Using the Balanced Scorecard to Drive Value

In summary, the Balanced Scorecard enhances shareholder value through measurement and action in four areas: financial, customer, internal business process, and learning and growth. Action takes the form of new initiatives that are developed by specific strategies in the four areas or quadrants. It also recognizes foundational business components that are essential for the long-term growth of the business. Research has found that a higher percentage of measurement-managed companies were identified as industry leaders, as being financially in the top third of their industry, and as successfully managing their change effort.

The Balanced Scorecard has three major strengths. First, it creates measurements that can be used to manage and guide an organization. Second, the Balanced Scorecard makes an effort to measure some soft factors such as customer satisfaction and organizational alignment. Third, the framework can be used to create a process to manage strategy. This provides a way for the strategy to be implemented into business operations. The major weakness of this measurement system is that it does not link to valuation metrics. We will discuss the valuation filter in Chapter 11.