Balanced Scorecards

Whilst a Strategy Map is a tool for developing and visualising strategy, a Balanced Scorecard is a measure of the level of performance to KPIs that represent that strategy. It is useful to use both the Strategy Map and the BSC in tandem – the former representing "What are the Objectives that we need to measure performance against?" and the latter representing "How are we performing against those objectives?"

Therefore, the BSC is more a feedback mechanism than a strategy development tool. It gives management a balanced view of the overall performance of the organisation from a viewpoint that each Perspective provides – see below for a typical BSC.

Strategy Maps are transformed into Balanced Scorecards (BSCs) by following a 3-part process: Developing Measures (KPIs), Defining Measures and Setting Targets.

Measures (KPIs)

Note: Measures are also known as KPIs – the term KPI (Key Performance Indicator) is a "Personalised form" of a Measure. A Measure in a Balanced Scorecard is a "quantified" Objective from a Strategy Map. For example, an Objective in an iron ore mine may be to "be the lowest cost iron ore producer" the equivalent Measure or KPI would be "Cost per tonne" and a target could be "$23/tonne".

Define Measures

"Measures" or KPIs. Note need accurate, unambiguous descriptions so that misinterpretation of confusion is avoided, and there is a uniformity in understanding across the organisation.

Set Targets

Measures or KPIs require Targets that are both aligned with and cascaded from the highest level Targets on Balanced Scorecards. For example, if the sales targets for an organisation were "$100 million per quarter" and there were ten equal divisions, the target for each division would be "$10 million per quarter". Likewise, the target of $10 million per quarter at division level could be further cascaded to retail outlet level – e.g. five equal shops would each have targets of "$2 million per quarter".