The Balanced Scorecard – Beyond Performance Measurement

Management without measurement is, needless to say, one of the biggest strategic mistakes an organization could commit. But what about measurement without management? Too often, one comes across references to the Balanced Scorecard as a performance measurement framework. In my opinion, that is akin to calling Six Sigma “a defect control device”. A better description of the BSC would be as a metrics-based strategic management system. A majority of organizations today are riding on the BSC bandwagon – but only a few of them have achieved the dramatic results that Kaplan and Norton envisaged.

Trent Limited, the retail arm of the Tata Group, opened its first store – Westside – in 1998 when the retail business in India was still in the fledgling state. By 2001, its annual growth rate had exceeded 100%. But the group realized that there was no place for complacency – to sustain and stabilize this growth, they needed to clearly articulate a common strategy for the entire organization. Trent needed a performance management system that went beyond financial measures and analyzed other critical factors like customer satisfaction an efficiency of internal operations. The BSC, with its four-dimensional model, double-loop feedback and strategy map, came up as the perfect option. The first step was to get a cross-functional team to work on putting together the strategy map. This process enabled them to identify strategic objectives and ensure that the entire management team was on the same “strategic wavelength”. The team defined their financial objectives – short term and long term – and went on to identify ways to achieve these by considering all the four BSC perspectives. These solutions were further broken down into specific, measurable and time-bound action plans which are still reviewed on a regular basis.

While monitoring its strategic action plans, Trent hit upon a well-known but oft-ignored management dictum – listen to your customers and employees. The company’s customer relationship team hit the shop floor, literally, to see what the customer really wanted. This hands-on knowledge was behind the whopping success of Trent’s homegrown, customized brands in its stores – particularly Westside. Simultaneously, they tackled the problem of high attrition – retail’s biggest bane – by designing a unique coaching initiative which has now become the training benchmark for the entire Tata Group. Trent made spectacular improvements in customer satisfaction, employee retention and profitability within four years of implementing the BSC – a feat that got the company a mention in the Balance Scorecard Hall of Fame.

The writing on the wall: If you want to reap real benefits from BSC, be prepared for the long haul. If you are looking for an organizational “ruler” – an instrument for one-time measurement – maybe you should look elsewhere.

Explore posts in the same categories: 03 Customer and Market Focus, 04 Measurement, Analysis, and Knowledge Management, 06 Human Resource Focus, Benchmarking, Business, Management

Tags: a unique coaching initiative which has now become the t, Balanced Scorecard, Balanced Scorecard in Retail, BSC, employee retention and profitability within four years, improvements in customer satisfaction, Performance Management System, Retail Business in India, The BSC with its four-dimensional model; double-loop fe, the problem of high attrition in retail

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