Kaplan and Norton in a paper in 1992 presented the traditionally-used balanced scorecard approach. This scorecarding system is to track businesses in the areas of: business processes (internal), customer, financial and learning and growth.
Balanced Scorecard Approach and Performance Organizational Measurement Balance
It is important to have balance in scorecards. The reason for this is that whenever there is no balance an organization could be focusing on one metric more then another measurement. When this occurs problems can occur. To illustrate this, an organization would only give an emphasis to timely delivery of product, than the quality of the product could be jeopardized in order to meet scheduled shipment dates. With this balance in mind, one needs to be careful how this balanced is accomplished.
It is more powerful to have a natural balance than pushing for a tradition balanced scorecard approach of the categories of customer, financial, learning, and internal business process, noting that these categories might not be appropriate to all business areas. One should also keep in mind that if there is the structure of a scorecard that has a close tie to the organizational chart there is an additional point that would need to be addressed in that the traditional balanced scorecard approach would need to be changed with significant re-organizations.
Also, the Balanced Scorecard approach of giving a concentration in alignment of measurements to strategies that can result in differing implementation, interpretations, and problems. The organizational strategy wordings is often no different in a statement like we are to be the-best-of-the-best. The question can be asked how this statement format can be carried throughout the organization so that the most appropriate specific, appropriate actions are undertaken.
Balanced Scorecard Approach and the Integrated Enterprise Excellence (IEE) system
The systematic approach of the Integrated Enterprise Excellence (IEE) business management system provides throughout the organization a natural balance scorecard approach using an enterprise IEE value chain. An example value chain is shown in the figure below, which is from Figure 7.3 of the Integrated Enterprise Excellence free e-book. In this figure, the rectangular boxes describe processes, while the oblong symbols denote metrics relative to quality, cost, and time for the listed functions.
Two of the many advantages of this form of reporting as a balanced scorecard approach are:
- In the IEE system, metrics have a 30,000-foot-level predictive performance reporting format, as opposed to the use of red-yellow-green scorecards, which can lead to much firefighting.
- The IEE value chain can have its predictive scorecards automatically updated (e.g., daily) using Enterprise Performance Reporting System (EPRS) software.
In the IEE business management system, the category of learning and growth typically would have an HR assignment, but could also have an assignment another function’s performance. It should also be pointed out that the IEE strategy development process can also have a structured blending of enterprise analytics with innovation. This result of this is specific improvement projects that have a whole-enterprise benefit.
A 5 IEE book-volume series elaborates more on these concepts for a balanced scorecard approach, and more. These books describe a system where there are balances of checks that will endure regardless of management continuity, economic climate changes, and competitive conditions. The result of this is a methodology which enhances not only Lean Six Sigma but the Balanced Scorecard approach as well.
IEE provides a detailed roadmap in Volume II of the series for assessing the enterprise as a whole to determine where improvement efforts should focus so that the business as a whole benefits. IEE in Volume III and the Lean Six Sigma Project Execution Guide also provides a detailed roadmap for making improvement efforts. IEE replaces firefighting with fire preventive actions.
Balanced Scorecard Approach and Business Process Management (BPM)
A traditional balanced scorecard approach has also been suggested for use with organizational business process management (BPM) deployments; however, it has the same issues as described above.
The implementation and integration of IEE methodologies in a BPM system is described in the book The Business Process Management Guidebook, which is available for downloading as a free e-book. This BPM free e-book also describes the integration of BPM with Enterprise Process Management (EPM).
Balanced Scorecard Approach Integration with IEE BPM Benefits
Organizations benefit when they apply the balanced scorecard with enhanced methodologies to:
• Their deployment of business process management
• Performance measurement system reporting
Balanced Scorecard Approach Implementation
Looking forward your thoughts about the described methodology. If would like to discuss application of the techniques to your situation contact me at +1 512.918.0280 or [email protected]