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

• Financial Perspective – While non-financial measures may represent an EDO’s overall success (e.g., number of jobs created, rather than profitability achieved), financial performance is still important to an EDO’s ability to carry out its task. For one, it must raise money against competing demands, complete its projects within budget and bring money into the economy. Many of these factors are both a cause and an effect of an EDO’s ability to satisfy its customers, but they must also be measured independently within the financial perspective.

• Internal Process Perspective – In order to achieve its mission and deliver on its customer and financial goals, an EDO must execute a set of internal processes. They may include prospecting for potential corporate candidates, running training programs for its own staff, making calls on corporate leaders to understand their issues, and managing a “one-stop-shop” for business support. These processes are important ingredients of the cause-and-effect chains that link organizational inputs (investments and activities) with outputs and outcomes.

• Learning and Growth Perspective – The learning and growth perspective represents the foundation on which an EDO’s performance is built. It includes staffing, infrastructure and technology that go into executing internal processes. For example, an EDO might hire new staff or create an internship program to develop its capability to carry out an initiative that may in turn enhance its ability to carry out its mission. Alternatively, it might make an investment in its staff by providing new technology (such as a mobile communications device) to improve their productivity, which may in turn lead to better performance. In essence, it is making investments in certain inputs which are then consumed in the internal process in order to generate results for the organization. These inputs form the foundation on which an organization’s performance is built, and must be measured in the learning and growth perspective.

The Balanced Scorecard’s perspectives provide a lens through which the leadership looks at objectives, strategy, processes, and capabilities. It relies on a participatory process to identify and discuss strategic objectives; identify relevant stakeholder segments and develop specialized strategies for each segment; review and implement organizational processes to implement these strategies; and develop the various capabilities, skills, equipment, and infrastructure to enable the organization to implement these processes. These activities are linked by a chain of causality that runs from organizational capabilities to internal process to stakeholder satisfaction to financial results, and finally to the achievement of the organization’s mission.

Often as a result of the process of putting together a Balanced Scorecard, performance measurement and data collection systems are put in place to measure the strategy itself. This metric makes the organizational strategy the centerpiece of its performance measurement system, helping to avert misalignment between what an organization is designed to achieve and what gets measured.

Scaling the strategy down – or up

Once the top-level strategy has been developed and agreed upon, each organizational sub-unit creates its own strategy for achieving its obligations towards the larger organizational strategy. As the process cascades down the hierarchy with multiple levels of Balanced Scorecards being developed and deployed, the goals of various sub-units and that of the larger organization are aligned. A similar effect can be achieved throughout an economy when an EDO’s Balanced Scorecard is scaled up into city, regional and state Balanced Scorecards.

Once this process of strategy-making and scorecard development has taken place, each sub-unit’s actual performance is measured against its own targets and is monitored on a regular basis. The Balanced Scorecard thus becomes a means to focus energies toward what is important. It is often claimed that the Balanced Scorecard simplifies and communicates the strategy and brings laser-like focus to an organization’s goals, thus making strategy everyone’s job. Balanced Scorecards also are used as a communications tool at management and board meetings, helping focus discussion on measuring progress toward the organizational strategy.

This process also leads to learning across the organization – detecting discrepancies between achieved and targeted performance, analyzing their causes, and suggesting possible remedial actions. Using metrics to support a cause-and-effect model of organizational performance, the leadership can also, over time, test hypothesized relationships between inputs, process and outcomes, and update their own mental models of organizational performance.

A Balanced Scorecard may seem like a simple way of organizing an EDO's strategy and performance activities, but it is not simplistic. Over half of the organizations that claim to implement a Balanced Scorecard do not do so in both letter and spirit. They do not, therefore, achieve the benefits that are available. Understanding the intricacies and nuances of the various steps that go into the construction of a wellfunctioning Balanced Scorecard is critical to implementation. Thinking through the underlying philosophy of the Balanced Scorecard as it applies to commercial entities and adapting it to EDOs is an even more important consideration.

ANGLE Technology Group (www.angletechnologyus.com) is an international technology-based economic development and technology commercialization cconsulting, management, and venture capital company. For more information and comments, contact the author at athar.osama@angletec.com.

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