Kaplan and Norton believe that scorecards can be taken still deeper into the organization. In their newest book, Alignment: Using the Balanced Scorecard to Create Corporate Synergies, the authors suggest that, although scorecards have been used effectively within business units in the past, they could play a greater role in creating alignment within the overall corporate business strategy. The authors recognize that some companies have already adapted their scorecards to create synergies within their organizations, and use these examples as useful case studies to describe how other companies can follow the leaders.

Old and new ground

Little of what Kaplan and Norton recommend is exactly revolutionary. They stress the value of the synergies that can be created if different line businesses share an enterprise value proposition — a central strategic goal agreed upon at the corporate level. The importance of mission, vision and values are central to all well-developed quality improvement programs, so this particular aspect of the book is a subject that has been explored, in the interest of business process management, often in the past.

The first half of the book explains how to align people, technology, culture, and leadership within the organization — how to align internal shared services, shared customers, learning and growth strategies, and support functions (considered here as HR, finance and IT). Although these chapters are interesting and include useful case studies, there is little that seems new. In fact, the discussion of the finance function as a support function rather than an integrated part of other business units (as described in “Creating the go-to team,” in the June/July 2005 issue of CMA Management) seems to diminish somewhat the changing nature of the finance/business unit relationship. 

What the authors do offer, in the second half of the book, is useful advice about how to cascade a scorecard culture throughout an organization, regardless of where the initiative originates. They also explain how to take the scorecard beyond the core organization into the boardroom, to the shareholders and to clients and business partners.

Adoption advice

Cascading a scorecard through an organization can be a challenge but the authors explain how you can do so from anywhere to anywhere in the organization. For instance, if a business unit decides that it wants to implement a scorecard, the authors suggest that this fact be raised with corporate head office. The questions that should be asked by the business unit to corporate include: “Where do we fit within the corporate-level strategy? As we develop our strategy, our map, and our scorecard, what corporate priorities should we consider?”

When the business unit poses these and similar questions, they create a dialogue that maintains a connection with the main priorities of the corporate office. Even if a terse reply is given — for instance, go out there and make money — even this acts as a guide; adopt any strategy you want, just make sure it hits financial targets.

The authors also offer case studies of top-down common value propositions, bottom-up approaches, and a couple of very interesting hybrid examples that demonstrate the flexibility possible in the development of a scorecard, as long as all parties are willing. The authors really demonstrate that, if there are rules, those rules have to be broken to adapt to the uniqueness of each organization.

Boards and beyond

Kaplan and Norton’s discussion of using the Balanced Scorecard in Board governance is something that CMA Canada has explored and started to put into practice. The chapter that the authors provide on the subject offers a very useful explanation of how this can work, and how communicating some of the key information in the corporate scorecard to investors and analysts can improve organizational alignment with these groups.

The final component in an alignment program, according to Kaplan and Norton, is for the enterprise to build scorecards with their strategic external partners — key suppliers, customers and alliances. Through these scorecards, the two entities can reach a consensus about the objectives for the relationship, and create a greater sense of trust. It also creates explicit measures to monitor the effectiveness of the interorganizational performance.

As the authors explain, the successful execution of strategy requires the successful alignment of four components: the strategy, the organization, the employees, and the management systems. When all of these alignment components are effectively managed, it’s a recipe for success. Strategy is at the centre of the management system; when strategy is clearly defined, the management process can be designed to create alignment. Alignment, the book, is an effective guide to taking the concepts of the Balanced Scorecard further into an organization’s culture. The case studies and supporting documents, including scorecards and strategy maps, offer effective templates for organizations that are beginning a new phase of their scorecarding journey.

Robert Colman is the editor-in-chief of CMA Management.

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