According to a recent study, companies that adopt a Balanced Scorecard (BSC) outperform firms that do not adopt the BSC over a three year period. The results reinforce the value of this proven performance management tool and confirm the experience of Palladium Group, Inc., the global market leader in helping organizations execute their strategies, and standards–keeper of the prestigious Palladium Balanced Scorecard Hall of Fame for Executing StrategyTM.
The research published in the journal Advances in Accounting1 provides further evidence that the BSC is an effective strategic management tool that leads to improved shareholder returns. Researchers used a long–horizon event study methodology to examine the relationship between BSC adoption and shareholder returns. Using a matched pair design with various matching criteria, they found the following results:
- BSC firms performed statistically better than control firms for matches based on market value of equity, book–to–market ratios, and net assets.
- Over the three–year post–adoption period, BSC adopters outperformed their industry counterparts who chose not to adopt the BSC by 27-30 percentage points.
- There is also evidence that firms earn greater excess returns after adoption of the BSC than before.
For Palladium Group, the study´s results come as no surprise. A study from the company´s own research found that 70 percent of organizations that use a formal process for managing strategy, such as the BSC, outperform their peer group. In addition, for most of the past decade, Palladium Group has celebrated the value of the BSC with its annual Balanced Scorecard Hall of Fame - recent winners of which include Infosys, Lockheed Martin, Nemours, and PSE&G.
"The success we´ve had at Nemours is evidence of the effectiveness of the Balanced Scorecard. We selected it as our preferred framework for execution and monitoring of our Strategy Management System," said Dr. David Bailey, CEO of Nemours, an integrated pediatric health system. "Strategic communications is one area in which our effectiveness improved to a level that our bond agency improved our rating, saving us millions. It also led to our induction into Palladium Group´s BSC Hall of Fame."
Palladium Group recognizes enterprises that use the Balanced Scorecard to become Strategy–Focused Organizations and achieve breakthrough results. The 2008 North American winners will be inducted to the Palladium Balanced Scorecard Hall of Fame for Executing Strategy on November 6th during Palladium´s North American Summit.
"Dr. Kaplan and I appreciate the validation of our observations that organizations can achieve performance breakthroughs within the first three years of implementing a BSC. We have seen it time and again, and have recognized hundreds of these achievements through the BSC Hall of Fame," said Dr. David P. Norton, founder and director of Palladium Group. "The Balanced Scorecard continues to be at the cornerstone of our work and serves as a key element of the Execution Premium management model. We consider an execution premium the extraordinary value an organization can achieve by doing the right things right, including results such as an increase in share price, revenues, brand recognition, customer loyalty, or employee commitment."
Palladium Group collaborated closely with Drs. Kaplan and Norton in the development of the Execution Premium model through its various education, conference, consulting, and research programs. The company has leveraged this work into an Execution Premium Assessment (XPA), designed to help companies understand the strategic performance gap between where they are and where they want to be. XPA, part of an integrated suite from Palladium, is a two week process consisting of executive interviews, document reviews and a comprehensive survey that capture´s an organization´s view of its performance and issues through the lens of execution premium best practices. Insights from the process provide a shared framework integrating the diverse components of the management systems to help the organization clarify strategy, drive performance, and optimize data.
About Palladium Group, Inc.
Palladium Group helps its clients link strategy and operations to achieve an execution premium. Palladium´s expertise in strategy, finance, and IT"”delivered through consulting, education, training, and technology implementation services"”helps more than 500 client organizations clarify strategy, drive performance, and optimize data. Palladium has offices throughout North America, Europe, the Middle East, Latin America, Africa, and the Asia–Pacific region. Palladium´s Balanced Scorecard Hall of Fame for Executing Strategy TM recognizes organizations that have achieved an outstanding execution premium.
For more information visit www.thepalladiumgroup.com
1 Crabtree, A.D., & DeBusk, G.K., (2008). The effects of adopting the Balanced Scorecard on shareholder returns. Advances in Accounting, 24 (1), 8–15.
