The Balanced Scorecard

Outline

Introduction to the Balanced Scorecard

What is it?
Why do it?

Balanced Scorecard Fundamentals

The Four Perspectives
Measures, Targets and Initiatives
Roles and Responsibilities

Using the BSC as a Management System

The Balanced Scorecard
What is it?
Definition:
The Balanced Scorecard is a
management tool that provides
stakeholders with a comprehensive
measure of how the organization is
progressing towards the
achievement of its strategic goals.
 The Balanced Scorecard
What is it?
The Balanced Scorecard:

 Balances financial and non-financial measures

 Balances short and long-term measures

 Balances performance drivers (leading indicators) with

outcome measures (lagging indicators)

 Should contain just enough data to give a complete picture

of organizational performance… and no more!

 Leads to strategic focus and organizational alignment.

 The Balanced Scorecard
Why do it?
• To achieve strategic objectives.
• To provide quality with fewer resources.
• To eliminate non-value added efforts.
• To align customer priorities and
expectations with the customer.
• To track progress.
• To evaluate process changes.
• To continually improve.
• To increase accountability.
The Balanced Scorecard
Why do it?
It works!

“The BSC has forced our management team

to focus beyond financial measures… too
often in the past we would get sucked
into short-term thinking.”

“The BSC dramatically improved our data

analysis… we don’t overreact nearly as
much as we used to.”
 The Strategy Focused
Organization
Mission – What we do

Vision – What we aspire to be

Strategies – How we accomplish

our goals

Measures – Indicators of our

progress
 Environmental Scan

Strengths Weaknesses

Opportunities Threats

A Model for
Values
Strategic
Planning
Mission &
Vision

Strategic Issues

Strategic Priorities

Objectives, Initiatives, and Evaluation

 The Strategy Focused
Organization
The Five Principles

1. Translate the strategy to operational

terms.
2. Align the organization to the strategy.
3. Make strategy everyone’s job
4. Make strategy a continual process
5. Mobilize change through executive
leadership

Source: The Strategy Focused Organization, Norton & Kaplan

The Balanced Scorecard
and The Big Picture
•Activity Based Costing
•Economic Value Added
•Forecasting
S trategic •Benchmarking
P lanning •Market Research
•Best Practices
M ission
•Six Sigma
and
•Statistical Process Control
V ision
•Reengineering
B alanced •ISO 9000
S corecard •Total Quality Management
•Empowerment
•Learning Organization
•Self-Directed Work Teams
•Change Management
 THE BALANCED SCORECARD

FINANCIAL/REGULATORY
CUSTOMER
To satisfy our constituents,
To achieve our vision,
what financial & regulatory
what customer needs must
objectives must
we serve?
we accomplish?

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?
 Customer Perspective

To achieve our vision, what customer needs

must we serve?

Possible Performance Measures

o Customer Satisfaction (Average)
o Satisfaction Gap Analysis (Satisfaction vs.
Level of Importance)
o Satisfaction Distribution (% of each area scored)
 Financial / Regulatory Perspective

To satisfy our constituents, what financial

and
regulatory objectives must we accomplish?
Possible Performance Measures
o Cost / Unit
o Unfunded Requirements or Projects
o Cost of Service
o Budget Projections and Targets
 Internal Perspective

To satisfy our customers, in which business

processes must we excel?
Possible Performance Measures
o Cycle Time
o Completion Rate
o Workload and Employee Utilization
o Transactions per employee
o Errors or Rework
 Learning and Growth

To achieve our goals and accomplish core activities,

how must we learn, communicate and work
together?
Possible Performance Measures
o Employee Satisfaction
o Retention and Turnover
o Training Hours and Resources
o Technology Investment
Financial / Regulatory
Perspective
Objectives Measures Targets
Initiatives
Customer Perspective
Objectives Measures Targets
Initiatives
Internal Perspective
Objectives Measures Targets
Initiatives
Learning and Growth

Objectives Measures Targets

Initiatives
Strategy Map
The Balanced Scorecard
as a Management System
BSC reviewed regularly to enhance
operational decision-making
 Success of initiatives assessed based on

DATA… not opinions

 Leading indicators evaluated to confirm

accuracy of assumptions
The Balanced Scorecard
as a Management System
The BSC is a “Living Document” that
requires regular revision of objectives,
measures and initiatives:
 How are we doing?

 Are we measuring the right things?

 What initiatives do we need to get us

where we want to go?

 Have our organizational goals changed?