Balanced Scorecard

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An IT department could use Balanced Scorecard to assess the impact of a corporate strategy to enter a new business line and to determine how IT could link itself to support the parent company's goal, Rau says. Or IT could use the model to track its own initiatives, such as how moving to a different hardware platform would affect the department's processes, budget, training requirements and the user groups it serves within the corporation.

"While an IS department can make significant improvements as a separate department, the IS department is really the foundation for the entire company's Balanced Scorecard effort," says Jim Brigman, co-founder and chief operating officer at Acorn Systems Inc. in Houston. Brigman received his master's degree from Harvard University under the tutelage of Kaplan.

Measurable Goals

Brigman says IT managers developing a Balanced Scorecard for their projects should take the following steps to develop measurable goals in each of the model's four areas of concern:

  • Internal processes: Define the crucial capabilities and purposes of the IT department.
  • Finances: Weigh the cost of an IT project against the benefits it will deliver and the operational impact it will have on the rest of the company.
  • Customers: Consider the impact of IT projects on the user community and how any IT projects will influence users' opinions of IT's performance.
  • Employee innovation and learning: Determine whether any planned projects will fill the need of IT employees for continual development.

"Any company implementing the Balanced Scorecard that has not made the IS department central to this task has missed the boat," Brigman says. "The IS department controls the company's data. They are the crucial group responsible for transforming data into information."

Instead of being a planning tool used only by executive management, the Balanced Scorecard model can clarify roles and expectations at all corporate levels, Mack says.

"From each executive director to each area manager, they can see how their specific goals tie to the entire organization's software management objectives," says Mack. "I think it's a pretty powerful tool for setting the organization's goals."

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Balanced Scorecard Origin

The originators of the Balanced Scorecard concept are Robert S. Kaplan and David Norton, co- authors of The Balanced Scorecard: Translating Strategy Into Action (Harvard Business School Press, 1996). They coined the term "Balanced Scorecard" in a 1992 article for the Harvard Business Review. The article, "The Balanced Scorecard: Measures that Drive Performance," is available at the Harvard Business School Publishing Web site.

The site also offers several Balanced Scorecard case studies by other authors, including Nicole Tempest's 1998 article, "Wells Fargo Online Financial Services," which reviews the bank's process for developing an online banking division.

Kaplan also wrote another book about the Balanced Scorecard methodology, The Balanced Scorecard: You Can't Drive a Car Solely Relying on a Rearview Mirror (Harvard Business School Press, 1996).

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Copyright © 2000 IDG Communications, Inc.

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