Between 1992 and 1995, Mobil North America Marketing & Refining (Mobil NAM&R) catapulted from dead last to first place among its industry peers, a position it sustained for the next five years. Within a similar time frame, the city government of Charlotte, North Carolina, found a new way to rally its many departments and service units around a common vision. Meanwhile, UPS was staying ahead of a rapidly changing market by becoming more customer-focused and giving frontline employees a clear sense of the connection between their everyday activities and the company's overall objectives.

To help accomplish all this, each of these diverse organizations used the Balanced Scorecard to put strategy at the center of its key management systems. HBS professor Robert Kaplan and consultant David P. Norton introduced the Balanced Scorecard in a 1992 Harvard Business Review article and in their 1996 book, The Balanced Scorecard (Harvard Business School Press). They designed it as a tool that translates an operation's mission and strategy into a comprehensive set of performance measures whose focus goes beyond a financial metric to provide perspective on the customer, internal business processes, and the capacity for innovation and growth.

Since then, the two have seen their concept evolve into a holistic management system that concentrates all the resources and energy of an organization on its strategy. In their latest work, The Strategy-Focused Organization (Harvard Business School Press), Kaplan and Norton document more than twenty examples of this approach.

"We started out," Kaplan explains, "to solve a specific problem: How do you measure performance when so many of your most important capabilities-like innovation-are intangible? The Balanced Scorecard was the solution. But as organizations went about implementing this system," he continues, "they extended its use beyond performance measurement. We soon realized that the scorecard helped to solve a much more important management problem: how to implement strategy."

Kaplan and Norton found that organizations successful in doing that displayed a consistent pattern. "Although each unit approached the challenge in different ways, at different paces, and in different sequences," they explain, "we observed five common practices at work that we formulated into principles for attaining sustainable performance improvements: translate strategy into operational terms, align the organization to the strategy, make strategy everyone's everyday job, make strategy a continual process, and mobilize change through executive leadership."

To translate its strategy into operational terms, an organization must define its vision, identify goals to achieve it, and implement measures that will gauge success. The process of developing a Balanced Scorecard provides the framework for ascertaining these elements and describing them in a consistent way for the entire operation.

	We soon realized that the scorecard helped to solve a much more important management problem: how to implement strategy.

The Mobil Speedpass program exemplifies what can happen when strategy is clearly defined and communicated. Using the Balanced Scorecard methodology, executives at Mobil mapped a two-pronged strategy for generating higher volume on premium-priced products and services while reducing costs and improving productivity. The revenue growth component required Mobil to offer customers "fast, friendly service."

By understanding the customer value proposition, a planning manager in Mobil's Marketing Technology Group found an improved way to enhance customer service by developing the Speedpass, a small electronic device atached to a key chain or car window. When waved in front of a photocell on a gasoline pump, it identifies both the consumer and the method of payment, providing a quick and easy transaction that has helped Mobil differentiate itself from its competitors.

But articulating goals and measures is not enough. To implement a vision, an enterprise must also align its individual business and support functions and create synergies among its various units. While many operations have difficulty communicating and coordinating across these functions, strategy-focused organizations break through this barrier, according to Kaplan and Nolan.

Once Charlotte established a scorecard for the whole city, for example, its operating units-including police, fire, planning, and community development-developed their own scorecards, based on the city's version. In addition, Charlotte's city manager established cross-functional cabinets to work on each of the strategic themes articulated in the city's scorecard, creating cross-functional partnerships among departments. Charlotte's police chief, for instance, was an obvious choice for the community safety cabinet, but he also joined the transportation cabinet when he realized that more of Charlotte's citizens were injured as a result of traffic accidents than crimes. "When local objectives are aligned with each other and the rest of the organization, they become reinforcing, and synergies are achieved," notes Kaplan.

While it is important that executives, department heads, and business unit managers are attuned to their organization's strategy, today's frontline worker must also be strategically savvy. The principle to "make strategy everyone's everyday job" is all about communication and accountability. For example, UPS established local targets for customer satisfaction, employee relations, competitive position, and time spent in transit. As a result, its more than 300,000 employees had a much clearer view of how their local activities contributed to higher-level corporate goals.

But for workers to become truly strategy-focused, they must also create personal and team goals that reinforce their organization's scorecard. Incentive and reward systems also give employees a stake in their company's success. Both Mobil and the city of Charlotte based employee incentive programs on Balanced Scorecard results, while all UPS employees could buy stock in the company even before it went public in 1999.

To make strategy an ongoing process, Kaplan and Norton advise that organizations develop feedback systems to promote continual learning. In addition, they underscore the importance of linking budgets with strategies. By using the Balanced Scorecard as a yardstick for evaluating potential investments and initiatives, companies embed their strategy throughout their planning, budgeting, and reporting processes. "The strategic budget identifies what new operations are required; what new capabilities must be created; what new products and services must be launched; what new customers, markets, applications, and regions must be served; and what new alliances and joint ventures must be established," Kaplan and Norton write.

The authors' fifth principle, "mobilize change through executive leadership," is at the heart of all strategy-focused organizations. "Leadership runs throughout the entire process," declares Kaplan. "A leader starts the journey, has a vision of what the organization can become, and inspires people to fulfill that vision. It takes leadership to launch the effort and sustain the program."

From measuring progress to navigating strategy, the Balanced Scorecard has proved helpful to a wide spectrum of organizations. As The Strategy-Focused Organization makes clear, operations that make good use of it will benefit from keeping strategy right where it belongs-directly in the cross hairs of the entire enterprise.

by Judith A. Ross

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