For much of the 20th century, the main measures used to assess organizational performance were mainly financial ratios. The measures were focused narrowly on shareholders and debt capital providers. By the 1980s, management leaders began to call for broader metrics. The concept of the balanced scorecard (BS) emerged during the early 1990s. A balanced scorecard strategy is an organization strategy aimed at achieving a set of balanced scorecard goals, not just a limited set of financial targets.

The BS serves both as a strategy formulation framework and as a monitoring system. It helps management develop a strategy in line with its vision and then develop a broadly based set of performance metrics consistent with that strategy. The scorecard encourages performance that will satisfy the demands not only of investors, but also those of employees, customers, suppliers, the public and government.

Given its broadly-based viewpoint, a BS strategy represents a tough task for managers. It requires them to achieve many targets simultaneously. The BS concept requires managers to define not only financial targets, but also targets for the areas of the customer, business process plus learning and growth.

As a result, BS strategies pose a significant challenge because they force organizations to hit a large number of detailed targets. Organizations in all sectors of the economy are required to perform to target. That includes private, government and non-profit organizations. Since the vision and goals of these organizations vary greatly, so too must their performance metrics.

In much the same way that the structure of an organization follows its strategy, performance metrics also must be designed to match strategy. Selection of appropriate metrics involves four critical steps. First, management must select the issues deserving measurement. Second, it must develop relevant metrics. Third, management must set appropriate targets. Finally, it must monitor and manage progress towards those targets.

The customer perspective seeks to ensure that efforts of the firm are fully aligned with the needs and satisfaction of the customer. Performance in this area is clearly a leading indicator of financial performance. If customer satisfaction begins to wane, sales will falter and profitability soon decrease.

To recap, hundreds of organizations have embraced the BS concept and developed a balanced scorecard strategy. External consultancies have equipped themselves to assist firms with the associated methodologies and techniques. A Balanced Scorecard Institute has been founded to organize training in partnership with the George Washington University. The institute emphasizes that the BS is a true management system, not just a measurement tool.

eNth Dimension is a team of experienced CPM program consultants who can assist your organization in the design and development of a Corporate Performance Management System. They specialize in data warehousing, business intelligence, and balanced scorecard strategy. (http://enthdimension.com)