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1、Excellence in Financial ManagementCourse 11: The Balanced Scorecard Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides a step-by-step guide on how to build a Balanced Scorecard. An understanding of strategic planning is recommended prior to taking this course. Refer to Course 10 on strat
2、egic planning. This course is recommended for 2 hours of Continuing Professional Education. In order to receive credit, you will need to pass a multiple-choice exam which is administered by installing the exe file version of this short course. The exe file can be downloaded from Revised: February 4
3、, 2002Basic Concepts Accountants communicate with financial statements. Engineers communicate with as-built drawings. Architects communicate with physical models. It seems that almost every profession has some means of communicating clearly to the end user. However, for people engaged in strategic p
4、lanning there has been an on-going dilemma. The finished product, the strategic plan, has not communicated and reached the end user. Sure strategic plans are nice to look at, full of bar charts, nice covers, well written, and professionally prepared; but they simply have not impacted the people who
5、must execute the strategic plan. The end result has been poor execution of the strategic plan throughout the entire organization. And the sad fact of the matter is that execution of the strategic plan is everybodys business, not just upper level management. Upper level management creates the strateg
6、y, but execution takes place from the bottom up. Chapter1So why do strategic plans fail? According to the Balanced Scorecard Collaborative, there are four barriers to strategic implementation:1. Vision Barrier No one in the organization understands the strategies of the organization.2. People Barrie
7、r Most people have objectives that are not linked to the strategy of the organization.3. Resource Barrier Time, energy, and money are not allocated to those things that are critical to the organization. For example, budgets are not linked to strategy, resulting in wasted resources.4. Management Barr
8、ier Management spends too little time on strategy and too much time on short-term tactical decision-making.Only 5% of the workforce understands their company strategy.Only 25% of managers have incentives linked to strategy.60% of organizations dont link budgets to strategy.86% of executive teams spe
9、nd less than one hour per month discussing strategy. Balanced Scorecard Collaborative Therefore, we need a new way of communicating strategy to the end-user. Enter the Balanced Scorecard. At long last, strategic planners now have a crisp and clear way of communicating strategy. With balanced scoreca
10、rds, strategy reaches everyone in a language that makes sense. When strategy is expressed in terms of measurements and targets, the employee can relate to what must happen. This leads to much better execution of strategy. Not only does the Balanced Scorecard transform how the strategic plan is expre
11、ssed, but it also pulls everything together. This is the so-called “cause and effect” relationship or linking of all elements together. For example, if you want strong financial results, you must have great customer service. If you want great customer service, you must have excellent processes in pl
12、ace (such as Customer Relations Management). If you want great processes, you must have the right people, knowledge, and systems (intellectual capital). In the past, many components for implementing a strategic plan have been managed separately, not collectively within one overall management system.
13、 As a result, everything has moved in different directions, leading to poor execution of the strategic plan. Like a marching band, everyone needs to move in lockstep behind one overall strategy. Therefore, you should think of the Balanced Scorecard as a management system, not just another performanc
14、e measurement program. And since strategy is at the center of value-creation for the organization, the Balanced Scorecard has become a critical management system for any organization. In 1997, Harvard Business Review called the Balanced Scorecard one of the most significant business developments of
15、the previous 75 years. Balanced Scorecards provide the framework around which an organization changes through the execution of its strategy. This is accomplished by linking everything together. This is what makes the Balanced Scorecard so different; it captures the cause and effect relationship thro
16、ughout every part of the organization. In the case of Mobil Oil, the truck driver pulls a balanced scorecard off the visor in his cab, outlining the five things he must do as a truck driver. Like a laser beam, strategy now has a clear path to everyone in the organization. Balanced Scorecards tell you the knowledge, sk
