Balanced Scorecard
The Balanced Scorecard and Performance Measurement Assignment
1. The design of a good performance measurement system must follow a “top down” approach to ensure that key measures are in fact a measure of the strategic goals established by senior management. Performance initiatives should always start at the top because senior management has the power to implement the system and provide the organizations missions and objectives. The top down approach starts with a clear business strategy expressed through the organization down to operational units. The “top down” approach emphasizes the importance of the role senior management plays in an effective performance measurement system. By sending a clear message of active support and commitment from the top down, each individual and business unit will also adhere to this culture of commitment and accountability to the business strategy. Once a vision of the corporate strategies and goals are determined they are driven down into the organization in a way that is significant, understood, and owned by every member. A broad communication program shares the strategy and the critical objectives employees have to meet if the strategy is to succeed. The goals of lower levels are therefore determined by the strategic intent of higher levels, in which participants work down from to determine key measures and activities that support the strategic task. The “top down” approach prevents local optimization while emphasizing overall optimization throughout the organization. In contrast, the “bottom up” approach starts with a set of measures and determines which ones may be most useful in assessing performance, but these measures may not relate directly to the overall strategy. The “bottom up” approach looks at existing measures so if you aren’t currently measuring an important key measure it may not be considered. For example, if revenue growth is linked to outstanding customer service and you currently
1. The design of a good performance measurement system must follow a “top down” approach to ensure that key measures are in fact a measure of the strategic goals established by senior management. Performance initiatives should always start at the top because senior management has the power to implement the system and provide the organizations missions and objectives. The top down approach starts with a clear business strategy expressed through the organization down to operational units. The “top down” approach emphasizes the importance of the role senior management plays in an effective performance measurement system. By sending a clear message of active support and commitment from the top down, each individual and business unit will also adhere to this culture of commitment and accountability to the business strategy. Once a vision of the corporate strategies and goals are determined they are driven down into the organization in a way that is significant, understood, and owned by every member. A broad communication program shares the strategy and the critical objectives employees have to meet if the strategy is to succeed. The goals of lower levels are therefore determined by the strategic intent of higher levels, in which participants work down from to determine key measures and activities that support the strategic task. The “top down” approach prevents local optimization while emphasizing overall optimization throughout the organization. In contrast, the “bottom up” approach starts with a set of measures and determines which ones may be most useful in assessing performance, but these measures may not relate directly to the overall strategy. The “bottom up” approach looks at existing measures so if you aren’t currently measuring an important key measure it may not be considered. For example, if revenue growth is linked to outstanding customer service and you currently