Measuring enterprise performance

In modern business models, intangible assets such as employee skills and knowledge levels, customer and supplier relationships, and an innovative culture are critical in providing the much-needed cutting-edge to the organisation. This is where tools like the balanced scorecard method hold relevance for the enterprise.

Developed by Robert Kaplan and David Norton, the balanced scorecard method translates an organisation’s strategy into performance objectives, measures, targets and initiatives. It is based on four balanced perspectives, and links them together with the concept of cause and effect. Paul Niven’s book is a work that attempts to explore this crucial business aid.

A proper balanced scorecard can predict the effectiveness of an organisation’s strategy through a series of linked performance measures based on four perspectives including finance, customers, internal processes and employee learning and growth. It is based on common-sense principles—increased financial returns, greater employee alignment to overall goals, improved collaboration, and unrelenting focus on strategy.

This book is divided into five parts and 14 chapters. In the first part, the reader is introduced to performance measurement and the balanced scorecard method.

Title : Balanced Scorecard Step-By- Step: Maximizing Performance and Maintaining Results Author : Paul R Niven Publisher : John Wiley & Sons Available through : www.oxfordbookstore.com Pages : 334 Price : Rs 2,124

Chapter one highlights how the scorecard method solves two fundamental issues of modern business. These issues are reliance on financial performance measures and strategy implementation.

Four barriers prevent successful strategy implementation in an organisation. These are vision, people, resource, and management barriers. The balance in the balanced scorecard method is the balance between financial and non-financial indicators, internal and external constituents of the organisation, as well as lead and lag indicators.

The second chapter focusses on the rising prominence of human capital in today’s enterprise. A substantial amount of an organisation’s value is derived from its intangible assets.

The second part provides a detailed review and description of elements necessary to use this method. This examination starts from the third chapter which examines the objectives of the balanced scorecard, how to secure executive sponsorship, how to create a team, and how to prepare a development plan. The fourth chapter talks about the core elements of the effective balanced scorecard method. The fifth chapter gives an in-depth view of what it takes to build indicators that act as faithful translation of strategy.

The sixth chapter explains the right perspectives for an organisation. This involves topics such as how it can gather relevant background material, and how to measure the four perspectives and narrow the performance measures to a select few that form a cause-effect link to describe an organisation’s strategy. The seventh chapter deals with how to set targets. It reviews different types of targets to ensure that organisational plans and initiatives are aligned with the balanced scorecard and strategy.

The third part focusses on how the scorecard can be used as a strategic management tool. Chapter eight highlights how to align every employee’s actions with the overall organisational goal. This helps the organisation to enjoy the benefits of the employee’s increasing knowledge, and focus on key strategies. Chapter nine focusses on the role of the balanced scorecard in budget processing, and the specific techniques used to align spending with strategies. The tenth chapter reviews critical compensation planning and design elements.

Part four focusses on how to sustain the balanced scorecard success. It also deals with topics such as whether an organisation should buy performance management software off the shelf or create its own reporting solution.

The fifth part examines how the balanced scorecard is used in the public and non-profit sectors. It also highlights the top ten implementation issues.

This book can guide not only those who want to use the balanced scorecard for the first time, but it will also be useful for those organisations which have been using the balanced scorecard for some time because they will be able to audit their system to get the most from it.

— Kumar Dawada