Compensation as a Strategic Asset

CHAPTER 5HOW TO GROW THE COMPENSATION PIE: THE BALANCED SCORECARD FACTOR¹

“The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand.”

—San Tzu

In Chapter 4, we discuss the critical importance of having a dynamic mission, vision, and set of values as the foundation for long-term success. After you build the foundation, you can start building and managing the firm for profits. Perhaps one of the best modern tools to help manage the firm for profits is the Balanced Scorecard.

In this chapter, we explain the Balanced Scorecard and how to use it successfully in managing a public accounting firm. We also cover how to create strategies and strategy maps.

THE BALANCED SCORECARD

The Balanced Scorecard was created in the early 1990s by Harvard Business School Professor Robert S. Kaplan and consultant David P. Norton, president of Renaissance Solutions, Inc. The Balanced Scorecard was originally developed to measure performance for corporations, especially manufacturing firms. It is now being used in accounting, consulting, and law firms as well as financial institutions and other service-related firms to help implement strategy, monitor objectives, and reward for performance.

While a great deal has been written about the Balanced Scorecard, an important thing to remember is that it measures the results of manage-ment’s efforts and the effectiveness of management’s strategies. In short, it ...