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The baked scorecard is a powerful management tool for strategy execution used as a true strategy scorecard, it can help management not only execute strategy but also refine it. Let's examine an important use of the balanced scorecard framework in today's business environment-- strategy evaluation and refinement.
The Balanced Scorecard
The balanced scorecard, as developed by Robert Kaplan and David Norton (The Balanced Scorecard: Translating Strategy Into Action, Harvard Business School Press, 1996), is a strategy-focused approach to performance management that includes performance measures derived from the organization's vision and strategy. Scorecards include strategic objectives and performance measures in a hierarchy of areas, such as financial, customer, internal processes, and innovation. The strategic objectives and performance measures within the balanced scorecard framework are derived from the vision and strategy of the organization. Companies using the balanced scorecard include ABB Switzerland, AT&T Canada, Chemical Bank, Hilton Hotels, Sears, UPS, Wells Fargo Online Financial Services, and Wendy's International. The U.S. Army also has recently adopted it as part of its Strategic Readiness System.
The balanced scorecard provides a hierarchical framework that management can use to link or connect the unique strategic activities to the ultimate goal of financial value creation. At the top of the framework is financial performance, which is driven by a unique customer value proposition. This is in turn delivered by the right set of business processes (the value chain). At the base of the hierarchy is innovation and growth, which provide the capabilities and infrastructure for a continually evolving value proposition and processes. The cause-andeffect linkages within the balanced scorecard hierarchy can be powerful tools for strategy evaluation.
The IMA Survey
Some of the recent IMA surveys on performance management reflect these cause-andeffect linkages (Frigo, "Strategy, Business Execution, and Performance Measures," Strategic Finance, May 2002). The surveys found that, for balanced scorecard...