In business

performance management Business performance management (BPM) (also known as corporate performance management (CPM) enterprise performance management (EPM),) is a management approach which encompasses a set of processes and analytical tools to ensure that a business o ...

, a third-generation balanced scorecard is a version of the traditional

balanced scorecard A balanced scorecard is a strategy performance management tool – a well-structured report used to keep track of the execution of activities by staff and to monitor the consequences arising from these actions. The term 'balanced scorecard' prim ...

, a structured report, supported by design methods and automated tools, that can be used by managers to keep track of the execution of activities by the staff within their control, and to monitor the consequences arising from these actions. The third-generation version was developed in the late 1990s to address design problems inherent to earlier generations. It is distinguished by the components making up the balanced scorecard and the design process used to develop these components.

Components

A third-generation balanced scorecard has four main components: *A ''destination statement'' or ''vision statement'': This is a one- or two-page description of the

organisation An organization or organisation ( Commonwealth English; see spelling differences) is an entity—such as a company, or corporation or an institution ( formal organization), or an association—comprising one or more people and having a pa ...

at a defined point in the future, assuming the current

strategy Strategy (from Greek στρατηγία ''stratēgia'', "troop leadership; office of general, command, generalship") is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the " a ...

has been successfully implemented. The descriptions of the successful future are segmented into

perspectives Perspective may refer to: Vision and mathematics * Perspectivity, the formation of an image in a picture plane of a scene viewed from a fixed point, and its modeling in geometry ** Perspective (graphical), representing the effects of visual persp ...

for example ''financial & stakeholder expectations'', ''

customer In sales, commerce, and economics, a customer (sometimes known as a Client (business), client, buyer, or purchaser) is the recipient of a Good (economics), good, service (economics), service, product (business), product, or an Intellectual prop ...

& external relationships'', ''processes & activities'', ''organisation & culture''. *A ''strategic linkage model'': This is a version of the traditional ''

strategy map In management, a strategy map is a diagram that documents the strategic goals being pursued by an organization or management team. It is an element of the documentation associated with the Balanced Scorecard, and in particular is characteristic ...

'' that typically contains 12 to 24 ''strategic objectives'' segmented into two perspectives, activities and outcomes, analogous to the

logical framework In logic, a logical framework provides a means to define (or present) a logic as a signature in a higher-order type theory in such a way that provability of a formula in the original logic reduces to a type inhabitation problem in the framework ty ...

. Linkages indicate hypothesised causal relations between strategic objectives. *A set of ''definitions'' for each of the strategic objectives. *A set of definitions for each of the ''measures'' selected to monitor each of the strategic objectives, including ''targets''.

Design process

The design process for third-generation balanced scorecard requires the active involvement of the

management team Senior management, executive management, or upper management is an occupation at the highest level of management of an organization, performed by individuals who have the day-to-day tasks of managing the organization, sometimes a company or a cor ...

who will eventually use the balanced scorecard. The managers themselves make all decisions about the balanced scorecard content. The process begins with the development of a 'destination or Vision statement' to build management consensus on longer term strategic goals; this document is then used to build a 'strategic linkage model', describing the shorter term management priorities, both the strategic activities to complete and the strategic outcomes to achieve. Once the 'strategic objectives' are decided in outline these are assigned 'owners' from within the

, who further define each objective, plus the measures and targets associated with achieving each objective. The main improvements with this third generation of balanced scorecard relate to the improved "ownership" of the objectives by managers, because objectives, goals and outcomes are refined by the responsible managers themselves. All measures and targets must be reviewed to ensure that they are interconnected (dependencies identifies) and congruent (appropriately prioritised and support one another). In large/complex organisations the scorecard can be developed by functional or project specific areas to relate to the

for that area. It is important in this case for the team creating the scorecard to understand the linkages between their area and that of other management teams across the organization with whom they may collaborate or have as stakeholders/customers. In many cases the objectives for the scorecard of a functional or project organization will include cascaded objectives and priorities of the host organization, senior leaders, and stakeholders (what is important to them).

Components

Design process

See also

References

Further reading