The Balanced Scorecard: What Is It And Why Does Business Need One?

By Ed Adkins

To figure out what the balanced scorecard is, it is best to first ask, “what problems need solving at work?” In fact, the more that you come up with the easier time you will have determining the use for such a thing as the balanced scorecard. Simply, it is a tool to help you get from where you are in your business to where you want to be.

First defined by Robert Kaplan and David Norton in a number of articles published in the Harvard Business Review between 1992 and 1996, the balanced scorecard has been sweeping through the world’s most successful businesses ever since. It is at the heart of answering how to create meaningful change in your company and how to set and meet strategic goals.

Why it Matters

The balanced scorecard provides the framework for companies to turn strategy into action, which is what they often fail to do. This is the conclusion of a recent survey conducted by Renaissance Solutions in association with Robert Kaplan of Harvard Business School.

Ninety percent of surveyed companies believed that a clear, action-oriented understanding of an organization’s strategy could significantly influence that organization’s success. However, the same survey showed that less than sixty percent of senior managers and less than ten percent of the total company believed that they had a clear understanding of their company’s strategy. In addition, less than thirty percent of senior managers who understood their company’s strategy believed that it had been effectively implemented.

These findings raise a series of key issues for major corporations that need to be addressed. These can be summarized as follows:

A clear strategic vision is not enough

It requires communication to the entire company to be understood. When a strategic vision is in place, it typically has little or no impact on the operating goals of departments and individuals. It must be tied to the goals and objectives of the individuals and departments concerned.

Day-to-day decisions ignore the strategic plan

The plan must be broken down into objectives and initiatives that have a direct relevance to the day to day activities of personnel.

Companies fail to collect the right information to monitor progress toward their strategic goals

It requires the right data be gathered and input to provide effective measurement of objectives.

Companies do not identify or learn from their mistakes

If an objective is not attained, it must be clearly understood which initiatives should be created to modify the objective or change the approach.

The Balanced Scorecard is a management approach that addresses these precise issues. Its purpose, "...to translate strategy into measures that uniquely communicate your vision to the organization" as defined by Robert Kaplan and David Norton in their book, ‘The Balanced Scorecard’.

It is called the Balanced Scorecard because it takes into account four different performance indicators that each drive the success of any company or organization. The different types of performance indicators can be broken down into what balanced scorecard aficionados call ‘perspectives’. Perspectives reflect the different views that can be taken of an organization.

The Financial Perspective monitors the traditional monetary measures that are familiar to most people. These include measures such as profitability, revenue growth and shareholder value.

The Customer Perspective looks at an organization through the eyes of its customers. It measures indicators such as service levels, satisfaction ratings and the volume of repeat business.

The Internal Perspective reports on the efficiency of internal processes and procedures. It encompasses metrics like productivity, cycle time and cost.

The Organization and Learning Perspective deals with employee issues. Indicators here might contain items such as intellectual assets, market innovation and skills development.

What makes the Scorecard such an effective tool is that it forces managers to think of their customers and their internal processes, rather than just their bottom line when assessing the health of the company. Also, the scorecard is a powerful tool to align your company with your strategic goals. Lastly, the card addresses the most common complaint of managers, “we set goals every year, but we have no system in place to track our success or efforts.”

If you want to learn more about the balanced scorecard, please contact Ed Adkins at Barnard, Vogler & Company at 775-786-6141.

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Jobs And Growth Tax Relief Reconciliation Act of 2003: How Am I Affected?

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) was signed into law on May 28, 2003 by President Bush. The table to the right highlights how the new law will cut your tax bill for 2003 and what’s in store for future years.

Also ahead

The increased amount of the child tax credit will be paid “in advance” beginning in mid-July over a period of three weeks. The amount of advance payments will be based on a person’s 2002 filing status and income, as well as the number children claimed on the 2002 tax return who will still be under age 17 in 2003.

Reduced taxes on capital gains and dividends

For sales and exchanges (and installment payments received) after May 5, 2003, gains on most capital assets held longer than one year will be taxed at a maximum rate of 15% instead of 20%. The maximum tax rate on capital gains drops to 5% instead of 10%, if it would otherwise be taxed at ordinary income rates of 10% or 15%.

Dividends received in 2003 from a domestic corporation (or certain “qualified foreign corporations”) are taxed at the same rates that apply to capital gains.

Increase in business expensing for new investment

The amount of the investment that may be immediately deducted is increased from $25,000 to $100,000 beginning in 2003 thorough 2005 and will be adjusted for inflation. The amount of investment qualifying for this immediate deduction begins to phase out for small businesses with investment in excess of $400,000 (increased from $200,000).

Increase in first-year bonus depreciation

The additional first-year bonus depreciation deduction is increased 30% to 50% for investments acquired and placed in service after May 5, 2003 and before January 1, 2005.

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Changes at BV&Co: The Climb

Barnard, Vogler & Co. is proud to be unveiling our new mission statement. But first, why did we come up with a new one?

On January 16th we came together at a retreat to ask ourselves, "what is our direction?" and decided that some things needed to change in our company. The answers are changes that we know that our clients will feel for the years to come.

First, we looked at our vision for the future, and decided that it needed to change. We wanted to have aggressive goals not only for growth, but to take care of our clients' needs completely and to the best of or ability. Next, we put core values on paper.

These values have driven BV&CO for 30 years, and it was important to voice them in a manner that would be able to guide this strategic plan, which we are now calling, "The Climb."

When we finished our retreat, we had enough information to build our Market-Based Strategic Plan. It's results, along with our new mission statement will be unveiled soon. Keep your eye out!

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IRS Warns of Two New Tax Scams

The IRS has issued a warning detailing two new tax schemes that target the families of those serving in the armed forces and e-mail users. In both schemes, people represent themselves as being from the IRS.

In particular, the IRS warns consumers to beware of any variation of a scenario in which a telephone caller posing as an IRS employee tells a family member that he is entitled to a $4,000 refund because his relative is in the armed forces and then requests a credit card number to cover a $42 fee for postage. The scammer provides an actual IRS toll-free number as the call back number in order to make the call seem legitimate. However, the scammer then makes numerous unauthorized purchases with the victim's credit card number.

In another scheme, victims receive an e-mail that appears to be from the IRS. The e-mail contains links to a non-IRS Internet web page that asks for personal and financial information. Such information could be used to steal the respondent's identity and get access to sensitive financial data or accounts.

Taxpayers who are on the receiving end of one of the scams should contact the Treasury Inspector General for Tax Administration (TIGTA) by calling the toll-free fraud referral hotline at 1-800-366-4484, faxing a complaint to 202-927-7018 or writing to the TIGTA Hotline, P.O. Box 589, Ben Franklin Station, Washington, D.C. 20044-0589 or by accessing TIGTA's website at www.ustreas.gov/tigta.

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Client Profile: Incline Village General Improvement District

Guided by a focused vision and a dynamic board of trustees, the Incline Village General Improvement District is constantly getting things done. If you take a look at all they have, including two championship golf courses, Diamond Peak Ski Resort, three sandy beaches, a 20,000 square foot community center, a 44,000 square foot recreation center, a state of the art ozone water treatment plant and an environmentally sensitive sewage processing operation, you would think that they would be happy to sit back and enjoy it. Instead, this group continues to forge forward.

The District, formed in 1961, is located on the northeast corner of Lake Tahoe, occupying a land area of approximately 15.36 square miles and serving a base population of almost 10,000 residents. IVGID provides water, wastewater, and trash services within its boundaries as well as various recreational amenities. The District currently serves approximately 4,100 water customers, accommodates about 125,000 skiers, 57,000 golfers, and 106,000 beach users, and oversees a variety of other activities annually.

“IVGID’s strengths,” says General Manager William B. Horn, “begin with the leadership and vision provided by the Board of Trustees.” According to Horn, it is their multi-talented workforce committed to continuously improving their people and services while achieving superior results that turn the vision into reality. Hence their mission statement, “We lead by continuously improving people and services, achieving superior results”.

As a result, IVGID is currently working on a total of almost $19 million of construction projects. These include tennis tournament courts, a golfcourse clubhouse, an upgrade to their Crystal Ski Lift and reconstruction of their Championship Golf Course.

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Employee Profile: Dawn Connolly

There’s another yet another new addition to Barnard, Vogler & Co.; she is our new additional receptionist, Dawn Connolly. She’s a local with lots of business experience and we know that you’ll find her as great as we do.

Dawn loves the fact that she’s a true local. “I was born and raised here and I’ve never left.” She sites Reno’s climate and culture as reasons for staying here, along with her close family. “We all live about a mile from each other, but we manage to keep from going crazy from it.”

Dawn’s immediate family includes her husband Tom and her two sons, Sean and Patrick. Tom works for SBC in testing, while Sean, 18, is a sophomore at Boise State and Patrick, 15, a sophomore at Reno High School (where both of his parents also graduated.)

Even though you may already know this Reno local, you may not know that she runs her own business. Dawn and a partner sell elegantly decorated flower planters under the name “The Harried Potters.” Also of interest, Dawn actually went to high school with BV&CO Partner, Mike Davis!

Before joining BV&CO, Dawn worked 18 years in advertising as, among other things, a secretary, a media buyer and a production manager. “I needed a change of pace,” says Dawn. And change of pace she got.

What does Dawn think of her first Tax Season? “It was very busy,” Dawn says, “but it wasn’t as bad as I expected.” That was most likely because Dawn and our other receptionist Linda worked tirelessly making this last season incredibly smooth for BV&CO and our clients.

Dawn also says of her experience here that, “accountants aren’t as boring as people say.” We take that as a compliment, and hope that we can keep her interested for a long time because she is definitely one of a kind.

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