Participants Handbook - On BSC

SAIL STRATEGIC SCORE CARD
[Understand: Facilitate: Construct]
Hand Book for Participants
Steel Authority of India Limited

September/October 2010
Prepared and Facilitated by
CII Institute of Quality

&
Centre for Excellence in Organization Pvt Ltd.,
India – South East Asia
Balanced Score Card
www.exploreceo.com
Contents
Page No.
1 SAIL – Chairman’s Strategic Thrust

……………………………….3
2 Basic Concepts of Balanced Score

Card…………………………..5
i. What is Balanced Score Card? And it’s
utility…………….5
ii. Back Ground of Balanced Score
Card……………………….6
iii. Terminologies: An
overview…………………………………..11
3 Building a Balanced Score Card (BSC)..

…………………………15
i. Phase 1: Strategic
Foundation……………………………….16
a) Strategic alignment
b) Strategic Objectives
c) Strategy Maps
ii. Phase 2: Strategy Execution
:Structure…………………..16
a) Measures
b) Targets
c) Initiatives
iii. Phase 3: Strategy
Deployment……………………………….16
a) Roll out
CII – CEO / SAIL / September/October 2010 2

Balanced Score Card
b) Reviews
c) Automation
4 Understanding the SAIL Enterprise

Map………………………39
Contents
Page No.
5 Defining the SAIL Unit Strategic

Map…………………………40
i. BSC as a Strategy Management Tool
ii. Balanced Scorecard as a Measurement Tool
iii. Defining Critical Success Factors and Measures
6 Constructing a Balanced Scorecard (sample

Templates will be circulated)
……………………………………………………………..52
i. Analyzing Cause and Effect
ii. How many Measures to Choose?
7 Consultants Experiences, cautions, dos and don’ts

on
BSC……………………………………………………………
……………58
8 FAQ’s on
BSC……………………………………………………………..5
9

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9 Bibliography……………………………………………………
………….70
10 Sample BSC
Template…………………………………………………78
This hand book shall be used in conjunction with the presentation

material / templates / exercise etc., Presentation slides would be shared as
electronic copies.

Balanced Score Card
1. SAIL Chairman’s Strategic Thrust
Mr. Chandra Shekhar Verma, Chairman, SAIL, inaugurated the launch of

SAIL Strategic Score Card on 16th of September 2010. The program was
facilitated by Centre for Excellence in Organization under the umbrella of
CII Institute of Quality.
Emphasizing the sustenance of the SAIL PRIDE, he emphasized on the
need for “Survival of the Fittest” is the context of Global trends.
As Leading Steel Manufacturer, SAIL has been a

lead player and the pride of Maharatana needs to
be augmented. Manpower productivity of SAIL Is
225 tcs/yr, while the Indian average is 500 tcs/yr
and the global average is 1000 tcs/yr.
In the twelfth five year plan, Govt is investing

trillion rupees in infrastructure and SAIL VIBRANCY
is the need of the hour. New players emerging in
India are an opportunity for SAIL to take the competition head on. Hence
the Strategies need a newer thrustand measurement systems should go
beyond the financial perspective
It is important to internalize the BSC processes and role model the delivery
of each of the leadership members from 1st Nov 2010- through the BSC
processes. We can perfect this in the financial year 2011-2012. As we are
investing in technology, it is time to re-strategize, enhance vibrancy and
responsiveness to remain competitive.

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ED (CP), introducing the theme emphasizes the need to aggressively look

at the ROC on all technological investments. . The internal environment
analysis highlights the areas of strength and weaknesses which the
organization has and the external environment analysis throws light on the
opportunities and the threats being offered by the various areas of the
environment. The most important thing that can ensure the success of any
organization is the development of Execution plan. SAIL’S Responsiveness
to execution needs quantum leap. Based on the preparatory work we do,
the detailed action plans shall be created and proper reporting systems
will be established to start operation of the Balanced Scorecard. We will,
from the Business Excellence team, catalyze the execution and support
the Chairman’s dream to make SAIL – THE GLOBAL LEADER. No planning
system can deliver results; it’s the execution of the plans that deliver
results. The Balanced Score card facilitates planning from strategy to
implementation to measurement and reporting

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2. Basic Concept of Balanced Score Card
i. What is Balanced Score Card? And it’s utility

The balanced scorecard is a strategic planning and management system
that is widely applicable to organizations regardless of size or type of
business. The system, extensively used in business and industry,
government, and nonprofit organizations worldwide, provides a method of
aligning business activities to the vision and strategy of the organization,
improving internal and external communications, and monitoring
organization performance against strategic goals. It was originated by
Robert Kaplan and David Norton of Harvard University in about 1990 and
detailed in a series of Harvard Business Review articles and subsequent
books, but the roots of the balanced scorecard 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 Board – literally, an instrument panel or dashboard
of performance measures) in the early part of the 20th century in France.
Because the balanced scorecard is a generic term, it means different

things to different people, and in practice, there are wide variations in both
understanding and implementation. To some, the balanced scorecard is a
simple dashboard of performance measures, while to others it is a
comprehensive planning and management system covering the whole
organization and designed to focus efforts on organization strategy and,
more importantly, on performance and results.
The balanced scorecard has evolved from its early use as a simple
performance measurement framework for non-financial performance
measures to a full strategic planning and management system. The “new”
balanced scorecard transforms an organization’s strategic plan from an

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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.
ii. Back Ground of Balanced Score Card

Frederick W. Taylor’s Division of Labor resulted in aggressive focus on SILO
measures resulting in accountants communicate with financial statements,
engineers with shop floor issues and architects communicate with physical
models. It seems that almost every profession has some means of
communicating clearly to the end user. However the bigger picture of the
Organizational thrust gets lost in the hierarchical and departmental
ownerships. Outstanding strategies that can bring quantum leaping results
never ends in execution. It is some time ok to have ordinary or poor
strategies and outstanding execution. Outstanding strategies, with poor
execution only results in diffusion, frustration and blame games.
Throughout the history of contemporary management theories starting

from the ones that were introduced by the intrusion of the mass
production in the beginning of the 20th century and until today, all the
gurus of management have been trying to find uniform solutions on more
efficient allocation and use of very limited resources available to
businesses.
In the 1930-ies, the main topic was motivation of employees, as it turned

out that human nature does not enable to work long hours on a repetitive
tasks without frustration level getting so high enough to diminish
productivity. In the 1940-ies and 1950-ies, the first statistical and linear
methods were introduced in trying to measure logistics of the operations
management and its implications to overall company success in financial-
analysis side. In the beginning of 1980-ies, partly because of introduction
of electronic data processing equipment and quick development of

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computers, the whole array of management techniques were initiated. The

particular reasons for the vast development of the new theories were
catalyzed mainly by ever growing competition generated through more
systematic use of computers, and of course also by rapid growth of the
importance of human capital.
Today’s companies are in the midst of a revolutionary transformation.

Industrial age competition is shifting to information age competition.
During the industrial age, roughly from 1850 to about 1975, companies
succeeded by how well they could capture the benefits from economies of
scale and scope. Technology mattered, but, ultimately, success accrued to
companies that could embed the new technology into physical assets that
offered efficient, mass production of standard products. During the
industrial age, the financial control systems were developed in major
companies to facilitate and monitor efficient allocations of financial and
physical capital.
A summary financial measure such as return-on-capital-employed (ROCE)

could both direct a company’s internal capital to its most productive use
and monitor the efficiency by which operating divisions used financial and
physical capital to create value for shareholders.
The emergence of the information era, however, in the last decades of the
20th century, has made obsolete many of the fundamental assumptions of
industrial age competition. The information age environment for both
manufacturing and service organizations requires new capabilities for
competitive success. The ability of a company to mobilize and exploit its
intangible assets has become far more decisive than investing and
managing tangible, physical assets.
Industrial age companies created a sharp distinction between two groups

of employees. The intellectual elite – managers and engineers – used their
analytical skills to design products and processes, select and manage

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customers, and supervise day-to-day operations. The second group was

composed of the people who actually produced the products and delivered
the services. This direct labor work force was a principal factor of
production, which performed its tasks under supervision of the first group.
Today automation and productivity have increased the number of people
performing analytic functions: engineering, marketing, management and
administration. Therefore, the people are more viewed as problem solvers,
not as variable costs. In other words, information age has brought about
the concept of knowledge management.

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The shift to successful knowledge management has introduced a variety of

Improvement initiatives:
• Just-in-time,
• Total quality management,
• Lean enterprise,
• Business process re-engineering,
• Time-based competition,
• Customer-focused organization,
• Activity-based cost management,
• Employee empowerment,
• Self Managed Teams,
• Living company, and so on.
Some of those programmes have meant in practice real breakthrough and

improvement, others have proven to be in the best case just a short-time
disturbance, but in the worst cases total failures resulting in disarray or
even bankruptcy of a particular company. The main reason for that lies in
five main implementation problems:
i. Current performance measurement systems are based on the
traditional financial accounting model, which does not enable to
objectively analyze information-age companies;
ii. If some non-financial performance measurement even is made, it is

solely based on employees’ tactical performance, not on strategic
performance;
iii. Majority of management and employee salary-based motivation

schemes are only short-run profit oriented, that does not enable to
align towards long-run goals;
iv. Overall company strategy is not closely linked to organizational and

personal improvement programmes; and

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v. Strategy is not generally linked to resource allocation, which results

in under- financing some of the crucial parts of organization’s
development.
As for today, superior financial performance and efficiency in production

are just not enough to gain sufficient competitive advantage, but more and
more attention needs to be paid to intangible sides of business.
The long-term success of any organization is determined by the

capabilities and the competencies it has developed. Today’s businesses
require a better understanding of their customers (both existing and
potential ) and their needs, better streamlined processes and highly skilled
people for ensuring future survival and sustainable growth. Hence for
people engaged in strategic planning there has been an on-going dilemma.
The finished product, the strategic plan, has not communicated and
reached the end user. Sure strategic plans are nice to look at, full of bar
charts, nice covers, well written, and professionally prepared; but they
simply have not impacted the people who must execute the strategic plan.
The end result has been poor execution of the strategic plan throughout
the entire organization. And the sad fact of the matter is that execution of
the strategic plan is everybody’s business, not just upper level
management. Upper level management creates the strategy, but
execution takes place from the bottom up. Absence of their inclusion and
water fall approach results in unsatisfactory performance.
Mobilizing change through executive leadership.

Everyone in the organization needs to understand why a corporate
strategy is changing, and only the leaders can drive that change. For
example, after Bombay terror attack, the government established an office
of strategy management to develop new objectives for agencies like the
CID, CBI and the varied state Police Directorates to co-ordinate through an
integrated agency set up by Government of India. The office changed the
bureau’s agenda from one that restricted information and shared only

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what it had to, to one whose objective is to share information and restrict
only what it must.
This innovative tool “Balanced Scorecard” developed by Robert S Kaplan

and David P Norton in 1992 is unique in two ways compared to the
traditional performance measurement tools. They are:-
i. It considers the financial indices as well the non-financial ones in
determining the corporate performance level and
ii. It is not just a performance measurement tool but is also a
performance management system the aim of the Balanced
Scorecard is to direct, help manage and change in support of the
longer-term strategy in order to manage performance. The
scorecard reflects what the company and the strategies are all
about. It acts as a catalyst for bringing in the ‘change’ element
within the organization.
Balanced Scorecard uses a balanced measurement system that comprises

of “the old” financial side and four “new” perspectives of:
i. Financial Perspective – How do we look at shareholders?
ii. Customer Perspective – How should we appear to our customers?
iii. Internal Business Processes Perspective – What must we excel at?
iv. Learning and Growth Perspective
Can we continue to improve and create value? Hence, from the above lines
we can say that this tool has considered not only the financial results to be
important but also those factors which actually drive an organization
towards future successes as mentioned earlier. The tool has given stress
on the other areas which are required to ‘balance’ the financial perspective
in order to get a total view about the organizational performance and
improve the same. The framework tries to bring a balance and linkage
between
i. Financial and the Non-Financial indicators,
ii. Tangible and the Intangible measures,

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iii. Internal and the External aspects and

iv. Leading and the Lagging indicators.
iii. Terminologies : An Overview - Speaking the Common

Language:
Throughout the entire process of building and implementing a balanced
scorecard, we all need to speak the same language. Therefore, the first
thing to do is to understand a few terms:
SWOT:
Every organization should do a reflective exercise to evaluate the four
parameters
• Strengths ( Good will in the name of SAIL SUSTAINED OVER A PERIOD
OF 52 YEARS)
• Weakness (Past success determining the glory while the global context
is far ahead – the 225- 500-1000 challenge of SAIL). Being a 52 year old
organization, depletion of tacit knowledge because a retirement is a
great weakness.
• Opportunities. Growth of Infrastructure locally and globally is a great
opportunity
• Threats. New players with agility, China’s aggression and competitions
cost advantage are a threat. SAIL responsiveness and agility and
execution of strategies are a threat.
Risk Management:
The global meltdown, the economic tsunami saw the “who is who”
collapsing. Also, in spite of 54% of Western companies following the BSC,
organizations not factoring risk management have seen disasters. Risk
management and other measures of corporate strategy need a short-term
focus and long-term context in a recession. A recession means short-term
focus but with long-term perspective

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“In a recession you need to focus on short-term goals and the three Cs:
reduce costs, rebuild capital and watch your credit,”
Cause Effect Relationship:

The natural flow of business performance from a lower level to an upper
level, or between perspectives or hierarchical flow is related to the cause
and effect. For example, training employees on customer relation’s leads
to better customer service which in turn leads to improved financial
results. One side is the leader or driver, producing an end result or effect
on the other side.
Goal:
An overall achievement that is considered critical to the future success of
the organization goals expresses where the organization wants to be.
Measurement:
A way of monitoring and tracking the progress of strategic objectives and
giving an enumerative or qualitative value to the pre and post progress is
called measure. Measurements can be leading indicators of performance
(leads to an end result) or lagging indicators (the end results). If you can’t
measure, you can’t manage and you can’t improve upon your corporate
success.
Lead Indicators.
Actions we anticipate and take to convert strategies to end results are lead
indicators. For example in the Context of SAIL, anticipating Coal Shortage,
taking over new Coal Mines, or working on strategic collaborations, or
sourcing alternate to Coal or all lead indicators. We anticipate a challenge
and take actions. Similarly, in the current context, sourcing and retaining
engineering talents is becoming a challenge. If organization puts in a
strategy to Build People than Buy people (not ready market talent), then it
is a lead indicator.

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Lag Indicators:
Lag indicators or measuring an event that has already happened. Financial
performance, process audits are all lag indicators. Inspection is a lag
indicator. Focus is on measuring the out puts.
Objective:
What specifically must be done to execute the strategy; i.e. what is critical
to the future success of our strategy? What the organization must do to
reach its goals!
Perspectives:
Four or five different views of what drives the organization. Perspectives
provide a framework for measurement. The four most common
perspectives are: Financial (final outcomes), Customer, Internal Processes,
and Learning & Growth.
Initiatives:
One of the critical success factors in the BSC approach is linking strategy
to end result. Major programs or projects that must be undertaken in order
to meet one or more strategic objectives for delivering the desired results
are called “Initiatives”.
In these troubled economic times, Kaplan advises companies to focus on
four or five key strategic initiatives, though not lose sight of long-term
corporate strategy.
Strategic Area:
A major strategic thrust for the organization, such as maximizing
shareholder value or improving the efficiency of operations or seeding
Winnovation is the thought architecture. Strategic areas define the scope
for building the balanced scorecard system. It is a proactive and
intellectual input for quantum leaping out put.

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Strategic Map:
It is a logical framework for organizing a collection of strategic objectives
for the perspectives. Everything is linked to capture a cause and effect
relationship. Strategic maps are the foundation for building the Balanced
Scorecard.
Strategic Model:
It is a frame that combines all strategic objectives over a strategic map,
well connected and complete, providing one single model or structure for
managing the strategic area.
Strategy:
It is thought architecture – derived from collective wisdom, global
knowledge, R&D and bench marking. An expression of what the
organization must do to get from one reference point to another reference
point. Strategy is often expressed in terms of a mission statement, vision,
goals, and objectives. Strategy is usually developed at the top levels of the
organization, but executed by lower levels within the organization.
Target:
An expected level of performance or improvement required in the future.
Templates:
Visual tools for assisting people with building a balanced scorecard,
typically used for capturing and comparing data within the four
components of the Balanced Scorecard: Strategic Maps, Measurements,
Targets, and Programs.
Vision: An overall statement of how the organization wants to be

perceived over the long-term (3 to 5 years).

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3. Building the Balanced Score Card
Strategy
Vision -> Goals -> Themes
Financial Perspective Objectives

What financial results are Measures
required for meeting the Targets
expectation of our shareholders Initiatives
Customer Perspective Objectives

What customer needs must we Measures
satisfy for meeting shareholder Targets
expectations Initiatives
Internal Perspective Objectives

What processes must we deliver Measures
on for meeting customer and Targets
shareholder expectations Initiatives
Learning Perspective Objectives

What organizational values are Measures
critical for meeting our strategic Targets
goals and objectives Initiatives
Phase I: The Strategic Foundation
Step 1:
Communicate and align the organization around a clear and concise
strategy. This is the fundamental starting point behind everything else.
Your strategy is what “feeds” the Balanced Scorecard.
Step 2:
Determine the major strategic areas or scope for getting the organization
focused on those things the organization can actually do.
Step 3:
Build a strategic map for each major strategic area (step 2) of the
business. Out of all the steps in the entire process, this can be the most

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difficult since we must take our entire strategy (step 1) and transform it
into specific terms that everyone can understand. And everything must be
linked to form one complete strategic model.
Phase II: Strategy Structure

Step 4:
Establish Measurements: For each strategic objective on each strategic
map, there needs to be at least one measurement. Measurement provides
the feedback on whether or not we are meeting our strategic objectives.
Step 5:
Set Targets for each measurement: For each measurement in your
scorecard, establish a corresponding target.
Step 6:
Launch Initiatives: Things will not happen unless the organization
undertakes formal programs, initiatives or projects. This effectively closes
the loop and links us back to where we started – driving the strategy that
was formulated in phase me.
Phase III: Strategy Deployment

Step 7:
Once the Balanced Scorecard has been built, you need to push the entire
processes into other parts of the organization until you construct a single
coherent management system. This pulls everything together, allowing
successful execution of your strategy.
Overall

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i. Strategic Foundation
Step 1: Strategic Alignment
When balanced scorecards were first introduced, it seems that everyone
rushed to put a whole new set of measurements in place. However, this is
not how a balanced scorecard is built. Strategizing is critically important
for building a good balanced scorecard. In fact, it is so important that the
authors of the book, The Balanced Scorecard, Robert S. Kaplan and David
P. Norton, released a follow-up book titled “The Strategy Focused
Organization”.
Therefore, we need to focus on building a strategic foundation, culminating

with a set of strategic grids or maps. This is the watershed event within the
entire process! The combination of strategic grids, measurements, targets
and programs represent the four key components that makeup the
Balanced Scorecard. All of these components will be described in detail as
we work our way through the seven step three phase process.
When designing a balanced scorecard, we always start by asking: “What is

your strategy?” Once we understand the strategy, we can build a new
framework for describing the strategy, which we call a strategy map.
- The Strategy Focused Organization by Robert S. Kaplan & David P.
Norton
A clear strategy requires two things: Specific objectives that tell people
what to do and a set of targets for communicating what is expected.
Objectives need to communicate the action people must undertake.
As strategy guru Michael Porter of Harvard University points out – “The

essence of strategy is in the activities, choosing to perform
activities differently or to perform different activities than rivals.”
We must define what these activities are if we expect to have a clear and
sharp strategy.

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Strategic objectives expressed in relation to action and activities

Over the next six months, delivery times will decrease by 15% through
more localized distribution centers.
By the year 2003, customer turnover will decline by 30% through newly
created customer service representatives and pro-active customer
maintenance procedures.
Operating downtimes will get cut in half by cross training front line
personnel and combining all four operating departments into one single
service center.
The second key ingredient for a clear strategy is targets. Targets put
teeth into a strategy by imposing criteria that the organization
must achieve. For example, the strategy needs to be clarified by defining
market share, revenue growth, new products introduced, and other
specifics that set forth the end results of our strategy. In order to have
targets, we need measurements. Both targets and measurements are
critical components of the Balanced Scorecard and if you have
measurements and targets as components of your strategy, then building
the Balanced Scorecard will be much easier.
Once you have defined a clear strategy (objectives and targets), then you
must rally the organization around it. This requires a major communication
initiative. A good starting point is to develop a communication plan. A
communication plan outlines how you will communicate the strategy to
each stakeholder group:
Effective communication is the Achilles Heel in this entire process.

Therefore, extensive and continuous communication is vital to getting the
organization aligned around its strategy.
“I sure wish I’d done a better job of communicating with GM people. I’d do
that differently a second time around and make sure they understand and
shared my vision for the company. Then they would know why I was

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tearing the place up, taking out whole divisions, changing our whole
production structure . . . I never got this across.”
Roger Smith, CEO of General Motors
– Strategic Choices by Kenneth Primozic, Edward Primozic, and Joe Leben
Finally, you need to align and re-configure the various parts of the
organization around the strategy. This may require changes to the
organizational structure, selling off assets, making sure you have a
“productive” culture, and other significant changes. Strategy is about
closing the gaps between the present position of the organization and
where the organization wants to be. Therefore, you must make changes to
the organization if you expect success with your strategy.
Once the organization is set around its strategy, only then can you begin
building the balanced scorecard system. In the case of Mobil Oil, it took
over one year to create the right number of operating divisions around its
new strategy.
Step 2: Strategic Focus Areas

Before we start designing the Balanced Scorecard, we need a “fence line”
of strategic areas. This helps the organization to focus on selected areas
for achieving strategic success; otherwise the organization may find itself
trying to do too many things. Strategy is about choices and making
decisions on those things the organization can do vs. those things the
organization cannot do. Or to put it another way: A few successes are
better than a lot of failures.
Therefore, the strategic thrust of the organization needs to be confined to

a few major areas. This will provide the “scope” we need for building a set
of balanced scorecards.
For most organizations, the strategic thrust of the organization will revolve
around stakeholder groups; such as customers, shareholders, and
employees. For example, most publicly traded corporations will have

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“shareholder value” as a major strategic area. This becomes one of the

strategic areas for building the Balanced Scorecard.
Additionally, each strategic area will flow across all four perspectives of the
Balanced
Scorecard: Financial, Customer, Internal Processes, and Learning and
Growth. The following example illustrates how shareholder value flows up
across the four perspectives of the Balanced Scorecard.
Basic flow of Strategic Area within the Balanced Scorecard
FINANCIAL Revenue Growth
CUSTOMER More Customers
INTERNAL PROCESS Efficient processes – QCD
LEARNING & GROWTH Support systems and personnel
: Strategic Areas
“One of the mistakes companies make is coming up with a list of measures
of what they could measure instead of what they should be measuring. If a
company thinks about what it needs to achieve to be successful in the
eyes of its shareholders, clients and internal stakeholders that will yield
operational activities that the organization needs to do well to achieve
those strategies.”
Vicki Elliott, Principal, William M. Mercer “Putting the Scorecard to
Work”
– Business Finance Magazine
Notice how each lower perspective layer supports and enables the upper
perspective layer; such as more Customers will enable Revenue Growth.
Keep in mind that we are trying to link everything together. This is critical
to building a great balanced scorecard; i.e. capturing the cause effect
relationship.
Collectively, we want to limit our strategic areas to not more than five
areas. This helps ensure successful implementation of our strategy. Some
common strategic areas are:
• Customer Service

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• Shareholder Value
• Operational Efficiency
• Product Innovation and
• Social Responsibility.
Linking a strategic goal to a strategic area

Strategic Objective By the year 2005, our company will have the
most innovative product line of hand held
computers
Strategic Focus Area Product Innovation
Finally, there is the possibility that one strategic area may conflict with
another. For example, Operational Efficiency may require cost reductions
while Market Share may require more expenses. If such conflicts do exist,
make sure all stakeholders involved are fully aware of these conflicting
areas and how they fit within your strategic plan.
Now that we have a strategy in place (step 1) and now that we have
defined our strategic areas or scope (step 2), we will translate the specifics
of our strategy into a set of maps. We noted that balanced scorecards are
structured over four perspectives or layers: Financial, Customer, Internal
Processes, and Learning and Growth.
Step 3: Strategy Maps

Strategic maps include these four layers. Within each layer, we will place
our strategic objectives, making sure everything links back. Trying to
develop strategic objectives and placing them into the correct layers for all

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strategic maps is probably the most difficult step in building the Balanced
Scorecard. Consultants sometimes refer to this step as straw modeling;
trying to string connecting lines over a map that presents an overall
strategic model.
Building a strategic map starts at the very top – strategic goals and areas.
As we indicated earlier, most publicly traded companies have shareholder
value as a strategic area. In order to improve shareholder value, the
organization can do things like grow revenues or increase operating
performance. Once you decide on your strategy for improving shareholder
value, then you have to decide on how you will grow revenues or improve
operating performance. The following exhibit illustrates this bottom up flow
within the Financial Perspective:
Flowing strategic objectives within the Financial Perspective
Share Holder Value
Grow revenues Asset Utilization
New sources of Increase Lower costs Operating

revenues customer improvements
profitability
We will flow our strategic objectives down each perspective within a map
of boxes, making sure everything is linked. This map will serve as the
foundation for constructing the Balanced Scorecard.
Next, we move down to the Customer Perspective. In order to construct

the customer perspective, we need to understand the value(s) we provide
to our customers. For example, Federal Express is extremely efficient in
getting packages delivered on time.
Therefore, on time delivery is the specific value that Federal Express

delivers to its customers. Companies that emphasize operational efficiency
usually provide certain value attributes, such as competitive pricing, on-

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time delivery, or superb quality. Other companies may create value for
customers through their great relationship with the customer. Finally,
some companies may add value by emphasizing innovative and unique
products and / or services. It is extremely important to define your
customer and the values you provide; otherwise you run the risk of
building a scorecard that doesn’t fit with the capabilities of the
organization.
Once you have clearly defined your customer values, you can define
strategic objectives within the Customer Perspective, linking these
objectives to the financial perspective objectives. For example, suppose we
have a strategic goal that stipulates that our company will be the price
leader in long distance phone service. We can flow this goal within the
scorecard map as follows:
Linking customer objectives to financial objectives

Financial Share holder value
Grow Revenues
Customer Acquire more customers
Leader in Pricing
Notice how “Leader in Pricing” is the driver behind acquiring more

customers. In turn, more customers will flow up to the next layer of
growing revenues. And growing revenues is our strategy for meeting our
strategic thrust or area of creating shareholder value.
Next, we need to ask the question: How will we become a leader in

competitive pricing for attracting new customers? This brings us down to
the next perspective: Internal Processes. Internal Processes represent the
collection of activities that give a company a competitive advantage in the
marketplace.

Balanced Score Card
Referring back to the Customer Perspective, we could choose between

three strategies:
a. Operational Efficiency
• Value for customers through competitive pricing, superior quality,
on-time delivery or diverse product lines.
b. Customer Relationships
• Value for customers through personal service, building trust, brand
loyalty, providing customized solutions, and other one-to-one
relationships.
c. Innovative Products & Services
• Inventing new products and features, fast delivery of products and
services, forming partnerships to expand product lines, and other
product leadership initiatives.
If we go back to our example on price leadership in long distance phone

service, we need to emphasize operational efficiency within our strategy
since this will enable competitive pricing. Next, the company must define
its strategic objectives for operational efficiency (which leads to
competitive pricing). This can include numerous
Objectives: Supply chain management, cycle time improvements, cost
reduction programs, and any objective aimed at operational excellence.
Once we decide on objectives, we can extend our strategic map down into
the next perspective as follows:
Linking objectives down to Internal Processes

Grow Revenues
Leader in Pricing
Improve Operational Efficiency
Cost Knowledge Eliminate Non
Internal Process
Reduction Based Core Activities
Program System

Balanced Score Card
This brings us to the final perspective, Learning and Growth. Learning and
Growth is the foundation that enables us to deliver on strategic objectives
defined in the Internal Processes Perspective. Like the other perspectives,
we need to look at different strategies that fit with our current strategic
map
a. Competencies
• Skills and knowledge of the work force.
b. Technologies
• Applications and systems for execution of internal processes.
c. Change Culture
• Organizational alignment, employee motivation, executive
leadership, communication, and other qualities of empowering the
organization.
If we go back to our strategic map on Internal Processes, we must decide

on what strategic objectives are required for meeting the three objectives
defined in the Internal Processes Perspective. Therefore, we can extend
our map as follows:
Strategic objectives defined for all four perspectives
Grow Revenues
Leader in Pricing
Improve Operational Efficiency
Internal
Cost Knowledge Eliminate Non
Process
Reduction Based System Core Activities
Program
Learning & Training : Best Data Base Realign with
Growth practices in cost network on core
mgmt Operational competencies
Mgmt
\\Learning and
Once you have completed the strategic map, go back and make sure
everything fits with your overall strategy. A set of strategic maps should

Balanced Score Card
provide the strategic model for running the business and outlining the
specifics of the strategy. All stakeholders should be able to look at your
maps and follow the flow of your strategy.
Don’t forget that you are trying to limit your objectives (and maps) to a
critical few strategic areas. If possible, keep the total number of objectives
on the map to not more than 20 to 25 objectives. We have completed the
foundation of the Balanced Scorecard, a set of strategic maps for each
strategic area that captures and links objectives across four or more
perspectives. We can now move forward and populate each map with:
Measurements, Targets, and Initiatives.
ii. Strategic Execution Structure: Three Critical Components

Once we have completed the strategic foundation (phase I), we are set to
measure our objectives, establish a target for each measurement and
initiate programs that will make all of this happen. This will effectively
complete the building of the Balanced Scorecard.
For each strategic objective on your strategic map, you need at least one
measurement. If you have several measurements for a strategic objective,
then chances are you have more than one strategic objective. Can you
have an objective without a measurement?
Yes, it is possible, but not having a measurement makes it difficult to

manage the objective. It’s best to revisit this objective and ask the
question: Why is this objective?
Measurement allows us to quantify our strategic objectives, asking the

question: How well are we doing? So how do you build your
measurements? Here are some basic guidelines:
Linked:

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• Measurements communicate what is strategically important by

linking back to your strategic objectives.
Repeatable:
• Measurements are continuous over time, allowing comparisons.
Leading:
• Measurements can be used for establishing targets, leading to
future performance.
Accountable:
• Measurements are reliable, verifiable, and accurate.
Available:
• Measurements can be derived when they are needed.

Balanced Score Card
The following template can be used to help build an appropriate

measurement:
Measurement Template
Step 1: Define a measurement for each strategic objective:
Strategic Objective =>
Measurement to be used =>
Description of Measurement =>
Units of Measurement ($,%,etc)
Update Frequency => ___ Monthly ___ Quarterly ___ Yearly ___ Other
Step 2: Define the sources for the measurement:
Internal documents / reports
External documents / reports
Special studies
Programs
Databases
Other ______________________________________
Step 3: Define how the measurement is derived and reported:
Calculation Required: _______________________________________________
Assumptions in Calculation: _________________________________________
Availability of Data:
Currently Available
Requires some research
Requires extensive research
Not Available at this time
In addition to the above criteria, you need to understand some concepts

related to measurement. For example, some measurements will lead to
change in your organization. These types of measurements are called
leading indicators since they drive or push final outcomes within the
organization. Examples include customer contracts executed, competitive
pricing index, employee feedback indicator, service response time, and
time spent with customers. If your organization needs to change rapidly,
then you need to include some leading type measurements into your
balanced scorecard. A common place to use leading measurements
is within the Learning and Growth perspective since this is the
principal “driver” perspective behind the Balanced Scorecard.
The other side of measurement is looking back, historical type

measurements that show us a final outcome or result. These

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measurements are referred to as lagging indicators and they dominate

most performance measurement systems. About 70% of all measurements
tend to fall into this category. Examples include most financial type
measurements (return on equity, sales growth, economic value added,
etc.) and many non-financial type measurements (production breakeven,
customer retention, employee productivity index, etc.). Lagging type
measurements are common within the Customer and financial
perspectives since these are outcome related.
Almost half of your measurements can be extrapolated from existing

systems and procedures. Some common type measurements include
ratios, percentages, rankings and indexes. Ratios are good for expressing
critical relationships while percentages are good for expressing an overall
trend over time. Rankings work well for highly ranked companies trying to
move up in the ranking.
However, lower ranked companies usually cannot move easily within a

ranking system and therefore, this form of measurement may be too
ambitious. Another way to look at measurement is to understand the
relationship between leading and lagging indicators for the three lower
perspectives.
For example, the Customer Perspective can be broken down into two
groups of measurement: Lagging Indicators such as customer satisfaction,
retention, and market share; and Leading Indicators such as competitive
pricing, excellent quality, outstanding reputation, image, and customer
relationships. For example, in order to retain customers, we must provide
one or more value attributes to the customer.
The Internal Process Perspective can be broken down into three result
categories:
Pre Delivery Results

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• Innovative Processes that meet customer needs, provide solutions,

and address emerging trends. Example of Leading Indicator =>
Number of new products introduced.
Delivery Results
• Operations that produce and deliver products and services to
customers. Example of Leading Indicator => Delivery Response
Time to Customer.
Post Delivery Results

• Value added services provided to customers once products and / or
services have been delivered. Example of Leading Indicator =>
Cycle Time for Resolving Customer Complaint.
The Learning and Growth Perspective will emphasize three result

categories: Employees, Systems, and Organization.
Results for Employees
• Employee satisfaction, productivity, and retention. Example of
Leading Indicator => Percentage of Key Personnel Turnover.
System Results
• Engaging to the end user, accessibility, and quality of information.
Example of Leading Indicator => Percentage of employees who
have on-line access.
Results for the Organization

• Climate for change, strong leadership, empowering the workforce,
and other motivating factors. Example of Leading Indicator =>
Number of Employee Suggestions.

Balanced Score Card
One of the major challenges in building your balanced scorecard is to keep

the number of measurements to a manageable few. Throughout building
the balanced scorecard, we try to follow the “4 to 5 Rule.” This rule says
that we build balanced scorecards with four to five layers, four to five
measurements per layer, resulting in not more than 20 to 25
measurements per scorecard (strategic maps).
However, indexing is a sword sharp at both ends. It helps reduce the

number of measurements, but it also buries the results making it difficult
to clearly see what is going on. The best approach is to use stand-alone
measurements wherever possible.
One of the best benchmarks to apply to your measurements is to ask the

following question: Can somebody understand your strategic objective by
simply looking at your measurement? Keep in mind that you are trying to
capture the best “cause and effect” relationship that you can. This is what
makes a great balanced scorecard.
For example, what does this measurement say: % sales growth? This
measurement implies that we have a strategic objective that must be
related to growing sales revenues.
Suppose your strategic objective was not to increase sales revenues, but
to increase return on shareholder equity. This changes your measurement
to return on equity. Remember everything must be linked as you build
your balanced scorecard
Measurement alone is not good enough. We must drive behavioral

changes within the organization if we expect to execute strategy. This
requires establishing a target for each measurement within the Balanced
Scorecard. Targets are designed to stretch and push the organization in
meeting its strategic objectives. For example, suppose the strategic
objective is to improve customer satisfaction and the measurement is

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based on number of customer complaints. The average number of monthly

complaints is 45 for the last 12 months. A target of not more than 30
complaints could be established. However this is dependent on the
business cycles and practicality.
Targets need to be realistic so that people feel comfortable about trying to

execute on the target. Therefore, targets should be mutually agreed upon
between management and the person held responsible for hitting the
target. One good place to start in setting a target is to look at past
performance. Past trends can be extended for modest improvement.
Your strategic goals can also give you clues as to what your targets should
be. Another good source for targets is benchmarking for best practices.
Make sure your targets match your measurements one to one,
communicating what needs to change in relation to the measurement. Also
be aware that targets may require considerable research. Finally, if past
targets have not resulted in much change, then you should consider
setting more aggressive targets.
Adding Measurements and Targets to the Balanced Scorecard

Perspecti Target Target
Objective Measures
ve ‘03 ‘04
Financial
Return on Equity 12% 13%
Maximum
Returns
Financial Utilization of Utilization rates 7% 8%
Assets
% change in
Revenue Growth 11% 11%
revenues
Customer
Retention % 75% 75%
Retention
Customer Customer service Survey rating 85% 88%
Customer
Self Initiated calls 35% 40%
Relations
Internal Fast delivery Turnaround time 15 m 14 m
Effective Service Fist time 68% 70%

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resolvement
Optimal Cost % cost of sales 66% 61%
Process Resource Productivity
78% 83%
Utilization indicator
High Skill levels Skill set ratio 65% 68%
Learning
Employee
& Growth Survey Index 76% 79%
Satisfaction
2003
The final design step is to close the loop and put specific initiatives in place
to make everything happen. This is perhaps the fun part in the entire
process. How do we actually hit these targets and meet our strategic
objectives? What major initiatives must the organization undertake to
make all of this happen?
Initiatives are the major projects that facilitate execution of everything

downstream within the scorecard. Some typical examples of initiatives
include quality improvement initiatives, marketing initiatives, enterprise
resource planning, and Customer Relation’s Management and supply chain
management.
Initiatives usually have certain characteristics:

• Sponsored by upper level management
• Utilizes designated leaders and cross-functional teams
• Consists of deliverables, milestones and a timeline
• Requires resources (people, facilities, allocated budget, etc).
Once initiatives have been established and sold to various stakeholders,

they tend to add some degree of strategic value or impact. However,
getting a major program initially launched can be difficult due to funding,
apprehension, politics and other obstacles. If existing initiatives lose
funding, then you need to work back through your scorecard, adjusting
your targets and making sure everything still fits.

Balanced Score Card
One of the critical steps in selecting initiatives is to plot them against all
strategic objectives and assess the strategic impact. This can be extremely
important since executive management will routinely demand cost
reductions. You don’t want to cut initiatives with the biggest strategic
impact. This would undercut your ability in meeting strategic objectives.
Initiatives with little or no strategic impact should get lowest
priority within the organization.
In the above example, notice that the Production Yield System and the
Customer Management program impact three different strategic objectives
while the IT Complaint Tracking program and the Community Awareness
program fail to impact any strategic objective. Generally, since the
Financial Perspective is the final outcome, there are usually no programs
associated with driving financial related strategic objectives.

Balanced Score Card
iii. Strategy Deployment

Once we have designed the Balanced Scorecard, we need to implement it
throughout the entire organization. This requires careful planning and
coordination with all parts of the organization. We should have learned
several lessons from our first stage scorecard:
• How to organize and kick off the process
• How to coordinate and gain consensus
• How to identify the benefits and difficulties associated with the
Balanced Scorecard
• An understanding of project deliverables
Also we should have knowledge about what factors influence

implementation of the
Balanced Scorecard such as:
• Time required developing a balanced scorecard
• Availability of data and resources for building the Balanced Scorecard
• Degree of support from upper level management
The deployment phase will involve reviewing and aligning the first
scorecard with other parts of the business (divisions, operating units,
departments, etc.). We want to integrate the Corporate or Business Unit
Scorecard into lower level scorecards. As we move the scorecard forward,
a more formal collection and reporting system should emerge for the
Balanced Scorecard. Once we get more and more scorecards working we

Balanced Score Card
will begin to explore the possibility of linking compensation to the

measurements within the Balanced Scorecard.
Since strategizing takes place at the upper level of the organization, one
place to start building the Balanced Scorecard is at the corporate level.
Once again we can go back to our four to five rules: Build your scorecard
at the upper layer of the organization, corporate; work your way down to
the second layer, operating; then work your way down to shared service
departments; next work your way down to the lowest levels such as
department, teams, and individuals. By following this process, we ensure
alignment. However, most organizations build their first scorecard at the
strategic business unit level (such as operating units or divisions within the
business).
The reason is simple. You want to build a balanced scorecard that covers
the entire value chain; i.e. customers, production, sales, innovation and all
elements that go into making a “complete” scorecard. Also by letting other
business units start the process you may get stronger “buy in” to the
Balanced Scorecard. For example, if executive management pushes the
scorecard down to divisions, the divisions may see the scorecard as just
another phony management program. By letting each division use the
score card first and report back to executive management, the
organization is better positioned for full-scale deployment of the Balanced
Scorecard.
Balanced Scorecards often require continuous testing and modification to

see if the technique really fits. This can be frustrating for executives who
routinely expect perfect solutions right out-of-the-box. Keep in mind that
you are testing something that has never been applied before and you
must revisit the construction of your scorecard, adjusting and re-aligning it
to fit with the organization. It is not unusual to postpone the rollout of
additional scorecards for more than one year until the first scorecard is
well established and working. Therefore, companies that have been

Balanced Score Card
successful with the Balanced Scorecard have a high tolerance for making
change happen in a positive way.
For example, linking part of employee compensation to the Balanced

Scorecard should be postponed until such time as you have the correct set
of measurements.
Some other attributes of companies that have been successful with the
Balanced
Scorecard includes the following:
- A strong commitment from the top to the Balanced Scorecard.
- A process for transforming strategies into balanced scorecards.
- A cross-functional process for moving strategy down into the lower
parts of the organization.
- Leveraging the Balanced Scorecard by using it with other processes
and activities such as budgeting, project management and regular
management meetings.
These principles are often cited as components for shifting the
organization into a strategic mindset. And this is the ultimate goal behind
implementation of the Balanced Scorecard. However reaching this big
“pay-off” is incredibly difficult for almost every organization since it means
moving from a “strategic planning” organization to a “strategic thinking”
organization.
Strategic Planning Strategic Thinking

A formal structured process of A natural and intuitive process of
researching and analyzing the seeing through the competition,
competition in an effort to identify anticipating future trends and
strengths, weaknesses, comprehending future changes
Opportunities and threats. required for the organization.
Planning Strategic Thinking

Balanced Score Card
Since initiatives are the final component within our balanced scorecard and
since programs require budgets, we need budgeting to follow right behind
completion of the Balanced Scorecard. This extends linking to the next
related activity. Therefore, linking budgeting to the Balanced Scorecard is
another best practice. It’s worth noting that budgeting occurs at the tail
end of the process and not at the beginning. For many organizations
(especially government agencies), the reverse is often true.
Budgeting drives decision-making and as a result, strategic
implementation becomes exceedingly difficult.
Best Practices
Deploying a balanced scorecard is more about strategic alignment,
communication and change management. However, many organizations
prefer to use a software application to help pull together the Balanced
Scorecard. Unfortunately, most existing software applications cannot
manage the information contained in the Balanced Scorecard. This is due
to the fact that most systems are transaction oriented such as Enterprise
Resource Planning (ERP) programs. It is estimated that less than half of the
information for feeding the scorecard can be derived from transaction-
based systems, such as ERP systems. Most of the information is stand-
alone like customer surveys, employee suggestions and other independent
sources. Therefore, full automation of the Balanced Scorecard can be
somewhat of a challenge.
However, for companies seeking to deploy the Balanced Scorecard through

automation there are several advantages:
- Provides users with rapid access to exception alerts.
- Allows easy drill down to more details about measurements and
targets.
- Easy to follow dependency paths show cause and effect
relationships.
- Flexibility on making changes to the scorecard including
organizational changes.
- Graphical reporting of measurements and relationships.

Balanced Score Card
- Facilitates control over who can see what within the scorecard
system.
- Wide on-line distribution of company vision and strategy.
- Analysis of strategy on-line.
- Test relations against actual data for fine-tuning the scorecard.
- Integration with other desktop applications.
- Pre-defined templates and other applications make it easy to
change and update different components of the scorecard.
- Drives rapid deployment of the scorecard with minimal manual
effort.
Since balanced scorecards cut across the entire organization, they are
usually developed by cross-functional teams. The cross functional team
consists of middle level management since they can serve as the bridge
between the executive level where strategic thinking takes place and the
lower levels where the strategy gets implemented.
Obviously, we need executive management to sponsor the Balanced

Scorecard and support the cross-functional team. And at the same time we
need feedback from lower levels of the organization, especially on the
specifics of the scorecard. Managing teams is a big part of any balanced
scorecard project since it touches all levels of the organization.
One of the most common tools used for building balanced scorecards is
the template. Templates are usually spreadsheets, organized to capture,
compare and report data used in constructing the Balanced Scorecard.

Balanced Score Card
Balanced Scorecards are not just for businesses. Since balanced

scorecards are an extension of strategy and since strategy is essential to
all types of organizations, balanced scorecards are appropriate for any
organization concerned about the execution of its strategy.
4. Understanding SAIL Enterprise Map

In the 16th September 2010, ED’s and GM’s articulated the Corporate
Enterprise Strategy Map. Before, we move to a perfectibility journey on
Balanced score card, we will use the template as a sample template for the
Unit Strategy Map. This will be reviewed and course corrected in Feb 2011.
It has to be borne in mind that the actual set-up of a particular Balanced
Scorecard may vary from organization to organization because of very
close linkages to particular establishment’s main functions, vision and
strategy. For public sector organizations like SAIL, for instance, it would be
necessary to reinforce the financial part of the section of Balanced to add

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additional features specific to Unit Dynamics and that can be dovetailed in

the Unit Strategy Map.
5. Defining SAIL Unit Strategic Map

As a resource team, we will work on the draft Unit/Functional Strategic
map. This will be a sample template. What we evolve here will be
upgraded and aligned with the respective ED’s and GMs... This will be
reworked in the workshop we do at every unit.
The process for evolving the maps will be going through the following
steps.
i. Balanced Scorecard as a Strategic Management System

From the management point of view it is also not particularly foreseen – it
might be set up using the standard project management techniques

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(preparation- interviews-workshops-implementation-reviews) or be
managed by a special unit that is co-coordinating the overall
implementation.
It is to be remembered that the SAIL vision should be understood by each

and every employee of the organization. If it is understood by the top
management only, then it is definite that the organization will fail to realize
its goals. Hence, before starting with the strategic implementation process,
the organizations needs to be clear about the reason for its existence,
where it wants to see itself after a certain number of years and properly
decide its business definition. You as ED’s and General Managers should
build a consensus around the organization’s vision and strategy. The
strategies, in fact, emanate from the vision and mission of the SAIL which
means that a linkage is formed between the strategies of the different
business units and the vision of the organization. The lofty statements
must be translated into an integrated set of objectives and measures. The
first task in building up the Balanced Scorecard is clarifying and translating
company’s vision and strategic goals. Thus, by using this tool, the overall
strategic objectives for Your Unit/Function company gets clarified which
helps to achieve consensus across different business units on the overall
strategic objectives for SAIL.
The overall purpose of the strategic management is to find a single priority

long-term goal which would serve as a basis in resource allocation and
organizational development. According to the Balanced Scorecard
methodology, the first item that the senior executives of a particular
company should consider is the financial goal. The executive team may
decide whether to head for revenues or market growth, profitability or
cash flow generation or building talent pipe line or innovation in raw
material procurement or creating a new brand pull on the value added
products or re directing the R&D focus.

Balanced Score Card
We will write our thoughts individually and then articulate the wisdom
collectively to arrive at our common Language. Also, it is important to
leverage best practices with in the varied SAIL units.
ii. Balanced Scorecard as a Measurement Tool

Communicating and Linking Strategic Objectives and Measures Just
communicating the vision and the strategies are not an end in itself. The
strategic goals and the measures to be set in the different areas have to
be decided upon. The long-term strategic goals have to be translated into
both departmental and individual goals which should be aligned to each
other in order to realize the long-term goals. The process continues by
asking what internal processes must the company excel at to achieve
exceptional on-time-delivery. To achieve improved OTD, the business may
need to achieve short cycle times in operating processes and high-quality
internal processes, both factors that could be Scorecard measures in the
internal perspective. And how do organizations improve the quality and
reduce the cycle times of their internal processes? By training and
improving the skills of their operating employees, an objective that would
be a candidate for the learning and growth perspective.
In a very similar vein, recent work in the service profit chain has
emphasized the causal relationships among employee satisfaction,
customer satisfaction, customer loyalty, market share, and, eventually,
financial performance.
Steps included in the Phase of Testing the Results of BSC Implementation

Testing phase of BSC implementation hold its unique position in the overall
BSC concept. Again as applicable for other processes, it should too be
instigated with a focused approach to eventually complete it successfully.
The Testing phase encompasses of a 3-step process to be followed by the
businesses as mentioned below as mentioned below:

Balanced Score Card
Preparations prior to initiating the testing phase. The hypotheses

underlying the BSC have to be explored to the maximum extent possible.
Better formulation and implementation of strategy is achieved by
proceeding with this step. Determining the results of parameters of
Balanced Scorecard. This step of the result testing phase of BSC
implementation aimed at calculating the actual results of the company and
comparing it with the values of parameters. Divergence in the results are
found out which finally enables the company to know what its current
position is and where it wants to be in the future. Devising the ways to
correct the performance of the BSC is also done in this step.
Updating the core elements of Balanced Scorecard. The core elements of

BSC comprises of the objectives, strategies, measures and targets. Time to
time update is what is invariably required for efficient usage of the
balanced scorecard. Changes in the business environment may call for
updating the core elements to help the company in staying focus towards
the achievement of end goals. Updating is also required when the
company requires improving the understanding of its employees regarding
the BSC concept.
iii. Defining Critical Success Factors and Measures

Financial Perspectives
a) Financial Perspective – How do we look at shareholders? From all the
measurement perspectives of a Balanced Scorecard, the financial
perspective needs to be introduced the least as the main financial
measurement systems have been analyzed during the past years very
thoroughly.
b) The particular financial performance measures for any Balanced
Scorecard should define long-run financial objectives for the
organization. While most of the organizations would emphasize
profitability objectives, other possibilities may also be considered.
Businesses with many products in the early stage of their life cycle can

Balanced Score Card
stress rapid growth objectives, and mature businesses may emphasize

maximizing cash flow.
c) Norton and Kaplan recommend to simplify the financial perspective
measurement selection pool to identify first the organization’s stage,
which would mainly be one of the three:
i. “Rapid growth” organizations – are at the early stages of their life
cycle. They may have to make considerable investments to develop
and enhance new products and 11 services, to construct and
expand production facilities, to build operating capabilities, to invest
in systems, infra-structure, and distribution networks that will
support relationships, and to nurture and develop customer
relationships.
ii. “Sustain” organizations – organizations that still attract investment

and reinvestment, but are required to earn excellent returns on their
invested capital. These businesses are expected to maintain their
existing market share and perhaps grow it somewhat. Investment
projects will be more directed to relieving bottlenecks, expanding
capacity, and enhancing continuous improvement.
iii. “Harvest” organizations – have reached a mature phase of their life

cycle, where the company wants to harvest the investments made
in the earlier to stages. These businesses no longer warrant
significant investment – only enough to maintain equipment and
capabilities, not to expand or build new capabilities. Any investment
project will have to have very short and definite payback periods.
The main goal is to maximize cash flow back to the organization.
d) The financial objectives for businesses in each of these three stages are
quite different. Financial objectives in the growth stage will emphasize
sales growth; sales in new markets and to new customers; sales from
new products and services; maintaining adequate spending levels for
product and process development, systems, employee capabilities; and
establishment of new marketing, sales, and distribution channels.

Balanced Score Card
Financial objectives in the sustain stage will emphasize traditional

financial measurements, such as return on capital employed, operating
income, and gross margin.
e) Investment projects for businesses in the sustain category will be
evaluated by standard, discounted cash flow, capital budgeting
analyses. Some companies will employ newer financial metrics, such as
economic value added and shareholder value. These metrics all
represent the classic financial objective---earn excellent returns on the
capital provided to the business.
f) The financial objectives for the harvest businesses will stress cash flow.
Any investments must have immediate and certain cash paybacks. The
goal is not to maximize return on investment, which may encourage
managers to seek additional investment funds based on future return
projections. Virtually no spending will be done for research or
development or on expanding capabilities, because of the short time
remaining in the economic life of business units in their “harvest”
phase.
Some of the objectives together with a measurement measures

Objectives Measures
Survive Cash Flow
Prosper Increase in Market Share
Profitability Return on Equity
Cost Leadership Unit cost ( Price minus)

Balanced Score Card
Customer Perspective
How should we appear to our customers? The customer perspective
addresses the question of how the firm is viewed by its customers and how
well the firm is serving its targeted customers in order to meet the
financial objectives. Generally, customers view the firm in terms of time,
quality, performance, and cost. Most customer objectives fall into one of
those four categories.
In the customer perspective of the Balanced Scorecard, managers identify

the customer and market segments in which the business unit will
compete and the measures of the business unit’s performance in these
targeted segments.
The customer perspective typically includes several generic measures of

the successful outcomes from a well-formulated and implemented
strategy. The generic outcome measures include customer satisfaction,
customer retention, new customer acquisition, customer profitability, and
market and account share in targeted segments. While these measures
may appear to be generic across all types of organizations, they should be
customized to the targeted customer groups from whom the business unit
expects its greatest growth and profitability to be derived.
Market and Account Share Market share, especially for targeted customer
segments, reveals how well a company is penetrating a desired market.
For example, a company may temporarily be meeting 13 sales growth
objectives by retaining customers in non-targeted segments, but not
increasing its share in targeted segments. The measure of market share
with targeted customers would balance a pure financial signal (sales) to
indicate whether an intended strategy is yielding expected results.
When companies have targeted particular customers or market segments,

they can also use a second market-share type measure: the account share

Balanced Score Card
of those customers’ business (some refer to this as the share of the

“customers’ wallet”). The overall market share measure based on business
with these companies could be affected by the total amount of business
these companies are offering in a given period. That is, the share of
business with these targeted customers could be decreasing because
these customers are offering less business to all their suppliers. Companies
can measure-customer by customer or segment by segment-how much of
the customers’ and market segments’ business they are receiving. Such a
measure provides a strong focus to the company when trying to dominate
its targeted customers’ purchases of products or services in categories
that it offers.
Customer Retention Clearly, a desirable way for maintaining or increasing

market share in targeted customer segments is to retain existing
customers in those segments. Research on the service profit chain has
demonstrated the importance of customer retention.6 Companies that can
readily identify all of their customers-for example, industrial companies,
distributors and wholesalers, newspaper and magazine publishers,
computer on-line service companies, banks, credit card companies, and
long-distance telephone suppliers- can readily measure customer retention
from period to period. Beyond just retaining customers, many companies
will wish to measure customer loyalty by the percentage growth of
business with existing customers.
Customer Acquisition Companies seeking to grow their business will

generally have an objective to increase their customer base in targeted
segments. The customer acquisition measure tracks, in absolute or relative
terms, the rate at which a business unit attracts or wins new customers or
business. Customer acquisition could be measured by either the number of
new customers or the total sales to new customers in these segments.
Companies such as those in the credit and charge card business, magazine
subscriptions, cellular telephone service, cable television, and banking and
other financial services solicit new customers through broad, often

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expensive, marketing efforts. These companies could examine the number

of customer responses to solicitations and the conversion rate- number of
actual new customers divided by number of prospective inquiries. They
could measure solicitation cost per new customer acquired, and the ratio
of new customer revenues per sales call or per dollar of solicitation
expense.
Customer Satisfaction Both customer retention and customer acquisition is

driven from meeting customers’ needs. Customer satisfaction measures
provide feedback on how well the company is doing. The importance of
customer satisfaction probably cannot be over-emphasized. Recent
research has indicated that just scoring adequately on customer
satisfaction is not sufficient for achieving high degrees of loyalty, retention,
and profitability. Only when customers rate their buying experience as
completely or extremely satisfying can the company count on their repeat
purchasing behavior.
Customer Profitability Succeeding in the core customer measures of share,

retention, acquisition, and satisfaction, however, does not guarantee that
the company has profitable customers. Obviously, one way to have
extremely satisfied customers (and angry competitors) is to sell products
and services at very low prices. Since customer satisfaction and high
market share are themselves only a means to achieving higher financial
returns, companies will probably wish to measure not just the extent of
business they do with customers, but the profitability of this business,
particularly in targeted customer segments. Activity-based cost (ABC)
systems permit companies to measure individual and aggregate customer
profitability. Companies should want more than satisfied and happy
customers; they should want profitable customers. A financial measure,
such as customer profitability, can help keep customer-focused
organizations from becoming customer-obsessed. The customer
profitability measure may reveal that certain targeted customers are
unprofitable. This is particularly likely to occur for newly acquired

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customers, where the considerable sales effort to acquire a new customer

has yet to be offset from the margins earned by selling products and
services to the customer. In these cases, lifetime profitability becomes the
basis for deciding whether to retain or discourage currently unprofitable
customers.
Newly acquired customers can still be valued, even if currently

unprofitable, because of their growth potential. But unprofitable customers
who have been with the company for many years will likely require explicit
action to cope with their incurred losses.
Beyond the Core: Measuring Customer Value Propositions Customers’

value propositions represent the attributes that supplying companies
provide, through their products and services, to create loyalty and
satisfaction in targeted customer segments. The value proposition is the
key concept for understanding the drivers of the core measurements of
satisfaction, acquisition, retention, and market and account share. For
example, customers could value short lead times and on-time delivery.
They could value a constant stream of innovative products and services.
Or they could value a supplier able to anticipate their needs and capable of
developing new products and approaches to satisfy those emerging needs.
While value propositions vary across industries, and across different

market segments within industries, Kaplan and Norton have observed a
common set of attributes that organizes the value propositions in all of the
industries where we have constructed scorecards. These attributes are
organized into three categories.
• Product/Service Attributes
• Customer Relationship
• Image and Reputation
Product and service attributes encompass the functionality of the

product/service, its price, and its quality. The image and reputation

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dimension enables a company to pro- actively define itself for its

customers. The customer relationship dimension includes the delivery of
the product/service to the customer, including the response and delivery
time dimension, and how the customer feels about the experience of
purchasing from the company.
In summary, the customer perspective enables business unit managers to

articulate their unique customer and market-based strategy that will
deliver superior future financial returns.

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Objectives Measures
New Products % of sales from Newer
products
Customer Relationship %of retained customers
Responsive supply On time Delivery
STOMACH IS THE SIZE OF THE LET US DISCUSS
MARKET
Internal Business Processes Perspective

What must we excel at? Internal business process objectives address the
question of which processes are most critical for satisfying customers and
shareholders. These are the processes in which the firm must concentrate
its efforts to excel.
In the internal business process perspective, executives identify the critical

internal processes in which the organization must excel. The critical
internal business processes enable the business unit to deliver on the
value propositions of customers in targeted market segments, and satisfy
shareholder expectations of excellent financial returns. The measures
should be focused on the internal processes that will have the greatest
impact on customer satisfaction and achieving the organization’s financial
objectives.
The internal business process perspective reveals two fundamental

differences between traditional and the Balanced Scorecard approaches to
performance measurement. Traditional approaches attempt to monitor
and improve existing business processes.
They may go beyond just financial measures of performance by

incorporating quality and time-based metrics. But they still focus on
improving existing processes. The Balanced Scorecard approach, however,

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will usually identify entirely new processes at which the organization must
excel to meet customer and financial objectives. The internal business
process objectives highlight the processes most critical for the
organization’s strategy to succeed.
The second departure of the Balanced Scorecard approach is to

incorporate innovation processes into the internal business process
perspective. Traditional performance measurement systems focus on the
processes of delivering today’s products and services to today’s
customers. They attempt to control and improve existing operations – the
short wave of value creation. But the drivers of long-term financial success
may require the organization to create entirely new products and services
that will meet the emerging needs of current and future customers. But
managers do not have to choose between these two vital internal
processes. The internal business process perspective of the Balanced
Scorecard incorporates objectives and measures for both the long-wave
innovation cycle as well as the short-wave operations cycle.

Objectives Measures
Manufacturing excellence Cycle time per Unit
Safety Incidence Index Number of Accidents
Increase design Productivity Engineering efficiency
Reduce product Launch Delays Actual Launch date vs. Plan

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Learning and Growth Perspective

Can we continue to improve and create value?
Learning and growth metrics address the question of how the firm must
learn, improve, and innovate in order to meet its objectives. Much of this
perspective is employee- centered.
The fourth Balanced Scorecard perspective, Learning and growth, identifies

the infrastructure that the organization must build to create long-term
growth and improvement. The customer and internal business process
perspectives identify the factors most critical for current and future
success. Businesses are unlikely to be able to meet their long-term targets
for customers and internal processes using today’s technologies and
capabilities. Also, intense global competition requires that companies
continually improve their capabilities for delivering value to customers and
shareholders.
Organizational learning and growth come from three principal sources:

people, systems, and organizational procedures. The financial, customer,
and internal business process objectives on the Balanced Scorecard will
typically reveal large gaps between existing capabilities of people,
systems, and procedures and what will be required to achieve targets for
breakthrough performance. To close these gaps, businesses will have to
invest in re-skilling employees, enhancing information technology and
systems, and aligning organizational procedures and routines. These
objectives are articulated in the learning and growth perspective of the
Balanced Scorecard. As in the customer perspective, employee-based
measures include a mixture of generic outcome measures- employee
satisfaction, employee retention, employee training, and employee skills-
along with specific drivers of these generic measures, such as detailed
indexes of specific skills required for the new competitive environment.
Information systems capabilities can be measured by real-time availability

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of accurate customer and internal process information to front-line

employees. Organizational procedures can examine alignment of
employee incentives with overall organizational success factors, and
measured rates of improvement in critical customer-based and internal
processes.

Objectives Measures
Technology Time to develop newer products
Leadership
Manufacturing Time to new process Maturity
Learning
Product focus % of products representing 80% of sales
Empowered Teams No of Self Managed Teams working without
supervision
Building talent pipe No of people enabled and empowered to assume
line newer roles
6. Constructing a Balanced Scorecard –Sample

Template
Constructing a Balanced Scorecard

One of the possible ways to go through all the steps of construction of
successfully operating Balanced Scorecard might be shortly described as
seen on.
1. First, members of the organization would have to visit the SAIL vision.
Everybody in the organization has to agree upon one single goal where
the organization has to be heading.
2. Then organization’s management has to recognize the strategies that
will tell how to reach the vision.
3. Then the perspectives have to be identified. In some businesses, not
necessarily all four are relevant. Please look at the Unit strategy maps.
In some areas, additional perspectives need to be measured.

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• Financial perspective (how do we look to our shareholders?)

• Customer’s perspective (how do we look to our customers?)
• Internal business process perspective (what processes do we
have to be good at?)
• Learning and growth perspective (how will we sustain our ability
to improve and change?)
4. Then critical success factors for all the perspectives have to be found
out. Example: for customers we have to deliver on time, financially we
have to be cost-efficient, on the development side we have to produce
X amount of new ideas every week etc.
5. After the critical success factors are in place, they have to be measured
somehow; therefore all the measurement systems have to be figured
out.
6. The next step is to go through appraisal of the established draft
Balanced Scorecard to identify whether it would start measuring the
right things and assist the management to steer the organization to the
right direction. It might be advisable to establish a test field to simulate
how the Balanced Scorecard would start to respond to the actions
taken.
7. Based on the preparatory work the detailed action plans should be
created and proper reporting systems have to be established to start
operation of the Balanced Scorecard.
8. Finally, it has to be remembered that the Balanced Scorecard is not a
“finished product”. It has to be amended, improved and changed
whenever there is a need for the organization to change something in
its vision or strategic goals.
It has to be borne in mind that the actual set-up of a particular Balanced

Scorecard may vary from organization to organization because of very
close linkages to particular establishment’s main functions, vision and
strategy.

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Construct Model for BSC

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BSC Implementation: Templates & Typical plan (during practice sessions)

See Annexure 2.
Analyzing Cause and Effect

The Four Perspectives: Cause and Effect Relationship. The four
perspectives as mentioned above are highly interlinked. There is a logical
connection between them. The explanation is as follows:
If an organization focuses on the learning and the growth aspect, it is

definitely going to lead to better business processes. This in turn would be
followed by increased customer value by producing better products which
ultimately gives rise to improved financial performance.
LEARNING AND GROWTH
BETTER PROCESSES
INCREASED CUSTOMER VALUE

IMPROVED FINANCIAL
PERFORMANCE
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How many Measures to Choose?

After the measures have been set for all the perspectives, the organization
may face the problem of having either too little or too many items to
measure. Many aspects of our bodily functions must perform within narrow
operating parameters if we are to survive. If our body temperature departs
from a normal 1-2deg window (away from 37degrees Celsius) or if our
blood pressure drops too low or escalates too high, we have a serious
problem for our survival. In such circumstances, all our energies (and those
of skilled medical professionals) are mobilized to restore these parameters
back to their normal levels. But we don’t devote enormous energy to
optimizing our body temperature and blood pressure. Being able to control
our body temperature to within 0.01deg of the optimum will not be one of
the strategic success factors that will determine whether we become a
chief executive of a company, a senior partner in an international
consulting firm, or a tenured full professor at a major university. Other
factors are much more decisive in determining whether we achieve our
unique personal and professional objectives. Are body temperature and
blood pressure important? Absolutely. Should these measurements fall
outside certain control limits, we have a major problem that we must
attend to and solve immediately. But while these measurements are
necessary, they are not sufficient for the achievement of our long-run
goals. Similarly, corporations should have hundreds, perhaps thousands, of
measures that they can monitor to ensure that they are functioning as
expected and that will signal when corrective action must be taken. But

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these are not the drivers of businesses’ competitive success. Such

measures capture the necessary “hygiene factors” that enable the
company to operate. These measures should be monitored diagnostically
with deviations from expectations noted rapidly; in effect, management by
exception.
The outcome and performance driver measures on the Balanced Scorecard

should be the subjects of intensive and extensive interactions among
senior and middle-level managers as they evaluate strategies based on
new information about competitors, customers, markets, technologies, and
suppliers. Unlike the strategic measures selected for inclusion on the
Balanced Scorecard, diagnostic measures are not the basis for competitive
breakthroughs. As one executive remarked, after he had implemented his
first Balanced Scorecard:
“Our division had always measured hundreds of operating variables. In

building a Balanced Scorecard, we chose 12 measures as the key to
implementing our strategy. Of these 12 measures, seven were entirely
new measurements for the division.”
Choosing the right measures and right number of measures is definitely

one of the most crucial parts in building up a Balanced Scorecard. Usually
the set of 15-25 measures is identified as optimal, as for a single person in
an organization 6-8 measures to follow is the maximum ceiling. In the case
that the organization uses an IT system to follow the developments
according to the Balanced Scorecard, the number may also rise
accordingly. But it is impossible to give an optimum, for this is also up to
the specifics of a particular establishment.

Balanced Score Card
7. Consultants Experiences, cautions, Do’s &

Don’ts on BSC
It has to be remembered that the Balanced Scorecard is not a “finished

product”. It has to be amended, improved and changed whenever there is
a need for the organization to change something in its vision or strategic
goals. Companies like Coromandel Fertilizers, BHEL have linked the BSC’s
to policy deployment and have percolated to the junior most management
of the organization.
Maturity processes takes two to three years. Process rigor is critical. In a

public sector organization like BHEL the review of rigor is very robust. In
fact the top management reviews this eleven times in a year and has been
doing this for nearly a decade. In SAIL, the concerns have been the
integration of leadership changes and adherence to systems /processes.
The initial drill and rigor is must to make this part of the DNA. Each
business head/Functional head, instead of looking at the macro direction,
should ensure BSC in their area is robust.

Balanced Score Card
8. Frequently Asked Questions on BSC
1. SAIL is a 52 year Organization and we are a Maharatana.

a. What is the necessity for the Balanced Scorecard?
b. What are the challenges to make it successful?
As Balanced Scorecard is a tool, which is intended to link and align short-

term operational and financial targets on long-term vision and strategy of
business, the age of the organization does not matter. The tool itself is just
two decades old while many organizations have adopted the tool to their
organizational context.
SAIL usually measure the result in monetary terms and our Maharatana
parameters are more linked to 65turnovers. The Income & Profit
statements which we prepare for SAIL units do not reflect the true
performance. Let us understand the various technological investments we
have made and measure the ROC. Most of our performance measures are
on Lag indicators and not on Lead indicators. Yes we are doing well but
from a competitive perspective there are many areas where if we refocus,
we will be able to develop internal capabilities which will be beneficial in
the future and in doing so may not produce immediate profits but help in
creating long term stability. Preparing for the future is about investing in
competencies, cultivating customer relationships and creating appropriate
databases.
Balanced Scorecard helps to translate the vision of the company into

actionable operating plans which can be measured over time for its
implementation. Despite the best intention of the company, quite often

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Vision & Mission statements remain as lofty ideals and statements like
becoming best in class, customer focused etc; not supported by clear
action plans and objectives which are measured. For people to act on the
words of vision and strategy statements, these statements must be
expressed as a set of objectives and measures agreed upon by the
executives that describe a clear chartered direction for the company.
Balanced Scorecard helps in creating specific action plans with clearly

defined measures and responsibilities for balancing and exceeding all the
stakeholders’ needs instead of only focusing on profit figures. It is the
operating system which helps in creating long-term capabilities and
canalizing the day-to-day operational activities and achieving both long-
term stability and short term profit objectives.
Like any other initiative BSC can succeed only if it is duly mandated and
nurtured by Top management and a qualified cross functional team is
allocated the responsibility of implementing it with guidance and steering
by Top management... and Chairman has rightly emphasized this in the
inaugural
B) There are several positives of SAIL and most of the people have
tremendous loyalty, emotional attachment and they are both a plus and
minus. Also talent depletion in view of attrition (both retirements and
young talents) calls for a systemic thrust. Execution becomes our
challenge and being highly layered organization, we need to look at
redirection, course correction, better responsiveness and leverage the
outstanding infrastructure environment we have today in the country.
Cost, quality and speed are going to be a critical driver.
2. How does Balanced Scorecard help in creating a Strategy-

Focused Organization?
Balanced Scorecard helps in creating a Strategy-Focused Organization,
which has three distinct dimensions;

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• Strategy – Make strategy the central organizational agenda.

Balanced Scorecard allows organizations, for the first time, to describe and
communicate strategy in a way that could be understood & acted upon
• Focus – Create incredible focus
With Balanced Scorecard as a ‘navigation’ aide, every resource and
activity in the organization is aligned to the strategy
• Organization – Mobilize all employees to act in
fundamentally different ways
Balanced scorecard provides the logic & architecture to establish new
organization linkages across business units, shared services & individual
employees.
3. How is Balanced Scorecard different from Annual Business

Plans & Budgets?
Budgeting is a program for action based on assumptions of business
performance expressed in financial terms. The Balanced Scorecard
however uses not only financial terms but looks at performance of the
company vis-a-vis its customers and also employees. These stakeholders
are as important as shareholders (owners) and only when you keep them
happy at all times with a clearly defined program can the company
delivers financial results. Although the Budget will tell you in financial
terms where one is, one needs to look at the other perspectives to stay
ahead.
Thus, Balanced Scorecard helps organizations in integrating the changing

needs and expectations of all its key stakeholders, viz., customers,
shareholders and employees into a company program. The
implementation of this program is systematically measured, evaluated and
improved. Thus, the company moves on a self-regulating and self-
correcting axis of continuous improvement, deriving its energy from within,
i.e., from its people. This is the primary basis of building a learning
organization.

Balanced Score Card
However SAIL BUSINEES PLANS come from the thrust areas of the
Government of India on which our Annual Business Plans are drawn. In the
current and next financial year, we will keep the ABP DOCUMENT as a
driver and focus on the robustness of executing the strategies.
4. Balanced Scorecard is a complex model and it is difficult to

communicate to employees. How can we simplify it?
The BSC is not really a complex model. It is based on three dimensions in
time; yesterday, today and tomorrow. The ‘Financial Perspectives’ deal
with the yesterday; the ‘Customer Perspectives’ and the ‘Internal Process
Perspectives’ deal with today and the ‘Learning & Growth Perspectives’
deal with tomorrow. The four perspectives which comprise the basic
model are:
a) To succeed financially, how should we look to our shareholders?
b) To succeed with our vision, how should we look at our customers?
c) To satisfy our shareholders and customers, at what internal processes
should we excel?
d) To achieve out financial & customer goals, how shall we sustain our
capacity to learn and grow?
Also, it is time we focus on the three ring approach. We will selective shed
the past (which are not relevant in today’s context), do the best
concurrently and invent the future)
5. How do we integrate Balanced Scorecard measures and

initiatives with Budgeting process?
The BSCs ‘Financial Perspective’ encompasses almost everything that the
budget comprises of. It deals with revenues, costs and profits. In addition,
Balanced Scorecard also captures performance data of the company vis-a-
vis customers, employees and also effectiveness of internal processes and
systems.
6. At some stage, can we identify KRAs of executives for the

purpose of PMS through Balanced Scorecard measures?

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Yes. It is possible. Balanced Scorecard measures are lead to PMS since the
PMS can be designed based on the BSC. Also today our KRA’s are not
directly linked to the strategies and do not flow from the enterprise score
card. The BSC approach will course correct this gap.
7. Does Balanced Scorecard help in identifying certain key issues

that inhibits good performance requiring deeper analysis?
It certainly does. Since the measures are clearly thought out based on
issues which are critical for the organizations’ success, any deviations /
variations automatically trigger a need for a deeper analysis to find out
reasons for deviations. This will help in understanding root causes and
eliminating the constraints.
8. Is it required to prepare a monthly scorecard / report for all

business units and how is it useful?
Yes. The annual plan can be broken down into quarterly / monthly plans
giving milestones of achievement. This would help in taking corrective
actions IN TIME so as to stay on course. But when BSC is initially rolled out
it is suggested to have a quarterly score card. In a Public sector context,
BHEL is a classic example where the rigor of monthly review has resulted
in their process robustness and price minus strategy.
9. What are some common mistakes that one commits in

companies due to which Scorecard implementation fails and
how to avoid them?
Any change initiative in an organization requires a ‘buy-in’ by the users.
Unless everybody involved is communicated about why there is a need for
change, how that change will affect the company and the individual, and
how both benefit by accepting the change initiative, there will not be total
commitment.
As Chairman has reiterated, it is very important for EVERY INDIVIDUAL to

know about where the company is heading and how each individual is

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contributing towards achieving the company’s goals. Unless this is

communicated, the BSC concept is hard to succeed. Hence transparency in
information sharing is critical for success.
Furthermore, people should feel this as direction setting and development

tool and not used for punitive action.
Tracking of measures as required by the Balanced Scorecard calls for some

effort initially and hence objective owners may drag a little longer and feel
uncomfortable to put a clear measurement system which may not exist
currently. At this stage, close follow up is required by the implementation
team and they should help the objective owners in simplifying the
measures.
Strategic objectives and measures should be identified through a process

of interaction and brainstorming with the team of managers who are
responsible for the unit / departmental level performance.
In SAIL we will look at sufficient consideration to unique circumstances in

which each and every profit centre is positioned and forces that are
impacting them. This can differ from one Unit of SAIL to that of another.
Thus each Unit will have its unique strategy and performance plan, which
is linked up to specific measures, targets & initiatives. We should
appreciate that Balanced Scorecard is an Enterprise Performance Tool and
is not a Reporting Format.
10. Isn’t the balanced scorecard just the latest management fad
that will soon pass away?
The “buzz word” may change, but not the underlying concepts, which are
here to stay for a long time – thinking strategically, measuring
performance, evaluating results, feedback – these are fundamental
concepts in management that have been around a long time and will be
here in the future. So managers who learn the methods of the balanced

Balanced Score Card
scorecard will be in a better position to lead in the future. They will have
the right skills to think, plan and assess the success of their organizations –
these skills will be valuable for the foreseeable future.
11. What are the benefits of the balanced scorecard approach?

The benefits of the balanced scorecard have been identified by many
organizations:
• Improved organization alignment Improved communications, both
internally and externally
• Linked strategy and operations
• More emphasis on strategy and organizational results
• Integrated strategic planning and management
12. I understand BSC is good for SAIL, but what is in it for me

personally?
It is a very good question. Like BSC addresses lot of intangibility, at a
personal level, the focus facilitates you to reinvent your own job and the
results your produce makes you noticed and leveraged. Many individuals,
who have internalized the BSC in their DNA, have progressed in their
careers very well. Even if you are in the last few years of service, the very
process of following the BSC helps you in your future endeavors. While as
a country, we have more young population the knowledge gap and the
absence of technical depth at grass roots become a great USP for those
above 50. For the younger teams, it is a new way of life to get noticed
through your focused initiatives.
13. How does the balanced scorecard compare to the Six Sigma
management approach or TQM or TPM or Lean Management.
Have we reaped the best of TQM and why now BSC?

Balanced Score Card
A relevant question and true in most Indian organization. At the cost of

wrong English, it is important that we should focus on the INITIATIVE TO
FINISHIATIVE.
The fanfare of launch is not followed through in its spirit both in Execution
and top management review.
While the balanced scorecard is almost always described as a strategic

management system, Six Sigma is usually defined in terms of quality
improvement related to internal business processes. Six Sigma is
equivalent to approximately 3.4 failures per million events. To achieve
these levels of quality, Six Sigma encompasses all aspects of a business,
including management, service delivery, design, production and customer
satisfaction.” Six Sigma was developed at Motorola, GE and Allied Signal,
and is widely used in many businesses. While the original concept has
expanded over the years to become more strategic, most balanced
scorecard organizations will use Six Sigma as project initiatives to improve
the efficiency of internal business processes.
In the case of Indian Public Sector Organization like BHEL Six Sigma and
balanced scorecard have been integrated at design stage and also the
system deployment is so robust, the measures are through six sigma. They
both require dedicated top-level management support, a dedicated team
of change agents, strategic alignment, implementation of improvement
initiatives as projects, cultural change management, and a combination of
top-down and bottom-up development. Also, Six Sigma practitioners often
adopt the balanced scorecard as a way of deriving appropriate
performance metrics.
14. How does the balanced scorecard compare to the Baldrige?

EFQM?
The Baldrige Award, the European EFQM is examples of organizational
assessment tools. Usually, these assessment frameworks are used as

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“snapshots” of the current organizational situation at a particular point in

time. The assessment uses a point scale to compare the actual situation
against a 1000 points (perfect score) scale. Annual awards are given to a
few organizations each year that demonstrate exemplary performance
against the 1000 point scale. The balanced scorecard uses assessment
data to determine what improvements and breakthroughs in performance
are most needed, so that strategies can be crafted to meet these needs.
The balanced scorecard includes much more than assessment, and is a
dynamic strategic planning and management system.
15. Where can we get software to support the balanced

scorecard?
The balanced scorecard is not a piece of software. The balanced scorecard
is front-loaded with leadership, education, communication, and cultural
preparation. However, once these are in place, there comes a time to
consider the purchase of software to support the collection, reporting and
analysis of balanced scorecard data.
The ePeoplePower, online Performance Management tool developed by the

IT vertical of CEO gives several options to customize the process to the
need of your organization. The tool is designed to automate the entire
process eliminating administrative activities and gives complete access for
strategic planning and goal deployment.
16. It is true that 54% of Western Organizations have followed

BSC and how come the global melt down was not predicted
in the Western Economy where the authors of Balanced
Score card Live.
It is a very interesting question and we need to look at the cause and
effect analysis. If we look at the collapse of most of the financial services
firm and that in turn affected the manufacturing in the west, the intent of
BSC got short circuited. Financial perspective and deceptive customer pull
resulted in mindlessness. Hence, it is nothing to do with the tool per say. It

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is Important from Indian perspective to understand the Karmic processes.

Let us not chase the results but perfect the inputs. We are also in our
reviews look more at the bottom line than the appropriateness of
processes. AS Chairman said in his BSC inaugural, Mahatma Gandhi used
Non-violence, a means; he never diluted to get the end result of Indian
Independence. Non-violence is most intangible means but the outcome is
the most outstanding.
17. How can we ensure that our balanced scorecard system is

maintained in the long term?
It is important not only to build the system right, but to maintain it by
continual use and re-education of personnel on its purpose and benefits.
Since everything is changing in the business environment, a balanced
scorecard program is never “done” – it is an ongoing journey. So the key is
to maintain strategic alignment to mission and vision and desired long-
term strategic results – these are unlikely to change much, and they
provide a “pivot” around which everything else revolves. Leaders should
help to clarify this vision.
18. What is the Uniqueness SAIL should focus while

implementing the BSC?
This was another interesting question that emerged in the dinner meeting
with ED’s and GM’s on the 16th September 2010 BSC Launch. If SAIL can
look at Customers profitability and also looking at Customer’s Customer
and their profitability, you will drive Price-minus and better value added
product. Therefore examine, are your customers profitable? Are you able
to leverage on your customer base? It is important all senior members of
SAIL should read “Customers-Customer” and drive that psyche. Customer
here would mean both internal and external.
Well if you dint know the answers for these, you can find them by
implementing balanced scorecard. Yet amid all these measures of

Balanced Score Card
customer success, some companies lose sight of the ultimate objective: to

make a profit from selling products and services.
CUSTOMER FOCUSSED OR CUSTOMER OBSESSED?

In the josh to delight customers, companies become customer obsessed
rather than being customer focused. If you keep on delighting the
customer without measuring if they are helping to improve profit margins,
it is called being customer obsessed.
Whereas if you know how much a customer has helped in increasing

profits for the service he has taken from the company, its called customer
focused.
BSC CUSTOMER PROFITABILITY METRICS

The ability to measure profitability at the individual customer level allows
companies to consider new customer profitability metrics such as
"percentage of unprofitable customers," or "rupees lost in unprofitable
customer relationships." Such customer profitability measures provide a
valuable signal that satisfaction, retention, and growth in customer
relationships are desirable only if these relationships contribute to higher,
not lower, profits.
BSC customer profitability metrics are also highly actionable. If a company

finds that an important customer is unprofitable, it should first look
internally to see how it can improve its internal processes to lower the
cost-to-serve. After all, we can't expect customers to pay for our
inefficiencies. For example, if important customers are migrating to smaller
order sizes, the company can focus on reducing setup and order handling
costs.
19. Which are the Indian Companies where Balanced Score Card
is a success and is it copy righted?

Balanced Score Card
Few excellent success stories should give us the energy that SAIL will be
one organization that wills role model. In Public Sector, we have BHEL, and
in private sectors, companies who have similar long history BSC is in
CESC of RPG group(118 year old company), EID Parry(240 year old
company), Tatas , ( 100 plus year old), and green field organizations like
GMR, Vedanta(Sterlite) and hospital settings like CARE Hospital. Balanced
scorecard is a generic management term, such as “information
technology” or “performance measurement”. It is not trademarked or
copyrighted.
20. What is my role in making BSC a success?

This is one of the best questions that emerged in the dinner meeting with
ED’s and GM’s in the 16th September Inaugural.
It is important to become an enabler. Environment will throw lot of

disablers. But, the roles each one of you are in the SAIL, IS hierarchically
and role holding wise, most coveted and important. Leadership is all about
Laddership. Overcoming the obstacles and making your area as role model
in the BSC perspective amidst presence or absence of cross functional
support is the first step. Creating grass root inclusion is the second step.
Influencing the cross functionality is the third step. Process robustness will
take six to eighteen months to deliver the quantum leaping results and
have patience. Then, you will be noticed and then there is no looking back.
Do read more on BSC, visit successful organization and then you take the
unthreaded path to become the bench leader not bench marker.

Balanced Score Card
9. BIBLIOGRAPHY
• Bossidy, L., Charan, R. (2002). Execution: The Discipline of Getting
Things Done. Bestseller by the CEO of Allied Signal.
• Brown, M.G., Hitchcock, D.E. and Willard, M.L. (1994). Why TQM Fails
and What to Do About It. McGraw-Hill, New York. Lots of good advice
that is still relevant.
• Cartin, T.J. (1993). Principles and Practices of TQM. ASQC Quality Press,
Milwaukee, WI. Practical guide to the concepts and tools of total quality
management.
• Cox, B.G. and Chinnappa, B. N. (1995). Business Survey Methods.
Wiley. NY. A good reference to help in the design of quality personal
opinion and assessment surveys.
• Deming, W. Edwards. (1986). Out of the Crisis. MIT Center for Advanced
Engineering Study. Cambridge, MA. This is the classic book by Deming
that summarized his teachings, which became the foundation for
modern measurement-based management.
• Drucker, P. (1985). Innovation and Entrepreneurship. Harper Business,
NY. Ways that organizations can encourage new ideas, from the
management guru who helped to inspire many of them.
• Drucker, P. (1990). Managing the Nonprofit Organization. HarperCollins.
The wisdom of Drucker in his prime. If you are a nonprofit manager you
must get this book.
• Fitz-enz, J. and Phillips, J. (1998). A New Vision for Human Resources.
Crisp Publications, Inc. Brief outline of measurement-based HR
management by the well-respected founder of the Saratoga Institute.
• Gabor, A. (1990). The Man Who Discovered Quality. PenguinBooks. New
York. A admirer's distillation of the teachings of -- who else? -- W.
Edwards Deming.
• Hodgetts, R.M. (1998). Measures of Quality and High Performance.
Amacom (American Management Association), NY.

Balanced Score Card
• Juran, J.M. (1989). Juran on Leadership for Quality. FreePress. New York.
Widely known author of the TQM era.
• Kalton, G. (1983). Introduction to Survey Sampling. Sage Publications,
London. A brief introduction to the mathematical analysis involved in
surveys.
• Kaplan, R.S. and Norton, D.P. (1996). The Balanced Scorecard:
Translating Strategy into Action. Harvard Business School Press,
Boston, MA. The book that coined the term, but does not include
strategy maps because they weren't invented yet.
• Kaplan, R.S. and Norton, D.P. (2001). The Strategy-Focused
Organization: How Balanced Scorecard Companies Thrive in the New
Business Environment. Harvard Business School Press, Boston, MA.
Recommended for a manager's introduction to the key concepts.
• Kaplan, R.S. and Norton, D.P. (2004). Strategy Maps: Converting
Intangible Assets into Tangible Outcomes. Harvard Business School
Press, Boston, MA. 400 pages of private sector strategy maps; 28 pages
of government and not-for-profit strategy maps.
• Kaplan, R.S. and Norton, D.P. (2006). Alignment: Using the Balanced
Scorecard to Create Corporate Synergies. Harvard Business School
Press, Boston, MA. An advanced BSC book for large corporate
enterprises.
• Kaplan, R.S. and Norton, D.P. (2008). The Execution Premium. Harvard
Business School Press, Boston, MA. Linking Strategy to Operations for
Competitive Advantage.
• Kaydos, W. (1991). Measuring, Managing, and Maximizing Performance:
What Every Manager Needs to Know about Quality and Productivity to
Make Real Improvements in Performance. Productivity Press Inc. The
title says it all.
• Kaydos, W. (1998). Operational Performance Measurement: Increasing
Total Productivity. CRC Press. An excellent treatment by one of our own
consultants.

Balanced Score Card
• Keehley, P. et al., (1997). Benchmarking for Best Practices in the Public

Sector: Achieving Performance Breakthroughs in Federal, State and
Local Agencies, Jossey-Bass. Explains the processes used in conducting
benchmarking projects between governmental organizations.
• Leidig, G. and Sommerfeld, R. (2002), Balanced Scorecard als
Instrument zur Strategieumsetzung. Handbuch für die Druck- und
Medienindustrie, Bundesverband Druck und Medien (German Printing
Association), Wiesdaden (391 pp. incl. CD-ROM, ISBN 3-88701-238-0).
• Leidig, G. and Mayer, T. (Hrsg.) (2002), Betriebswirtschaft und
Mediengesellschaft im Wandel. Festschrift für Diethelm Schmidt und
Lorenz Rottland, Bundesverband Druck und Medien, Wiesbaden (XVIII
pp., 365 pp., ISBN 3-88701-237-2).
• McCormack, C. and Jones, D. (1997). Building a Web-Based Education
System. Wiley Computer Publishing, New York. Includes software to
support all aspects of training.
• Miller, G.J., Hildreth, W.B., Rabin, J. (2001). Performance Based
Budgeting: An ASPA Classic. Westview Press. An anthology of the best
academic articles on this subject. Includes an important article by ex-
Senator Fred Thompson.
• Mintzberg, H., Ahlstrand, B., and Lampel, J. (1998). Strategy Safari: A
Guided Tour Through the Wilds of Strategic Management. Free Press,
New York. Classic but advanced book that describes ten schools of
strategic management.
• Monahan, K.E. (2001). Balanced Measures for Strategic Planning: A
Public Sector Handbook. Management Concepts, Vienna, VA. Outgrowth
of a study done for the National Partnership for Reinventing
Government (NPR). A practical reference book with numerous public
sector case studies.
• Olson, A., et al. (1995). Performance Measurement. Coopers & Lybrand
LLP, Arlington, VA. A monograph by a leading supplier of management
consulting to the US federal government.

Balanced Score Card
• Olve, N., Roy, J. and Wetter, M. (English ed., 1999). Performance

Drivers: A Practical Guide to Using the Balanced Scorecard. Wiley, New
York. The Swedish approach to the BSC.
• Olve, N., Roy, J. and Wetter, M. (English ed., 2003). Making Scorecards
Actionable: Balancing Strategy and Control. Wiley, New York. An update
on progress with the BSC in several mostly Scandinavian companies.
• Pederson, L.M. (2002). Performance-Oriented Management: A Practical
Guide for Government Agencies. Management Concepts, Inc., Vienna,
VA. Includes how to facilitate offsite strategic planning retreats, develop
performance management systems, and conduct Baldrige assessments.
Contains several assessment tools in appendices.
• Raj, D. (1968). Sampling Theory. McGraw-Hill. NY. Textbook on survey
and experimental design.
• Savage, S.L. (2003). Decision Making with Insight. Brooks/Cole -
Thomson Learning, Belmont, CA. Contains software for making
analytical decision models and Monte Carlo simulations with Excel
spreadsheets.
• Shewhart, W. (1939). Statistical Method from the Viewpoint of Quality
Control. in Deming, W.E., ed., Graduate School of the Department of
Agriculture. Washington, DC. Shewhart was the inventor of SPC
(Statistical Process Control) which was an early form of performance
measurement and control of industrial processes.
• Tingey, M.O. (1997). Comparing ISO 9000, Malcom Baldrige and the SEI
CMM for Software, Prentice-Hall. A reference and selection guide for
these three quality management assessment methodologies.
• Van Grembergen, W. (2001). Information Technology Evaluation
Methods & Management. Idea Group Publishing, London. Collection of
scholarly studies by various authors that includes balanced scorecard
concepts as they relate to IT management.
• Wholey, J.S., Hatry, H.P. and Newcomer, K.E., eds. (1994). Handbook of
Practical Program Evaluation. Jossey-Bass, San Francisco. A major 600-

Balanced Score Card
page textbook written by key leaders in US government program

evaluation.
• Also the internet down load case studies has the authors mentioned in
the down load. Plus experiences of the facilitators in Indian companies.
10. Sample BSC Template
BALANCED SCORE CARD

NAME OF THE BUSINESS / SBU / DEPT / INDIVIDUAL ACIDS BUSINESS
YEAR 2009-2010
FINANCIAL PERSPECTIVE
Target
S.No. Objective UOM Weightage
2008-09 2009-10
1.1 Maximization P2O5 Production 163607 224000 MT 5
1.2 Improve EBIDTA 687 192 Cr 5
1.3 Improve P2O5 Recovery 96.54 97.18 % 5
1.4 Achieve Zero cost and beyond 477 -1190 Rs/MT 5
1.5 Strategic Rock Sourcing 5.96 7.75 Lac MT 5
25
CUSTOMER PERSPECTIVE
Target
2008-09 2009-10
2.1 Improve market share in Gypsum 55 60 % 5
2.2 Customer satisfaction and retention 80 85 % 5
2.3 To develop Slag market 2.2 10 Lakh MT 10
2.4 To construct the tank terminal in port In progress Completed Timeline 2
To Control Fluorine emission & Dust Emission
2.5 <25 Mg/Nm3 3
in plant
25
INTERNAL BUSINESS PROCESS PERSPECTIVE
Target
2008-09 2009-10
3.1 TPM (GOVIND) Continuous Continuous Modules 5
To benchmark with top 3 plants in Asia in

3.2 NA 9-Dec timeline 5
Operational parameters and submit the report

Balanced Score Card
3.3 Anti dumping duty initiation by Ministry In process 9-Dec timeline 5
3.4 CRM conceptualization & business case study NA 10-Feb timeline 5
3.5 To Implement TQM projects 1 2 Nos 5

25
L&G PERSPECTIVE
Target
2008-09 2009-10
4.1 SPIDER - Phase III to be completed 75 85 % 5
Nos/employ
4.2 Ideas Implementation 4 2 5
ee/year
4.3 Star development 5 8 nos 5
4.4 women employees <10% 11%-15% % 5
nos. per
4.5 Skill enhancement for employees 0 4 5
year
25

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SAIL STRATEGIC SCORE CARD

[Understand: Facilitate: Construct]

Hand Book for Participants

Steel Authority of India Limited

Prepared and Facilitated by

CII Institute of Quality

1 SAIL – Chairman’s Strategic Thrust

2 Basic Concepts of Balanced Score

3 Building a Balanced Score Card (BSC)..

CII – CEO / SAIL / September/October 2010 2

4 Understanding the SAIL Enterprise

5 Defining the SAIL Unit Strategic

6 Constructing a Balanced Scorecard (sample

7 Consultants Experiences, cautions, dos and don’ts

CII – CEO / SAIL / September/October 2010 3

This hand book shall be used in conjunction with the presentation

CII – CEO / SAIL / September/October 2010 4

1. SAIL Chairman’s Strategic Thrust

Mr. Chandra Shekhar Verma, Chairman, SAIL, inaugurated the launch of

As Leading Steel Manufacturer, SAIL has been a

In the twelfth five year plan, Govt is investing

CII – CEO / SAIL / September/October 2010 5

ED (CP), introducing the theme emphasizes the need to aggressively look

CII – CEO / SAIL / September/October 2010 6

2. Basic Concept of Balanced Score Card

i. What is Balanced Score Card? And it’s utility

Because the balanced scorecard is a generic term, it means different

CII – CEO / SAIL / September/October 2010 7

ii. Back Ground of Balanced Score Card

Throughout the history of contemporary management theories starting

In the 1930-ies, the main topic was motivation of employees, as it turned

CII – CEO / SAIL / September/October 2010 8

computers, the whole array of management techniques were initiated. The

Today’s companies are in the midst of a revolutionary transformation.

A summary financial measure such as return-on-capital-employed (ROCE)

Industrial age companies created a sharp distinction between two groups

CII – CEO / SAIL / September/October 2010 9

customers, and supervise day-to-day operations. The second group was

CII – CEO / SAIL / September/October 2010 10

The shift to successful knowledge management has introduced a variety of

Some of those programmes have meant in practice real breakthrough and

ii. If some non-financial performance measurement even is made, it is

iii. Majority of management and employee salary-based motivation

iv. Overall company strategy is not closely linked to organizational and

CII – CEO / SAIL / September/October 2010 11

v. Strategy is not generally linked to resource allocation, which results

As for today, superior financial performance and efficiency in production

The long-term success of any organization is determined by the

Mobilizing change through executive leadership.

CII – CEO / SAIL / September/October 2010 12

This innovative tool “Balanced Scorecard” developed by Robert S Kaplan

Balanced Scorecard uses a balanced measurement system that comprises

CII – CEO / SAIL / September/October 2010 13

iii. Internal and the External aspects and

iii. Terminologies : An Overview - Speaking the Common

CII – CEO / SAIL / September/October 2010 14

Cause Effect Relationship:

CII – CEO / SAIL / September/October 2010 15

CII – CEO / SAIL / September/October 2010 16

Vision: An overall statement of how the organization wants to be

CII – CEO / SAIL / September/October 2010 17

3. Building the Balanced Score Card