Robert Kaplan (1940- ) and David
Americans Kaplan (pictured right) and Norton (pictured right below) are famous for their creation
of the Balanced Scorecard.
Kaplan, a Harvard Business School professor, is also a renowned expert in management
The Balanced Scorecard
Successful organizations base their corporate strategy, mission and vision on the “Balanced Scorecard”.
This measures an organization’s performance in four key areas that are fully
integrated into its management:
Profitability, sales growth, productivity improvement and utilization of assets.
Market share and customer satisfaction, retention, acquisition and profitability.
3. Internal business processes
e.g. innovation, operations and after-sales service.
4. Learning and growth
- employee motivation, retention and learning
- creating a climate of change and innovation.
This Balanced Scorecard should not only measure change but encourage it (which is why
learning is particularly important).
Key quote on the Balanced
The real power of the Balanced Scorecard... occurs when it is transformed from a measurement system to a
The Strategy-Focused Organization
The best organizations are “strategy focused” -
i.e. they put their strategy (based upon the Balanced Scorecard) effectively into action by following four
Leaders inspiring every employee to change.
2. Translate strategy into operational terms
Relating strategy to activities referred to in the Balanced Scorecard.
This strategy is illustrated by a “strategy map”.
3. Align organization to strategy
Making sure that all the organization’s activities (in all its business units) relate to the strategy.
4. Make the strategy everyone’s job
Achieve people’s responsibility and commitment towards the strategy through:
- linking rewards to achieving the strategy’s aims.
5. Make strategy formulation a continual process
Being prepared to change strategy because of:
- new knowledge (e.g. from budgeting).
Key quote on the Balanced Scorecard
Strategy-Focused Organizations use the Balanced Scorecard to put strategy at the centre of their management
Key quote on
The art of leadership is to delicately balance the tension between stability and change.
Other key books by Kaplan
Relevance Lost: The Rise and Fall of
Management Accounting (1987), written with Thomas Johnson (pictured
Management accounting must:
- improve the efficiency of an organization’s
- help to implement its long-term strategy.
So management accounting mustn’t encourage cutting expenditure on activities like
innovation, marketing and training that are vital to the organization’s future success.
Greater emphasis should be given to:
1. Non-financial measures of
(like customer satisfaction, innovation and employee satisfaction).
2. The valuation of vital intangible assets
(like people and knowledge).
So managers, as well as accountants, must be involved in the design of management
Key quote on management
Management accounting systems can and should be designed to support the operations and the strategy of the
The Design of Cost Management Systems
(1991), written with Robin Cooper
An organization should use activity-based costing that calculates the costs of its
activities relating to each of its products (e.g. product improvements) and services provided to different
Then the profitability of each product and customer can be calculated.