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Companies are designing their performance goals-and keeping scorebased on their unique needs and perceived critical success factors.
On October 30, 1996, Pacific Inland Bank of Anaheim, Calif., announced that it had changed its vision and strategy to such an extent that it was also changing its name to Security First Bank in a complete restructuring to transform it into "a true community bank, one that serves small businesses, professionals, and consumers:'1
The restructuring at Security First is only one example of how American companies are making major changes in responding to an increasingly competitive global economy. Indeed, the need for fundamental change is so strong that some leading authorities from academia and industry have called for a complete rethinking and reengineering of Corporate America. For example, in their book, Reengineering the Corporation,2 authors Hammer and Champy emphasize that it no longer is enough to do traditional tasks better. Rather, the realities of the current competitive environment require that the old "individual-based task-oriented" management concept be discarded completely and replaced with a "team-based process-oriented" management concept.
The current emphasis on restructuring has created a new problem for management because traditional measures of financial performance no longer are adequate to fully assess how the newly restructured organization is doing. Not only will successful restructuring require innovation in the way organizations view and measure performance, but developing, implementing, and evaluating such measures may be the greatest challenge that companies will have to face. In fact, a recent survey has found that "80% of large American companies want to change their performance measurement systems."3 The "Balanced Scorecard" may be just what organizations need to help them restructure successfully to meet the demands of the 21st Century.
WHAT IS THE BALANCED SCORECARD?
Essentially, the Balanced Scorecard is a set of financial and nonfinancial measures relating to a company's critical success factors. What is innovative about that concept is that the components of the scorecard are designed in an integrative fashion such that they reinforce each other in indicating both the current and future prospects of the company. More than others, Kaplan and Norton probably deserve much of the credit for elucidating and increasing the awareness of this concept.4
When Kaplan and Norton introduced the concept of the Balanced Scorecard...