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The Balanced Scorecard- Basic Terminology

Posted July 22, 2011 11:30 AM by Henry

Over the past weekend, I was able to spend some time with one of my younger brothers. As younger siblings will do, he began asking me random questions. Eventually, the conversation turned to my work as an associate consultant with Ascendant. He became intrigued by the Balanced Scorecard and continued to ask general questions about the framework. As the conversation moved into more detail, a majority of the questions centered on the specific words and phrases that I was using. In response to these questions, I have decided to define some of the basic vocabulary that I use on a daily basis.

Strategy Map : Communicates on one piece of paper the critical strategic objectives of an organization. It tells the story of your organization.

Buy-in : Yes, this term can refer to the minimum amount of chips required to enter a poker game, but in terms of strategic management, it is when members of an organization (management, staff, etc.) agree with, and embrace, the strategic changes within the organization.

Mission : An organization's unique reason for existence that reflects the values and priorities of the strategy.

Purpose Statement : Outlines the overarching goal that the strategy was designed to achieve, the means by which it will get there, and the scope of the operations.

Objectives : A key element of the strategy that outlines the behavior you want to see in your organization. They are critical success points in achieving the strategy for which measurable results can be obtained. Typically, they are written as an action statement in the verb + adjective + noun format.

Measures : Define the key areas of focus and help answer the question "how are we doing on achieving our strategy?" Each strategy has driver and outcome measures.

Driver Measure : These are input-oriented measures that should have an impact on the outcome measures.

Outcome Measure : These are results-oriented measures that can be difficult to have a direct impact on.

Targets : Goals that define the level of performance or rate of improvement needed.

Initiatives : Key projects or action programs that are required to achieve the strategic objectives. They state what must get done and when.

Perspectives : An organizing framework highlighting common management disciplines. There are four common perspectives, and each asks a different question:

  • Customer : "To achieve our mission, how must we look to our customers?"
  • Financial : "If we succeed, how will we look to our donors or taxpayers?"
  • Internal : "To satisfy our customers and financial donors, which business processes must we excel at?"
  • Learning and Growth : "To achieve our mission, how must our organization learn and improve?"

Themes : Illustrate the cause and effect relationships between the strategic objectives.

KPIs : (Key performance indicators) Measurements that are used to quantify objectives and reflect the critical success factors of an organization.

S.M.A.R.T. : This framework can be used to help in developing effective measures.

  • Specific : Clearly and precisely state what will be measured
  • Measurable : Every measure should be numeric and able to be graphed
  • Actionable : The results are easy to interpret and you should understand the actions that will affect the measure
  • Repeatable : You need to be able to consistently gather the information over time
  • Timely : It needs to be measure at a reasonable frequency

The above list is not intended to be comprehensive, but it would have been helpful for my brother during our conversation, and anyone else looking to understand some of the basic terminology behind the Balanced Scorecard. Please feel free to comment and continue expanding the scope of this list.

 

Brandon, nice post. If anyone wants to learn more terminology related to the Balanced Scorecard and performance management in general, you can go to <a href="http://www.bscwiki.com">www.bscwiki.com<...;. There you can search for terms, edit, and add your own terms as well.

-Ted
# Posted By Ted | 7/22/11 3:40 PM
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