BALANCE SCORE CARD

The balanced score card

 Developed by Harvard Professors Robert Kaplan and David Norton in early nineties.

 The logic of BS is that learning and people management help organizations improve
their internal processes (product development, service etc.) which are critical for
creating customer satisfaction and loyalty.
 Customer value creation in turn drives financial performance and profitability.

 BS enables to translate broad corporate goals into divisional, departmental and team
goals in a cascading fashion which helps an individual to see clearly how his
performance ties with overall performance of the firm.
What is a Balance Scorecard
 Balanced scorecard is a comprehensive performance measurement tool that reflects
all the measures critical for the success of the firm’s strategy.
 It’s a performance report based on a broad set of both financial and non financial
measures.
 It is a crucial part of the firm’s effort to better understand and to implement its
strategy.

USES OF BALANCED SCORE CARD

 Translating the vision into operational goals.
 Communicating the vision and link it to individual performance.

 Business planning.
 Feedback, learning and adjusting the strategy accordingly.
Advantages of Balanced Score Card
 It translates vision and strategy into action.
 It defines the strategic linkages to integrate performance across organizations.
 It communicates the objectives and measures to a business unit.
 It aligns the strategic initiatives in order to attain the long-term goals.
 It aligns everyone within an organization so that all employees understand how they
support the strategy.
 It provides a basis for compensation for performance.
 The scorecard provides a feedback to the senior management if the strategy is working.
 Focusing the whole organization on the few key things needed to create breakthrough
performance.
 Helps to integrate various corporate programs. Such as: quality, re-engineering, and
customer service initiatives.
 Breaking down strategic measures towards lower levels, so that unit managers, operators,
and employees can see what's required at their level to achieve excellent overall
performance.
 A means for implementing strategy by drawing managers’ attention to strategically
relevant critical success factors, and rewarding them for achievement of these factors
 A framework firms can use to achieve a desired organizational change in strategy, by
drawing attention to and rewarding achievement on factors that are part of a new strategy.
 A fair and objective basis for firms to use in determining each manager’s compensation
and advancement.
 A framework that coordinates efforts within the firm to achieve critical success factors.
BSC enables managers to see how their activity contributes to the success of others.

Limitations
 Nonfinancial information is subject to the reliability of the source and processes used
 Some information are required to be handled confidentially.

 Require timely, appropriate reporting of some elements of the scorecard.

 It is not easy to implement this tool because it involves a lot of subjectivity.
 The tool is much more complex compared to the other tools
 The measures that need to be taken is contingent upon the kind of environment, industry
and the business the organization is in.
 A lot of refinement is still required to be done so that it becomes understandable to every
stakeholder associated with the organization.