Corporate Citizenship and the Balanced Scorecard The Balanced Scorecard was developed by Robert Kaplan and David Norton of the Harvard Business School in the early 1990s. Its power comes from its simplicity and intuitive nature. To understand the scorecard, start by asking, "What are up to four critical measures of success for my company?" When Kaplan and Norton answer this question they figure that the solution is pretty much the same for all businesses. The figure below shows the result. • Financial perspective: Every business is going to care about this. Is the company profitable? Is it generating shareholder value? Is it keeping costs low and revenues high? • Internal business: How well is the company managed? To be successful, the company should be managed effectively and efficiently. Employees should be productive and exhibit high morale. • Innovation and learning: Kaplan and Norton argue that successful businesses are always innovating and learning. • Customer perspective: A successful business has happy customers that admire the company's product and are loyal to the company. On the surface, these measures make sense. Some of them may be more important to your business, others less. You might think of one or two measures that aren't captured, but if you must generalize across all businesses, these four aren’t a bad place to start. And if these are in fact the four most critical measures of success, then the question that every business line, staff function and employee should ask is, "How do I support those four core measures?" Each of these four measures of success becomes a “scorecard.” The complete scorecard is distributed to every department and business unit in the company. Using the scorecard to measure citizenship If your company is employing the balanced scorecard, the corporate citizenship team should jump at the chance to apply it. It’s a friendly measurement system, and can help you determine if the programs you’ve designed are strategic as opposed to reactive and scattered. For your group and colleagues in corporate citizenship, EHS, community relations, public affairs and related departments, you would use this balanced scorecard to answer, “How does my department support the elements of the scorecard?” Your team would then outline the specific goals and tactics that support the scorecard elements. You would next specify measures that indicate if you are meeting those goals. The beauty of the scorecard is that on strategy it’s rigid, but on measurement it’s adaptable. It’s rigid on strategy because the four elements are fixed. It’s a simple, yet powerful tool to get you focused. Are your current programs designed to support the elements of the scorecard? If not, maybe you should adapt your programs. At the same time, it’s adaptable on measurement. You determine what measures would tell you if you are meeting your goals. The scorecard in action After top management instituted a scorecard, the head of Community Affairs at one high tech Center member used it to great advantage. She immediately went through a review to identify the ways in which existing community involvement strategy and programs were supporting the scorecard elements. She and her team enhanced programs that tied in well, revised programs that sat on the fence, and ended programs that didn’t connect at all. She then began to set measures and keep records of results. For example, under “customer perspective” in the figure above, the Community Affairs team set goals to encourage opportunities for business development colleagues to tell potential clients about the company's impressive high-tech community signature program. It worked with business development to follow up with client reactions, and recorded the testimonials of their colleagues from sales. Over time, Community Affairs built a formidable database of testimonials from business development staff indicating how powerful and valuable the program was in supporting sales. Corporate citizenship as a core element of the scorecard Although it’s only been around a few years, the Balanced Scorecard has had a lot of influence. Many companies are adopting it. However, they are adapting the framework to suit their own context. Let’s look at those four core elements again. Are the scorecard elements reflective of your company’s core corporate values? Are there other values that you think are more important to emphasize than the four Kaplan and Norton define? Some companies, for example, may replace an element that Kaplan and Norton suggest, such as “Internal Business,” with a core corporate value such as “Employee Perspective.” While the scorecard can be a very helpful tool to measure corporate citizenship, the fun really begins when we can help shape the scorecard by including “corporate citizenship” as a core element. Think about it—how many companies either have or are considering developing rhetoric that says something like “our most important stakeholders are owners, customers, employees, community and environment”? How many have made public statements that say how important it is for your company to be a good corporate citizen, or socially responsible, or sustainable? Doesn’t the logic follow that corporate citizenship should be a core element of your scorecard? Baxter International thought so. The company went through a process to customize a scorecard it would use for organization-wide system measurement. The figure below shows that the first three elements connect with core business values—to be the Best Investment, the Best Partner, and Best Team. These are not inconsistent with the core elements Kaplan and Norton define. But a company like Baxter is strongly committed to corporate citizenship. It has core values to treat stakeholders with respect and be a positive presence in its communities. Wouldn’t it make sense to include a measure of corporate citizenship on its scorecard? After a thorough process of discussion and review, top management at Baxter concluded just that, adding “Best Citizen” to its scorecard elements. The implication is that—over a phased in period—each business unit and department will eventually build their own goals and measures to demonstrate how they are contributing to the “Best Citizen” scorecard element. Linking into the scorecard becomes a powerful tool to generate corporate wide buy-in for citizenship. Global food giant Cargill has built a very similar scorecard with “Community” as one of its core elements. Create your own citizenship scorecard Does the prospect of making corporate citizenship a core element of the Balanced Scorecard sound like an uphill battle? And how can all this be helpful if your company doesn't use the scorecard? The system is flexible enough to allow your department to build its own scorecard. This is what the Corporate Responsibility team at Unocal has started to do. The team considered, “What are up to four core measures of success for corporate responsibility at the company?” An adapted version of their answer is presented in the figure below. First, the company considers its core values. How does corporate citizenship help deliver on your company’s core values? Second, how does corporate citizenship minimize risks – both those that threaten the company, and those that threaten the company’s community and environmental stakeholders? Third, how does corporate responsibility create opportunities for both the business and its stakeholders? Finally, and very specific to an energy company, how does corporate citizenship prevent major “incidents” (fires, spills, accidental deaths and injuries, etc.) from occurring? This Corporate Responsibility Scorecard allows the team to communicate clearly and directly to top management and their colleagues about the value and outcomes corporate citizenship will deliver for the business. It provides a framework for the department to develop plans and assess its effectiveness. If successful in implementation, over time it may give an opportunity for the team to roll out the scorecard to managers of core business units and staff functions. (At this writing, Unocal’s Corporate Responsibility Scorecard is still in a testing and development mode.) The value of the scorecard The Balanced Scorecard has generated so much interest in part because it helps functions traditionally thought to be external to the core of the business—whether corporate citizenship, community relations, marketing, PR, governmental relations, HR, and others—a tool to demonstrate relevance and impact to the business. If your company has adopted this approach, take advantage. It can be a means to communicate powerfully the value you add and results you deliver. If your company hasn’t adopted it, the scorecard can be a simple, elegant means to define key goals and measure results.