Dear Gowtham, Greetings.

Glad to inform that you have been shortlisted for the next round of interview.  

Request you to prepare a PPT on the following topic:  

Topic :  Balance Scorecard and PMS ( What is BSC and PMS and How are they are connected, How to implement the BSC and PMS system in organization, and what is the use of BSC and PMS)No. of Slides : 6

Will get back to you regarding the date for the Presentation.

Performance managementPerformance management (PM) includes activities which ensure that goals are consistently being met in an

effective and efficient manner. Performance management can focus on the performance of an organization, a

department, employee, or even the processes to build a product of service, as well as many other areas.

PM is also known as a process by which organizations align their resources, systems and employees to

strategic objectives and priorities.[1]

Performance management as referenced on this page in a broad term coined by Dr. Aubrey Daniels in the late

1970s to describe a technology (i.e. science imbedded in applications methods) for managing both behavior

and results, two critical elements of what is known as performance.[2]

Contents

  [hide]

1   Application

2   Benefits

3   Organizational Development

4   Implementation

5   See also

6   References

7   Further reading

A management technique intended to holistically consider the performance of (usually a group

of) employees or machines to work towards optimum performance of a particular task or (more

frequently) a group of tasks

Performance management describes the processes by which managers improve the performance of

their employees by utilizing their power to reward, develop or discipline as appropriate. A performance

management system documents these processes as company policy and may form a legally binding

contract between the company and one or more employees.

[edit]Application

This is used most often in the workplace, can apply wherever people interact — schools, churches, community

meetings, sports teams, health setting, governmental agencies,social events and even political settings -

anywhere in the world people interact with their environments to produce desired effects. Armstrong and Baron

(1998) defined it as a “strategic and integrated approach to increase the effectiveness of companies by

improving the performance of the people who work in them and by developing the capabilities of teams and

individual contributors.”

It may be possible to get all employees to reconcile personal goals with organizational goals and increase

productivity and profitability of an organization using this process.[3] It can be applied by organizations or a

single department or section inside an organization, as well as an individual person. The performance process

is appropriately named the self-propelled performance process (SPPP).[citation needed]

First, a commitment analysis must be done where a job mission statement is drawn up for each job. The job

mission statement is a job definition in terms of purpose, customers, product and scope. The aim with this

analysis is to determine the continuous key objectives and performance standards for each job position.

Following the commitment analysis is the work analysis of a particular job in terms of the reporting structure

and job description. If a job description is not available, then a systems analysis can be done to draw up a job

description. The aim with this analysis is to determine the continuous critical objectives and performance

standards for each job.

[edit]Organizational Development

In organizational development (OD), performance can be thought of as Actual Results vs Desired Results. Any

discrepancy, where Actual is less than Desired, could constitute the performance improvement zone.

Performance management and improvement can be thought of as a cycle:

1. Performance planning where goals and objectives are established

2. Performance coaching where a manager intervenes to give feedback and adjust performance

3. Performance appraisal  where individual performance is formally documented and feedback delivered

A performance problem is any gap between Desired Results and Actual Results. Performance improvement is

any effort targeted at closing the gap between Actual Results and Desired Results.

Other organizational development definitions are slightly different. The U.S. Office of Personnel

Management (OPM) indicates that Performance Management consists of a system or process whereby:

1. Work is planned and expectations are set

2. Performance of work is monitored

3. Staff ability to perform is developed and enhanced

4. Performance is rated or measured and the ratings summarized

5. Top performance is rewarded[4]

Definition of Performance Management

The role of HR in the present scenario has undergone a sea change and its focus is on evolving such functional strategies which enable successful implementation of the major corporate strategies. In a way, HR and corporate strategies function in alignment. Today, HR works towards facilitating and improving the performance of the employees by building a conducive work environment and providing maximum opportunities to the employees for participating in organizational planning and decision making process. Today, all the major activities of HR are driven towards development of high performance leaders and fostering employee motivation. So, it can be interpreted that the role of HR has evolved from merely an appraiser to a facilitator and an enabler.

Performance management is the current buzzword and is the need in the current times of cut throat competition and the organizational battle for leadership. Performance management is a much broader and a complicated function of HR, as it encompasses activities such as joint goal setting, continuous progress

review and frequent communication, feedback and coaching for improved performance, implementation of employee development programmes and rewarding achievements. The process of performance management starts with the joining of a new incumbent in a system and ends when an employee quits the organization. Performance management can be regarded as a systematic process by which the overall performance of an organization can be improved by improving the performance of individuals within a team framework. It is a means for promoting superior performance by communicating expectations, defining roles within a required competence framework and establishing achievable benchmarks.

According to Armstrong and Baron (1998), Performance Management is both a strategic and an integrated approach to delivering successful results in organizations by improving the performance and developing the capabilities of teams and individuals. The term performance management gained its popularity in early 1980’s when total quality management programs received utmost importance for achievement of superior standards and quality performance. Tools such as job design, leadership development, training and reward system received an equal impetus along with the traditional performance appraisal process in the new comprehensive and a much wider framework. Performance management is an ongoing communication process which is carried between the supervisors and the employees through out the year. The process is very much cyclical and continuous in nature. A performance management system includes the following actions.

Developing clear job descriptions and employee performance plans which includes the key result areas (KRA') and performance indicators.

Selection of right set of people by implementing an appropriate selection process.

Negotiating requirements and performance standards for measuring the outcome and overall productivity against the predefined benchmarks.

Providing continuous coaching and feedback during the period of delivery of performance.

Identifying the training and development needs by measuring the outcomes achieved against the set standards and implementing effective development programs for improvement.

Holding quarterly performance development discussions and evaluating employee performance on the basis of performance plans.

Designing effective compensation and reward systems for recognizing those employees who excel in their jobs by achieving the set standards in accordance with the performance plans or rather exceed the performance benchmarks.

Providing promotional/career development support and guidance to the employees.

Performing exit interviews for understanding the cause of employee discontentment and thereafter exit from an organization.

A performance management process sets the platform for rewarding excellence by aligning individual employee accomplishments with the organization’s mission and objectives and making the employee and the organization understand the importance of a specific job in realizing outcomes. By establishing clear performance expectations which includes results, actions and behaviors, it helps the employees in understanding what exactly is expected out of their jobs and setting of standards help in eliminating those jobs which are of no use any longer. Through regular feedback and coaching, it provides an advantage of diagnosing the problems at an early stage and taking corrective actions.

To conclude, performance management can be regarded as a proactive system of managing employee performance for driving the individuals and the organizations towards desired performance and results. It’s about striking a harmonious alignment between individual and organizational objectives for accomplishment of excellence in performance.

The major objectives of performance management are discussed below:

To enable the employees towards achievement of superior standards of work performance.

To help the employees in identifying the knowledge and skills required for performing the job efficiently as this would drive their focus towards performing the right task in the right way.

Boosting the performance of the employees by encouraging employee empowerment, motivation and implementation of an effective reward mechanism.

Promoting a two way system of communication between the supervisors and the employees for clarifying expectations about the roles and accountabilities, communicating the functional and organizational goals, providing a regular and a transparent feedback for improving employee performance and continuous coaching.

Identifying the barriers to effective performance and resolving those barriers through constant monitoring, coaching and development interventions.

Creating a basis for several administrative decisions strategic planning, succession planning, promotions and performance based payment.

Promoting personal growth and advancement in the career of the employees by helping them in acquiring the desired knowledge and skills.

Any effective performance management system includes the following components:

1. Performance Planning: Performance planning is the first crucial component of any performance management process which forms the basis of performance appraisals. Performance planning is jointly done by the appraisee and also the reviewee in the beginning of a performance session. During this period, the employees decide upon the targets and the key performance areas which can be performed over a year within the performance budget., which is finalized after a mutual agreement between the reporting officer and the employee.

2. Performance Appraisal and Reviewing: The appraisals are normally performed twice in a year in an organization in the form of mid reviews and annual reviews which is held in the end of the financial year. In this process, the appraisee first offers the self filled up ratings in the self appraisal form and also describes his/her achievements over a period of time in quantifiable terms. After the self appraisal, the final ratings are provided by the appraiser for the quantifiable and measurable achievements of the employee being appraised. The entire process of review seeks an active participation of both the employee and the appraiser for analyzing the causes of loopholes in the performance and how it can be overcome. This has been discussed in the performance feedback section.

3. Feedback on the Performance followed by personal counseling and performance facilitation: Feedback and counseling is given a lot of importance in the performance management process. This is the stage in which the employee acquires awareness from the appraiser about the areas of improvements and also information on whether the employee is contributing the expected levels of

performance or not. The employee receives an open and a very transparent feedback and along with this the training and development needs of the employee is also identified. The appraiser adopts all the possible steps to ensure that the employee meets the expected outcomes for an organization through effective personal counseling and guidance, mentoring and representing the employee in training programmes which develop the competencies and improve the overall productivity.

4. Rewarding good performance: This is a very vital component as it will determine the work motivation of an employee. During this stage, an employee is publicly recognized for good performance and is rewarded. This stage is very sensitive for an employee as this may have a direct influence on the self esteem and achievement orientation. Any contributions duly recognized by an organization helps an employee in coping up with the failures successfully and satisfies the need for affection.

5. Performance Improvement Plans: In this stage, fresh set of goals are established for an employee and new deadline is provided for accomplishing those objectives. The employee is clearly communicated about the areas in which the employee is expected to improve and a stipulated deadline is also assigned within which the employee must show this improvement. This plan is jointly developed by the appraisee and the appraiser and is mutually approved.

6. Potential Appraisal: Potential appraisal forms a basis for both lateral and vertical movement of employees. By implementing competency mapping and various assessment techniques, potential appraisal is performed. Potential appraisal provides crucial inputs for succession planning and job rotation.

A good performance management system works towards the improvement of the overall organizational performance by managing the performances of teams and individuals for ensuring the achievement of the overall organizational ambitions and goals. An effective performance management system can play a very crucial role in managing the performance in an organization by:

Ensuring that the employees understand the importance of their contributions to the organizational goals and objectives.

Ensuring each employee understands what is expected from them and equally ascertaining whether the employees possess the required skills and support for fulfilling such expectations.

Ensuring proper aligning or linking of objectives and facilitating effective communication throughout the organization.

Facilitating a cordial and a harmonious relationship between an individual employee and the line manager based on trust and empowerment.

Performance management practices can have a positive influence on the job satisfaction and employee loyalty by:

Regularly providing open and transparent job feedbacks to the employees.

Establishing a clear linkage between performance and compensation

Providing ample learning and development opportunities by representing the employees in leadership development programmes, etc.

Evaluating performance and distributing incentives and rewards on a fair and equated basis.

Establishing clear performance objectives by facilitating an open communication and a joint dialogue.

Recognizing and rewarding good performance in an organization.

Providing maximum opportunities for career growth.

An effectively implemented performance management system can benefit the organization, managers and employees in several ways as depicted in the table given below:

Organization’s Benefits Improved organizational performance, employee retention and loyalty, improved productivity, overcoming the barriers to communication, clear accountabilities, and cost advantages.

Manager’s Benefits Saves time and reduces conflicts, ensures efficiency and consistency in performance.

Employee’s Benefits Clarifies expectations of the employees, self assessment opportunities clarifies the job accountabilities and contributes to improved performance, clearly defines career paths and promotes job satisfaction.

. The process includes the following stages:

Work Planning and defining expectations

Monitoring performance

Developing the weak performance areas

Performance rating

Rewarding good performance

The balanced scorecard (BSC) is a strategy performance management tool - a semi-standard structured

report, supported by design methods and automation tools, that can be used by managers to keep track

of the execution of activities by the staff within their control and to monitor the consequences arising from

these actions.[1] It is perhaps the best known of several such frameworks (it is the most widely adopted

performance management framework reported in the annual survey of management tools undertaken

by Bain & Company,[2] and has been widely adopted in English-speaking western countries and

Scandinavia in the early 1990s).

Contents

  [hide]

1   Characteristics

2   History

3   Design

o 3.1   Original design method

o 3.2   Improved design methods

o 3.3   Popularity

o 3.4   Variants, alternatives and criticisms

4   Criticism

o 4.1   Balanced Scorecard used for incentive based pay

5   The four perspectives

6   Measures

7   Software tools

8   See also

9   References

10   Sources

[edit]Characteristics

The characteristic of the balanced scorecard and its derivatives is the presentation of a mixture of

financial and non-financial measures each compared to a 'target' value within a single concise report. The

report is not meant to be a replacement for traditional financial or operational reports but a succinct

summary that captures the information most relevant to those reading it. It is the method by which this

'most relevant' information is determined (i.e., the design processes used to select the content) that most

differentiates the various versions of the tool in circulation. The balanced scorecard also gives light to the

company's vision and mission. These two elements must always be referred to when preparing a balance

scorecard.

As a model of performance, the balanced scorecard is effective in that "it articulates the links between

leading inputs (human and physical), processes, and lagging outcomes and focuses on the importance of

managing these components to achieve the organization's strategic priorities."[3]

The first versions of balanced scorecard asserted that relevance should derive from the corporate

strategy, and proposed design methods that focused on choosing measures and targets associated with

the main activities required to implement the strategy. As the initial audience for this were the readers of

the Harvard Business Review, the proposal was translated into a form that made sense to a typical reader

of that journal - one relevant to a mid-sized US business. Accordingly, initial designs were encouraged to

measure three categories of non-financial measure in addition to financial outputs - those of "customer,"

"internal business processes" and "learning and growth." Clearly these categories were not so relevant to

non-profits or units within complex organizations (which might have high degrees of internal

specialization), and much of the early literature on balanced scorecard focused on suggestions of

alternative 'perspectives' that might have more relevance to these groups.

Modern balanced scorecard thinking has evolved considerably since the initial ideas proposed in the late

1980s and early 1990s, and the modern performance management tools including Balanced Scorecard

are significantly improved - being more flexible (to suit a wider range of organisational types) and more

effective (as design methods have evolved to make them easier to design, and use).

[edit]History

Organizations have used systems consisting of a mix of financial and non-financial measures to track

progress for quite some time. One example of a such a system was created by Art Schneiderman in 1987

at Analog Devices, a mid-sized semi-conductor company; the Analog Devices Balanced Scorecard[4] was

similar to what is now recognised as a "First Generation" Balanced Scorecard design.[5] Subsequently Art

Schneiderman participated in an unrelated research study in 1990 led by Dr. Robert S. Kaplan in

conjunction with US management consultancy Nolan-Norton, and during this study described his work on

performance measurement. Subsequently, Kaplan and David P. Norton included anonymous details of

this use of balanced scorecard in a 1992 article.[6] Kaplan and Norton's article wasn't the only paper on

the topic published in early 1992[7] but the 1992 Kaplan and Norton paper was a popular success, and

was quickly followed by a second in 1993.[8] In 1996, they published the book The Balanced Scorecard.[9] These articles and the first book spread knowledge of the concept of balanced scorecard widely, and

has led to Kaplan and Norton being seen as the creators of the concept.

While the "balanced scorecard" terminology was coined by Art Schneiderman, the roots of performance

management as an activity run deep in management literature and practice. Management historians such

as Alfred Chandler suggest the origins of performance management can be seen in the emergence of the

complex organisation - most notably during the 19th Century in the USA.[10] More recent influences may

include the pioneering work of General Electric on performance measurement reporting in the 1950s and

the work of French process engineers (who created the tableau de bord – literally, a "dashboard" of

performance measures) in the early part of the 20th century. The tool also draws strongly on the ideas of

the 'resource based view of the firm'[11]proposed by Edith Penrose. However it should be noted that none

of these influences is explicitly linked to original descriptions of balanced scorecard by Schneiderman,

Maisel, or Kaplan & Norton.

Kaplan and Norton's first book, The Balanced Scorecard, remains their most popular. The book reflects

the earliest incarnations of balanced scorecards - effectively restating the concept as described in the

second Harvard Business Review article. Their second book, The Strategy Focused Organization,

echoed work by others (particularly in Scandinavia[12]) on the value of visually documenting the links

between measures by proposing the "Strategic Linkage Model" or strategy map.

[edit]Design

Design of a balanced scorecard ultimately is about the identification of a small number of financial and

non-financial measures and attaching targets to them, so that when they are reviewed it is possible to

determine whether current performance 'meets expectations'. The idea behind this is that by alerting

managers to areas where performance deviates from expectations, they can be encouraged to focus their

attention on these areas, and hopefully as a result trigger improved performance within the part of the

organization they lead.

The original thinking behind a balanced scorecard was for it to be focused on information relating to the

implementation of a strategy, and, perhaps unsurprisingly, over time there has been a blurring of the

boundaries between conventional strategic planning and control activities and those required to design a

Balanced Scorecard. This is illustrated well by the four steps required to design a balanced scorecard

included in Kaplan & Norton's writing on the subject in the late 1990s, where they assert four steps as

being part of the Balanced Scorecard design process:

1. Translating the vision into operational goals;

2. Communicating the vision and link it to individual performance;

3. Business planning; index setting

4. Feedback and learning, and adjusting the strategy accordingly.

These steps go far beyond the simple task of identifying a small number of financial and non-financial

measures, but illustrate the requirement for whatever design process is used to fit within broader thinking

about how the resulting Balanced Scorecard will integrate with the wider business management process.

This is also illustrated by books and articles referring to Balanced Scorecards confusing the design

process elements and the balanced scorecard itself. In particular, it is common for people to refer to a

"strategic linkage model" or "strategy map" as being a balanced scorecard.

Although it helps focus managers' attention on strategic issues and the management of the

implementation of strategy, it is important to remember that the Balanced Scorecard itself has no role in

the formation of strategy. In fact, balanced scorecards can comfortably co-exist with strategic planning

systems and other tools.

[edit]Original design method

The earliest balanced scorecards comprised simple tables broken into four sections - typically these

"perspectives" were labeled "financial", "customer", "internal business processes", and "learning and

growth". Designing the balanced scorecard required selecting five or six good measures for each

perspective.

Many authors have since suggested alternative headings for these perspectives, and also suggested

using either additional or fewer perspectives. These suggestions were notably triggered by a recognition

that different but equivalent headings would yield alternative sets of measures. The major design

challenge faced with this type of balanced scorecard is justifying the choice of measures made. "Of all the

measures you could have chosen, why did you choose these?" This common question is hard to answer

using this type of design process. If users are not confident that the measures within the Balanced

Scorecard are well chosen, they will have less confidence in the information it provides. Although less

common, these early-style balanced scorecards are still designed and used today.

In short, early-style balanced scorecards are hard to design in a way that builds confidence that they are

well designed. Because of this, many are abandoned soon after completion.[13]

[edit]Improved design methods

In the mid-1990s, an improved design method emerged. In the new method, measures are selected

based on a set of "strategic objectives" plotted on a "strategic linkage model" or "strategy map". With this

modified approach, the strategic objectives are distributed across the four measurement perspectives, so

as to "connect the dots" to form a visual presentation of strategy and measures.

To develop a strategy map, managers select a few strategic objectives within each of the perspectives,

and then define the cause-effect chain among these objectives by drawing links between them. A

balanced scorecard of strategic performance measures is then derived directly from the strategic

objectives. This type of approach provides greater contextual justification for the measures chosen, and is

generally easier for managers to work through. This style of balanced scorecard has been commonly

used since 1996 or so: it is significantly different in approach to the methods originally proposed, and so

can be thought of as representing the "2nd Generation" of design[14] approach adopted for balanced

scorecard since its introduction.

Several design issues still remain with this enhanced approach to balanced scorecard design, but it has

been much more successful than the design approach it superseded.

In the late 1990s, the design approach had evolved yet again. One problem with the "2nd generation"

design approach described above was that the plotting of causal links amongst twenty or so medium-term

strategic goals was still a relatively abstract activity. In practice it ignored the fact that opportunities to

intervene, to influence strategic goals are, and need to be anchored in the "now;" in current and real

management activity. Secondly, the need to "roll forward" and test the impact of these goals necessitated

the creation of an additional design instrument; the Vision or Destination Statement. This device was a

statement of what "strategic success," or the "strategic end-state" looked like. It was quickly realized, that

if a Destination Statement was created at the beginning of the design process then it was much easier to

select strategic activity and outcome objectives to respond to it. Measures and targets could then be

selected to track the achievement of these objectives. Design methods that incorporate a "destination

statement" or equivalent (e.g. the results based management method proposed by the UN in 2002)

represent a tangibly different design approach to those that went before, and have been proposed as

representing a "3rd generation" design method for balanced scorecard.

Design methods for balanced scorecards continue to evolve and adapt to reflect the deficiencies in the

currently used methods, and the particular needs of communities of interest (e.g. NGO's and government

departments have found the 3rd generation methods embedded in results based management more

useful than 1st or 2nd generation design methods).[citation needed]

The balanced scorecard represents an adaptive tool for assessing public and private programs and

projects. A very interesting initiative is a new application of BSC proposed by Ioppolo G. et al. He has

published on land use policy journal the structure and application of the territory balanced scorecard to

support environmental management projects and new public governance actions.[15]

[edit]Popularity

In 1997, Kurtzman found that 64 percent of the companies questioned were measuring performance from

a number of perspectives in a similar way to the balanced scorecard. Balanced scorecards have been

implemented by government agencies, military units, business units and corporations as a whole, non-

profit organisations, and schools.

Many examples of balanced scorecards can be found via web searches. However, adapting one

organisation's balanced scorecard to another is generally not advised by theorists, who believe that much

of the benefit of the balanced scorecard comes from the design process itself.[citation needed] Indeed, it could

be argued that many failures in the early days of balanced scorecard could be attributed to this problem,

in that early balanced scorecards were often designed remotely by consultants.[citation needed] Managers did

not trust, and so failed to engage with and use, these measure suites created by people lacking

knowledge of the organisation and management responsibility.[citation needed]

[edit]Variants, alternatives and criticisms

Since the balanced scorecard was popularized in the early 1990s, a large number of alternatives to the

original 'four box' balanced scorecard promoted by Kaplan and Norton in their various articles and books

have emerged. Most have very limited application, and are typically proposed either by academics as

vehicles for promoting other agendas (such as green issues),[16] or consultants as an attempt at

differentiation to promote sales of books and / or consultancy.[17]

Many of the variations proposed are broadly similar, and a research paper published in 2002[18] attempted

to identify a pattern in these variations - noting three distinct types of variation. The variations appeared to

be part of an evolution of the Balanced Scorecard concept, and so the paper refers to these distinct types

as "generations". Broadly, the original 'measures in boxes' type design (as proposed by Kaplan & Norton)

constitutes the 1st generation balanced scorecard design; balanced scorecard designs that include a

'strategy map' or 'strategic linkage model' (e.g. the Performance Prism, later Kaplan & Norton designs,[19] the Performance Driver model of Olve & Wetter[20]) constitute the 2nd Generation of Balanced

Scorecard design; and designs that augment the strategy map / strategic linkage model with a separate

document describing the long-term outcomes sought from the strategy (the "destination statement" idea)

comprise the 3rd generation balanced scorecard design.

[edit]Criticism

The balanced scorecard has attracted criticism from a variety of sources. Most has come from the

academic community, who dislike the empirical nature of the framework: Kaplan and Norton notoriously

failed to include any citation of prior art in their initial papers on the topic. Some of this criticism focuses

on technical flaws in the methods and design of the original Balanced Scorecard proposed by Kaplan and

Norton,[21] and has over time driven the evolution of the device through its various Generations. Other

academics have simply focused on the lack of citation support.[22]

Another criticism is that the balanced scorecard does not provide a bottom line score or a unified view

with clear recommendations: it is simply a list of metrics.[23] These critics usually include in their criticism

suggestions about how the 'unanswered' question postulated could be answered. Typically, however, the

unanswered question relates to things outside the scope of balanced scorecard itself (such as developing

strategies).[24]

There are few empirical studies linking the use of balanced scorecards to better decision making or

improved financial performance of companies, but some work has been done in these areas. However,

broadcast surveys of usage have difficulties in this respect, due to the wide variations in definition of 'what

a balanced scorecard is' noted above (making it hard to work out in a survey if you are comparing like

with like). Single organization case studies suffer from the 'lack of a control' issue common to any study of

organizational change - you don't know what the organization would have achieved if the change had not

been made, so it is difficult to attribute changes observed over time to a single intervention (such as

introducing a balanced scorecard). However, such studies as have been done have typically found

balanced scorecard to be useful.[25]

[edit]Balanced Scorecard used for incentive based pay

A common use of balanced scorecard is to support the payments of incentives to individuals, even though

it was not designed for this purpose nor is particularly suited to it.[26]

[edit]The four perspectives

The 1st generation design method proposed by Kaplan and Norton was based on the use of three non-

financial topic areas as prompts to aid the identification of non-financial measures in addition to one

looking at financial. Four "perspectives" were proposed:[27]

Financial: encourages the identification of a few relevant high-level financial measures. In particular,

designers were encouraged to choose measures that helped inform the answer to the question "How

do we look to shareholders?"

Customer: encourages the identification of measures that answer the question "How do customers

see us?"

Internal business processes: encourages the identification of measures that answer the question

"What must we excel at?"

Learning and growth: encourages the identification of measures that answer the question "How can

we continue to improve and create value?".

These 'prompt questions' illustrate that Kaplan and Norton were thinking about the needs of small to

medium sized commercial organizations in the USA[citation needed] (the target demographic for the Harvard

Business Review) when choosing these topic areas. They are not very helpful to other kinds of

organizations, and much of what has been written on balanced scorecard since has, in one way or

another, focused on the identification of alternative headings more suited to a broader range of

organizations.

[edit]Measures

The balanced scorecard is ultimately about choosing measures and targets. The various design methods

proposed are intended to help in the identification of these measures and targets, usually by a process of

abstraction that narrows the search space for a measure (e.g. find a measure to inform about a particular

'objective' within the customer perspective, rather than simply finding a measure for 'customer'). Although

lists of general and industry-specific measure definitions can be found in the case studies and

methodological articles and books presented in the references section. In general measure catalogs and

suggestions from books are only helpful 'after the event' - in the same way that a Dictionary can help you

confirm the spelling (and usage) of a word, but only once you have decided to use it proficiently.

[edit]Software tools

It is important to recognize that the balanced scorecard by definition is not a complex thing - typically no

more than about 20 measures spread across a mix of financial and non-financial topics, and easily

reported manually (on paper, or using simple office software).

The processes of collecting, reporting, and distributing balanced scorecard information can be labor

intensive and prone to procedural problems (for example, getting all relevant people to return the

information required by the required date). The simplest mechanism to use is to delegate these activities

to an individual, and many Balanced Scorecards are reported via ad-hoc methods based around email,

phone calls and office software.

In more complex organizations, where there are multiple balanced scorecards to report and/or a need for

co-ordination of results between balanced scorecards (for example, if one level of reports relies on

information collected and reported at a lower level) the use of individual reporters is problematic. Where

these conditions apply, organizations use balanced scorecard reporting software to automate the

production and distribution of these reports.

A 2009 survey[28] of software usage found roughly one third of organizations used office software to report

their balanced scorecard, one third used software developed specifically for their own use, and one third

used one of the many commercial packages available.

[edit]See also

Balanced Scorecard Basics

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, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.  While the phrase balanced scorecard was coined in the early 1990s, the roots of the this type of approach are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950’s and the work of French process engineers (who created the Tableau de Bord – literally, a "dashboard" of performance measures) in the early part of the 20th century.

The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. 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.

This new approach to strategic management was first detailed in a series of articles and books by Drs. Kaplan and Norton. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective. The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.

Kaplan and Norton describe the innovation of the balanced scorecard as follows:

"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."

Adapted from Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review (January-February 1996): 76.

Perspectives

The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:

The Learning & Growth PerspectiveThis perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization.

Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems."

The Business Process PerspectiveThis perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants.

The Customer PerspectiveRecent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.

In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.

The Financial PerspectiveKaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.  There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

Strategy Mapping

Strategy maps are communication tools used to tell a story of how value is created for the organization.  They show a logical, step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a cause-and-effect chain.  Generally speaking, improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up), which in turn enables the organization to create desirable results in the Customer and Financial perspectives (the top two rows).

Balanced Scorecard Software

The balanced scorecard is not a piece of software.  Unfortunately, many people believe that implementing software amounts to implementing a balanced scorecard. Once a scorecard has been developed and implemented, however, performance management software can be used to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information. The Balanced Scorecard Institute formally recommends the QuickScore Performance Information SystemTM developed by Spider Strategies   and co-marketed by the Institute.

Main benefits of using the balanced scorecard

Helps companies focus on what has to be done in order to create a breakthrough performance

Acts as an integrating device for a variety of corporate programmes Makes strategy operational by translating it into performance measures and

targets Helps break down corporate level measures so that local managers and

employees can see what they need to do well if they want to improve organisational effectiveness

Provides a comprehensive view that overturns the traditional idea of the organisation as a collection of isolated, independent functions and departments

Uses

1. Facilitates communication across the entire organization and enhances understanding of vision, mission and strategy2. Ties the vision, mission and strategy to the goals and objectivesof individuals and departments concerned3. Helps define clear metrics for better and more objective performance management4. Facilitates a clear understanding of the reasons behind strategic initiatives5. Acts as an effective basis for resource allocation with focus on both managing current performance as well as long- term value6. Used to establish clear governance frameworks and review Mechanisms

 Department Areas

 Finance Return On Investment Cash Flow Return on Capital Employed Financial Results (Quarterly/Yearly)

Internal Business Processes

Number of activities per function Duplicate activities across functions Process alignment (is the right process in the right department?) Process bottlenecks Process automation

Learning & Growth Is there the correct level of expertise for the job? Employee turnover Job satisfaction Training/Learning opportunities

Customer Delivery performance to customer Quality performance for customer Customer satisfaction rate Customer percentage of market Customer retention rate

The Process: Constructing a Balanced Scorecard1. Define a few goals in each perspective2. Select a few indicators for each goal3. Construct the metrics a. identify data sourcesb. write up methodsc. choose targets4. Collect data & review results

The Process: Constructing a Balanced Scorecard1. Define a few goals in each perspective2. Select a few indicators for each goal3. Construct the metrics a. identify data sources

b. write up methodsc. choose targets4. Collect data & review results

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