The Balanced Scorecard translates a company's vision and strategy into a coherent set of

performance measures. The four perspectives of the scorecard--financial measures, customer

knowledge, internal business processes, and learning and growth--offer a balance between shortterm and long-term objectives, between outcomes desired and performance drivers of those
outcomes, and between hard objective measures and softer, more subjective measures. In the first
part, Kaplan and Norton provide the theoretical foundations for the Balanced Scorecard; in the
second part, they describe the steps organizations must take to build their own Scorecards; and,
finally, they discuss how the Balanced Scorecard can be used as a driver of change.

Perspectives

The balanced scorecard suggests that we view the organization from four perspectives, and to
develop metrics, collect data and analyze it relative to each of these perspectives:

The Learning & Growth Perspective

This perspective includes employee training and corporate cultural attitudes related to both
individual and corporate self-improvement. In a knowledge-worker organization, people -- the
only repository of knowledge -- are the main resource. In the current climate of rapid
technological change, it is becoming necessary for knowledge workers to be in a continuous

learning mode. Metrics can be put into place to guide managers in focusing training funds where
they can help the most. In any case, learning and growth constitute the essential foundation for
success of any knowledge-worker organization.

Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like
mentors and tutors within the organization, as well as that ease of communication among
workers that allows them to readily get help on a problem when it is needed. It also includes
technological tools; what the Baldrige criteria call "high performance work systems."

Performance Measures from a Learning and Growth Perspective

In the learning and growth perspective of The Balanced Scorecard, resourceful and
motivated employees drive achievement in the other three perspectives. Organizations
that focus solely on financial objectives often treat investments to motivate and improve
people as expenses to be eliminated when financial performance declines. The Balanced
Scorecardstresses the importance of investing in the future. That includes investing in the
capabilities, productivity and motivation of employees and measuring the outcome of
these investments by determining the rates of employee (The Balanced Scorecard 1996,
page 129):
satisfaction
retention
productivity
Most organizations should and do measure employee satisfaction, retention and
productivity, and influence behavior with targeted incentives. All can be measured in

several ways. Employee satisfaction is typically measured by retention or the rate of staff
turnover. The simplest and most common measure of productivity is revenue per
employee. But managers indifferent to such workforce measures sometimes make simple
tactical changes to improve the outcome without really improving the results. For
example, outsourcing some functions may improve employee productivity measures
simply because there are fewer employees on the books. This doesn't mean that
productivity actually improves or that customer objectives are being met.
Ideas for improving the customer experience and realizing customer objectives must
increasingly rely on input from the employees closest to both the customer and the
organization's internal processes. Employees must be engaged so that their minds and
creative capabilities can be applied to achieve customer and organizational objectives.
Here, Kaplan and Norton acknowledge the importance of aligning people, processes and
technology to support strategic objectives. To do so, organizations must consider
investment in three categories that enable learning and growth (The Balanced
Scorecard 1996, page 127-146):
1. Employee capabilitiesas customer needs change, internal processes must
respond, and investment is needed to apply employee knowledge and creative
skills to help facilitate change, retrain and re-skill employees if required to realize
evolving objectives.
2. Information system capabilitiesinvestment is needed to support the workforce
by providing it with strategic information necessary to be knowledgeable about
changing conditions and to be responsive to customers.
3. Motivation, empowerment and alignmentmethods and practices to motivate,
empower, reward and align the efforts of employees across the organization are
required to achieve customer and organizational objectives.
Kaplan and Norton note that most organizations have devoted little effort to measuring
the outcomes or drivers regarding employee skills, strategic information availability and
organizational alignment. Efforts that advance, re-train or re-skill employees are often
overlooked when developing strategic objectives. Exposing strategic information that can
potentially impact employee job performance is inadequately planned. Aligning
individuals, teams and departments or groups with the organization's strategy to drive
long-term objectives is inconsistent and sporadic.

Organizations must shift workforce thinking and behavior. Merely executing planned
processes and reacting to customer requests is inadequate. Rather, organizations should
proactively anticipate customer needs, and then market an expanded set of products and
services to them. This may require re-training, new skills or realignment of the
organization and its resources. The Balanced Scorecard offers techniques and measures
by which transformation can be assessed. Those of note include:
Strategic job coverage: an analysis that maps the skills required of employees by
job families, such as sales, services and operations. It helps determine the extent to
which these skills match what is needed to exceed customer perspective measures.
The result of which may be to assign new roles and responsibilities, require new
skills or re-training.
Strategic information availability: an analysis of the information used by
employees, measuring its quality, accuracy and timeliness critical to enhance
knowledge, improve judgment and make decisions relative to each job family.
Percentage of business processes achieved: an analysis of business process
execution that meets performance measures. Those that don't achieve target rates
may suggest that employee execution is lacking, requiring renewed focus on
workforce skills and capabilities for those processes.
Percentage of key employees aligned to the scorecard objective: an analysis of
how business strategy and scorecard practices are disseminated throughout the
organization. The key principle of the scorecard is to align all aspects of an
organization to reach strategic objectives. Top heavy concentration of objectives at
executive and managerial levels should be avoided with responsibilities dispersed
to key employees in the job families that most influence value chain performance
and customer satisfaction.
Aligning an organization to a shared vision with common direction requires
communication and education programs, so that all employees understand the strategy
and required behaviors to meet it. The strategy then needs to be translated into personal
and team objectives to drive that behavior. The Balanced Scorecard permits and enables
all employees within an organization to understand its strategy and shows how individual
action influences the "big picture" perspective across financial, customer, business

process and learning and growth perspectives. Reward systems then need to be
established to motivate the behavior.