JUNE - Department of Defence

insight
DOD applies the Balanced
Scorecard as Strategic
Management System
16
By Lt Col F.H. Makhaphela,
SO1 Performance Management &
Analysis
Photo: Cpl Elias Mahuma
Public Service Regulations,
2001 (as amended) requires
public departments to establish
a performance management
system in order to
enhance organisational efficiency
and effectiveness as
well as accountability for the use of
resources and the achievement of
results.
A process of assessing progress
towards the achievement of predetermined
objectives, including information
on the efficiency, effectiveness
and utilisation of allocated resources is
necessary. The Department of Defence
(DOD), in its quest to fulfil its mandate,
has opted to develop and implement
the Balanced Scorecard (BSC) as
a Strategic Management System in
order to monitor and evaluate its performance.
A brief description of the
BSC as a strategic management system
follows below.
THE BALANCED SCORECARD
The BSC, as a more contemporary
means of implementing the strategies
of an organisation, was developed in
the last decade by Harvard Business
School professors Robert Kaplan and
David Norton. The BSC was viewed
not only as a measurement system, but
also as a management system that
enabled organisations to clarify their
strategies, translate them into action
and provide meaningful feedback. The
BSC is arguably the most recognised
strategy-focused measurement framework.
It is thus a management system
that can motivate breakthrough
S A S O L D I E R J U N E 2 0 0 7
WHO NEEDS
TO BE INVOLVED?
Executive leadership within the
organisation must initiate and champion
the development and implemen-
improvements in critical areas.
According to Pearce and
Robinson (2003: 337) the BSC
methodology adapts the TQM
ideas of customer-defined quality,
continuous improvement, employee
empowerment, and measurement-based
management and feedback
into an expanded methodology
that includes traditional financial
data and results. The BSC
incorporates feedback around
internal business process outputs,
as in the TQM, but also adds feedback
around the outcomes of business
strategy. The BSC thus directs
an organisation to link its own
long-term strategy with tangible
goals and actions.
Goold and Quinn (1990) define
a strategic management as "The process
which allows senior management
to determine whether a business unit is
performing satisfactorily, and which
provides motivation for business unit
management to see that it continues to
do so. It therefore normally involves
the agreement of objectives for the
business between different levels of
management, monitoring of performance
against these objectives, and
feedback on results achieved, together
with incentives and sanctions for business
management". The BSC thus falls
squarely into this category.
The traditional BSC consists of four
perspectives: Financial, Customer,
Internal Business Processes, and
Learning and Growth. However, the
DOD has adopted the following
perspectives:
Output Deliverables - "Are we
delivering what the stakeholders
require from us?"
Resources - "How are we planning
and managing our resources?"
Lt Col F.H. Makhaphela.
Internal Business Processes - "In
which internal business processes
must we excel in order to satisfy
the stakeholders?"
Building for the Future - "How
must the organisation learn, grow
and innovate in order to achieve
predetermined goals?"
These perspectives derive their
meaning from the vision and strategy
of the organisation and each contains
objectives, measures, targets and initiatives
that link performance measures
to strategy. The BSC system
reflects the natural cause and effect
logic of organisational performance.
The cause and effect logic (strategy
map) will be dealt with when dealing
with the development of scorecards
and roles and responsibility.