The Stakeholder Scorecard: An Effective Management Tool

An important but elusive concept is how best to measure the overall performance of an organization in real time. Some years ago, Kaplan and Norton first presented the idea of the balanced scorecard; a comprehensive yet straightforward way to track progress beyond simply reporting financials. Their concept links financial, business processes, customer, and learning and growth items to organizational vision and strategy. Consider the stakeholder scorecard as a subset of this.

A working definition of stakeholders is any group of people who would feel a sense of loss if the enterprise went away. Identifying organizational stakeholders is not difficult. They usually fit into five categories: employees, customers, suppliers, shareholders, and the broader community.

As part of the planning process, it is useful to identify objectives around each of these stakeholder groups. In doing so, keep in mind that the requirements of one may, at times, be at odds with those of another.

For example, given the current challenge of recruiting and retaining talented, dedicated team members, business leaders are trying all manner of tactics to fill open positions. While flexible work schedules and off-site options may be attractive to current and potential employees, these can only be considered in the context of the requirements of other stakeholders, in particular customers.

Shareholders may want more frequent distributions of earnings while the management team may see the need to retain these for investment purposes.

As with most things, being “in balance” is a matter of the time horizon used. That is, at any point in time, the stakeholder scorecard may be out of balance in favor of one group over another. But this is not a static state: re-balancing will likely and naturally occur over time.

For more information on ways to measure your organization’s performance, contact me at joe@ajstrategy.com.