In business performance management, a third-generation balanced scorecard is a version of the traditional balanced scorecard, a structured report, supported by proven design methods and automated tools, that can be used by managers to keep track of the execution of activities by the staff within their control, and to monitor the consequences arising from these actions. The third-generation version was developed in the late 1990s to address design problems inherent to earlier generations It is distinguished by the components making up the balanced scorecard and the design process used to develop these components.

Components

A third-generation balanced scorecard has four main components: *A ''Destination Statement'' or ''Vision Statement''. This is a ne or two pagedescription of the organisation at a defined point in the future, assuming the current

strategy Strategy (from Greek στρατηγία ''stratēgia'', "art of troop leader; office of general, command, generalship") is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the "art ...

has been successfully implemented. The descriptions of the successful future are segmented into

perspectives Perspective may refer to: Vision and mathematics * Perspectivity, the formation of an image in a picture plane of a scene viewed from a fixed point, and its modeling in geometry ** Perspective (graphical), representing the effects of visual persp ...

for example ''financial &

stakeholder Stakeholder may refer to: *Stakeholder (corporate), a group, corporate, organization, member, or system that affects or can be affected by an organization's actions *Project stakeholder, a person, group, or organization with an interest in a proje ...

expectations'', ''

customer In sales, commerce, and economics, a customer (sometimes known as a client, buyer, or purchaser) is the recipient of a good, service, product or an idea - obtained from a seller, vendor, or supplier via a financial transaction or exchange for ...

& external relationships'', ''processes & activities'', ''organisation & culture'' *A ''strategic linkage model''. This is a version of the traditional ''

strategy map A strategy map is a diagram that documents the strategic goals being pursued by an organization or management team. It is an element of the documentation associated with the Balanced Scorecard, and in particular is characteristic of the second gen ...

'' that typically contains 12-24 ''strategic objectives'' segmented into two perspectives, activities and outcomes, analogous to the

logical framework In logic, a logical framework provides a means to define (or present) a logic as a signature in a higher-order type theory in such a way that provability of a formula in the original logic reduces to a type inhabitation problem in the framework typ ...

. Linkages indicate hypothesised causal relations between strategic objectives. *A set of ''definitions'' for each of the strategic objectives. *A set of definitions for each of the ''measures'' selected to monitor each of the strategic objectives, including ''targets''.

Design process

The design process for third-generation balanced scorecard requires the active involvement of the

management team Senior management, executive management, upper management, or a management is generally individuals at the highest level of management of an organization who have the day-to-day tasks of managing that organization—sometimes a company or a corpo ...

who will eventually use the balanced scorecard. The managers themselves make all decisions about the balanced scorecard content. The process begins with the development of a 'destination or Vision statement' to build management consensus on longer term strategic goals; this document is then used to build a 'strategic linkage model', describing the shorter term management priorities, both the strategic activities to complete and the strategic outcomes to achieve. Once the 'strategic objectives' are decided in outline these are assigned 'owners' from within the

, who further define each objective, plus the measures and targets associated with achieving each objective. The main improvements with this third generation of balanced scorecard relate to the improved “ownership” of the objectives by managers, because objectives, goals and outcomes are refined by the responsible managers themselves. All measures and targets must be reviewed to ensure that they are interconnected (dependencies identifies) and congruent (appropriately prioritised and support one another). In large/ complex organisations the scorecard can be developed by functional or project specific areas to relate to the

for that area. It is important in this case for the team creating the scorecard to understand the linkages between their area and that of other management teams across the organization with whom they may collaborate or have as stakeholders/ customers. In many cases the objectives for the scorecard of a functional or project organization will include cascaded objectives and priorities of the host organization/ senior leaders/ their stakeholders (what is important to them).

References

*Lawrie, G.J.G., Cobbold, I., and Marshall, J., (2004)
“Corporate Performance Management System in a Devolved UK Governmental Organisation: a Case Study”
International Journal of Productivity and Performance Management, Vol. 53, No. 4, pp. 353–370. *Lawrie, G.J.G., Kalff, D., and Andersen, H.V., (2005)
“Balanced Scorecard and Results-Based Management: Convergent Performance Management Systems”
Presented at 3rd Annual Conference on Performance Measurement and Management Control, The European Institute for Advanced Studies in Management (EIASM),

Nice, France Nice ( , ; Niçard dialect, Niçard: , classical norm, or , nonstandard, ; it, Nizza ; lij, Nissa; grc, Νίκαια; la, Nicaea) is the prefecture of the Alpes-Maritimes departments of France, department in France. The Nice urban unit, agg ...

, September 2005 *Morisawa, T., (2002)
“Building Performance Measurement Systems with the Balanced Scorecard Approach”
Nomura Research Institute, Paper No. 45 April 1, 2002. {{DEFAULTSORT:Third Generation Balanced Scorecard Organizational performance management

Components

Design process

See also

References