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What is the Balanced Scorecard?
The Balanced Scorecard (BSC) is a comprehensive The Balanced Scorecard (BSC) is a comprehensive management performance control tool with a strong management performance control tool with a strong focus on vision and strategy. focus on vision and strategy.
The strategy is translated into specific tactical The strategy is translated into specific tactical performance-driving activities. performance-driving activities.
Measures are established for each activity. Measures are established for each activity.
The Balanced Scorecard provides a four perspective frameworkto formulate strategy and translate it into operational terms
BSC as a Performance Measurement Tool
The The
Balanced ScorecardBalanced Scorecard
VisionVisionMissionMissionStrategyStrategy
Performance Measures
The Balanced Scorecard - Indicators
1. The Learning and Innovation
This perspective includes employee training and
corporate cultural attitudes related to both individual and corporate self-improvement. 2. The Internal Business
Process
This perspective allow the managers to know how well their business is running, is there any scope to improve
anyfurther
The Balanced Scorecard - Indicators
4. The Financial Perspective
Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate financial data will
always be a priority
3. The Customer Perspective
This perspective emphasises customer focus and customer
satisfaction.
Every Measure in BS culminates in to financial outcome -
ORGANIZATIONAL LEARNINGTraining Time, Turnover, Staff Satisfaction Score
BUSINESS PROCESS IMPROVEMENTCycle Time, Defects, Activity Costs
CUSTOMER SATISFACTIONMarket Share, Survey Scores, Complaints
FINANCIALSTRENGTH
Product Profitability,EBIT
Financial Innovative and Learning
Internal Business Process
Customer
Assured market share
R& D Achievement
New product line
Customer retention (gets hooked to the Co).
Growth in revenue.
Employee training
Productivity Cost effective product
Growth in market
Test marketing
Better production planning
Assured acceptance
Balanced Scorecard – Cause Effect Relationship Among Indicators
Examples-
Indicators -
The Balanced Scorecard –Indicators/Measures/Controls
BS incorporates all significant controls in one frame.
BSC Maintains balance between – BSC Maintains balance between – • Short term and long term objectivesShort term and long term objectives• Financial and Non-Financial PerformanceFinancial and Non-Financial Performance• Lagging and Leading IndicatorsLagging and Leading Indicators• Internal and External measuresInternal and External measures
How does BSC benefit organizations?
BSC acts as a Strategic Management/Implementation Tool Which Helps in ……
Validation/Enhancement of Strategy Validation/Enhancement of Strategy Getting clear consensus on the sameGetting clear consensus on the sameArticulation and Communication of Vision & Mission into key Articulation and Communication of Vision & Mission into key strategic objectivesstrategic objectivesCreation of Strategic Maps at corporate and SBU levelCreation of Strategic Maps at corporate and SBU level Alignment of the entire organization to the strategyAlignment of the entire organization to the strategyBrings in Clarity and Transparency – enhanced understanding of Brings in Clarity and Transparency – enhanced understanding of strategic objectives down to operating levelstrategic objectives down to operating levelMake customer focused organizationMake customer focused organizationProvides unambiguous measures for performance controlProvides unambiguous measures for performance controlConsensus on ownership of objectives at all levels of managementConsensus on ownership of objectives at all levels of managementPrioritization of strategic action plans Prioritization of strategic action plans Makes strategic planning a continuous process Makes strategic planning a continuous process
How does BSC benefit organizations?
Provides a “BALANCED” Performance Management Tool –
Adequate balance between lead and lag measures/indicatorsAdequate balance between lead and lag measures/indicatorsHelp organization remain pro-activeHelp organization remain pro-activeProvides macro perspective to senior management – Provides macro perspective to senior management –
no more longer working in “silos” no more longer working in “silos” Clear linkage and alignment of individual and enterprise Clear linkage and alignment of individual and enterprise performanceperformanceFlexible KRA’s depending on the business needs of the organizationFlexible KRA’s depending on the business needs of the organizationHelps achieve financial results by managing simultaneously non Helps achieve financial results by managing simultaneously non financial measuresfinancial measures
Some of the Success stories through BSC….
Conclusion –
BSC is highly effective management system to align company’s vision & mission to strategy and activities
BSC provides management with a comprehensive picture of company’s operations
BSC to be used as an integral part of a company’s planning process in order to realize its fullest potential