Starting in the 90s, the Balanced Scorecard system (also called Dashboard or Balanced Scorecard) has been installed in the business world as the most rigorous and effective methodology to measure the performance of those aspects of the company considered intangibles, such as human capital, information and culture.
This system allows you to quantify your business strengths from four perspectives:
- Economic-financial measures Customers Internal processes; and Human Resources
The topic was originally developed by Robert S. Kaplan (HBS professor) and David P. Norton in two important books: The Balanced Scorecard: translating strategy into action (1996) and The strategy-focused organization: how Balanced Scorecard companies thrieve in the new business enviroment (2000).
Recently the same authors have launched their new book Strategy Maps: converting intangible assets into tangible outcomes (2004) in which they have completed the original model based on the four perspectives mentioned above, adding a dynamic of time-based strategies. In simple terms this means incorporating the Strategic Map as a complementary tool to the Balanced Scorecard.
But how does the use of Strategy Maps benefit a corporation?
A Strategic Map offers us a visual representation of the organization's Strategy. This is really a typical example of how a picture is worth a thousand words.
The Economic, Financial and Customer Perspectives describe the company's results, while the Internal Processes and Human Resources Perspectives describe how we intend to achieve those results.
On the other hand, the discipline to create the Strategic Map commits the entire executive team, achieving greater clarity and commitment to the Strategy.
Once created, the Map becomes a powerful communication tool that allows all employees to understand the Strategy, thus facilitating the success of the organization. At the same time, it streamlines executive meetings by providing a representation that allows you to quickly see which aspects of the Strategy are succeeding and which are not meeting expectations. The causal relationship allows managers to verify the theoretical Strategy in practice.
Does company size matter before considering map implementation? Who is in charge of its operation?
It has been observed that in companies with no more than 25 employees its application has been very effective, and in larger companies it also helps to align the multiple units of the company. The vast majority of companies designate a person in charge of the Map. This person ensures continuous data entry, maintenance, compliance and organization of monthly reports, and prepares the agenda for management meetings on the performance of the Strategy.
In larger organizations, the process is carried out by the team dedicated to Company Strategy. This office is especially in charge of the process of periodic review and updating of the Map and provides a central resource to implement the five management processes that allow the company to strategically focus: mobilize, translate, align, motivate and sustain.
An important part of the work of this team aims to reinforce the discipline to ensure that the Strategies achieve the specific objectives for shareholders and clients, to formulate a commercial proposal that adds value in an explicit way; and internally to create and deliver said proposal, align human resources, technological information and cultural organization.
The framework of the Strategic Map allows companies to identify and unite the internal process with the human, the informative and the capital organization in order to achieve the different commercial proposal. Thus, the Strategic Map and the Balanced Scorecard translate the strategy into specific objectives, measures, targets and initiatives in the four perspectives. In other words, it allows you to translate, communicate, implement and review the Strategy.
A substantial part of our methodology is to be completely general and open; Any strategic framework adopted by a company needs to be translated and communicated across all business units and all employees in order to implement the Strategy effectively.
Strategy Maps help deepen the concept of alignment. What follows is to work on the governance aspects of the Balanced Scorecard integrating attaching boards of directors and shareholders.
