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Chapter 4 • Business Reporting, Visual Analytics, and Business Performance Management 207

tABle 4.1 Comparison of Balanced Scorecard and Six Sigma

Balanced Scorecard Six Sigma
Strategic management system Performance measurement system
Relates to the longer-term view of the Provides snapshot of business’s performance and
business identifies measures that drive performance
toward profitability
Designed to develop balanced set of Designed to identify a set of measurements that
measures impact profitability
Identifies measurements around vision Establishes accountability for leadership for wellness
and values and profitability
Critical management processes are to Includes all business processes—management
clarify vision/strategy, communicate, and operational
plan, set targets, align strategic
initiatives, and enhance feedback
Balances customer and internal Balances management and employees’ roles;
operations without a clearly defined balances costs and revenue of heavy processes
leadership role
Emphasizes targets for each Emphasizes aggressive rate of improvement for
measurement each measurement, irrespective of target
Emphasizes learning of executives Emphasizes learning and innovation at all levels
based on the feedback based on the process feedback; enlists all employ-
ees’ participation
Focuses on growth Focuses on maximizing profitability
Heavy on strategic content Heavy on execution for profitability
Management system consisting of Measurement system based on process
measures management
Source: P. Gupta, Six Sigma Business Scorecard, 2nd ed., McGraw-Hill Professional, New York, 2006.

effective performance Measurement
A number of books provide recipes for determining whether a collection of performance
measures is good or bad. Among the basic ingredients of a good collection are the following:
• Measures should focus on key factors.
• Measures should be a mix of past, present, and future.
• Measures should balance the needs of shareholders, employees, partners, suppliers,
and other stakeholders.
• Measures should start at the top and flow down to the bottom.
• Measures need to have targets that are based on research and reality rather than
arbitrary.
As the section on KPIs notes, although all of these characteristics are important,
the real key to an effective performance measurement system is to have a good strategy.
Measures need to be derived from the corporate and business unit strategies and from
an analysis of the key business processes required to achieve those strategies. Of course,
this is easier said than done. If it were simple, most organizations would already have
effective performance measurement systems in place, but they do not.
Application Case 4.8, which describes the Web-based KPI scorecard system at
expedia.com, offers insights into the difficulties of defining both outcome and driver
KPIs and the importance of aligning departmental KPIs to overall company objectives.

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