Introduction to Productivity Balanced Scorecard

Access your KPIs online;
Measure your success;

Navigation: All Balanced Scorecard Articles > General

The origin of the Productivity Balanced Scorecard dates from 1990 when the Nolan Norton Institute, the research division of KPMG, sponsored a study of a year-long multiple companies: "Measuring the results in company in the future." Check additional information about Productivity Balanced Scorecard.

The study was motivated by the belief that existing approaches to measuring performance, which depended primarily on financial accounting valuations, were becoming obsolete. Participants in the study believed that the dependence on a concise financial performance measurement was hampering the ability and the ability of organizations to create future economic value.

David Norton, CEO of Nolan Norton, acted as study leader and Robert Kaplan as academic advisor. Representatives from a dozen companies, manufacturers and service of heavy industry and high tech - met bimonthly throughout 1990 to develop a new model of performance measurement.

At the beginning of the project were reviewed recent studies on cases of innovative performance measurement. One of them, Analog Devices, described an approach to measure the rate of progress of continuous improvement activities. The case also showed how that Analog was using a "corporate control panel, start ups, in addition to several traditional financial indicators, contained measures of performance related to delivery to customers, quality and time cycles of manufacturing processes and the effectiveness of new product developments. Art Schneiderman, who was then vice president of improving quality and productivity at Analog Devices, attended a meeting to share experiences of his company with the Productivity Balanced Scorecard. During the first half of the study presented a variety of ideas, including shareholder value, productivity and quality measurements, and new compensation plans, but the participants focused on the Balanced multidimensional, and that seemed to be as promising for your needs.

Group discussions led to an expanding Control Panel to reach what was called a "Productivity Balanced Scorecard", organized into four very specific perspectives: financial, of the customer, internal, and the innovation and training. The name reflected the balance between short-and long-term between financial and nonfinancial measures, including pension and historical indicators, and prospects for action between external and internal.

Several participants experienced building prototypes Scorecards in pilot installations of its companies. After the study group reported on the acceptance, barriers and opportunities of the Productivity Balanced Scorecard. The study concluded in December 1990, documented the feasibility and benefits of a measurement system as balanced.

The findings of the study group in an article, "The Productivity Balanced Scorecard", Harvard Business Review (January-February 1992). At that time several executives contacted Norton and Kaplan to help them implement the Productivity Balanced Scorecard within their organizations. These efforts led to the next phase of development. Two executives, Norman Chambers, at that time CEO of Rockwater and Larry Brady, who was executive vice president (later promoted to president) of the FMC Corporation, stand out as particularly effective in extending the application of Productivity Balanced Scorecard. Chambers and Brady saw the Productivity Balanced Scorecard as more than a measurement system. Both wanted to use the new measurement system to communicate and align their organizations with new strategies, far from the historical approach and short-term cost reduction and low-priced competition, and to the generation of increased opportunities, offering customers products and value-added services and tailor made.

Working with Chambers and Brady, and with directors of their organizations, stressed the importance of linking indicators Scorecard with the strategy of an organization. Although seemingly obvious insight is, in fact most organizations, even those that are implementing new systems of performance measurement, measurements were not aligned with the strategy. Most companies were trying to improve the performance of existing processes, through lower costs, improved quality and shorter response times but not really strategic processes were identified: those who have done exceptionally well, so that the strategy an organization to succeed.

In a second article in HBR, Norton and Kaplan described the importance of selecting indicators based on strategic success, "Putting to work the Productivity Balanced Scorecard," published in September-October 1993.

In mid-1993, Norton was CEO of a new organization, Renaissance Solutions, Inc. (RSI), one of whose primary service was the advice on strategies using the Productivity Balanced Scorecard as a vehicle to help the company to translate and implement the strategy. An alliance between Renaissance and Gemini Consulting offered the opportunity to integrate the Productivity Balanced Scorecard in the major transformation programs. These experiences further refined strategic junctions Scorecard, demonstrating how, even 20 to 25 indicators from the four perspectives, could communicate and help implement a single strategy. Thus, instead of considering multiple measures require some complex exchanges, strategic links allowed the Scorecard indicators were linked in a series of cause and effect. Taken collectively, these relationships described the strategic path, the way that investments in employee re-training, information technology and innovative products and services, dramatically improve their financial future.

The experiences showed that innovative CEOs used the Productivity Balanced Scorecard not only to clarify and communicate the strategy, but also to manage it. Indeed, the Productivity Balanced Scorecard has evolved a system of indicators improved, to become a central management system.

Executives at many companies, worldwide, using the Productivity Balanced Scorecard as the central organizational structure of key management processes: individual and team establishment of objectives, compensation, training and feedback, resource allocation, budgeting and planning and strategy.

If you are interested in Productivity Balanced Scorecard, check this link to find out more about Balanced Scorecard. Also, you can check other articles in General category.

Balanced Scorecard Toolkit includes step-by-step manuals, documents, presentations, check lists designed to help business professionals with successful development and implementation of Balanced Scorecard. Learn more about BSC Toolkit.