Business Intelligence/Create and disseminate scorecard
- Purpose: To create the frame scorecard based on the strategy map
- Input: Strategy Diagram, Strategy Map the most important
- Activities: Create and disseminate scorecard
- Outputs: Slice of strategy map for theme or decision maker (Scorecard)
- Documents: Scorecard
Scorecard: Aligning Strategy with Operational Activities
“The Balanced Scorecard is a performance management tool. It began as a concept for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy. Organizations were encouraged to measure, in addition to financial outputs, those factors which influenced the financial outputs. The underlying rationale is that organizations cannot directly influence financial outcomes, as these are ‘lag ’measures, and that the use of financial measures alone to inform the strategic control of the firm is unwise. Organizations should instead also measure those areas where direct management intervention is possible. In so doing, the early versions of the Balanced Scorecard helped organizations achieve a degree of "balance" in selection of performance measures. In practice, early Scorecards achieved this balance by encouraging managers to select measures from three additional categories or perspectives: ‘Customer,’ ‘Internal Business Processes ’and ‘Learning and Growth.’” -Norton and Kaplan
Understanding Business Intelligence requires, first and foremost, an understanding of the balanced scorecard as a performance management methodology. Business Intelligence is a tool for examining strategy and managing performance. The Balanced Scorecard is a performance management tool. They are therefore joined at the hip
It began as a concept for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy. Stated differently, the purpose of the scorecard is to align vision and mission to customer requirements and day-to-day work (Howard Rohm). Scorecards also allow companies to manage and evaluate strategy. It accomplishes this by linking strategic themes and objectives to measures of operational excellence. In order to understand the role of the scorecard in Business Intelligence it is first necessary to discuss quantitative methodology.
What is a scorecard?
Cobbold and Lawrie identify key components of a 3rd Generation Balanced Scorecard (2002), quoted verbatim: [ http://www.2gc.co.uk/pdf/2GC-CP-ClassBSC-090311.pdf PDF]
- Destination Statement: In order to make rational decisions about organizational activity and not least set targets for those activities, an enterprise should develop a clear idea about what the organization is trying to achieve (Senge 1990, Kotter 1995). A destination statement describes, ideally in some detail, what the organization is likely to look like at an agreed future date (Olve et al. 1999 and Shulver et al. 2000). In many cases this exercise builds on existing plans and documents - but is rarely in practice to find a pre-existing document that offers the necessary clarity and certainty to fully serve this purpose within an organization.
- Strategic Objectives: The destination statement offers a clear and shared picture of an organization at some point in the future, but it does not provide a suitable focus for management attention between now and then. What needs to be done and achieved in the medium term for the organization to "reach" its destination on time is agreed upon in the form of objectives or priorities. By representing the selected objectives on a "strategic linkage model", the design team is encouraged to apply "systems thinking" (Senge 1990; Senge et al. 1999) to identify cause-and-effect relationships between the selected objectives i.e. what do we need to do to achieve the results we expect. This approach also helps ensure the objectives chosen are mutually supportive and represent the combined thinking of the team's high-level perception of the business model.
- Strategic Linkage Model and Perspectives: The chosen strategic objectives are spread across four zones or 'perspectives'. The lower two perspectives contain objectives relating to the most important activities in terms of business processes, cycle time,. productive, etc. (Internal Processes) and what needs to happen for these processes to be sustained and further developed in terms of people, product and process development (Learning & Growth). The two top perspectives house objectives relating to the desired results of the activities undertaken, i.e., how we wish external stakeholders (e.g. the general public, partner agencies and organizations to perceive us (External Relations) and how this will ultimately translate into financial results and economic value (Financial).
- Measures and Initiatives: Once objectives have been agreed, measures can be identified and constructed with the intention to support management's ability to monitor the organization's progress towards achievement of its goals (Olve et al., 1999). Initiatives are special projects with a finite start and end date and are mapped to strategic objectives to give an indication of the projects or actions needed in order to realize the objectives (Niven 2002).