Kaplan and Norton Intellectual Biography - Essay Example

Kaplan and Norton Intellectual Biography Lecturer: Introduction Robert Kaplan together with David Norton are recognized as advocates for balanced scorecard an approach they introduced in Harvard business review article entitled “The balanced scorecard: measures that drive performance”. Robert gained B.S and M.S in electrical engineering at MIT and later his PhD in operations research from Cornel University and went on to become dean at the faculty of Carnegie-Mellon University for the period between 1977 and 1983. He later moved to Harvard school of business in 1984 where he is currently a professor at the Baker foundation in the school. Norton is a consultant as well as a speaker withregard to strategic performance management and a founder of Palladium group. The profession group mainly deals with performance measurement and management and before founding andbecoming the group’s director he engaged in Renaissance Solutions a consulting company he founded together with Robert Kaplan in 1992. The balanced scorecard aims at helping the development and management of strategy through focusing on the way key measures relate in tracking progress. In the paper Kaplan and Norton believe only adherence to quarterly financial returns and bottom line does not offer an organization the overall strategic view. However, the balanced scorecard goes beyond only the exploitation of financial measures through incorporation of three other essential perspectives. These other perspectives include customer perspective, internal business perspective and the learning or innovation perspective. Customer perspective addresses the way customers consider an organization while internal business perspective requires an organization to establish what is needed for it to excel; moreover, the innovation perspective addresses what is needed in an organization to improve and create value in future. Through evaluation of the present and offering indications of future drivers, the scorecard is capable of measuring and motivating business performance (Kaplan& Norton, 1992). Kaplan and Norton published Strategy Maps, in this book they show that despite the increased significance of knowledge based assets, many organizations still focused on measuring short term financial performance. The book elaborates strategy as a notion by describing it in terms of its relationship referred to as strategy map. The book shows shifting trend from product-driven economy toward a knowledge economy values intangible assets in organizational performance. However, at the time of writing the book there was no literature offering a holistic view regarding the strategy; hence, skewing it to perspective of Balanced Scorecard. The book addresses the problem were companies have strategies and management systems but without velar links between them. Moreover, the book is useful for companies disappointed by vaguesuccess with regard to implementation of strategy.The book also offers a way of ensuring that strategy can be mapped to show linkages between intangible assets to the development of an organization based on Balanced Scorecard. The book is comprehensive andintegrates visual representation of acompany’s strategy to serve as an initial step in becoming strategy-focused organization (Kaplan& Norton, 2004). Kaplan and Norton in their book Alignment help show how an organization can develop an organizational strategy map as well as balanced scorecard that articulates organizational value proposition. The book helps enterprises create value beyond what is achieved by single business units operating on their own. The book is a breakthrough from the field’s premier thinkers andshow the way modern companies can unlock the untapped value from enterprise synergies. The book is useful in addressing the issues raised by the multiple business units since the efforts from the individual units are not coordinated resulting in conflict, diminished performance and even lostopportunities (Kaplan & Norton, 2006b). The balanced scorecard has become a planning and management system that is extensively used in businesses and industries to align business actionswith vision and strategy in an attempt to improve communication and monitor performance. Kaplan and Norton’s paper on Balance Scorecard incorporated strategic and non-financial performance measures the conventional financial metrics in order to offer managers a balanced view of an organization’s performance. The balanced scorecard has managed to evolve from its initial simple measurement framework of the 1990s to a strategic planning systems and management system (Balanced Scorecard Institute, 2014). The balanced scorecard being an approach for strategic management as detailed in the various articles and books by Kaplan and Norton acknowledges the various weaknesses in previous management approaches. The approach in the subsequent articles from the thinkers helps provide a clear way companies regarding what organizations can measure in an attempt to balance the financial perspective. The balanced scorecard offers a framework to measure performance as well as help planners establish what needs to be done; hence, helping managers to execute their strategies. In their book Strategy Maps, the thinkers use communication tools to show the way value is generated for an organization. Within the book the thinkers illustrate a logical step-by-step connection in a form of cause-and-effect chain that improving performance established in growth perspective enables an organization to improve its internal process perspective. This consequently enables an organization to develop desirable results to customer and financial perspectives by creating a continuum from the lowest-level measures in Balanced Scorecard to highest principle regarding business strategy. The thinkers refer to the top-bottom approach as the strategy map and outline it in their third book “Strategy Maps” (Koch, 2003). The use of non-financial metrics was has been there since various years before its use in the Balanced Scorecard was associated by various organizations to complement financial indicators using non-financial indicators. For several years studies raised concerns regarding the insufficiency of financial indicators giving way for emergence of non-financial indicators. Nevertheless, emergence and use of non-financial indicators had a prominent role beginning in the 90s because management consultants and researchers developed performance management that reinforced relationsbetween financial and non-financial metrics. The theme of performance measurement persists in management literature; however, Balanced Scorecard assumes a leadership position in research reference and as international corporate strategy. Moreover, regardless of “Balanced Scorecard”proliferation across the globe it is hard to evaluate success of its implementation using the impact it has on financial performance. This is because one cannot assume that adoption of the Balanced Scorecard automatically increases financial performance. The structure of Balanced Scorecard bases on a systematic set of performance metrics on four different performance perspectives that include, customer, financial, internal and learning growth. As an element in strategic management Balanced Scorecard encourages development of the four management processes that contribute to alignment of strategic objectives and short term actions. Corporations use balanced Scorecard to align various business units and areas that support strategy; however, effectiveness of the methodology in execution of the strategy relies on the ability to clearly describe strategy into objectives and measures easily perceptible as well as the ability to link strategy to management systems. The outcome is an effective alignment of units, processes and organization systems with regard to the corporate strategy. Balanced Scorecard methodology involves description of the strategy in a step-by-step approach that relates to objectives and initiatives and organizational strategy. In Balanced Scorecard, there is adoption of explanatory and exploratory qualitative method in analyzing effectiveness of Balanced Scorecard against the strategy management processes. The use of balanced Scorecard enables managers to use its elements and knowledge in execution of former strategies in promoting strategic dialogue and interaction (Kaplan& Norton, 1992). However, implementation of Balanced Scorecard alone does not guarantee success because benefits over the financial performance are never automatic since theyare hard to measure. Hence, the practitioners of Balanced Scorecard need to be aware that the methodology may offer benefits to an organization depending on the manner in which Balanced Scorecard gets implemented as ways the way it is utilized. The strategy map represents organizational strategy in a clear manner through concepts and representations that make sense to managers willing to implement the strategy; hence, Balanced Scorecard improves strategic planning. This is possible because strategy map clarifies vision and strategy for a business unit through description;moreover, strategy map encourage consensus in strategy. Balanced Scorecard is shown as an effective method in communicating strategy since strategy maps communicates strategy within the organization (Kaplan& Norton, 2004). Development of Balanced scorecard offers an opportunity to investigate unusually clear reflections regarding knowledge as well as interventions from management accounting domain. Kaplan together with Norton claim to tackle major fallacy in management accounting head on because of the domain’s inability to expose what really takes place in firms. The thinkers approach is classical rationalism in attaining satisfactory results necessary in acquiring true knowledge in businesses processes. To attain this, the thinkers present a model in which financial accounting is placed alongside other three aspects of business activities and evaluated in systematic way. Financial measures in this model retain their previous significance; however, Kaplan and Norton insist that they are linked to performance drivers that generate the financial results. Alignment being the fourth book by the thinkers identifies five essential principles in aligning an organization’s measurement and management systems with regard to strategy. Methodology here involves mobilization of change through executive leadership, translating strategy to operational terms and aligning the organization to the strategy. Moreover, methodology in the book establishes motivation in order to make strategy everybody’s job and governing in a way that encourages strategy as a continuous process. The book and article launches a framework for representing strategy through certain objectives that can be linked using a cause-and-effect relation across four balanced scorecard perspectives (Kaplan& Norton, 1992). The approach aligns procedures, individuals and technology toward customer’s value intention and objectives of shareholder. The book extends the principle of aligning all organizational units to strategy since many enterprises are made up of various business and support units. Implementing a corporate strategy based on balanced scorecard does not merely require managers in businesses to support units neither should corporate scorecard be replicated without considering the different realities in all business units. In their writings, Kaplan and Norton assume a management system based on a balanced scorecard framework in order to align strategy and structure. They believe managers in various levels in their organizations can use the framework tools to propel the managers’ unit performance. Moreover, Kaplan and Norton assume that managers are capable of defining and communicating cause-and-effect relations using strategy maps. Moreover, Kaplan and Norton assume a balanced scorecard-based system offers a template and regular language useful in assembling and transmitting information regarding creation of value. Kaplan and Norton’s Balanced Scorecard is widely consideredas a way of taking a broad perspective regarding organizational performancein order to facilitate improved decision making. The authors in scorecard consider elements of intellectual capital in various ways mainly through three essentialelements that include human capital, structural as well as relational capital. Balanced scorecard has been essential in strategic planning regarding the development of explicit and implicit connections between an enterprise and its clients mainly employee, partners and community. Kaplan and Norton approach helps relate strategy to planning while highlighting concept regarding the desired vision for the future as well as the ways of attaining it. The main contribution Kaplan and Norton have contributed to management has been the relationship between planning and operational actions carried by an organization. This is possible through actions that clarify, translate vision and strategy while at the same time communicating and associating objectives to strategic measures andplanning that establishes goals and strategic initiatives. While some managers argue it is impossible to operate with various measurements for performance withina businessunit, many managers and consultants believe they create a balanced scorecard by supplementing the traditional financial measures with non-financial measures (Kaplan& Norton, 2006a). Balanced Scorecard has been considered to be a collection of financial and non-financial measurementsand translating business unit strategy using a linked measure that defines long-term objectives and mechanisms for achieving them. Kaplan and Norton presentation of balanced scorecard as a cause-and-effect principle remains an essential feature in Balanced Scorecard. The Principle of Cause-and-effect has managed to develop from inspiration within service management literatureto business model in form of strategy maps. The cause-and-effect relation is considered to be a feature that distinguishes balanced scorecards from the various forms of scorecards. Currently, strategy maps relations attract substantial interest inpractitioners making some firms to develop a Balanced Scorecard based on strategy mapping (Kaplan and Norton, 1996). References ‘Balanced Scorecard Institute’ (2014) Balanced Scorecard Basics. Available at:< https://balancedscorecard.org/Resources/AbouttheBalancedScorecard/tabid/55/Default.aspx> Kaplan, R. S. & Norton, D. P. (1996).Linking the Balanced Scorecard to Strategy. Available at: Kaplan, R. S. & Norton, D. P. (2004).Strategy maps. Available at: [4 March 2014] Kaplan, R. S. & Norton, D. P. (2006a). How to implement a new strategy without disrupting your organization. Available at: Kaplan, R. S. & Norton, D. P.(1992). The Balanced Scorecard-Measures that Drive Performance. Boston: Harvard Business School Press. Kaplan, R. S., & Norton, D. P. (2006b). Alignment: using the balanced scorecard to create corporate synergies. Boston, Mass, Harvard Business School Press. Koch C. (2003). Q&A with Robert Kaplan And David Norton on Strategy Maps and ITs Link to Corporate Strategy. Available at: [4 March 2014] Read More