The scorecard lets them introduce four new management processes that, separately and in combination, contribute to linking long-term strategic objectives with short-term actions.(See the exhibit “Managing Strategy: Four Processes.”) —helps managers build a consensus around the organization’s vision and strategy.The scorecard allowed companies to track financial results while monitoring progress in building the capabilities needed for growth.The tool was not intended to be a replacement for financial measures but rather a complement—and that’s just how most companies treated it.Used this way, the scorecard addresses a serious deficiency in traditional management systems: their inability to link a company’s long-term strategy with its short-term actions.
The third process——enables companies to integrate their business and financial plans.
Almost all organizations today are implementing a variety of change programs, each with its own champions, gurus, and consultants, and each competing for senior executives’ time, energy, and resources.
Managers find it difficult to integrate those diverse initiatives to achieve their strategic goals—a situation that leads to frequent disappointments with the programs’ results.
After agreeing on performance measures for the four scorecard perspectives, companies identify the most influential “drivers” of the desired outcomes and then set milestones for gauging the progress they make with these drivers. Thus, at any point in the implementation, managers can know whether the strategy is working—and if not, why. By going beyond traditional measures of financial performance, the concept has given a generation of managers a better understanding of how their companies are really doing.
By supplying a mechanism for strategic feedback and review, the balanced scorecard helps an organization foster a kind of learning often missing in companies: the ability to reflect on inferences and adjust theories about cause-and-effect relationships. These nonfinancial metrics are so valuable mainly because they predict future financial performance rather than simply report what’s already happened.