The Balanced Scorecard:

A Key Enabler to Business Transformation

Example of a Balanced Scprecard using visual indicators for performance updates provided by Q1 Macros at:
https://www.qimacros.com/quality-tools/balanced-scorecard/
 The Balanced Scorecard:
A Key Enabler to Business Transformation

A key enabler to company-wide transformation rather you are engaged in a $10M private small
business transformation or a Fortune 500 global enterprise business transformation, is a well-
articulated, understood, & actionable strategy integrated with a strong metrics-centered performance
management system aligned to short and long term “SMART” strategic objectives (Specific,
Measurable, Aggressive, Relevant, Timebound). Rather focused on annual business plans or long-term
(3yr, 5yr, 10yr+) strategic plans, the “Balanced Scorecard” should be a critical element of any holistic
transformation strategy deployment, business operating system implementation, or any major action
plan focused on progress towards company vision and in working to achieve key business goals or
objectives.
Michael Dugger, President/CEO
Transformation Solutions, Inc

As a best practice tool core to effective performance management systems, The “Balanced Scorecard” is a key
foundation for enterprise transformation and the Lean Six Sigma Transformation Deployment and robust operating
systems for stabilizing, optimizing, and systemizing robust daily management standards based on best practices.
Starting at the very top of any business or organization, these strategically selected and aligned “success metrics”
should be cascaded across all business teams and functions and down to front lines with the primary objective of
reassuring that all the key business elements are linked and aligned based on the direction of the overall business.
This ensures that success is clearly defined at each level of the organization and that all the key organizational
elements of an effectively designed business including: People, Processes, Plans/Projects, & Products/Services are
linked and aligned to a common performance management infrastructure that clearly defines the success of the
overall company, holistically, by providing cascaded/aligned scorecards of success metrics, often referred to as
“Key Performance Indicators” (a.k.a. KPIs), for every element and individual within the organization, front line to
top echelon.
Standardized Key Performance Indicators (KPIs) and clear goals are key to the success of any performance
management system, and likewise using Balanced Scorecards to deploy a clear definition of success across an
organization requires a clearly defined set of success metrics, and the consistent use of related “SMART” goals
(Specific, Measurable, Aggressive, Relevant, Timebound) and strategic objectives when linked to the “key business
elements” mentioned (People, Processes, Plans/Projects, & Products/Services).
If an organization’s strategic objectives are not linked and aligned to the level of individual people and core
business processes, then the company will continue to have significant gaps preventing them from becoming
market leaders in delivering excellent customer value, and therefore will struggle to stabilize, much less drive
dramatic profitable growth. In the illustration below, there is substantial statistical data that clearly demonstrates
that the businesses that tend to be “in the “LEADING” percentiles of their respective industry and or market/s,
consistently are able to prove that they have integrated a robust performance management system with cascaded
success metrics from top of organization to front lines integrated with company short and long term plans and that
align business objectives across the key elements of the organization’s structure or framework. These scorecards
and KPIs are key to employee engagement and enabling the progression towards company vision and goal
attainment. All employees must understand their role in achieving organizational objectives within their scope of
responsibility, have a clear idea of how they can positively contribute to successful strategy execution and
transformation, and understand that they have both the accountability and the authority to identify opportunities
and to lead continuous improvement within their respective areas of expertise and focus.
 The Balanced Scorecard:
A Key Enabler to Business Transformation

The three main functions of the balanced scorecard:

1. Communication of clear short- and long-term goals to the business unit and even individual level
2. Cascading top level goals across all teams and levels and making links to individual levels and teams clear
3. Building a performance focused culture of accountability for delivering customer value and continuously
seeking to improve

Communication
Based on much research, strategy plans often either do not exist in a formally documented or distributed format
or are a mystery to non-management roles and even front line supervisor positions, especially to many of the
employees within privately held companies. Assuming most organizations have a documented strategy,
communication of the strategy is often lost in translation, particularly to the broader population of the hourly
workforce. Plans have often been treated as highly confidential, and strategy plans made available are too difficult
for all employees to clearly understand how they can help drive results in their own role and daily responsibilities.
Today, many companies are being more transparent and engaging broadly across the organizations in their
strategic planning processes and even KPI performance reviews so that employees at all levels are treated as
business partners, empowering them and holding accountable to engage in continuous improvement efforts and
take ownership of performance, especially within the immediate scope of their respective roles. Companies are
learning that by engaging the entire workforce to drive improvement in the key processes and KPIs that they most
significant influence and impact relative to their roles within the organization, they are able to reach new
breakthrough levels of performance. Many of the top performing organizations benchmarked make all levels of
their scorecards available to the entire work force, while some do require some confidentiality at their highest
tiers related to direct financial KPIs and strategic objectives as these can be significantly sensitive and considered
confidential especially in private companies who are not required to disclose financial performance data to the SEC
and public due to investor rights to specific accounting information as found in Annual reports. This includes using
clear “SMART” goals embedded in the strategy and linking throughout the enterprise to the front lines and
individual level. It is critical that strategy plans be based on closing performance gaps in standardized tier1 key
metrics. This enables leadership to effectively cascade and communicate relevant success targets throughout the
enterprise.

Cascading Links
At the enterprise level, it is critical that the tier 1 KPIs align to the strategy and is effectively linked to a series of
cascading scorecards, each with specific measures and goals for different organizational levels, roles, and/or
groups, it begins to make strategy actionable. Using SMART goals for the enterprise top KPIs should clearly defines
what it means to achieve the enterprise. The organization must make sure that identical key performance indicator
calculations are being used at the lower and higher levels so that the comparisons will be accurate and consistent.

Accountability
Accountability is key to achieving short term and long-term organizational objectives. With clearly defined Key
Performance Indicators (KPIs) that are logically cascaded throughout the enterprise, all employees should
understand their role and ultimate responsibility and how it is linked to the company’s success. The KPIs should be
integrated into human performance management systems to ensure all employees have ownership of the
enterprise, business unit, and/or site level results.