Balanced Scorecard

Outline
Introduction to the Balanced Scorecard.
What is it ?
Importance
The Four Perspectives.
Conclusion.
References.

Introduction
The balanced scorecard is a strategic planning and
management system that is used extensively in
business and industry, government, and nonprofit
organizations worldwide to align business activities
to the vision and strategy of the organization,
It improve internal and external communications,
and monitor organization performance against
strategic goals.
Balances financial and non-financial measures
Balances score card is an management system not
a measurement system.

According to Kaplan and Norton

A set of measures that gives top managers
a fast but comprehensive view of the
business

Why the Balanced Scorecard?

The Organization are
strategically focused.

becoming more

Need more balanced approach to looking at

performance, both tactical and strategic.
Only 5% of a workforce tends to
understand their companys strategy.
86% of executive teams spend less than
one hour per month discussing strategy.

Importance

To achieve strategic objectives.

To provide quality with fewer resources.
To eliminate non-value added efforts.
To align customer priorities an
expectations with the customer.
To track progress.
To evaluate process changes.
To continually improve.
To increase accountability.

Original Business Perspectives

Adapted from The
Balanced Scorecard by
Kaplan & Norton
The Balanced
Scorecard model
suggests that we view
the organization from 4
perspectives.
Then Develop
metrics, collect data
and analyze it relative
to each of these
perspectives

THE BALANCED SCORECARD

FINANCIAL/REGULATORY
To satisfy our constituents,
what financial & regulatory
objectives must
we accomplish?

CUSTOMER
To achieve our vision,
what customer needs must
we serve?

INTERNAL
To satisfy our customers and
stakeholders, in which business
processes must we excel?

LEARNING & GROWTH

To achieve our goals, how
must we learn, communicate
and grow?

Financial perspective
The three possible stages as described by
Kaplan and Norton (1996) areRapid growth:
The growth stage will stem from the development
and growth of the organization which will lead to
increased sales volumes, acquisition of new
customers, growth in revenues etc.
.

Sustain stage:
measures that evaluate the effectiveness of
the organization to manage its operations
and costs, by calculating the return on
investment, the return on capital employed,
etc

Harvest stage:
It will be based on cash flow analysis with
measures such as, revenue growth, costs,
profit margins, net operating income etc.

Customer perspective
Recent management philosophy has shown
an increasing realization of the importance
of customer focus and customer
satisfaction in any business.
It includes measures such as customer
satisfaction, customer retention, and
market share in target segments.

Internal process perspective

It is concerned with the processes that
create and deliver the customer value
proposition.
It focuses on all the activities and key
processes required in order for the
company to excel at providing the value
expected by the customers both
productively and efficiently.

Learning and growth

It includes employee training and corporate
cultural attitudes related to both individual
and self-improvement.
Learning and growth lead to better
business processes, which in turn lead to
increased value to the customer.
It includes measures such as employee
satisfaction, employee retention, skill sets,
etc.

Each perspective of the Balanced

Scorecard includes
Objectives:
major objectives to be achieved
Measures:
The observable parameters that will be
used to measure progress toward reaching
the objective.

Targets :
The specific target values for the measures.
Initiatives :
Action programs to be initiated in order to
meet the objective.

Disadvantages
Lack of a well Defined Strategy The balanced scorecard relies on a
well defined strategy and understanding of linkages between strategic
objections and metrics. Without this foundation the implementation could
fail.

Too much focus on the lagging measures Focusing on only the

lagging measures may cause a lack of priority or opportunity for the
leading measures.
Use of Generic Metrics Dont just copy metrics from another firm.

Identify the measures that apply to your strategy and competitive position.
Self-serving managers Managers whose goal is to achieve a desired
result in order to obtain a bonus or other self reward.

Conclusion
It provides a framework that not only
provides performance measurements, but
helps planners identify what should be
done and measured.
It enables executives to truly execute their
strategies.