A BALANCED SCORECARD OF BUSINESS MEASURES

OVERVIEW

Over the past few years, it has become generally recognized that the traditional financial and accounting measures provide an incomplete tool for executive decision making in today's environment. A focus on short-term, purely financial issues ignores a number of important performance areas and strategies that are needed to compete effectively in today's marketplace. As in other areas of quantitative management, the Japanese have led the way. A recent study showed “…that the top ten performance measures in Japan (did) not include any financial measures, whereas in Europe manufacturing cost, overhead cost, labour (sic) cost and material cost (were) all widely used” (Letza 1995, 4).

The balanced scorecard:

• Translates business goals into performance measures.
• Includes both strategic and operational measures.
• Serves as a portfolio of interrelated measures.
• Offers a comprehesive view of the entire IT function.
• Assess multiple projects.
• Facilitates the alignment and integration of projects to common objectives.
• For a given project, facilitates measures from more than one perspective.

The balanced scorecard was developed to address the need for a broader perspective of enterprise performance. It attempts to incorporate the elements of strategy, customer satisfaction, and business value that were discussed in previous sections of this technical report. However, instead of replacing or competing with the historic concept of financial controls for current activities, the balanced scorecard embraces the need for financial measures and complements them with strategic and operational measures that are the drivers of future success.

The Balanced Scorecard

The balanced scorecard is essentially a guideline for a strategic management system. It begins with the concept that corporate vision and strategy are pre-eminent requirements of strategic success. They must be carefully crafted by senior management, clearly communicated throughout the entire organization, and routinely monitored.

The second fundamental construct of the scorecard is that management must view the corporation from several different perspectives in order to maintain a healthy, growing enterprise over both long-term and short-term business cycles. To provide for those multiple perspectives, the scorecard looks at four essential areas:

• Financial performance
• Customer satisfaction
• Internal processes
• Learning and innovation

Each of these areas is explained in the following paragraphs.

Financial Performance. Financial performance is the most mature of the four perspectives. Budgets, measures for cost and profit planning are well established in virtually all companies. They are the traditional language of business management. As such, the scorecard approach is to enhance and support these measures, not to replace them. From a scorecard perspective, the challenge is to establish a financial, planning, and reporting structure that is more oriented to proactive tracking and reporting of non-traditional, non-financial measures developed by the scorecard concepts. ABC and COQ measures could be implemented to enhance the more traditional financial performance measures in support of the balanced scorecard objectives.

Customer Satisfaction. The customer perspective identifies the customer and market segments in which the business unit will compete. Strategies and objectives address fundamental issues such as "What business are we really in? What's our market share and the potential for growth in each product line and market segment? How satisfied are our customers with quality, service, and price? What's our customer profitability profile?" These same questions could be asked in most marketing organizations. So the challenge for the business units is to develop knowledge of the customer base, analyze that data, and develop plans, strategies, and measures of performance in these targeted segments within the context of the unique culture and environment of the enterprise.

Internal Processes. In the internal business process perspective, executives identify the critical internal processes in which the organization must excel. They focus on the ability of the business unit to deliver those functions that will have the greatest impact on customer satisfaction and achieving the organization's financial objectives.

As opposed to traditional approaches that attempt to monitor and improve existing business processes, the balanced scorecard approach seeks to identify entirely new processes at which the organization must excel to meet customer and financial objectives. Further, while the traditional methods attempt to control and improve existing operations (short-term value creation), the scorecard approach also includes the drivers of long-term financial success—entirely new products and services that will meet the emerging needs of current and future customers.

Measures in this category may include such items as expanded infrastructure, reduced cycle time for new products, or revisions to existing products.

Innovation and Learning. This perspective deals with identifying and managing the infrastructure (people, information systems, and organizational procedures) that is necessary to create and sustain long-term growth and improvement. These requirements generally come as the financial, customer, and internal business process perspectives identify their most critical factors for current and future success.

Typically, the needs of these three perspectives will identify large gaps between the organization’s abilities and those required to achieve targets for future success. To close these gaps, businesses will have to invest in building additional employee skills, enhancing information technology and systems, and aligning organizational procedures and routines to match the demands of the marketplace for more flexibility and speed of delivery.

Employee-based measures include: employee satisfaction and retention, skills inventory and training, and knowledge of the organizational process and technology. Specific drivers of these measures could include detailed indexes reflecting specific skills required for the new competitive environment versus the current employee skills inventory, and experience level of specific critical functions such as database and communications skills measured in staff-years.

Information systems capabilities can be measured by real-time availability of accurate information to internal and external customers, growth capability of strategic systems, and cycle time, productivity, and quality indexes.

Organizational procedures can examine alignment of employee incentives with overall organizational success factors: effectiveness of hiring, training, and retention programs; and measured rates of process improvement in critical processes.

Building the Scorecard

The balanced scorecard is organized around the four business perspectives described in the previous section. Specific goals and CSFs must be established for each. Then appropriate measures can be selected. These steps can take advantage of the techniques introduced in earlier sections of this technical report. Buy-in must be obtained at all levels. Finally, a measurement and reporting process can be implemented to support the balanced scorecard.

Steps

The following six steps define a generic process for developing a balanced scorecard:

Step 1. Start by Selecting an Appropriate Organizational Unit. The enterprise may be a corporation or a business unit as described in Section 2. The unit should have well-defined boundaries and a significant degree of autonomy.

Step 2. Ensure That the Program Is Driven From the Top. Executive management involvement is the most essential element in the scorecard concept. They are the intended user of the scorecard information.

“…the scorecard should represent the collective wisdom and energies of the senior executive team of the business unit. Unless the [senior management] team is fully engaged in the process, a successful outcome is unlikely. Without the active sponsorship and participation of the senior executives, a scorecard project should not be initiated. It will surely fail without leadership and commitment at the top.”

“We are aware of two instances where an excellent scorecard was built by a very senior staff executive without actively engaging the senior management team in the process. In one company, the scorecard was developed by the chief financial officer, and in the other by the senior vice president of business development. In both companies, the executive was a member of the most senior executive team, an active, contributing participant in all senior executive strategy-setting and management meetings. Because of their high-level involvement with corporate strategy, both individuals produced scorecards that accurately captured the strategy, customer focus, and critical internal processes of their companies. Their scorecards were accepted as accurate representations of the organizations’ critical objectives and measures. But in both instances, the scorecard ultimately did not drive charge or become an integral part of the companies’ management processes. We believe this disappointing outcome occurred because of the lack of senior executive involvement in the process and a lack of consensus about the role for the Balanced Scorecard. The scorecard project was likely viewed, in both organizations, as a staff-lead initiative to improve a measurement system, not to make fundamental changes in the way the organization viewed or managed itself” (Kaplan and Norton, 1996).

Step 3. Establish Linkages to Other Parts of the Organization. Much of the information necessary will originate with other organizational elements, such as the following:

Financial targets for growth and profitability and data from finance

Corporate initiatives in the environment, innovation, quality, and pricing from strategic planning

Other business units with information about common customers, core competencies, and supplier relationships

Step 4. Develop the Objectives and Measures. While giving senior managers information from four different perspectives, the balanced scorecard minimizes information overload by limiting the number of measures used (Letza 1995, 4). This is one of the most challenging aspects of the scorecard concept, and it requires a significant amount of time and effort. The average scorecard development process is approximately sixteen weeks, an indication that it is far easier to create a large number of measures than it is to create the ‘vital few’—that minimal set of measures that truly reflects the health of the enterprise.

The techniques described in Sections Error! Reference source not found. and Error! Reference source not found. of this technical report can be used to develop goals and select appropriate measures. Alternatively, less formal techniques such as brainstorming and interviews can be used to build consensus on the specific objectives and measures to be employed. Working groups often are established to examine each of the four perspectives.

Table 1 shows an example of a template for a balanced scorecard. The template shows linkages between the leading and lagging indicators of improved performance. The arrow shows the links established between improvement projects and strategic goals.

Table 1 . Example Mission-Based HS Agency Performance Measures

	HS Agency Performance Indicators
	Outcome Measures (lag indicators of mission success)	Output Measures (lead indicators of goal achievement)	Improvement Initiatives
Strategic Objectives
	( measures of CSFs & progress toward ultimate ends )	( measures of progress toward intermediate ends )
Financial
F1 – Minimize average processing costs per case	Changes in average worker hours spent per case	Time spent by clients in online sessions per month	e-Gov Program
Customer & Other Stakeholder
C3 – Instill stakeholder confidence in effective case handling	Percentage of contested cases	Number of identified policy violations per month	Process Redesign Program
Operational (Internal Business Process)
O2 – ……..			Process Redesign Program
Learning, Innovation, & Maturity
L1 – Be able to respond quickly to changing business requirements	Average lead time and resources required to adapt to new government obligations	Number of potentially useful HS insights and practices gleaned per month from mail based communications	Communities of Practice Program

In other words, improvement initiatives result in measurable outputs (“lead indicators”), which in turn lead to measurable outcomes (“lag indicators”), which again in turn indicate the degree of success in meeting mission-based objectives (measurable goals):

The outcome measures indicate the progress toward the enterprise and organizational goals (ultimate ends).

The output measures indicate progress toward project goals (intermediate ends).

The arrows on the template illustrate this flow of measurement-based linkages between improvement initiatives and strategic goals. The next table illustrates associated performance measures for an IT support organization.

Table 2. Example Mission-Based IT Performance Measures

	IT Performance Indicators
	Outcome Measures (lag indicators of mission success)	Output Measures (lead indicators of goal achievement)	Improvement Initiatives
Strategic Objectives
	( measures of CSFs & progress toward ultimate ends )	( measures of progress toward intermediate ends )
Financial
F1 – Improve HS cost structure through targeted strategic investment in IT	Changes in average worker hours spent per case	Time spent by clients in online sessions per month	e-Gov Program
Customer & Other Stakeholder
C3 – Improve consistency in case processing	Caseworker ratings of degree to which systems enable improved human performance	Process control chart results	Process Redesign Program
Operational (Internal Business Process)
O2 – ……….			Process Redesign Program
Learning, Innovation, & Maturity
L1 – Be able to quickly satisfy changing reporting requirements	Average lead time and resources required to satisfy new reporting requirements	Number of reporting-related lessons learned and innovations gleaned per month from mail based communications	Communities of Practice Program

While a template is often used in this process, the approach is intended to be flexible and should not be limited by the template. Section 4.7.2 discusses typical measures that might be included in a balanced scorecard. Step 4 is complete when the executive team approves the strategy, objectives, and measures.

Step 5. Communicate the Objectives to Lower Levels and Receive Feedback on the Feasibility of Plans. Both the financial and non-financial measures included in a balanced scorecard should be derived from the enterprise’s strategy. Articulating the strategies, identifying CSFs, and communicating goals throughout the organization helps align individual, departmental, and cross-departmental initiatives to achieve the enterprise mission and business goals. Lower-level managers must devise a vision of their responsibility, develop lower-level plans and measures, and begin linking performance reviews to objectives.

Rather than following the traditional process of attempting to control behavior by specifying the particular actions they want employees to take and measuring to see that the actions are taken, the emphasis of the balanced scorecard is on achieving the targets. The scorecard process assumes that people will adopt whatever action is necessary to arrive at these goals. The scorecard approach should be revised to facilitate this based on feedback on the initial plan. Step 5 is completed when the final plan is approved and sent back to the business units for implementation.

“It was clear that good communication and building of commitment was of the utmost importance. It was also very clear that the unique culture and existing company philosophy had to be incorporated into the scorecard for it to be acceptable to managers. Closely aligned to this was a need to link performance measures with company strategy” (Letza 1996).

Step 6. Link the Measures to Performance Objectives. Communicating the scorecard approach builds ownership of the plan among managers and staff. Linking performance reviews to the achievement of lower-level plans solidifies this ownership. The only restriction is that the lower-level goals, measures, and reporting processes must be consistent with the enterprise strategy. This process focuses the entire organization, from top to bottom, on achieving a common, limited number of strategic objectives.

Typical Scorecard Measures

Any of the measures discussed in the previous sections of this technical report may be selected for inclusion in a scorecard. However, the balanced scorecard approach suggests that one or more measures be defined for each of four categories of measures:

Customer/Stakeholder. Perceptions of products and services, operations, and values.

Internal. Conditions of processes and capabilities.

Learning and Innovation. Extent of change and improvement, adaptability, and flexibility.

Financial. Standing of budgets and timelines.

These four categories map to the three methods of calculating business value described in Section 4.6. The financial view of the scorecard corresponds to the economic view of value. The internal view of the scorecard corresponds to the operational view of value. The customer and learning views of the scorecard are combined in the strategic view of value. However, the strategic view described in Section 4.6.3 is broader than these two categories would indicate.

The measures selected from each category should be those that most closely map to the strategic objectives of the enterprise within each view. Kaplan and Norton (1996) note the following “core” measures that occur repeatedly on scorecards:

Financial Measures

ROI or economic value added (EVA)

Profitability

Revenue growth/mix

Cost reduction

Core Customer Measures

Market Share

Customer acquisition

Customer retention

Customer profitability

Customer satisfaction

Core Internal Business Process Measures

...

…

…

Core Learning and Growth Measures

Employee satisfaction

Employee retention

Employee productivity

The category of “internal” measures tends to be specific to the enterprise and its method of doing business. Typically these are measures of internal processes. For a software producing organization they might be defect rate, cycle time, or productivity.

In developing enterprise performance measures—both financial and non-financial—two philosophies are key:

While managers must review the results of a process, as most traditional measures do, these are lagging measures that look backward at past events. It is equally, or even more, important to develop a set of in-process or predictive measures that provide guidance on how to navigate into the future while the strategy is unfolding.

Many traditional measures, particularly the non-financial ones, tend to be generic. They may not be tied to any specific strategic objective. They should not be selected for the balanced scorecard simply because they already exist.

Managing with the Scorecard

Considerations for Effective Scorecard Use

The balanced scorecard has been used successfully by many organizations, but it does have some weaknesses that must be guarded against. Three important considerations are as follows:

Without a comprehensive and reliable strategic planning process, the balanced scorecard must be based on opinion and guesswork. Achieving consensus on a poor strategy and carefully tracking accomplishment of it via the scorecard probably will not lead to business success.

While the balanced scorecard approach includes both financial and strategic measures of performance, it is basically still a reporting mechanism. Unless appropriate investments are made in implementing the selected strategy, the scorecard reduces to management by objectives, with all the inherent pitfalls of that approach, but on a grander scale.

The culture of an organization may limit the level of success that may be achieved (Letza 1995, 4). Measurement techniques, in general, work best in an organization where information is shared openly and management confronts problems without recriminations.

Experience has shown that the balanced scorecard is most effectively used to drive the process of change (Kaplan and Norton 1996). A well-crafted balanced scorecard can help guide an organization to adapt to an emerging or changing marketplace. Effective implementation of the balanced scorecard should:

Assist an organization in developing and implementing a strategic management system

Deliver high-quality, timely information to guide the strategy as it evolves

Balance short-term financial performance with long-term growth opportunities

Increase performance and effectiveness by integrating the four essential perspectives—financial, internal processes, customer satisfaction, and growth and learning

Focus the activities and efforts of the entire organization by communicating management's business strategy, priorities, and CSFs both horizontally (across functionality) and vertically (through levels of management)

Serve as a dynamic, continuous process used to evaluate performance and redefine strategy and measures based on results

In designing a balanced scorecard, managers should bear in mind that “lofty vision and strategy statements don't translate easily into action at the local level” (Kaplan and Norton 1996). Developing an effective strategic management system using the balanced scorecard requires significant effort, including several iterations of analysis, dialogue, commitment, and action. However, as a growing number of organizations will attest, the results are often well worth the effort.

Definitions

Acronyms & Abbreviations

ABC	activity-based costing
COQ	cost-of-quality
CSF	critical success factor
EPM	enterprise performance measurement
EVA	economic value added
FEA	functional economic analysis
GQM	goal/question/metric method
IRM	information resources management
IRR	internal rate of return
IT	information technology
KPA	key process area
LOC	lines of code
NPV	net present value
QFD	quality function deployment
QM	quantitative management
ROA	return on assets
ROE	return on owners’ equity
ROI	return on investment
ROIC	return on invested capital
ROVA	work value/return on value added
SPC	statistical process control
SWOT	strengths, weaknesses, opportunities, and threats
TQM	total quality management
………	……………..

Glossary

Alignment.The degree of agreement, conformance, and consistency among an enterprise’s purpose, vision, values, goals, strategies, structures, systems, processes, skills, and behaviors.

Balanced scorecard.An analysis technique and management instrument that translates an enterprise’s mission and strategy into a comprehensive set of performance measures to provide a framework for strategic action. The scorecard gauges organizational performance across several perspectives: financial, customers, internal business processes, and learning and growth.

Critical success factors (CSFs).Developed by John F. Rockart (MIT’s Sloan School of Management) in the 1970s as a means of understanding the information requirements of chief executive officers, this approach seeks to identify “those few critical areas where things must go right for the business to flourish.” CSFs refer to both internal and external conditions. External CSFs are circumstances or events that impact or influence how a business meets its goals but are beyond the short-term control of the organization—e.g., “demographics,” “environmental issues,” “regulations,” “social issues,” and “technological advances.” Internal CSFs are particular overarching operational goals to be met in any functional activity or improvement action—they are those key things that the organization must do right to be successful—e.g., “leadership,” “customer service,” “image,” “distribution,” and “perceived quality.” Rockart identifies five sources of CSFs:

The Industry. Characteristics of the industry itself might mean that a small or rapid change in some area might have large or rapid impact on the enterprise.

Competitive Strategy or Industry Position. The enterprise may have a particular niche or role within an industry and need to closely monitor unique strategies, for example, to grow faster than its competition.

Environmental Factors. As changes occur such as interest rates or regulations, the corporation might have a special need to take advantage of them if possible.

Temporal Factors. These relate to short-term situations, often crises, such as a major accident, bad publicity, cash shortage, executive loss, or loss of a market segment because of the sudden appearance of a substitute product/service. While short lived, CSFs relating to crises may be extremely important.

Managerial Position. Some CSFs are associated with certain jobs or are important to a particular manager.

Customer.A stakeholder who is a recipient of a product or service produced by an enterprise. Customers may be internal or external to the organization. External customers, those in the marketplace, are the reason an enterprise exists. Internal customers are the reason a functional area or department exists—an interdependent department, or a downstream user in the value chain. When services rather than products are provided, customers are often called clients. For governmental organizations, customers can be termed constituents.

Customer satisfaction.How customer expectations regarding quality and delivery are managed in the core process. High-quality products or services (based on customer-driven target values) and regular on-time delivery are the paths to customer satisfaction (Lynch and Cross 1995, 237).

Cycle time.The time that elapses from the beginning to the end of a process or subprocess. Move time, inspect time, queue time, and storage time are not considered value added. Inspect time, queue time, and storage time are not considered value added.

Enterprise.Any corporate or business-unit organization with a distinct mission, market segment, suite of products or services, customer base, profit/loss responsibility, and set of competitors. The purpose for the organization’s existence is to perform its mission and achieve associated goals.

Information need.An unstructured statement that describes a type of information required by an organizational unit to enable it to perform its activities, satisfy its goals, and track its CSFs.

Input measure.An assessment of resources used to carry out a program or activity over a given time period with the purpose of achieving an output or outcome. Examples include number of staff, labor hours, funding, computer and telecommunications equipment and facilities, and supplies.

Life-cycle costTotal direct, indirect, recurring, nonrecurring, and other related costs of an IRM resource over its life cycle. These costs include studies, pilot or prototype testing, and other actions taken to support the planning and acquisition of the resource before its productive use begins. It covers costs of resources needed to meet functional requirements or needs over the system life. It includes such items as use of consultants or contractors; site preparation (construction, facilities, equipment, etc.); other costs associated with acquisition-related contracts; software development, maintenance, and/or conversion; cost of computer facilities; and network telecommunications costs.

Measurement.The dimension, quantity, or capacity of a process (Lynch and Cross 1995, 239). See results metrics and process metrics.

Mission.A general statement of the purpose and reason for the existence of the enterprise. A description of the business in terms of goods, markets, services, and client needs—areas that the company is currently pursuing and plans to pursue for some time in the future. An organization’s broadest overarching goal.

Non-value-added activity.An activity or step in a process that does not add value to an output product or service. Such an activity provides negative return on the investment or allocation of resources to it. It may or may not have a valid business reason for being performed. Within broad limits, an enterprise can benefit from allocating fewer resources to non-value-added activities.

Objective.A desired specific, measurable, dated goal state to be achieved. Often also called goal, end, mission, purpose, aim, target, standard, deadline, or quota.

Opportunity cost.What is sacrificed when choosing one alternative over another. That is, the value that could have been obtained if the investment had been applied to the next best alternative or in some other way.

Outcome measure.An outcome is the ultimate, long-term resulting effects—both expected and unexpected—of the customers’ use or application of an organization’s outputs. An outcome measure is an assessment of the results from a program activity or support function compared to its intended purpose. Can be difficult to measure for several reasons, e.g., results may not be immediately evident, or several organizational units or external suppliers or customers are involved and assigning the relative contribution of each is complex. Examples include the level of customer satisfaction with IT services and cycle time reduction attributable to automated work processes. Outcome measures, as opposed to outputmeasures, are required by the GPRA.

Output measure.Output is a product or service produced by an activity. An output measure is a tabulation, calculation, or recording of activity or effort. An assessment of actual work accomplished, services provided, or product produced over a given time period. Often process measures. Often used to control resources. Examples include number of function points delivered, number of projects completed, number of hot-line-service answers provided, and number of reports issued. Can be expressed in a quantitative or qualitative manner. Compare with outcome measure.

Payback period.A commonly used but technically deficient financial calculation that determines the amount of time required for the cumulative cash inflow from a project to equal the initial investment. It requires first specifying the maximum time within which the project must generate sufficient cash flows to pay back the required outlay. Among competing projects, the one accepted is the one that pays back its initial outlay the quickest and within the specified time frame. Payback period ignores the time value of money, the timing of cash inflows and outflows, and those cash flows that are past the payback period. Furthermore, there is no rule for determining the maximum payback period criterion. Nevertheless, because it simple to understand and easy to calculate, it is a widely used method for ranking investments.

Performance gap.When corporate performance does not measure up to expectation, e.g., when sales and profits decline, or when sales and profits stagnate while those of competitors rise. A potential trigger for strategy reformulation and strategic change implementation.

Performance goal.A target level of performance expressed as a tangible, measurable objective, against which actual achievements can be compared, including a goal expressed as a quantitative standard, value, or rate.

Performance indicator.A particular value or characteristic used to measure the output or outcome from a process.

Performance management system.A systematic approach to developing, strengthening, and reinforcing the right actions to maximize performance and organizational learning (Lynch and Cross 1995, 239).

Performance measure.A dimension of an activity or process—quality, cost, cycle time, or other characteristic—that can be used to judge the effectiveness or efficiency of the process against a target or standard value.

Performance measurement system.The integration of the measures of a core process. The system should (1) support top management priorities in a consistent manner from top to bottom in the organization, (2) aggregate measures in a way that provides decision makers with the right information at the right time, (3) help balance and integrate the financial and nonfinancial measures of the business, and (4) provide feedback on the performance of the core process horizontally in the internal customer-supplier networks, providing each part with the information it needs to help optimize the system (Lynch and Cross 1995, 239).

Process metrics.The managerial and behavioral factors such as an organization’s learning rate (Lynch and Cross 1995, 239).

Results metrics.The outcomes of product or service delivery from the customer’s perspective (Lynch and Cross 1995, 240).

Return on investment (ROI). Simple ROI is the ratio of the average annual net income earned from the project divided by the internal investment in the project. It is sometimes desirable to add interest to the numerator of the ratio to measure the productivity of assets, however. This method is typical for IT projects. The implementation and operating costs and the expected benefits are charted for the year anticipated. The point at which accumulated benefits exceed accumulated costs establishes the point where the base ROI occurs. This method assumes that unconstrained funds are available within the organization to support cost-justified projects. The method is not viable as stand-alone justification when projects are competing for investment dollars.

Strategic alignment. A state of collaboration, coordination of effort, perseverance, and commitment toward a shared set of strategic goals. The process of pursuing such a state.

Strategic control system.A system for linking operations to strategic goals, integrating financial and nonfinancial information to support internal business decisions, and focusing activities on customer requirements (Lynch and Cross 1995, 240).

Value.Worth or affordable excellence of a product or service. A judgment of (1) capability (utility), (2) quality and conformance to needs and standards, (3) timeliness, and (4) price relating to customer satisfaction. From the view of the customer, features that add more costs than utility, quality, or timeliness do not represent value. Those organizations best able to package features with additional customer service, including time and place utility, at an attractive price, are delivering value.

Value-added activity Value-added is the difference between dollar sales and the cost of raw materials and purchased parts. Value-added activity is an activity or step in a process that adds value to an output product or service. Such an activity merits the cost of the resources it consumes in production. These are the activities that customers would view as important and necessary. A value-added activity contributes directly to the performance of a mission, and could not be eliminated without impairing the mission.

Adapted from Kaplan, Robert S. and David P. Norton, The Balanced Scorecard. Boston , Massachusetts : Harvard Business School Press, 1996, 237.

Adapted from Robert S. Kaplan and David P. Norton, The Balanced Scorecard. Boston , Massachusetts : Harvard Business School Press, 1996, 9.

Original source: John F. Rockart, “Chief Executives Define Their Own Data Needs,” Harvard Business Review, March–April 1979.