Using a Balanced Scorecard to Measure Your Economic Development Strategy (cont.)

Introducing the Balanced Scorecard

A traditional balanced scorecard.

The Balanced Scorecard originated in a 1992 Harvard Business ReviewM article by a Harvard professor, Dr. Robert S. Kaplan, and a consultant, David P. Norton, titled “The Balanced Scorecard – Measures That Drive Performance.” The problem that these individuals were trying to address was the predominance of financial metrics in measuring organizational performance. Organizational performance, the authors argued, must be measured in a balanced manner that takes into account the additional dimensions of performance critical to an organization’s success. The original Balanced Scorecard used four dimensions (referred to as performance perspectives) to assess an organization’s performance: financial, customer, internal business process, and learning and growth.

The Balanced Scorecard itself has undergone major transformations through customer-driven innovation. Over the last decade, it has evolved from a system of key performance indicators to a communication system that provides strategy awareness and focus throughout an organization, to becoming the focal point of an organization’s strategic planning and performance measurement activities.

In the process, the Balanced Scorecard has become a new management paradigm in the corporate world. According to one estimate, over 50 percent of all Fortune 500 companies have implemented a Balanced Scorecard. A Balanced Scorecard “Hall of Fame” has been established by Kaplan and Norton to recognize those organizations that have implemented the Balanced Scorecard in its true spirit and have achieved breakthrough results. In addition to its use in corporate settings, the Balanced Scorecard has been used across the entire spectrum of organizational types, including government, non-profit, healthcare, academia, research and development, and education sectors.

Creating an Economic Development Balanced Scorecard

A balanced scorecard for an EDO.

The process of creating a Balanced Scorecard begins with understanding the key dimensions of organizational performance. As Balanced Scorecards have been implemented across different organizational types, they have been modified to incorporate the reality of those organizations. For example, while the financial perspective may represent the bottom line for corporate entities, it does not represent the objective of organizational performance in mission-driven public sector agencies. Consequently, proponents have introduced organizational mission as the overarching goal in these circumstances. EDOs fit this model.

While the precise structure of each EDO’s Balanced Scorecard may vary, a generic architecture could comprise the following dimensions of performance:

• Organizational Mission – An EDO’s mission, rather than financial profitability, represents the bottom line for its performance. EDOs differ in terms of what they are expected to achieve. Some are charged with creating jobs and attracting businesses to a particular region, others are tasked with making investments in human capital, and still others have multi-dimensional missions. Whatever the mission of an EDO is, it must be adequately defined and measured in the organization’s Balanced Scorecard. Everything else that an organization does – and measures – must directly support its overall mission.

• Customer (Stakeholders’) Perspective – While it may be possible to objectively measure how well an organization is achieving its mission, customer satisfaction is often a leading indicator of how well an organization is performing. An EDO must deal with a number of different kinds of customers, ranging from the general population to businesses in the region to the governments that provide legitimacy to its work. Each of these types of customers – or stakeholders – must be satisfied if the organization is to adequately achieve its mission and continue to exist.

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