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The balanced scorecard : measures that drive performance

17 Apr 2015-
TL;DR: A "balanced scorecard" is developed, a new performance measurement system that gives top managers a fast but comprehensive view of the business and complements those financial measures with three sets of operational measures having to do with customer satisfaction, internal processes, and the organization's ability to learn and improve.
Abstract: Frustrated by the inadequacies of traditional performance measurement systems, some managers have abandoned financial measures like return on equity and earnings per share. "Make operational improvements and the numbers will follow," the argument goes. But managers do not want to choose between financial and operational measures. Executives want a balanced presentation of measures that allow them to view the company from several perspectives simultaneously. During a year-long research project with 12 companies at the leading edge of performance measurement, the authors developed a "balanced scorecard," a new performance measurement system that gives top managers a fast but comprehensive view of the business. The balanced scorecard includes financial measures that tell the results of actions already taken. And it complements those financial measures with three sets of operational measures having to do with customer satisfaction, internal processes, and the organization's ability to learn and improve--the activities that drive future financial performance. Managers can create a balanced scorecard by translating their company's strategy and mission statements into specific goals and measures. To create the part of the scorecard that focuses on the customer perspective, for example, executives at Electronic Circuits Inc. established general goals for customer performance: get standard products to market sooner, improve customers' time-to-market, become customers' supplier of choice through partnerships, and develop innovative products tailored to customer needs. Managers translated these elements of strategy into four specific goals and identified a measure for each.
Topics: Balanced scorecard (69%), Strategy map (66%), Performance measurement (64%), Customer satisfaction (61%), Return on equity (50%)
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Journal ArticleDOI
TL;DR: Following a comprehensive review of the literature, proposes a research agenda that focuses on the process of performance measurement system design, rather than the detail of specific measures.
Abstract: The importance of performance measurement has long been recognized by academics and practitioners from a variety of functional disciplines. Seeks to bring together this diverse body of knowledge into a coherent whole. To ensure that the key issues are identified, focuses on the process of performance measurement system design, rather than the detail of specific measures. Following a comprehensive review of the literature, proposes a research agenda.

3,154 citations


Cites background from "The balanced scorecard : measures t..."

  • ...There are various ways in which these performance measures can be categorized, ranging from Kaplan and Norton's (1992)...

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Journal ArticleDOI
Abstract: We describe why human resource management (HRM) decisions are likely to have an important and unique influence on organizational performance. Our hope is that this research forum will help advance ...

3,052 citations


Cites background from "The balanced scorecard : measures t..."

  • ...There is clearly a need to fill in this gap at the business-unit level and to pay attention not only to traditional financial outcomes, but also to intermediate and process-related criteria that indicate how financial results are achieved (see, for example, Kaplan and Norton's [1992] "balanced scorecard" approach)....

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Journal ArticleDOI
TL;DR: The paper identifies the terminology or ontology used to describe a business model, and compares this terminology with previous work, and the general usages, roles and potential of the concept are outlined.
Abstract: This paper aims to clarify the concept of business models, its usages, and its roles in the Information Systems domain. A review of the literature shows a broad diversity of understandings, usages, and places in the firm. The paper identifies the terminology or ontology used to describe a business model, and compares this terminology with previous work. Then the general usages, roles and potential of the concept are outlined. Finally, the connection between the business model concept and Information Systems is described in the form of eight propositions to be analyzed in future work.

2,822 citations


Cites background or methods from "The balanced scorecard : measures t..."

  • ...…facilitate the choice of the indicators of an executive information system for monitoring strategy implementation [Camponovo and Pigneur 2004], using for example a balanced scorecard approach with its financial, customer, internal business, and innovation perspectives [Kaplan and Norton 1992]....

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  • ...The balanced scorecard [ Kaplan and Norton 1992 ] is a decision support tool at...

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  • ...Revenue Model Adapted from Kaplan and Norton [1992]...

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  • ...and innovation and learning perspectives outlined in the balanced scorecard approach [ Kaplan and Norton 1992 ]....

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Journal ArticleDOI
Abstract: Several years ago we introduced the Balanced Scorecard (Kaplan and Norton 1992). We began with the premise that an exclusive reliance on financial measures in a management system is insufficient. Financial measures are lag indicators that report on the outcomes from past actions. Exclusive reliance on financial indicators could promote behavior that sacrifices long-term value creation for short-term performance (Porter 1992; AICPA 1994). The Balanced Scorecard approach retains measures of financial performance--the lagging outcome indicators--but supplements these with measures on the drivers, the lead indicators, of future financial performance. THE BALANCED SCORECARD EMERGES The limitations of managing solely with financial measures, however, have been known for decades. [1] What is different now? Why has the Balanced Scorecard concept been so widely adopted by manufacturing and service companies, nonprofit organizations, and government entities around the world since its introduction in 1992? First, previous systems that incorporated nonfinancial measurements used ad hoc collections of such measures, more like checklists of measures for managers to keep track of and improve than a comprehensive system of linked measurements. The Balanced Scorecard emphasizes the linkage of measurement to strategy (Kaplan and Norton 1993) and the cause-and-effect linkages that describe the hypotheses of the strategy (Kaplan and Norton 1996b). The tighter connection between the measurement system and strategy elevates the role for nonfinancial measures from an operational checklist to a comprehensive system for strategy implementation (Kaplan and Norton 1996a). Second, the Balanced Scorecard reflects the changing nature of technology and competitive advantage in the latter decades of the 20th century. In the industrial-age competition of the 19th and much of the 20th centuries, companies achieved competitive advantage from their investment in and management of tangible assets such as inventory, property, plant, and equipment (Chandler 1990). In an economy dominated by tangible assets, financial measurements were adequate to record investments on companies' balance sheets. Income statements could also capture the expenses associated with the use of these tangible assets to produce revenues and profits. But by the end of the 20th century, intangible assets became the major source for competitive advantage. In 1982, tangible book values represented 62 percent of industrial organizations' market values; ten years later, the ratio had plummeted to 38 percent (Blair 1995). By the end of the 20th century, the book value of tangible assets accounted for less than 20 percen t of companies' market values (Webber 2000, quoting research by Baruch Lev). Clearly, strategies for creating value shifted from managing tangible assets to knowledge-based strategies that create and deploy an organization's intangible assets. These include customer relationships, innovative products and services, high-quality and responsive operating processes, skills and knowledge of the workforce, the information technology that supports the work force and links the firm to its customers and suppliers, and the organizational climate that encourages innovation, problem-solving, and improvement. But companies were unable to adequately measure their intangible assets (Johnson and Kaplan 1987, 201-202). Anecdotal data from management publications indicated that many companies could not implement their new strategies in this environment (Kiechel 1982; Charan and Colvin 1999). They could not manage what they could not describe or measure. INTANGIBLE ASSETS: VALUATION VS. VALUE CREATION Some call for accountants to make an organization's intangible assets more visible to managers and investors by placing them on a company's balance sheet. But several factors prevent valid valuation of intangible assets on balance sheets. …

1,957 citations


Journal ArticleDOI
Abstract: The authors conduct a meta-analysis that aggregates empirical findings from the market orientation literature. First, the study provides a quantitative summary of the bivariate findings regarding the antecedents and the consequences of market orientation. Second, the authors use multivariate analyses of aggregate study effects to identify significant antecedents of market orientation and the process variables that mediate the relationship between market orientation and performance. In addition, using regression analysis, the authors find that the market orientation–performance relationship is stronger in samples of manufacturing firms, in low power-distance and uncertainty-avoidance cultures, and in studies that use subjective measures of performance. The authors also find that the market orientation–performance correlation is stronger for both cost-based and revenue-based performance measures in manufacturing firms than in service firms. On the basis of the findings, the authors conclude with a ...

1,893 citations


Performance
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No. of citations received by the Paper in previous years
YearCitations
20223
2021298
2020398
2019483
2018511
2017635