April 1997

Using a Balanced Scorecard Approach to Measure Performance

Traditionally, many Federal agencies have measured their organizational performance by focusing on internal or process performance, looking at factors such as the number of full-time equivalents (FTE) allotted, the number of programs controlled by the agency, or the size of the budget for the fiscal year. In contrast, private sector businesses usually focus on the financial measures of their bottom line: return-on-investment, market share, and earnings-per-share. Alone, neither of these approaches provides the full perspective of an organization's performance that a manager needs to manage effectively. But by balancing internal and process measures with results and financial measures, managers will have a more complete picture and will know where to make improvements.

• Balancing Measures
• Four Perspectives
• Tie-In to Employee Performance

Balancing Measures. Robert S. Kaplan and David P. Norton have developed a set of measures that they refer to as "a balanced scorecard." These measures give top managers a fast but comprehensive view of the organization's performance and include both process and results measures. Kaplan and Norton compare the balanced scorecard to the dials and indicators in an airplane cockpit. For the complex task of flying an airplane, pilots need detailed information about fuel, air speed, altitude, bearing, and other indicators that summarize the current and predicted environment. Reliance on one instrument can be fatal. Similarly, the complexity of managing an organization requires that managers be able to view performance in several areas simultaneously. A balanced scorecard or a balanced set of measures provides that valuable information.

Four Perspectives. Kaplan and Norton recommend that managers gather information from four important perspectives:

• The customer's perspective. Managers must know if their organization is satisfying customer needs. They must determine the answer to the question, How do customers see us?
• The internal business perspective. Managers need to focus on those critical internal operations that enable them to satisfy customer needs. They must answer the question, What must we excel at?
• The innovation and learning perspective. An organization's ability to innovate, improve, and learn ties directly to its value as an organization. Managers must answer the question, Can we continue to improve and create value for our services?
• The financial perspective. In the private sector, these measures have typically focused on profit and market share. For the public sector, financial measures could include the results oriented measures required by the Government Performance and Results Act of 1993 (GPRA). Managers must answer the question, How do we look to Congress, the President, and other stakeholders?

Tie-In to Employee Performance. The balanced scorecard philosophy need not apply only at the organizational level. A balanced approach to employee performance appraisal is an effective way of getting a complete look at an employee's work performance, not just a partial view. Too often, employee performance plans with their elements and standards measure behaviors, actions, or processes without also measuring the results of employees' work. By measuring only behaviors or actions in employee performance plans, an organization might find that most of its employees are appraised as Outstanding when the organization as a whole has failed to meet its objectives.

By using balanced measures at the organizational level, and by sharing the results with supervisors, teams, and employees, managers are providing the information needed to align employee performance plans with organizational goals. By balancing the measures used in employee performance plans, the performance picture becomes complete.