Balanced Scorecard STEP-BY-STEP: Maximizing Performance and Maintaining Results and Balanced Scorecard STEP-BY-STEP: For Government and Nonprofit Agencies

Citation

Narasimhan, K. (2004), "Balanced Scorecard STEP-BY-STEP: Maximizing Performance and Maintaining Results and Balanced Scorecard STEP-BY-STEP: For Government and Nonprofit Agencies", Measuring Business Excellence, Vol. 8 No. 1. https://doi.org/10.1108/mbe.2004.26708aae.003

Balanced Scorecard STEP-BY-STEP: Maximizing Performance and Maintaining Results and Balanced Scorecard STEP-BY-STEP: For Government and Nonprofit Agencies

Balanced Scorecard STEP-BY-STEP: Maximizing Performance and Maintaining Results and Balanced Scorecard STEP-BY-STEP: For Government and Nonprofit Agencies

Paul R. Niven, John Wiley,ISBN: 0-471-07872-7,2002,hardback,334 pages,$45.00andPaul R. Niven, John Wiley,ISBN: 0-471-07872-7,2003,hardback,305 pages,$45.00DOI 10.1108/13683040410524775

Successful leading companies in the world have used a number of key success factors in addition to financial factors for a long time. However, Kaplan and Norton (1992) proposed an improved performance measurement system called the Balanced Scorecard (BSC). Now, it has evolved to become a management system of strategic importance. As Robert S. Kaplan opines in his foreword to the first book, Paul's books explicate the details and processes that can be followed to implement the BSC measurement and management system to turn strategy into action.

Paul is a management consultant specializing in performance management (PM) and balanced scorecard. He gained experience as a project leader while successfully implementing it at Nova Scotia Power, Canada, and has developed PM systems for all types of organizations.

Both books contain 14 chapters; however in the general book on BSC the chapters are grouped into five parts and in the book for government and nonprofit agencies the chapters are grouped into four parts. Part one comprising two chapters is similar in both books and is an introduction to performance measurement and the BSC. Chapter one first introduces the limitations of reliance on financial measures of performance and barriers to implementing an organization's strategy. Then the concepts of BSC are introduced and it is explained how BSC can overcome these limitations. In chapter two, Paul briefly explores the benefits that can be derived from an application of BSC in different types of organizations. As the other parts are distinctly different in grouping and contents they would be covered separately in this review. First, a review of the general book is given followed by the specific book on government and nonprofit agencies.

Part two deals with step-by-step development of BSC in five chapters. In chapter three, the rationale for launching a BSC project is considered followed by seven criteria for selecting an organizational unit for its introduction using a weighted-score method. Strategies for communicating the BSC project and pitfalls to avoid are also covered. Chapter four clarifies the four key components or building blocks – mission, core values, vision, and strategy – to which the BSC needs to be aligned. It also provides tools for determining their effectiveness or developing them. Developing effective performance objectives and leading and lagging measures of performance in each of the four quadrants – financial, customer, internal process, and employee learning and growth – that link to the strategy are covered in detail in chapter five. The critical importance of the cause-and-effect linkages among the four quadrants' measures and finalizing a shortlist of performance measures are explored in chapter six. Finally, In chapter seven, the importance of aligning organizational plans and initiatives with the BSC and strategy, the critical role of target setting using different types of targets, and prioritizing initiatives are dealt with succinctly.

The theme of part three is how to embed the BSC in the management system of an organization; and it is covered in three chapters. The critical aspect of "cascading" of the BSC to align every employee's action with the organizational goals is covered in chapter eight. In the following chapter, Paul examines the role of BSC in the budgeting process to align spending with strategy. Chapter ten contains a comprehensive review of methods of linking BSC and incentive compensation – both monetary and non-monetary – at all levels.

The critical issue of reporting of results in gaining support for using BSC, the use of software packages for reporting, and the need for a champion for owing and updating the BSC are dealt with in part four, in two chapters. The final part, comprising two chapters, deals with BSC in the public and not-for-profit sectors and top ten BSC implementation issues.

Part two of the book on government and nonprofit agencies also comprises five chapters, and is titled "Pouring the Foundation for Balanced Scorecard Success". In chapter three, the rationale for launching a BSC project is considered followed by seven criteria for selecting an organizational unit for its introduction, securing executive support and the roles and responsibilities of the BSC team are considered. The role of training and communication planning in the successful implementation of BSC are dealt with in chapter four. Chapter five identifies the link between the three key components or building blocks – mission, core values, and vision – and the BSC and how to determine if the BSC is aligned with the three components. In chapter six, Paul proposes a five-step model of formulating strategy, which is central to the development and successful use of a BSC. In chapter seven (a comparatively short chapter, eight pages) describes how to reach a consensus on definitions of performance measures, an essential step in overcoming misunderstandings.

Developing the BSC forms the theme of part three, comprising two chapters. Chapter eight contains a discussion of graphically describing strategy using a modified form of the BSC perspectives used in industry. Examples from a warfare center, a family access network, and the finance and administrative division of a university are used to explain how to develop strategy maps and maximize their effectiveness. Also covered is the importance of cause-and-effect linkages among the four quadrants' measures. In chapter nine, the attention is turned to types of measures used by public and nonprofit organizations. Input, output and outcome measures to provide leading and lagging indicators of performance in each of the four quadrants – financial, customer, internal process, and employee learning and growth – that link to the strategy are covered in some detail. Ten criteria for selecting performance measures are also provided.

In part four comprising five chapters, Niven explains how to maximize the effectiveness of the BSC. The critical aspect of "cascading" of the organizational BSC, through departmental, and operations group scorecards, to make employees see the connection between their actions and the organizational goals is covered in chapter ten. In the following chapter, Paul examines the role of BSC in linking budgeting/resource allocation to strategy, and describes a five-step process for achieving that linkage. In chapter 12, the critical issue of reporting performance and the selection of software packages for reporting are dealt with. Chapter 13 contains an interview which gives an idea of how the City of Charlotte, North Carolina, USA, has worked with the BSC since introducing it in 1996.

The books are easy to read. Each chapter begins with a roadmap (or an introduction to the chapter) and ends with summary and notes (references for further studies). Tables and exhibits used enhance the understanding of the concepts and their application. The book on government and nonprofit organizations includes a glossary of key terms, which is missing from the other book.

K. NarasimhanLearning and Teaching Fellow, Bolton Institute, UK