No.45   April 1, 2002   Building Performance Measurement Systems with the Balanced Scorecard Approach   Toru MORISAWA         The Balanced Scorecard (BSC) methodology has come in for increased attention and growing popularity among Japanese companies. Indeed, the fact that it has been applied to reforms undertaken by a large number of companies during the past several years has contributed to the rapid development of the BSC concept itself. For example, Kansai Electric Power Co., Inc. has been implementing a PDCA (Plan, Do, Check and Action) management cycle to increase the value of the company through a system of what is called a "Performance Linked Contract" between division managers and senior officials covering a diverse set of performance objectives. Concurrently, the company is also promoting reform by changing its organizational climate through the joint efforts of division managers and top executives. This example by Kansai Electric Power is bringing broader attention to the kind of reform that takes into account the third generation of BSC thinking, and which is advocated by the author and others in this field.     According to the results of BSC consultations by NRI (Nomura Research Institute, Ltd.), the requirements for successful reform can be summarized in the following three points: (1) adopting a problem-solving approach that does not rely on "tools"; (2) ensuring a commitment by management; and (3) creating a cross-functional team that incorporates such functions as corporate planning and personnel administration. Contents I Using the Balanced Scorecard to Effectively Achieve Value-Based Management 1 What is the Balanced Scorecard (BSC)? 2 The Essence of the BSC 3 Penetration State for BSC in Japanese Companies II Recent BSC Evolution 1 Transition from the First to the Third Generation 2 What is a Strategy Map? III Changing the Performance Measurement Systems: The Kansai Electric Power Example 1 Profile of the Company and its Organization 2 Background to the Implementation of the Performance Linked Contract 3 Evaluation by Outside Consultants 4 Building a Strategy Map 5 Results of Reform and Future Issues IV Requirements for Successfully Reforming Performance Measurement Systems Using the BSC 1 Selecting a Solution by Understanding the Total Picture of Management Issues 2 Commitment by Management to Realize Reform 3 A Cross-function Team Consisting of Planning and Personnel Functions 4 Expectations for Future Reform at Kansai Electric Power GO to PDF