A scorecard should be transparent back to the strategy:

In the past, if you had lost my strategic planning document on an airplane and a competitor found it, I would have been angry … [similarly with my] monthly operating review … This balanced scorecard, however, communicates my strategy so well that a competitor seeing this would be able to block the strategy and cause it to become effective.
(Kaplan & Norton p148)

Definition of strategy and the scorecard

A strategy is a set of hypotheses about cause and effect. The measurement system should make the relationships (hypotheses) among objectives (and measures) in the various perspectives explicit so that they can be managed and validated. The chain of cause and effect should pervade all four perspectives of a Balanced Scorecard:

The above diagram illustrates the example:

Return On Capital Employed (ROCE) may be seen as the most important, financial, scorecard measure. The driver of this measure could be repeat and expanded sales from existing customers, the result of a high degree of loyalty among those customers. So, customer loyalty is included on the scorecard (in the customer perspective) because it is expected to have a strong influence on ROCE … Analysis of customer preferences may reveal that on time delivery (OTD) of orders is highly valued by customers. Thus, OTD is expected to lead to higher customer loyalty, which, in turn, is expected to lead to higher financial performance. So both customer loyalty and OTD are incorporated into the customer perspective of the scorecard ... what internal processes must the company excel at to achieve exceptional OTD … short cycle times in operating processes and high quality internal processes. And how [do organisations do this]? By training and improving the skills of their operating employees …
(Kaplan & Norton pp30-1))

Feedforward: feedback control model

Linking performance measures and competitive strategies in business
Business Performance Criteria

Financial performance	profitability
	liquidity
	capital structure
	market ratios
Competitiveness	relative market share and position
	sales growth
	measures of the customer base
Resource utilisation	productivity (input: output)
	efficiency (resources planned: consumed)
	utilisation (resources available: consumed)
Quality of service	overall service indicators
	measures of the twelve determinants of
	service quality:
	reliability, responsiveness, aesthetics,
	cleanliness, comfort, friendliness,
	communication, courtesy, competence,
	access, availability, security
Innovation	proportion of new to old products and services
	new product and service sales levels
Flexibility	product/service introduction flexibility
	product/service mix flexibility
	volume flexibility
	delivery flexibility

Source: Table 11.1 Brignall et al

Performance measures used by Regional Office (RO) to measure branch performance: a high street bank (a retail bank)

Financial performance
profit and loss account	quarterly report to RO
average gross margins as % of average interest rate	reported half yearly by branches to RO
ratio of total commissions and expenses	calculated annually by RO and circulated to branches
return on notional capital	calculated annually by RO and circulated to branches in the form of a league table
level of bad debts	branches supply list of all high risk accounts/out of order accounts to RO every two months
Competitive performance
number of accounts by product category	quarterly report to RO
number of corporate accounts lost and gained, with reasons for transfer	quarterly report to RO
Resource utilisation
ratio of total workload and total available man hours	monthly reporting to RO
average debit and credit balance per head of staff	calculated annually by RO for each branch and circulated as a league table
Service quality
number of customer complaints received	continuously monitored by RO
number of corporate accounts lost and gained, with reasons for transfer	quarterly report to RO
audit of quality of branch lending decisions	carried out every three years by RO
Innovation and flexibility
none identified

Source: Table 11.2 Brignall et al

Performance measures used to monitor hotel performance

Financial performance
profit and loss account	monthly report to management team; costs and revenues broken down by department
budget variance analysis	each month general managers have to submit their P&L account explanation for the three largest variances
breakdown of payroll costs, days absence, overtime etc	reported by each hotel every two weeks to head office
Competitive performance
market share (number of rooms occupied out of total number of rooms available in local market	monthly report to management team
number and % of rooms occupied for each of the top six local competitors	monthly report to management team
average room rates charged by the top six local competitors	monthly report to management team
number of rooms sold by customer type	monthly report to management team
customer loyalty: number of repeat bookings	data available from automated booking system
Resource utilisation measures
% of rooms occupied out of total number available	monthly report to management team
Service quality measures
customer satisfaction with: overall	guest questionnaires: data compiled
service levels:	into a monthly report to
staff friendliness, helpfulness, attentiveness, efficiency and	management team with
discretion, cleanliness, appearance	statistics on all the items listed
and comfort of rooms, functionality	opposite
of facilities, quality of food, handling
of check in, value for money
likelihood of repeat custom	guest questionnaires
staff turnover by avoidable/ unavoidable reasons for transfer	monthly report to management team
Innovation and flexibility
none identified

Source: Table 11.3 Brignall et al
See also Table 11.4 in Brignall et al for similar table relating to the home electronics supply industry

Royal Mail (UK) approach to measurement

This model is based on a series of steps that, if an when applied properly, will lead to 'good value added' measurement.

There are 10 steps in this model which, most of the time, apply to both in process situations and results oriented situations:

Step 1	identify measurement classification - process or results and overall purpose
Step 2	identify precise aim and the type of measurement
Step 3	determine who will use it
Step 4	position the measurement (if attached to the process)
Step 5	identify specifically what to measure
Step 6	select an appropriate measurement technique
Step 7	define the measurement feedback technique
Step 8	ensure a healthy mix of measurement is established
Step 9	apply the measurement 'added value' test equations
Step 10	develop and implement measurements

References

Duncan Williamson
August 2001 revised 9 December 2001 and 26 February 2003