Who's Counting?

First Score

Norton says the scorecard concept was originally intended to help managers balance short- and long-term goals. "The problem most management groups have is that the pressure of being profitable makes them focus on the short term and all the management tools at their disposal also focus on that short term," Norton says.

Scorecards aim to bridge that gap by helping to translate long-term strategy into short-term actions. They can also help entrepreneurs in several other ways. First, they help clarify strategic goals. "The thing I like about them is they force you to set priorities," says John Warner, president of Capital Insights, a Greenville, South Carolina, venture capital firm that requires the companies it backs to use scorecards. "You have to say `Here's what's important. Here are the eight things we're going to track that are going to make a difference in this business.' "

Scorecards help communicate those objectives to other managers and employees. By creating standard methods of measuring such nebulous concepts as customer satisfaction, managers from different departments, who may have different ways of looking at things, can understand what others are talking about.

Scorecards also provide rapid, easily digestible feedback about how managers are doing, which allows them to modify their direction. This makes scorecarding more than a measuring device, say Kaplan and Norton--it turns it into a management tool.

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This article was originally published in the July 1998 print edition of Entrepreneur with the headline: Who's Counting?.

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