In 1996, Kaplan and Norton wrote an article about organizational functioning called “Using the balanced scorecard as a strategic management system.” The paper introduces a complement to the company’s financial metrics in the form of balanced scorecards, which imply the addition of certain non-financial factors. Kaplan and Norton believe that their framework of a new strategic management system allows for more reliable strategic planning because it creates transparency and interconnects the company’s short-term actions with its long-term objectives.
The article begins with a statement that modern competition is centered around the information. To adjust accordingly, the companies must change their focus from managing physical assets to exploiting intangible assets. Kaplan and Norton introduced the four-step balanced scorecards as a new strategic management system in this context. Firstly, in addition to the financial aspect, top management should incorporate non-financial perspectives into the strategic planning – relation to customers, internal business processes, and learning and growth – to achieve higher clarity. With four views in mind, a company should develop long-term plans and provide detailed information on how that vision should be interpreted at different company levels. Secondly, the vision has to be spread over the company’s units. Thirdly, managers should conduct business planning to connect the long-term vision with the short-term actions through the milestones. Lastly, employees should provide constructive feedback about the undertaken activities and strategy to ensure that everything works as intended.
The article’s purpose lies in instructing managers of all levels on how to connect their strategic planning with direct actions while making them overarching and understandable at the same time. Authors believe that this management system is the most efficient nowadays since it can cover new aspects, which become crucial for developing a competitive strategy. To prove their point, they list the system’s consequent implementation steps and provide detailed examples, which are claimed to be collected from over 100 companies, as pieces of evidence.
Robert S. Kaplan is a professor at Harvard Business school and a chairman and co-founder of Balanced Scorecard Collaborative. At the same time, David P. Norton is its CEO and co-founder. These facts, combined with the coauthorship of four books on the balanced scorecard matter, provide them with sufficient credibility in this subject. The evidence they provide in the article is employed according to its purpose – to enlighten readers through explanation and exemplification. Additional provision of illustrations and charts ensures that the written information is translated into generalized visual patterns. Overall, Kaplan and Norton manage to achieve their goal of proving the newer strategic management system’s efficiency. Their theoretical definitions are clear and understandable for future managers, while the experienced ones might find helpful information in the description of the concepts’ direct implementations.
Companies have to connect their long-term goals with short-term activities transparently to make strategic planning more reliable. The balanced scorecards resemble one of the possible ways of achieving that. By incorporating non-financial factors – such as the concern for the client, business processes, and learning and growth – into the financial metrics, managers can create overarching strategies that are understandable on every company’s level. In writing the article, Kaplan and Norton used all their knowledge and collected data to provide readers with well-organized and coherent information. Their approach to strategic planning can prove to be an asset to managers and the companies that decide to incorporate it.
References
Kaplan, R. S., & Norton, D. P. (1996). Using the balanced scorecard as a strategic management system. Harvard Business Review.