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Chapter
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1
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Introduction
to the Balanced Scorecard
A balanced scorecard is a format for describing activities
of an organization through a number of measures for each of
(usually) four perspectives. A good scorecard documents a
strategic logic: cause and effect relationships between current
activities and long-term success. As companies and other organizations
increasingly depend on their intangible assets, scorecards
are becoming a vital tool for management control.
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2
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Definition
of Terms: What is a Balanced Scorecard?
The balance of a scorecard, and the linkages between
measures and perspectives, will need to be modified to the
specific situation. Scorecards are used as customized communication
tools within a management control system. At different levels
of organization and for different types of strategy, the mix
of different types of control will vary.
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3
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Evolution
The concept of a balanced scorecard was first proposed in
1992 by Kaplan and Norton. As the basic format is quite simple,
a number of variants soon developed, both in terms of how
scorecards look and how they are used. This means that an
organization's claim that it uses balanced scorecards now
may mean very different things. We indicate some of the range.
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4
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The
E-Dimension
Ongoing use of scorecards will require IT solutions. The range
of applications and vendors is becoming large, reflecting
the very different ways scorecards are used in different organizations.
Because of this, it is often useful to rely on temporary solutions
at the beginning of scorecard projects, until it is possible
to predict how scorecards will look, who will use them, and
how.
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5
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The
Global Dimension
The major contribution of balanced scorecards to management
control is to improve communication about strategy. For a
global organization this will be especially valuable, as it
needs to convey the uniqueness of its offerings to more distant
customers, and its business logic to employees and partners
everywhere. It may also need to adapt its modes of operation
to different cultures, the use of scorecards to agree on how
business models can be allowed to differ. Case illustration:
Oriflame.
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6
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The
State of the Art
Successful introduction of scorecards consists of an initial
stage where scorecards and the processes for their use are
designed, followed by an on-going "living with scorecards"
as part of organizational control, learning, and revision
of strategies. This process is traced in some detail, together
with examples of scorecard design (including "strategy maps").
Comment is also made on topics such as scorecards for non-profit
making organizations, responsibilities for scorecards, requirements
for measures, and bonus systems.
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7
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In
Practice
Short case studies from a variety of firms and countries:
KappAhl, a Scandinavian retailer; Ericsson Enterprise, part
of a Swedish-based multinational; Ricoh and Xerox, two Japanese
and US multinationals in largely the same industry; and ATOM
Transportation, a Japanese company. Examples of their scorecards
are shown, but the emphasis is on their different approaches
in using scorecards and their differing degrees of success.
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8
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Key
Concepts and Thinkers
Short definitions of approximately 40 concepts relating to
balanced scorecards.
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9
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Resources
A listing of books, articles, reports, and websites containing
information for the study of balanced scorecards.
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10
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Ten
Steps to Making Balanced Scorecards Work
A collection of five suggested pieces of advice for the initial
development process, and five areas to consider during the
period after the introduction of scorecards. In conclusion,
some final words of wisdom.
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