Balanced Scorecard Evolution: A Dynamic Approach to Strategy Execution

CHAPTER 6 Create a Balanced Scorecard of Robust Measures, Meaningful Targets, and Strategic Initiatives

WHAT ARE PERFORMANCE MEASURES?

In the last chapter you learned how well-crafted strategic objectives on a strategy map will dramatically improve understanding of a company's strategy. However, simply logging strategic objectives on a map and expecting strategy execution to magically occur reminds me of an old riddle about three frogs on a fence. One of the frogs decides to jump off the fence, so how many are left? The answer is three, because one frog deciding to jump doesn't actually equate to jumping; deliberation isn't the same as action. So it is with the strategy map. Setting out your objectives will not automatically lead to strategy execution. What's needed is a method to assess whether or not you are actually achieving the objectives and advancing towards execution, and that is the province of the performance measure.

I define performance measures as standards used to evaluate and communicate performance against expected results. Unfortunately, like most of the definitions in this book, which are focused on arcane business subjects, this is a fairly dry rendering of performance measures, and certainly doesn't reflect the power they possess. A more colorful, yet completely accurate, description of measures comes from Dubner and Levitt, authors of the quirky economics book, Freakonomics. In it they say,

Knowing what to measure and how to measure it makes a complicated ...