Balanced Scorecard Seeks to Provide a Sense

Balanced scorecard seeks to provide a sense of strategic balance to an organization by focusing on four distinct perspectives, rather than having the organization orient itself strictly to maximizing shareholder wealth (Kaplan & Norton, 1996). The underlying logic of the balanced scorecard is that there are certain congruencies between the different perspectives. By understanding these perspectives, the firm is in a position where it can optimize its performance by maximizing key strategic elements (BSI, 2013). A good example of this is FedEx's "people-service-profits" philosophy, which draws a clear link between human resources, customer orientation and financial outcomes, and then makes those links a part of the corporation's overall strategy. One of the strengths of the balanced scorecard approach is that it can be adapted to meet the needs of many different types of organizations, including both not-for-profit enterprises, and public-private partnerships.

Heathrow

Basu, Little and Millard (2009) discuss how the balanced scorecard approach was used in the construction of Heathrow Airport's Terminal 5 project. The standard implementation of the balanced scorecard is to begin with the mission and vision of the organization, and then analyze how it can achieve those, using four different perspectives. The first perspective is the financial perspective, the second is the learning & growth perspective. The other two perspectives are the customer focus and the internal focus. For each quadrant in the scorecard, the organization would set out a few different objectives, and then for each objective would adopt a quantitative measure to help guide the company and evaluate the success of the strategy. The scorecard does not specifically lay out strategies that organizations should follow, because those will relate to the individual missions and visions of the company. The scorecard is merely a thought tool to help managers better envision how they can do different things within the perspectives to bring their organizations closer to their overall objectives.

From the outset, one of the most significant adjustments that the Heathrow management did with the T5 project was to include its partners and suppliers in the formulation of the balanced scorecard. The balanced scorecard is normally an internal tool, but in this case the T5 project was basically a public-private partnership. It would have been very difficult for the management at Heathrow to implement strong control over the project by way of a balanced scorecard without involving major stakeholders in the process. Thus, Heathrow management ensured that key stakeholders, including construction firms and financiers, were brought into the strategy formulation process from the outset.

The result of this stakeholder engagement was an adaptation of the metrics concept on which the balanced scorecard relies. Normally, metrics are specific and related to a particular objective. Heathrow management expanded on that idea, and created a metrics pyramid with five key performance indicators (KPIs), under which there were 10 key measures and finally 37 pieces of performance data. The key performance measures relate to the balanced scorecard in its normal implementation, but the other two meta categories provided further guidance for the project. These meta categories also helped in another way -- they helped to define the organizational culture around the project. This was actually critical, because the T5 project involved so many different stakeholders, each with its own culture. Seeking a unified organizational culture for the project was a stroke of brilliant insight, because all stakeholders became more oriented towards the T5 objectives than to their own, allowing congruence between the two sets of objectives to emerge.

A further adaptation of the scorecard featured regular feedback in the form of the non-conformance reports (NCRs). These NCRs were more regular than the feedback implied in the balanced scorecard, and with 37 performance measures they provided a wealth of information to the stakeholders. The root cause analysis should be a part of any balanced scorecard plan, but T5 made it a priority, and that allowed the project to resolve issues quickly. What this does is it allows the organization to meet its objective of leaving a quality legacy -- instead of burying problems only to have them resurface ten years on, the T5 sought to eliminate problems so that the issues would not re-emerged at a future point in time.