How to Use Balanced Scorecard to Develop Key Performance Indicators

How to Use Balanced Scorecard to Develop Key Performance Indicators

Balanced Scorecard was first proposed by Dr. Kaplan and Norton in 1992 and has since evolved into a strategic planning tool. Many big corporations around the world have adopted the Balanced Scorecard in its full scale operation. Incidentally, Strategy Map is one of the tools used within the concept of Balanced Scorecard.

Using Balanced Scorecard concept is an effective way to translate shareholder expectations into Key Performance Indicators for an organization. This article writes about how to use a Strategy Map to translate an expectation from shareholder into a set of key Performance Indicators.

I am going to share with you how I used Strategy Map to translate shareholder expectations into Key performance Indicators and to use them as a dashboard for performance monitoring and tracking of the business performance for busy entrepreneur, businessman or executive shareholders.

What is a Strategy Map?

It is a process to translate strategy into strategic objectives in the four perspective of Balanced Scorecard. Each of these Strategic objectives are required to be inter-dependent with each other. To develop the inter-dependency of each of these objectives, a commonly known “cause and effect “ relationship was used to perform it. A well aligned strategic objectives should be well aligned for a common goal i.e. supporting each others to achieve the shareholder’s expectations. The four perspectives of Balanced Scorecard are stated below:-

  1. Financial Perspective
  2. Customer Perspective
  3. Process Perspective
  4. Learning and Growth

When do you perform a Strategy Mapping?It is performed usually as part of a Strategic Planning Process after a strategy is developed. Depending on the frequency of your strategic planning, is should be treated as part of the Strategic Planning process.

Who should perform the Strategy Mapping?

Ideally, it should be performed by the same group of people who did the Strategic Planning Process. However, some CEO argue that since the Strategies are fixed, there is no need for the CEO to be involved in developing the Key Performance Indicator (KPI) One of the reasons for such a behavior is understandable because the CEO may already a goal for his strategies. Hence, to him, doing a Strategic Map to develop the KPI is an academic exercise.

In conclusion, you have to decided which path you want your team to take. If at all you want to develop the Key Performance Indicators based on the four perspectives, then you should learn how to perform the Strategy Map effectively. To help you with the understanding, I am going to publish my article “ How to perform a Strategy Map”.

About the Author: Dr. LM Foong, PhD
He publishes TQM articles, ebooks, case studies, trainer manual and presentation slides. Please Visit my Web Site for other TQM related matters.

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