Using the Balanced Scorecard
to Manage Strategic Alignment

The balanced scorecard, developed by Robert Kaplan and David Norton of the Harvard Business School, provides a unique tool with which to begin the strategic alignment process. The scorecard defines the objectives of the firm into four perspectives, including financial, customer, internal operations and learning and growth.

The balanced scorecard alignment process begins by asking four essential questions:

1. What are the financial objectives to support the firm's growth and productivity? What are the major sources of growth?
2. Who are the target customers that will benefit from our products and services snd support our financial growth objectives? What are their needs and objectives and how do we measure success with them?
3. What internal operating processes and procedures do we need to generate desired value by our target customers and the desired financial outcomes?
4. What learning and growth factors will influence these outcomes? That is, what skills, capabilities, employee knowledge, firm culture and technological tools do we require to support the operating processes necessary to meet cutomer requirements and meet our financial objectives?

Strategic alignment begins with coordination between the four elements of the scorecard at the enterprise level – financial, customer, internal, and innovation/learning processes, and extends through departments to individuals. For example, an enterprise goal of achieving 20% revenue growth could come from a combination of increased sales and reduced expenses. This approach may translate as a:

• 20% increase in sales to the sales department;
• 10% decrease in operating expenses;
• 10% increase in advertising; and
• 5% increase in new product development.

In addition, the finance group may have a goal of improving collections and the sales force, correspondingly, the added objective of monitoring 30/60/90 day collections from their customers. Complimentary objectives shared by different units or individuals must be strategically aligned so that the right results are achieved.

Outcomes of strategic alignment

Strategic alignment using the balanced scorecard produces several distinct outcomes which together translate into stronger execution towards results. These include:

• People communicate openly and consistently;
• Managers use strategy to deal with problems and issues;
• Plans and systems support real work;
• Goals are clear and results are measurable;
• Planning occurs at all levels;
• Different employee groups trust each other; and
• Values are expressed as firm objectives and individual values.