Encyclopedia of Leadership

2.8

MEASURING SUCCESS: THE BALANCED SCORECARD

Inspired by Robert S. Kaplan, David Norton, Joseph and Jimmie Boyett,

David Ulrich, Jack Zenger, and Norman Smallwood.

Until recently, most organizational hard performance scorecard numbers were traditional finan-

cials, like sales, return on capital, profitability, and so on. These numbers were aggregated to

help senior executives make corporatewide decisions. More recently, many organizations are

expanding these financial measures in two ways:

1. balancing harder financial and production measures with softer measures like cus-
   tomer satisfaction and environmental protection; [☛1.7 Results-Based Leaders]


2. generating and sharing significant measures with leaders at all levels. [☛4.6 Open-Book
   Leadership]

Measures and scorecards are necessary, encapsulated in the sayings “What gets measured,

gets done” and “Hard drives out soft.” The most common traditional business measure is

money, for the individual as well as for the organization: salary, stock options, bonuses, assets.

Recently, however, demand has arisen for other, more balanced measures andfor more bal-

anced lifestyles, as a result of the impact of such phenomena as the quality movement, the

information age, knowledge workers, virtual e-commerce, and environmental awareness.

Besides finding balanced measures for the success of your organization, business unit, pro-

ject, or yourself, this tool speaks for more balanced measures of success for individual and team

performance. It is a challenge to find the right balance of success measures for performance

management. For instance, some organizations have set up bonus systems to reward individu-

als who excelled—only to see them excel at the expense of others! People are smart about

working the system.

This tool presents a number of measures in a number of categories to help you choose, for

yourself personally and for your organization, a more balanced set of success measures. The dif-

ficulty is to select a small set of numbers that are significant and representative of the success

of the organization, as well as being significant to the individual using them. Some suggestions

are provided here for selecting the best measures. As you look at these measures, consider

which would be appropriate for each level of your organization: executives, business unit lead-

ers, and project leaders.

SECTION 2 TOOLS FORBIG-PICTURETHINKING 65

Scorecard measurement areas Some potential measures

Financial Success Measures

(Traditional measures extended to

many more leaders.)

Strategic Measures

(The measures of success supporting

the direction of the organization.)

Stakeholder Measures

(Customers, clients, suppliers,

regulators, unions, and other business

partners.)

Operating income, return on capital, sales, sales growth, profit margin, prof-

itability, revenue per unit, unit costs, and the like.

Look to your strategic direction statements for measures. Some measures may

include innovation, growth, new markets, new product development, organiza-

tional capabilities, and the like.

Customer or client satisfaction, retention, growth, service, returns and warranty

claims, on-time delivery, value-added measures, and the like.

Supplier satisfaction, quality, on-time delivery, rejects.

Regulatory disputes, legislation influence, and the like.