Robert Kaplan (1940- ) and David Norton

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 accounting.

Key books

The Balanced Scorecard (1996)

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:

1. Financial

Profitability, sales growth, productivity improvement and utilization of assets.

2. Customer

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 Scorecard

The real power of the Balanced Scorecard... occurs when it is transformed from a measurement system to a management system.

The Strategy-Focused Organization (2001)

The best organizations are “strategy focused” -

i.e. they put their strategy (based upon the Balanced Scorecard) effectively into action by following four principles:

1. Mobilize

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:

• effective communication.

• 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).

• learning.

Key quote on the Balanced Scorecard

Strategy-Focused Organizations use the Balanced Scorecard to put strategy at the centre of their management processes.

Key quote on leadership

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 right)

Management accounting must:

• improve the efficiency of an organization’s different processes.

• 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 performance 

(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 accounting systems.

Key quote on management accounting

Management accounting systems can and should be designed to support the operations and the strategy of the organization.

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 customers.

Then the profitability of each product and customer can be calculated.