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The Balanced Scorecard, Revisited

Many family companies are embracing the balanced scorecard approach to managing and evaluating business performance. The balanced scorecard” suggests that more should be measured than mere financial returns. Financial returns measure the past. Key measurements of three additional areas help the company build for the future: customer satisfaction, improvement in internal processes, and employee satisfaction.

Customer satisfaction can be measured through surveys, by tracking returns or other means. Measures of employee satisfaction might include results of morale surveys, attendance, turnover, grievances, etc. Measures of process improvement are often in the areas of cycle time, cost of quality improvements, break even time for new products, etc. (For more information see Balanced Scorecard, Robert S. Kaplan & David P. Norton, Harvard Business School Press, ISBN: 0875846513).

The balanced scorecard has some special meaning and some special implications for the family business. For starters, we find the balanced scorecard is particularly attractive to family firms because it gives importance to people and the long- term view. Family firms, more than non family firms, have a genuine sensitivity to all stakeholder groups, not just shareholders.

For family firms, we think a special adaptation to the balanced scorecard is appropriate. Instead of looking at Financial Results, we suggest a look at Shareholder Satisfaction. Beyond the classical financial measures of return on capital, share value growth, or economic value added, family shareholders are interested in pride of ownership, company reputation, liquidity, and risk. Factoring these considerations into the balanced scorecard might go a long way to building shareholder commitment to the business. We believe such shareholder commitment to be the family firm's most unique competitive advantage.

 

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