INTRODUCTION:

In 1992, Kaplan and Norton published an article about the Balanced Scorecard
(BSC) [KN92]. At that time, it was a new approach to strategic management. They
recognized some of the weaknesses and vagueness of previous management
approaches. The balanced scorecard approach provides a clear description as to
what companies should measure in order to 'balance' their financial perspectives.
Nowadays many large companies use a performance measurement system like
the BSC but many smaller companies have no performance measurement system
[SAG06]. Companies that start with a performance measurement system face
difficulties with the implementation. There are only a few articles published in
journals concentrating on implementation issues of performance measurement
systems in small and medium-sized organisations. The paper starts with the
introduction of the Balanced Scorecard, followed by the literature review of the
Balanced Scorecard. Next, the case background and research method are
described, followed by the results. Finally, the recommendations and conclusion is
presented.

What is the balanced Scorecard:

The Balanced Scorecard is a performance management tool that enables a
company to translate its vision and strategy into a tangible set of performance
measures. However, it is more than a measuring device. The scorecard provides
an enterprise view of an organisation's overall performance by integrating
financial measures with other key performance indicators around customer
perspectives, internal business processes, and organisational growth, learning, and
innovation. 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
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companies must make to create future value through investment in customers,

suppliers, employees, processes, technology, and innovation [KN96b]."

Balanced Scorecard SWOT Analysis:

As well as gaining an understanding of what the Balanced Scorecard is, the
participants must understand what it is not. It is not just a collection of
measurements. The Balanced Scorecard must tell a story of the organization.The
opening exercise of the SWOT analysis hanging on the wall will bring all the
perspectives together to begin the process of designing the arrangement which
will eventually tell the story in a dynamic ongoing fashion of the strategic
development of St. Joseph.s at Fleming. The outcome of the day will be two draft
documents . a strategy map and a Balanced Scorecard outline. These documents
are draft so that they can be further wordsmithed to reflect the meaning behind
what was said and so that the participants and other members of the organization
have the opportunity for further reflection and feedback of the
content.The Strategy Map demonstrates, in a one page document, the connection
and progression among all aspects of the Balanced Scorecard and how it guides
the organization in the strategic development. By holding a graphic picture for all
to see and understand, all employees maintain sight of the vision. The Strategy
Map presents the picture in a one page graphic presentation. The Balanced
Scorecard is a reporting tool usually several pages long in a table format. With the
perspectives in place, the Steering Committee must next apply the mission,
values, and vision to formulate objectives to make the strategy operational. Clear
objectives will lead to the identification of key performance measures.

SWOT analysis on Balanced Scorecard Author name Institution name A balance

scorecard provides both a financial and non-financial perspective of the business.
A balanced scorecard takes into consideration various players in the business.
These range from financial institutions, suppliers, customers, market, human
resource and so forth. The balanced score card developed by Kaplan and Norton
takes into consideration four perspectives. These include internal, customer,
financial and innovation and learning perspective. A SWOT analysis can be used in
assessing what strategies to measure in a balance scorecard. A SWOT analysis can
be utilized to develop key performance indicators to measure the four
perspectives. A SWOT analysis is important in identifying the strategy and vision of
an organization before employing the balanced scorecard. When an organization
combines the SWOT analysis with its balanced scorecard, it is able to measure its
strengths against its competitors weaknesses. In this way, an organization is
able to maximize its opportunities in the market. A SWOT analysis would be
employed to determine the weaknesses, strengths, opportunities and threats to
the four perspectives in the balanced scorecard. The analysis would develop

metrics to measure the efficiency of these perspectives. When conducting a SWOT

analysis on a balanced scorecard, various questions are likely to be asked.

Example SWOT analysis

This is an example of a SWOT analysis in deciding whether to introduce a new service into
their portfolio.

Strengths:

Excellent sales staff with strong knowledge of existing services

Good relationship with customers

Good internal communications

Excellent footfall

Successful marketing strategies

Reputation for innovation

Weaknesses:

Currently struggling to meet deadlines - too much work?

High rental costs

Market research data may be out of date

Cash flow problems

Holding too much stock

Poor record keeping

Opportunities:

Similar services on the market are not as reliable or are more expensive

Loyal customers

Service could be on the market for ideal time

Customer demand - have asked sales staff for similar services

Threats:

Competitors have a similar service

Competitors have launched a new advertising campaign

Competitor opening service center nearby

Downturn in economy may mean people are spending less

Imagine a hypothetical company and

develop a balance scorecard for that
company:
The Balanced Scorecard is an approach to measurement. The term was coined by
Robert S. Kaplan (a Harvard Business School accounting professor) and David
P.Norton (a consultant) in an article titled "The Balanced Scorecard -- Measures
that Drive Performance," that appeared in the Jan/Feb 1992 issue of Harvard
Business
Review. The basic idea is very straight forward. Kaplan and Norton began by
arguing that What you measure is what you get and that An organizations
measurement system strongly affects the behavior of managers and employees.
They went on to say that Traditional financial accounting measures like return-oninvestment and earnings-pershare can give misleading signals for continuous
improvement and innovation To counter the tendency to rely too heavily on
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financial accounting measures, Kaplan and Norton argued that senior executives
should establish a scorecard that took multiple measures into account.
They proposed a Balanced Scorecard that considered four
types of measures:
Financial Measures: How Do We Look to Shareholders?
Internal Business Measures: What Must We Excel At?
Innovation and Learning Measures: Can We Continue to Improve and Create
Value?
Customer Measures: How Do Customers See Us?
illustrates a scorecard of a hypothetical company discussed in Kaplin and Nortons
Jan/Feb 1992 article, Electronic Circuits Inc (ECI).The article was well received, and
Kaplan and Norton proceeded to write more articles and then to blow this nice, but
simple idea into a book:

The Balanced Scorecard:

Translating Strategy into Action. (Harvard Business School Press, 1996)
The initial article on the Balanced Scorecard appeared just as business process
reengineering was talking off in the early Nineties. Subsequent articles
emphasized important ideas like linking processes to customer concerns and
linking measures to strategies. Many of the early business process theorists
emphasized the importance of measurement, but didnt provide specifics about
how to accomplish it. It became popular for business process gurus to mention the
balanced scorecard, when asked to explain how to align strategies, processes and
measures. The Balanced Scorecard approach rapidly grew into a minor industry.
Kaplan and Norton went on to write several more HBR articles and, to date, two
books on the Balanced Scorecard. (They also offer tapes and a newsletter
published by HBS, and Kaplan has coauthored a third book with Paul Niven.) Other
authors joined in and a search at Barnes & Noble produces a list of some 49 titles
with the keywords Balanced Scorecard.
Its rather interesting to follow the evolution of the Balanced Scorecard idea. It
began with the injunction that managers ought to measure more than financial
results, and proposed a matrix with four types of measures: financial, internal
(process), innovation and learning, and customer. Initial work focused on how
managers might identify the best measures in each of the four areas and how they
might communicate them with subordinates.

The Evolution of the Balanced

Scorecard:
Like the basic idea behind the Scorecard itself, there is nothing wrong with this
idea.There ought to be a systematic link between a companys strategy, its goals,
and the measures used to determine if the goals are being met.The Balanced
Scorecard has proved popular for many reasons. The most important reason was
simply that it served as a wakeup call in the mid-Nineties. Many senior managers
were relying too heavily on financial measures, and a tidy model that suggested
how they might rely on other measures, including process measures and customer
satisfaction, proved popular.In 2000 Kaplan and Norton came out with a new book
and another HBR article: Having Trouble with Your Strategy? Then Map It. (HBR,
Sept-Oct, 2000.) The new article is,in our opinion, more dubious. They suggest
what they term Balanced Scorecard Strategy Maps. In essence, they introduce a
hierarchical model that suggests that some measures contribute to others and are
summed up in shareholder value.summarizes the idea behind the Balanced
Scorecard Strategy Maps.When we look at Figure 3, it seems very much like we
have come full circle. We havegone from the idea that senior managers should not
rely exclusively on financial measures, but on four balanced sets of measures, to
the idea that there is a hierarchy of measures, and that financial measures are on
the top. If I was a senior executive and saw Figure 3, Id assume that I could rely
on the financial measures, and delegate to lower level managers, the monitoring
of supportive measures.Ignoring that objection, consider the four categories of
internal measures suggested by Figure 3. In essence, these are the processes that
Kaplan and Norton seem to think executives should be concerned with. I suppose,
moving from left to right, one might assume that Build Franchise was Marketing,
the second was Sales and Support, and the third referred to a Supply Chain
process.We suspect that the continual elaboration of a simple idea has gradually
escaped the control of the authors. The original idea is great, but probably should
have been tied more closely to processes. Certainly the idea of elaborating a
strategy works better,in our experience, if its done via specific process strategies
rather than through the
approach suggested in Figure 2. And measures are better organized by explicit
processes rather than arranged hierarchically, as shown in Figure 3. For an
example of how measures can be tied to specific processes, check the May issue
of BPTrends Newsletter on the BPT rendswebsite Publications/Newsletters) or the
White Paper on The SCOR Methodology (Publications/White Papers). Imagine a
manager relying on the approach shown in Figure 3. The economy turns down.
How does our hypothetical manager decide how to cut costs. Does he cut 10%
from each department? Or does he consider which processes are yielding the most
profits, and cut from processes that are less productive? Or, better still, does he
6

consider which processes perform worst, as compared with industry benchmarks,

and mandate savings from the processes that are below standard. We suggest that
the Balanced Scorecard approach doesnt help a manager much when times get
tough, and that a truly process-centric approach provides a lot more power.
Ignoring efforts to spin the Balanced Scorecard idea into an independent
management or measurement methodology, the basic idea is still valid and viable.
A significant portion of Fortune 500 companies have experimented with the
Balanced Scorecard approach, and many continue to use it in one of its many
guises. Managers still put too much emphasis on financial measures, and not
enough on the other measures that the original scorecard article suggested. The
Balanced Scorecard approach can help shake this up a bit, and is better than a
over emphasis on one set of measures. Beyond the Balanced Scorecard, however,
lies more sophisticated measurement systems tied directly to the processes the
company supports.
Both of Kaplan and Nortons books are still available and are as good as any of the
many other books on the Balanced Scorecard we have seen. If you just want the
essence of the idea, however, we suggest you buy the original Harvard Business
Review
article that can be bought and downloaded from Amazon. ( www.amazon.com )

HYPOTHESIS DEVELOPMENT:
Balanced Scorecards perspectives are interrelated and significantly influence the
financial performance of an organization. To assess the performance of MFIs
following hypotheses have been formulated.

Hypothesis of Financial Perspective

(HFP):
HFP 1: There is no relation between increasing return on total asset and
performance
HFP 2: There is no relation between increasing profit margin and
performance
HFP 3: There is no relation between return on investment and
performance
HFP 4: There is no relation between operating self sufficiency and
performance

financial
financial
financial
financial

Hypothesis of Customer Perspective

(HCP):
HCP 5: There is no relation between continuing relationships with MFI customer
satisfaction
HCP 6: There is no relation between the proper service capability and customer
satisfaction
HCP 7: There is no relationship between receiving personal attention and customer
satisfaction

Hypothesis of Internal
Perspective (HIBP):

Business

HIBP 8: There is no relation between low recoding time and internal business
process
HIBP 9: There is no relation between high customer complain and internal business
process
HIBP 10: There is no relation between loan sanction time and internal business
process
HIBP 11: There is no relation between accurate recoding and internal business
process
HIBP 12: There is no relation between high operation cost and internal business
process

Hypothesis of Learning and Growth

Perspective (HLGP):
HLGP 13: There is no relation between flexibility of loan and learning and growth of
MFI
HLGP 14: There is no relation between training program and the learning and
growth of MFI
HLGP 15: There is no relation between job satisfaction and the learning and growth
of MFI

Development of the perspective of

Balanced Scorecard:
By analysing from the depth of different articles, journals as well as reports, I have
found thatthere should have some of the development in the perspective of
Balanced Scorecard. Frommy point of view a new perspective can be developed. It
is important to have E ffi c i e n c y & Eff ectiveness perspective because it is
so much important to have the efficiency in theorganization. The production as
well as internal management activities must have to be donemore effectively.
These things must have to be measured by the performance tool. If theBalanced
Scorecard can be developed in this perspective, then it will be easy for
theorganization to handle the overall organizational performance more perfectly.
This study has selected two MFIs from two different region of Bangladesh.
According to the
classification of MRA (Microcredit Regulatory Authority), they are the medium sized
microfinance organization with respect to the number of client. Of the two MFIs,
one is SafeSave and another is ADAMS. In analyzing the result, this study has
considered the demographic factors. Poor
villagers and slum dwellers were the respondents of this study. To conduct the
study, two separate populations have been identified. One population represents
the employees and other represents the microfinance users of selected MFIs.
Stratified sampling method has been used to divide the microfinance employee
and client population in to relatively homogenous groups, called strata. To ensure
the randomness from each stratum, a specified number of elements corresponding
to the proportion of that stratum in the population have been selected. Stratum for
the population of employee has been set by categorizing the number of
employees who are working in ADAMS and Safe Save. Stratum for the client has
been fixed by categorizing the microfinance user of ADAMS and Safe Save.
Proportion approach has been used to determine the sample size of employees
and clients. In this study, two stratified samples have been taken. One sample
includes 20 employees and another sample includes 100 microfinance users. As
the population size in both the cases is large enough, this study calculates the size
considering 12 to 13% tolerate limit and 95% confidence level while response rate
was satisfactory over 80% for all cases. The sample covers the employees of
different ranks, including the Manager, Officer, collectors in their respective
organization.
Questionnaire has been used to collect data for this study. Two set of
questionnaires have been developed for this study. One set questionnaire gathers
information from employees regarding financial, internal business process and
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learning and growth of organization and another set questionnaire gathers

information from microfinance user regarding their satisfaction. A pilot survey has
been conducted among small group of respondents to verify the question
standard. Questionnaires have been arranged with both close and open end
question. SPSS and Microsoft Excel have been used to analyze the data. To answer
the question, 5 point likert scale (where 1= strongly disagree, 2= disagree,
3=neutral, 4=agree, 5=strongly agree) has been used. A parametric statistical
tool (chi-square test) has been used to derive a meaningful conclusion from the
empirical data. In addition, different measures of central tendency have been used
in analyzing the data. In this study dependent variable are the desired outcome of
BSCs four perspectives and independent variable are the KPIs of each perspective.

FINDINGS AND ANALYSIS:

They use deposit as the main source of funds for lending. SafeSave does not have
any external borrowings. SafeSave now offering long term savings which offers
higher interest rate for depositors there by the cost of fund is increasing. SafeSave
charges high interest on loan. Raising interest is associated with improved
financial performance for individual lenders (Cull, kunt & Morduch, 2006). ADAMS
uses deposits as the main source of lending. ADAMS does not offer any long term
deposit. They offer general deposit at low interest rate. Fund management cost is
not high, as the interest on deposit is low. ADAMS could not develop strong savings
and loan portfolio as they are not offering variety of loan and savings product.
Hypothesis 4 shows that there is significant relation between OSS and financial
performance. OSS is an important measure of sustainability of the lending
operations. OSS helps MFIs managers to determine the extent to which microcredit
operations are self sustaining. OSS thus refers whether or not enough revenue has
been earned to cover the MFI's direct costs. NGO-MFIs have to compete for the
fund from donor and socially responsible investors. Many MFIs are now
emphasizing on the operating self sufficiency as the fund providers are squeezing
the amount of fund.
OSS of SafeSave is showing an increasing trend. SafeSaves use of technology
reduces the cost of paper work associated with micro-credit and micro-deposit
transactions. SafeSaves eight branches and head office are equipped with MIS.
Use of technology enhances the productivity of staffs by simplifying the
10

documentation process of transactions. It significantly reduces chances of fraud

and human error. Human resource cost of SafeSave is not high. For individual
lender financial performance is positively linked to the labor cost (Cull et al.,
2006). Savings portfolio at SafeSave is more than loan portfolio. Cost of
maintaining saving portfolio is high. The interest earned on loan might not
adequate for operating expenses in the long run. Interest payable on deposit
might become a liability for SafeSave in the long run. Individual lenders earn
highest average profit but do least well on indicators of outreach to the very poor
(Cull et al., 2006). In ADAMS manual process of recording increases the chances of
fraud and human error. Branches are located at remote location thus enhancing
the transportation and supervision cost of ADAMS.

MANAGERIAL IMPLICATIONS:
There are a number of literatures relating to the applicability of BSC in banking
institutions (Wu 2012; Wu, Tzeng & Chen 2009; Davis & Albright, 2004). This
literature identifies the KPIs pertaining to the Micro bank and explains the
significance of KPIs from the four views of Kaplan Nortons BSC. KPIs will help MFIs
manager to figure out the critical success factor. It will reduce the information
load, providing information on those performance indicators which have significant
impact on the MFIs performance. It will help management to better invest
resources in the aspects which need improvement most. KPIs will work as a
reference for MFIs management to design the strategic improvement process.
BSCs contents are interdependent and logically linked. Learning and growth
perspective will help manager to improve the capabilities of MFIs people, system
and procedure. Internal business perspective will develop a value chain to deliver
the value proposition to the target MFIs clients. Customer perspective will identify
the factors on which MFIs clients satisfaction depends. Effective coordination of
learning and growth, customer, and business process perspective will help MFIs to
reach the desired financial outcome. Managers can maintain trade-off between the
MFIs social and financial goal through BSC.

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CONCLUSION:
BSC helps to identify the critical factors which MFIs are now overlooking. BSC
breakdown the MFIs mission and vision and transform them into tactical work plan.
MFIs need to communicate these tactical work plans to their employees in
significant and feasible way. BSC incorporates both financial and non financial
measures. It can create and deliver superior value to customer and can integrate
the interest of all MFIs stakeholder along with improving the financial performance.
Findings of this study reveal that ROI and operating self sufficiency are applicable
to measure the MFIs financial performance. Proper service capability influences
the customer satisfaction. Loan sanction time, accurate recording and number of
customer complaints are the most critical internal process for achieving the
customer and shareholder objectives. Employee training, job satisfaction, product
and service flexibility are significant to achieve the MFIs learning and growth
objectives. In disaster prone area, MFIs can provide training on disaster
management to their employees and clients.

REFERENCES:
Cull, R., Kunt, A. D., & Morduch, J. (2006). Financial performance and outreach: a
global analysis on leading
Microbanks. The economic journal, 117(517), 107-133. http://dx.doi.org/
10.1111/j.1468-0297.2007.02017.x
Davis, S., & Albright, T. (2004). An investigation of the effect of balanced scorecard
implementation on financial
performance. Management accounting Research, 15(2), 135-153. http://dx.doi.org/
10.1016/j.mar.2003.11.0
Fernandes, K. J., Raja, V., & whalley, A. (2006), Lesson from implementing the
balanced scorecard in a small and
medium size manufacturing organization. Technovation, 26(5/6), 623-634.
http://dx.doi.org/10.1016/j.technovation.2005.03.006
Islam M. T., & Sakil, Z. H. (2010). Application of Balanced Scorecard method in cell
phone companies of
Bangladesh. Dhaka University Journal of Management. 2(2), 8-17
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Kaplan, R. S., & Norton, D. (1992). The balanced scorecard measures that drive
performance. Harvard Business
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Kaplan, R. S., & Norton, D. (1996a). Using the balanced scorecard as strategic
management system. Harvard
business review. 74(1), 75-85
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