Balanced Scorecard as a Strategy Formulation Tool

Balanced Scorecard is a classic strategy tool formulated in the 90’s. Several organizations across industries have found it to be a useful framework for describing and managing strategy, in the knowledge economy. It transforms intangible assets into tangible customer and financial outcomes.

One of our clients prepares Balanced Scorecards to help them in their strategic planning and communication around it. All departments inside the organization use it to communicate the strategy of the organization at large to its staff. It has become an excellent source for us working as partners to appreciate what our initiative’s larger impact on the organization and its future is.

The Balanced Score Card uses four perspectives:

  • Financial – what are the financial objectives? What are the major sources of growth
  • Customer – How do we measure success with customers? To achieve our vision, how must we look to our customers?
  • Internal Perspectives – To satisfy our customers at which processes must we excel
  • Learning and Growth – To achieve our vision, how must our organization learn and improve?

Strategy implies movement of the organization from its present position to a desirable but uncertain future position. Given that the organization has never been to this future position, there are a series of linked hypotheses. The view that the Balanced Scorecard takes is that strategy is a hypothesis; an effective strategy comes from a system of activities, each of which reinforces the other.

Look up any of the books written by the fathers of Balanced Scorecard going over case studies of organizations that have implemented the technique. These two are good to begin with:

  1. Balanced Scorecard, Translating Strategy into Action, by Robert S. Kaplan and David P. Norton 
  2. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment by Robert S. Kaplan and David P. Norton 
Ramana Metlapalli
Ramana Metlapalli
Ramana is a Managing Principal at Varasi. Ramana is a lifelong learner and eternally curious about what goes into making some individuals and organizations, high performance ones. He writes about Business Analysis, Salesforce best practices and the world of Consulting.