Sie sind auf Seite 1von 63


The balanced scorecard (BSC) is a strategic performance

management tool -a semi standard structured report supported by proven

design methods and automation tools can be used by managers to keep

track of the execution of activities by staff within their control and monitor

the consequences arising from these actions. It is perhaps the best known

of several such frameworks, and was widely adopted in Anglo-Saxon

countries and Scandinavia in the early 1990s. Since 2000, use of BSC, its

derivatives (e.g. performance prism), and other similar tools (e.g. Results

Based Management) have become common in the Middle East, Asia and

Spanish countries also.

Modern Balanced Scorecard thinking has evolved

considerably since the initial ideas proposed in the late 1980s and early

1990s, and the modern performance management tools including

Balanced Scorecard are significantly improved - being more flexible (to

suit a wider range of organizational types) and more effective (as design

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

The first balanced scorecard was created by Art Schneider

man (an independent consultant on the management of processes) in

1987 at Analog Devices, a mid-sized semiconductor company. Other early

applications of the concept in various companies were conducted by

Harvard professor Dr. Robert S. Kaplan and others in a Nolan-Norton

Institute study group. In 1992, Kaplan and David P. Norton began

reporting the findings of their balanced scorecard experience through a

series of journal articles. In 1996, they published a seminal book the

balanced scorecard.

Balanced Scorecard Basics:

The balanced scorecard is a strategic planning and

management system that is used extensively in business, industry,

government and nonprofit organizations worldwide to align business

activities to the vision and strategy of the organization, improve internal

and external communications, and monitor organization performance

against strategic goals.

The balanced scorecard has evolved from its early use a

simple performance measurement framework to a full strategic planning

and management system. The "new" balanced scorecard transforms an

organization's strategic plan from an attractive but passive document into

the "marching order" for the organization on a daily basis. It provides a

framework that not only provides performance measurement, but helps

planners identify what should be done and measured. It enables

executives to truly execute their strategies.

This new approach to strategic management was first

detailed in a series of articles and books by Drs. Kaplan and Norton.

Recognizing some of the weaknesses and vagueness of previous

management approaches, the balanced scorecard approach provides a

clear prescription as to what companies should measure in order to

`balance' the financial perspective. The balanced scorecard is a

management system (not only a measurement system) that enables

organizations to clarify their vision and strategy and translate them into

action. It provides feedback around both the internal business processes

and external outcomes in order to continuously improve strategic

performance and results. When fully deployed, the balanced scorecard

transforms strategic planning from an academic exercise into the center of

an enterprise.

Origin of the Balanced Scorecard:

The origin of the balanced scorecard was introduced January

1992 by R.S. Kaplan and D.P. Norton. Kaplan and Norton suggested that

organizations should focus their efforts on a limited number of specific,

critic performance measures which reflects stakeholder's key success



"A strategic planning and management system used to align

business activities to the vision statement of an organization" General

management system assessing progress toward goals a system that

measures and manager an organizations progress toward strategic


To embark the balanced scorecard path an organization first must know

the follow:

• The company's mission statement.

• The company's strategic plan/vision.


• The financial status of the organization

• How the organization is currently structured and operation

• The level of expertise of their employees

• Customer satisfaction level.


Balanced scorecard is a concept that measure company's

activities in terms of vision and strategic to give managers a

comprehensive view of the performances of a business. A balanced

scorecard enables organization to clarity their vision and strategy and

translate them into action the balanced scorecard incorporates not only

financial indicators but also three other perspectives customer internal

business and clearing/innovation. The scorecard shows how these

measures are interlinked and affect each other, enabling an organization

past, present and potential performance to be tracked and managed.


The balanced scorecard approach promotes the need

managers to have a full perspective of their overall performance by

creating a balance between financial measures as well as internal

processes and results measures.

Many company managers have been convinced of the effectiveness of the

BSC approach as they see that it is very effective in predicting their

companies, future performance. Therefore when formulating balanced

scorecard objectives there is a need for companies to be decisive about

what their goals and come up with strategic that are aligned with these.


• It tells the story of company's strategy, articulating a sequence of

cause and effect relationship the links among the various

perspectives that align implementation of the strategy.

• The balanced scorecard helps to communicate that strategy to all

members of the organization by translating the strategy into

coherent and linked set of understandable and measurable

operational targets.

• The balanced scorecard must motivate managers to take actions

that eventually result in improvement in financial performance.

• The balanced scorecard limits the number of measures, identifying

only the most aiticalones.

• The balanced scorecard highlights less-than-optimal tradeoffs that

managers may make when fail to consider operational and financial

measures together.

• The balanced scorecard allows managers to look at the business

from four important perspectives.

• It provides a balanced picture of overall performance highlighting

activities that need to be improved.

• Includes measures of efficiency and effectiveness.

• Comines both qualitative and quantitative measures.

• Assist business in clarifying their vision and strategies and provides

a meant translate these into action.

The way is the scorecard a balanced:

The scorecard produce a balanced between

• Four key business perspectives financial, customer, internal

processes and innovation.

• How the organization sees itself and how others it.

• The short run and the long run.

• The situation at a moment in time and change over time.


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

breakthrough performance.

• Act as an integrating device for a variety of corporate programmers.

• Makes strategy operational by translating it into performance

measures and targets.

• Helps breaks down corporate level measures so that local managers

and employees can see what they need to do well if they want to

improve organizational effectiveness.

• Provides a comprehensive view that overturns the traditional idea of

the organization as a collection of isolated independent functions

and department.


• The core characteristic of the BSC and its derivatives is the

presentation of a mixture of financial and non-financial measures

each compared to a `target' value within a single concise resort.

• The report is not meant to be a replacement for traditional financial

or operational reports, rather a succinct summary that captures the

information most relevant to those reading it. It is the methods by

which this `most relevant' information is determined (i.e. the design

processes used to select the content) that most differentiates the

various versions of the tool in circulation.

• The first versions of BSC asserted that relevance should derive from

the corporate strategy, and proposed design methods that focused

on choosing measures and targets associated with the main

activities required to implement the strategy.

• As the initial audiences for this were the readers of the Harvard

Business Review, the proposal was translated into a form that made

sense to a typical reader of that journal-one relevant to a mid-sized

US business.

• Accordingly, initial designs were encouraged to measure three

categories of non-financial measure in addition to financial outputs-

those of "Customer," "Internet Business Processes" and "Learning

and Growth".

• Clearly these categories were not so relevant to non-financial or

units within complex organizations (which might have high degrees

of internal specialization), and much of the early literature on BSC

focused on suggestions of alternative `perspectives' that might have

more relevance to these groups.

The Balanced Scorecard introduced customer metrics into

performance management systems. Scorecards feature all manner of

wonderful objectives relating to the customer value proposition and

customer outcome metrics. For example: market share, account share,

acquisition, and retention.

Yet amid all these measures of customer success, some

companies lose sight of the ultimate objectives to make a profit from

selling products and services. In their zeal to delight customers, these

companies actually lose money with them. They become customer-

obsessed rather than customer-focused. When the customer says "jump,"

they ask "how high". They offer additional product features and services to

their customers, but fail to receive prices that cover the costs for these

additional features and services. How can companies avoid this situation

by adding a metric that summarizes customer profitability.

Consider the situation faced in the 1990s by one of the

nation's largest distributors of medical and surgical supplies. In five years,

sales had more than tripled to nearly $3 billion, yet selling, general, and

administrative (SG&A) expenses, thought by many to be a fixed cost, had

increased even faster than sales. Despite the tripling in sales, margins had

just incurred its first loss in decades. Rather than SG&A costs being fixed

or even variable, these costs had becomes "super-variable."

The experience of this company is hardly unique.

Companies often capture additional business by offering more services.

The list is wide-ranging product or service customization; small order

quantities; special packaging; expedited and just-in-time delivery;

substantial pre-sales support from marketing, technical, and sales

resources; extra post-sales support for installation, training, warranty, and

field service; and liberal payment terms. While all of these come for free.

For a differentiated customer intimacy strategy to succeed the value

created by the differentiation-measured by higher margins and higher

sales volumes- has to exceed the cost of creating and delivering

customized featured and services.

Unfortunately, many companies cannot accurately

decompose their aggregate marketing, distribution, technical, service, and

administrative costs into the cost as fixed-period costs and don't drive

them to the customer level, or they use high-level, inaccurate methods,

such as allocating a flat percentage of sales revenue to each customer to

cover "below-the-line" indirect expenses.

It is reported that over 50% of fortune 1000 firms now use the

BSC methodology. Around 85% of organizations have adopted a

performance measurement initiative of some form. As a consultant have

helped to implement the BSC and found that it has acted as a catalyst to

assist staff to see their jobs and parts of the outside world from a totally

new and more dynamic perspective. Importantly, it acted as both a

catalyst and as a platform for learning.


• The balanced scorecard system considers both financial and non-

financial factors.

• It is well designed for compensating lower level employees.

• It provides detail of firm performances beyond that obtained from

market determined measures.

• Many modern business and government agencies hold most of their

value in their intangible assets namely their people and the

knowledge those people hare.

• Also modern companies recognize that mission success is largely

driven by the ideas and innovations that come from their people.

• It provides a framework that not only provides performances

measurements but helps planners identify what should be measured

it enables executives to truly execute their strategies.


• The balanced scorecard system is not a market determined

performance measure.

• It may not align perfectly with a shareholder wealth maximization


• It is somewhat difficult and time consuming to implement a

comprehensive balanced scorecard system in a large organization.

• One should not focus on a balanced scorecard initiatives unless the

organization has a high ranking potential has adequate funding and

is ready to meet the challenges of change.

The BSC Concept:

The concept was developed from the observation that

traditional performance measurement systems- that were largely based

upon financial performance indicators-would be inadequate to steer

organizations of the future. Such financially based performance

measurement approaches were seen as having a number of serious

drawbacks. These included:

1. Outcome focus: Established financial indicators such as turnover

and profit before tax are outcome indicators. They only alert us when

things have gone wrong and the effect is being felt by the business

and in the balance sheet. Such indicators and measures don't

provide us with an indication of when things may go right or wrong in

the future.

2. The drivers of business success: Financial measure alone do not

assess and measure the parts of the organization that create the

future customer value that in turn delivers profit. A more holistic

approach is needed that helps mangers- like physicians- to examine

the state of health of the entire body corporate.

3. Strategy into action: Have raised this failing in earlier briefings.

Many business plans paint favorable future financial returns but

don't explain explicitly what must be done to achieve the planned

returns. A well-managed BSC project will identify and measure the

key actions needed to deliver planned performance. A properly

constructed strategy map, success map or action-profit model( more

of this below) can help to fill the gap and help a wide range of

audiences within the organization to understand what has to be

done to achieve long-term goals.

4. Strategic communication, involvement and ownership: Traditional,

financially based plans are difficult to communicate across the

organization. Always remember, when it was a manager, giving a

presentation looking at the future objectives of my company and at

the end someone put their hand up and said "Excuse me, but what

does the word ROCE mean(return on capital employed) was a

technical term used by very few people in the company. The fact is

that most business strategies are not communicated in ways

everyone can understand.

The BSC is based on the simple premise that we must

understand and measure the true drivers of value creation. To do this, we

must define what are the component parts of the organization(again using

a medical analogy, components such as the nervous and digestives

systems of the human body) that deliver financial performance.

It all starts at the bottom in the "Learning and Growth"

perspective. Skills, culture, leaders and management information that are

aligned to the organization’s strategy will create effective and efficient

business processes as shown in the "Business Process" perspective.

Effective and efficient product delivery, customer relationships, innovation,

and regulatory processes in the make sure that the organization’s

offerings meet the needs of customers. The components of the

organization’s offerings (products, services, relationships and brand) are

shown in the customer perspective. Satisfied customers and efficient

business processes combine to produce growth, lower costs and better

use of the organization’s capital. So, if we create objectives and

measurements in each of the four dimensions or perspectives that are

aligned to our strategy we have a performance measurement and

assessment system that is:

• Holistic- all critical areas in the organization that produce financial

outcomes are assessed. In addition to the financial dimension, we

have the three key parts of the organization that inter-lock to deliver

shareholder value.

• Forward looking- failure to meet say, skill acquisition targets, is a

leading indicator of future failure in processes, customer satisfaction

and ultimately, profits.

• Easy to communicate- strategy can be easily explained and

communicated. The illustration above is the basis for a strategy

map- a series of initiatives that must be completed to achieve the

objectives in the organization’s business plan. A simple and visual

way of communicating what the organization plans to do to meet its

financial objectives.

• Based on measuring four key dimensions- Learning and Growth

(people, skills, culture, leadership and information), Business

Processes (embracing four processes- product delivery, customer

relationships, innovation and adherence to regulatory and broader

environmental needs), Customer Offerings and Relationships and

finally financial embracing key financial objectives.

The key to the success of the Balanced Scorecard is the

simplicity- essentially seeing an organization from four key perspectives-

one driving another. Financial results are driven first by people. People

with the right skills, motivation and information create effective and

efficient processes, which in turn deliver products, relationships and

services that create value for the customer. Customer value in turn

delivers profit to meet the organization's financial objectives.



One of the hot trends in management today is the

balanced scorecard. Though empirical research and many success stories

show that strategic measurement can work wonders, there are also many

cases where scorecards simply did not work. The most balanced

perspective is that these tools work well, when they are well implemented.

Even if you decide that a balanced scorecard is not for you,

knowing about scorecard tools can be helpful, since some of the tools can

be used independently.

Balanced scorecard, when developed as strategic planning and

management systems, can help align an organization behind a shared

vision of success, and get people working on the right things and focusing

on results. A scorecard is more than a way of keeping score it is a system,

consisting of people, strategy, processes, and technology.

One needs a disciplined framework to build the scorecard

system. This article is the first in a series describing how to build and

implement a balanced scorecard system using a systematic step-by-step


"Balanced Scorecard" means different things to different

people. At one extreme, a measurement-based balanced scorecard is

simply a performance measurement framework for grouping existing

measures into categories, and displaying the measure graphically, usually

as a dashboard. The measures in these systems are usually operational,

not strategic, and are used primarily to track production, program

operations and service delivery (input, output, and process measures).

At the other extreme, the balanced scorecard is a robust

organization-wide strategic planning, management and communications

system. These are strategy -based systems that align the work people do

with organization vision and strategy, communicate strategic intent

throughout the organization and to external stakeholders, and provide a

basis for better aligning strategic objectives with resources. In strategy-

based scorecard systems, strategic and operational performance

measures (outcomes, outputs, process and inputs) are only one of several

important components, and the measures are used to better inform

decision making at all levels in the organization. In strategy executed well.

A planning and management scorecard system uses strategic and

operational performance information to measure and evaluate how well

the organization is performing with financial and customer results,

operational efficiency, and organization capacity building.

Performance measurement balanced scorecards are not very

interesting, and add little business intelligence to help an organization

chart strategic direction and measure the progress of strategic execution.

Balanced scorecard built with the goal of "organizing the measures we

have" hardly justify the energy it takes to build them.

We' start our balanced scorecard journey not from

performance measures but from the results we want the organization to

accomplish. In other words, we' 11 start with the end in mind, not with the

measures we currently have. One of Stephen covey's quotes captures the

essence of our journey: "People and their managers are working so hard

to be sure things are done right, that they hardly have time to decide if

they are doing the right things."

Balanced Scorecard System Elements:

Engaged Leadership, Interactive Communications and Change

Management. Developing a scorecard system is transformational for an

organization it's about changing hearts and minds. Leaders who are

engaged in the discovery process, communication via two-way dialogue,

and planning and managing change are important first steps in the


Organization Mission, Vision, and Value: Critical to an aligned

organization are a well defined mission, a shared vision, and organization

values that are built on strong personal values. Most organization has

these components, but often there is no connecting tissue among the

components that allow employees to "get it" easily. A compelling and clear

"picture of the future" (the shared vision) is where the scorecard

development process starts employee buy-in follows as hearts and minds

are engaged in creating and executing the organization's strategies.

Organization Pains (Weaknesses) and Enablers (Strengths).

An organization environmental scan ("climate survey") will identify internal

and external pains and enablers that will drive strategy creation and the

approach to achieving future results.

Customers and Stakeholders, and the Value Proposition:

Effective strategy incorporates a view from the customer and stakeholder

perspective, and includes an understanding of customer needs, product

and service characteristics, desired relationships and the desired

"corporate image" that the organization wants to portray.

Perspectives, Strategic Themes, and Strategic Results: To view

strategy through different performance lenses (balanced scorecard

perspectives), the organization needs to define strategic perspectives, key

strategies and expected results. Key strategies are the main focus areas

or "pillars of excellence" that translate business strategy into operations,

and make strategy actionable to all employees.

Strategic Objectives and Strategy Map: Strategic objectives

are the building blocks of strategy (strategy "DNA"), and objectives linked

together in cause-effect relationships create a strategy map that shows

how an organization creates value for its customers and stakeholders.

Strategic Initiatives: Initiatives translate strategy into operational terms,

and provide a basis for prioritizing the budget and identifying the most

important projects for the organization to undertake.

Performance Information Reporting: Automated data collection and

reporting processes are used to visualize performance information and

better inform decision making throughout the organization. Cascade

Scorecard to Departments and Individuals. Align the organization through

strategy, using the strategy map, performance measures and targets, and

initiatives. Scorecards are used to improve accountability through

objective and performance measure ownership.

Rewards and Recognition: Incentives are tied to performance to make

strategy actionable for people, and help build buy-in for the behavior

changes needed to create a high-performance organization.

Evaluation: The results of the organization becomes more strategy-

focused are evaluated, and changes in strategy, measure, and initiatives

reflect organization learning.

Balanced Scorecard and Knowledge Management:

In recent years there has been a renewed in "human

resources" and "collaboration" under the term "knowledge management".

In another white paper, the meaning of knowledge management is

explored in more detail. Here, the focus is on the relationship between the

balanced scorecard and knowledge management. In their book the

Balanced Scorecard, Kaplan and Norton set forth a hypothesis about the

chain of cause and effect that leads to strategic success. This cause-and-

effect hypothesis is fundamental to understanding the metrics that the

balanced scorecard prescribes. There are four stages to this chain of

cause and effect, outlined as follow:

1. The foundation or fundamental cause for strategic success has to do

with people. Decades ago Peter Drucker recognized that innovation

from creative people provides the only assured source of long-term

success and competitiveness, because every other aspect of an

organization can be duplicated by others. The right people must be

hired, properly trained and mentored, and the learning process

should become continuous and endless. Peter Senge, in his very

influential book the Learning Organization, described a healthy

organization as one in which a learning culture prevails, fostered

both by formal and informal learning and by abundant internal

communication in all media.

2. In learning and growing organization, where the culture encourages

people make suggestions and questions the status quo, a steady

flow of new ideas arises from the rank-and-file employees. These

ideas are vital to the future of the organization, because they come

from the experts the people who are involved with the business

processes on a daily basis. This insight about employees traces

back to Deming, who saw the vital need for managers and shop-

floor supervisors to listen to workers' complaints and empower them

to make suggestions and improvement. Conversely, an organization

that stifles or ignores new ideas from its employees is probably

doomed. The balanced scorecard, using efforts such as employee

surveys and analysis of training data, is able to measure the degree

of learning and growth, allowing leaders to assess the potential for

long-term success.

3. Improved business processes lead to improved products and

services. For example, if an improved process saves time, this result

directly in a shorter delivery times to the customer something that

any customer will appreciate. In the government context, cost

reduction is also always of importance to the customer, because the

customer is the sponsor of the whole organization's budget direct

and overhead. The balanced scorecard measures customer

satisfaction, but improving processes produces it.

4. Finally, improved customer satisfaction leads to loyal customer and

increased market share, which directly affect the bottom line whether

that line equals profit, ROI(return on investment) or ROCE (return on

capital employed) in the private sector, or NOR (net operating result)

or IOH (overhead) in the public sector.

Corresponding to the steps in the causal chain are four general areas of

strategic management activities, as follows:

 Learning and growth is fostered by knowledge management

activities and initiatives. These include strategic recruiting, hiring,

training (both formal and informal), team development, document

management, collaborative communication system, and knowledge

and skills audits of employees, knowledge base developments, and

fostering of communities of interest within the organization.

 Business process improvements may range from moderate and

localized changes to wide-scale changes in business processes, the

elimination of paperwork and steps in processes, and the

introduction of automation and improved technology. Deployment of

the balanced scorecard measurement system itself is one of these


 Customer loyalty cannot any longer be taken for granted within the

government, nor is it sufficient to manage it in an ad hoc or

anecdotal way. Rather, customer relationships are becoming

increasingly structured and measured. Not only must the agency

work closely with customers on a personal level, it must also gain

documented and continuous feedback on customer perceptions and

loyalty. These efforts come under the general heading of customer

relationship management (CRM).

 Financial management in the passive sense of "bean counting" is

giving way to proactive initiatives in Activity- Based Costing (ABC),

Functional Economic Analysis (FEA), Earned-Valued Management

(EVM) and other practices by which managers can learn more from

financial data, in order to track projects more closely and make

better cost estimates. Also, innovations in budgeting including the

GRA's goal of linking performance to budgets are replacing Zero-

Based Budgeting and other earlier techniques in government

agencies. The availability of improved database technology with

more business intelligence capability is turning financial

management into an active part of an agency's overall strategy for


In conclusion, management experts agree that learning and

growth is the key to strategic success, the foundation for the future.

Learning and growing organization is one in which knowledge

management activities are deployed and expanding in order to

leverage the creativity of all the people in the organization.



The BSC is ultimately about choosing measures and

targets. The various design methods proposed are intended to the

identification of these measures and targets, usually by a process of

abstraction that narrows the search space for a measure ( e.g. find a

measure to inform about a particular `objectives' within the Customer

perspective, rather than simply finding a measure for `customer').

Although lists of general and industry-specific measure

definitions can be found in the case studies and methodological articles

and books presented in the references section. In general measure

catalogues and suggestions from books are only helpful `after the event' -

in the same way that a Dictionary can help you confirm the spelling (and

usage) of a word, but only once you have decided to use it.

Performance Measures:

Each performances objective should be supported by at

least one measure that will indicate an organizations performance against

that objective.

Measure should be precisely defined, including the

population to be measured, the method of measurement, the data source,

and the time period for the measurement. Measures should be written as

mathematical formulae, wherever possible.

Types of Measures:

Types of measures normally include the following:

Core Measures:

These are measures the Department expects all elements to

employ where applicable. The formulae and methods for core measures

shall be maintained as standard as is practicable from site to site.

Optional Measures:

These are measures suggested, but not required, by the

Department, and may be useful indicators for assessing progress towards

the predetermined core objective.

Local Measures:

These are measures, which have site or contractor

specificity that each site may identify and include as part of their BSC.

Outcome and In-Process Measures:

Core, optional, and local measures may be outcome (or) in-

process measures. All are indicators of performance (mission success in

business systems). Outcome measures may be found in the Customer,

Financial (or) Internal Business Process perspectives. Outcomes are

measures establish the current performance of a system.

In-Process measure will drive future performance and are

no less important than outcome measures. However, Success is only

desirable in these metrics, to the extent that it leads to success in outcome

measures. Success in these measures alone will not satisfy customers

poor performance in these measures may be addressed in time to prevent

negative impact on process outcomes and customer satisfaction. In short,

In-Process measures are management tools to drive and sustain


Balanced Scorecard (BSC):

Currently many business executive believe that the

traditional measurement criteria of performance are misleading in

situations that require continuous improvement and innovation in a

competitive environment. In such a situation achievement of short-term

financial soundness is not enough; rather emphasis should be given on

the achievement of long-term strategy. It requires a set of measures that

given top managers a vast but comprehensive view of the business. It

includes financial measures that tell the results of actions taken and

operational measures on customers' satisfaction, the internal force and the

organizational innovations and improvement activities, that is, the

operational measures that are the drivers of futures financial performance.

Because BSC shows the cause and effect relationship (Garrison and

Noreen, 2000:465) between:

Learning and growth... Internal business process... customer... Financial


It is, therefore, clear that if an organization is able to improve

on learning and growth then its internal business processes will be

benefited and if the internal business processes are improved then it

would be possible to serve the customer better .Better customer service

would lead to satisfied customers, which again would have a positive

impact on the performance of the organization. So it is important for

executives to track not only financial measures that indicate the results of

the past decisions, but also non-financial measures, which are leading

indicators of future performance. In this situation balanced scorecard

(BSC) may be an example of a performance measurement system.

Financial Measures Are Insufficient:

While financial accounting is suited to the tracking of

physical assets such as manufacturing equipment and inventory, it is less

capable of providing useful reports in environments with a large intangible

asset base. As intangible assets constitute an ever-increasing proportion

of a company's market value, there is an increase in the need for

measures that better report such assets as loyal customers, proprietary

processes, and highly-skilled staff.

Consider the case of a company that is not profitable but

that has a very large customer base. Such a firm could be an attractive

takeover target simply because the acquiring firm wants access to those

customers. It is not uncommon for a company to take over a competitor

with the plan to discontinue the competing product line and convert the

customer base to its own products and services. The balance sheets of

such takeover targets do not reflect the value of the customers who

nonetheless are worth something to the acquiring firm. Clearly, additional

measures are needed for such intangibles.

Scorecard Measures are Limited in Number:

The Balanced Scorecard is more than a collection of

measures used to identify problems. It is a system that integrates a firm's

strategy with a purposely limited number of key metrics. Simply adding

new metrics to the financial ones could result in hundreds of measures

and would create information overload.

To avoid this problem, the Balanced Scorecard focuses on

four major areas of performance and a limited number of metrics within

those areas. The objectives within the four perspectives are carefully
selected and are firm specific. To avoid information overload, the total

number of measures should be limited to somewhere between 15 and 20,

or three to four measures for each of the four perspectives. These

measures are selected as the ones deemed to be critical in achieving

breakthrough competitive performance; they essentially define what is

meant by "performance".

The Process of Building a Balanced Scorecard:

While there are many ways to develop a balanced

scorecard, Kaplan and Norton defined a four-step process that has been

used across a wide range of organizations.

1. Define the measurement architecture:

While a company initially introduces the Balanced Scorecard,

it is more manageable to apply it on the strategic business unit level rather

than the corporate level. However, interactions must be considered in

order avoid optimizing the results of one business unit at the expense of


2. Specify strategic objectives:

The top three or four objectives for each perspective are agreed

upon. Potential measures are identified for each objective.

3. Choose strategic measure:

Measures that are closely related to the actual performance

drivers are selected for evaluating the progress made toward achieving

the objectives.

4. Develop the implementation plan:

Target values are assigned to the measures. An information

system is developed to link the top level metrics to lower-level operational

measures. The scorecard is integrated into the management system.



The Balanced Scorecard originally was conceived as an

improved performance measurement system. However, it soon became

evident that it could be used as a management system to implement

strategy at all levels of the organization by facilitating the following


1. Clarifying strategy - the translation of strategic objectives into

quantifiable measures clarifies the management team's

understanding of the strategy and helps to develop a coherent


2. Communicating strategic objectives - the Balanced Scorecard can

serve to translate high level objectives into operational objectives

and communicate the strategy effectively throughout the


3. Planning, setting target, and aligning strategic initiatives - ambitious

but achievable targets are set for each perspective and initiatives

are developed to align efforts to reach the targets.

4. Strategic feedback and learning - executives receive feedback on

whether the strategy implementation is proceeding according to plan

and on whether the strategy itself is successful ("double-loop


5. These functions have made the Balanced Scorecard an effective

management system for the implementation of strategy. The

Balanced Scorecard has been applied successfully to private sector

companies, non-profit organizations, and government agencies.

Balanced Scorecard Benefits

Some of the benefits of the Balanced Scorecard system include:

• Translation of strategy into measurable parameters.

• Communication of the strategy to everybody in the firm.

• Alignment of individual goals with the firm's strategic objectives - the

BSC recognizes that the selected measures influence the behavior

of employees.

• Feedback of implementation results to the strategic planning


Since its beginnings as a performance measurement system, the

Balanced Scorecard has evolved into a strategy implementation system

that not only measures performance but also describes, communicates,

and aligns the strategy throughout the organization.


The 1st Generation design method proposed by Kaplan &

Norton was based on the use of three non-financial topic areas as

prompts to aid the identification of non-financial measures in addition to

one looking at financial. The "perspectives" proposed were:

• Financial;

• Customer;

• Internal Business;

• Innovation and Learning.

Financial Perspective:

The performance measures from financial perspective are

directed towards measurement of profitability and growth which in turn

create value to shareholders. In BSC, the spelled out financial goals are

not only to survive but it gives emphasis on success and prosperity. So

quantitative aspects relating to these areas are included in the

measurement .As financial measures are the carriers of the benefits of

other measures like measures of customers' satisfactions, internal

business performance and innovations and improvements, measures of

performance in these areas are very much essential to have an idea about

the long-term growth and performance.

Scorecard Metrics for Financial Perspective:

• Project expense: actual to budget, actual to forecast

• Operating expense: actual to budget, actual to forecast, fixed versus

variable, customer facing versus non-customer facing.

• Operating expense: cost per transaction for major delivery channels.

• Initiatives: forecasted staff requirements, resources used versus

forecasted, resource deployment percentages, base support versus


• Capital deployment: current system upgrades, capacity expansion,

new technology, investment required by business initiatives, return

on capital invested.

• Vendor management and outsourcing effectiveness in unit cost


Customer Prospect:

It is now accepted by all the successful companies are the

king. Satisfaction of their needs should be the main objective of a

successful company. So to be number one in delivering value to the

customers is a typical mission statement. The BSC demands that

management should translate the above general mission statement on

customer services into specific measure which reflect the factors that
really matter to the customers. Customers concern tends to fall into four

categories- time, quality, performance, services and cost.

Scorecard Metrics for Customer perspective:

• Customer satisfaction ratings

• Customer-driven volumes: accounts, requests, complaints,

transactions (online, at ATMs, to call centers, in branches).

• Market share by product and by market.

• Revenue achieved against revenue goals, by customer segment.

• Failed customer interactions (FCI) by channel: each occurrence

when a customer is unable to successfully use a bank-provided

product or service.

• Channel revenue loss per FCI: calculation of losses created (based

on number and type of transactions customers could not complete).

Internet Business Perspective:

This perspective of performance measurement is the logical

extension of the customers' perspective. Here measurement should be

made of what the company must do internally to meet its customer'

expectation. Excellent customer performance derives from process,

decisions and actions occurring throughout an organization. Managers

need to focus on those critical internal operations that enable them to

satisfy customer need. In this area of performance measurement, a

company should identify and measure the company's core competencies

and the critical technologies needed to ensure continued market

leadership. Companies should decide what process and competencies

they must excel at and specify measures for each.

Scorecard Metrics for Internal Perspective:

• Application development: software design and delivery completion


• Quality and availability of service: image archive availability, image

capture rates, ad hoc image retrieval success percentages, network

response times, host computer availability and any unscheduled

outages, major application transaction volumes.

• Support services: help desk speed of response and problem

resolution, turnaround time on hardware moves/adds/changes,

speed of password reset, info security access resolution.

• Problem management: time to restore services on customer-

impacting problems, problem resolution time for all high-severity


• Risk controls: external data transmission controls, intercepts of non-

secure transmissions, status of audit and compliance


Growth and Learning Perspective:

The targets for success do not remain static but they keep

changing. Intensive global competition requires that companies make

continual improvement to their existing products and process and have the

ability to introduce entirely new products with expanded capabilities. A

company's ability to improve and learn ties indirectly to its value. Value for

customers can be created by launching new product. It can also be done

by a company by improving operating efficiency. By that, a company can

penetrate new markets and increase revenues and margins. From the

above literature survey of `BSC' technique of performance measurement,

it is clear that this system is broad based and covers areas beyond the

financial and management aspects of performance. Now a comparative

picture of performance measurement between CAMEL rating system and

BSC is shown below in section-C.

Scorecard Metrics for Growth Perspective:

• Produce and service innovation: lead time to develop prototypes,

time to deploy for commercial use, research and development

initiatives under way.

• Application innovation: application development delivery speed,

software built versus bought as packages, reusable software

components in repository and deployed into new applications.

• Continuous improvement: six sigma process improvement projects

under way, six sigma projects certified and quantified as successful.

• Technology leadership: training statistics, externally sanctioned

certifications, regional and national leadership in standards groups.

• Employee attitudes: satisfaction survey results, voluntary turnover

percentages, loss of key technology personnel, key technology

positions unfilled, statistics on recognition for good results.



The Balanced Scorecard and its development the balanced

scorecard was first introduced in the early through the work of Robert

Kaplan and David Norton of the Harvard Business School.

Since then, the concept has become well known and its

various forms widely adopted across the world.

By combining financial measures and non-financial

measures in a single report, the Balanced Scorecard aims to provide

managers with richer and more relevant information about activities they

are managing than is provided by financial measures alone. To aid clarity

and utility, Kaplan and Norton proposed that the number of measures on a

Balanced Scorecard should also be constrained in number, and clustered

into four groups. Beyond this, the original definition of Balanced Scorecard

was sparse. But from the outset it was clear that the selection of

measures, both in terms of filtering (organizations typically had access to

many more measures than were needed to populate the Balanced

Scorecard) and clustering (deciding which measure should appear in

which perspectives) would be a key activity. Kaplan and Norton proposed

that measure selection should focus on information relevant to the

implementation of strategic plans, and that simple attitudinal questions be

used to help determine the appropriate allocation of measures to


In essence the Balanced Scorecard has remained

unchanged since these early papers, having at its core a limited number of

measures clustered into groups, and an underlying strategic focus. But

modern Balanced Scorecard designs also have a number of features that

clearly differentiate them from earlier examples. This paper describes

these changes as an evolution through three distinct `generations' of

Balanced Scorecard design.

1st Generation Balanced Scorecard:

Balanced Scorecard was initially described as a simply, "4

box" approach to performance measurement. In addition to financial

measures, managers were encouraged to look at measures drawn from

three other "perspectives" of the business: Learning and Growth; Internal

Business Process; and Customer, chosen to represent the major

stakeholder in a business.

Definition of what comprised a Balanced Scorecard was sparse and

focused on the high level structure of the device. Simple `causality'

between the four perspectives was illustrated but not used for specific

purpose. Kaplan and Norton's original paper's focus was on the selection

and reporting of a limited number of measures in each of the four

perspectives. The paper suggested use of attitudinal questions relating to

the vision and goals of the organization to help in the selection of

measures to be used, and also encouraged the consideration of `typical' in

this process.

Kaplan and Norton's original work makes no specific observations

concerning how the Balanced Scorecard might improve the performance

of organizations.

Practical Experiences with 1st Generation Balanced Scorecards the

authors' professional experience suggests that 1st Generation Balanced

Scorecards are still being developed, and that they probably still form the

large majority of Balanced Scorecard designs introduced into

organizations. This is reflected in the literature, where books and article

that use more advanced representations of Balanced Scorecard are only

recently appearing. But despite its huge popularity as a c concept, and

apparently widespread adoption, relatively few detailed case studies

concerning Balanced Scorecard implementation experiences appear to

exist in the academic literature. Those few that do focus primarily on the

architecture of the balanced scorecard design.

2nd Generation Balanced Scorecard:

The practical difficulties associated with the design of 1st

Generation Balanced Scorecard are significant, in part because the

definition of a Balanced Scorecard was initially vague, allowing for

considerable interpretation. Two significant areas of concern were filtering

(the process of choosing specific measures to report), and clustering

(deciding how to group measures into `perspectives').

Perhaps the most significant early change translated the attitudinal

approach to measure selection proposed initially be Kaplan and Norton

(e.g. "To succeed financially, how should we appear to our shareholders")

into a process that yielded a few appropriate key measures of

performance in each perspective. A solution was the introduction of the

concept of `strategic objectives'. Initially these were represented as short

sentences attached to the four perspectives, and were used to capture the

essence of the organizations strategy material to each of the areas:

measures were then selected that reflected achievement of these strategic

objectives. Although subtle, this approach to measure selection quite

different from that initially proposed, since strategic objectives were

developed directly from strategy statements based on a corporate vision

or a strategic plan.

Another key development concerned causality. Causality

between the perspectives had been Balanced Scorecard saw the idea of

causality developed further. Internal documents from one consulting firm's

work in 1993 shows an early attempt to indicate linkages between the

measures themselves. This improvement proposed later by others.

Measure based linkages provided a richer model of causality than before,

but presented conceptual problems- for example, the use of measures

encouraged attempts to `prove' the causality between measures using

various forms of analysis.

Collectively the changes in design described here represent a

materially different definition of what comprises a Balanced Scorecard

compared to Kaplan and Norton's original work- we will refer to Balanced

Scorecard that incorporate these developments as `2nd Generation

Balanced Scorecard'.

One consequence of this change in emphasis was to increase

the pressure on the design process to accurately reflect the organizations

strategic goals. Over time the idea of strategic linkage became an

increasingly important element of Balanced Scorecard design

methodology, and in the mid. Balanced Scorecard documentation began

to show graphically linkages between the strategic objectives themselves

(rather than the measures) with causality linking across the perspectives

toward key objectives relating to financial performance.

Practical Experiences with 2nd Generation Balanced

Scorecards there are still areas that prove difficult to deal with during the

development process for both management teams and consultants

charged with developing 2nd Generation Balanced Scorecard.

The first of these areas concerns the development of the

Strategic Linkage Model. Management teams find necessary selection of

priority elements within their collective vision and strategic goals difficult.

While there is usually some type of common reference point in the form of

visions or plans, often this is either poorly defined, lacking continuity or

something that the management team didn't fully agree on. Working to

choose objectives simply flushed these to the forefront of actually

selecting priority objectives itself is not one that has been found to support

open discussion about the collective alignment of strategic goals. Another

difficult area is target setting. While measure selection is easier, thanks to

Strategic Objectives and the Strategic Linkage Model, for similar reasons

to those note above, organizations often lack a common reference point

relating from which targets can be extrapolated. Finally, the Strategic

Linkage Model documentation, although clear to those familiar with

construct, has proven less helpful when used for broadcast

communication of strategy- it lacks sufficient supportive information to be

usefully stand alone as a communication concerning an organizations

strategic plans.

3rd Generation Balanced Scorecard:

The 3rd Generation Balanced Scorecard model is based

on a refinement of 2nd Generation design characteristics and mechanisms

to give better functionality and more strategic relevance. The origin of the

developments stem from the issues relating to target setting and the

validation of strategic objective selection outlined above. By agreeing in

this statement `how much' of key things would have been achieved by this

time (e.g. headcount, revenues, customer satisfaction, quality levels etc.)

the hope was it would subsequently by easier (for example) to check for

(or set) a consistent set of annual targets. Figure 3 shows an example

extract from an early `Destination Statement'.

A Model for Developing a Balanced Scorecard:

Following is the outlines of a model for developing a

balanced scorecard and the next level of detail for each of the four

perspectives. The model was developed for a financial institution and

should act as a practical example for building a balanced scorecard.

Creating the Balanced Scorecard Model:

The first part of the process is creating a model for the

scorecard. First, review and clarify strategies; this often requires some

facilitated arguments and discussions, so that broad disagreements can

be dealt with.

Many organizations do not adequately resolve their

strategic differences, so people work separately towards different visions.

For example, one automaker's strategies for selling cars were spilt by

group: the CEO believed in forming alliances with exotic makers, the sales

executive leaned on rebates, and the product group, with limited budgets,

soaped up existing economy cars. The result was an ineffectual,

expensive hodgepodge.

When one leader with a clear vision worked with others to

develop strategies, they were able to transform the culture end

organizational structure to produce vehicles that eventually saved the


The next step is agreeing on what capabilities are needed

within the company to actually pursue the strategy. At the automaker, they

needed to innovate without access to capital. They created a new design

process that included as many people as possible, from suppliers to

factory workers and mechanics, so that everyone shared the same

strategic goals, and worked together to pursue them. Lead time was cut in

half, costs were slashed, and the products gained immediate critical

acclaim; sales went up as costs went down.

As if to show that this was not simply an issue of new

technology, the same automaker changed their leadership style and

methods, abandoning their principles of involvement-and suffered higher

costs and lower sales.

To speed up the process, the off-site is preceded by a

survey of the leadership team. Once that is that is done, you can move to

the second step, which is designing or selecting measures for the

scorecard. This is where the process and the paper come together. One

way to do this is to assign teams to come up with appropriate measures.

There are several benefits to this approach:

• It involves more people in the process.

• It is a process check to ensure that the issues chosen are clear and

well understood.

• It takes away some of the time demands from the senior leaders.

The measurement teams normally present their conclusions to

the senior leaders, who then either use them, or ask for changes or
clarifications. The measurement teams can also be used to help with


As with any change, champions and constant communication

are be essential to success. Employee surveys can be not only a source

of measures, but also a tool to judge whether people understand the

process and are prepared for it; and how well the scorecard is being

implemented in each area.



The future scenario for the banking and finance sector in

can be viewed in the context of the sweeping changes that have come

about during the past few years.

It is expected that these change will continue.

The future prospects therefore lie in strengthening the

package of services already provided as well as offer complementary

services in the following areas:


The industry has started provided complete corporate and

retail financial services to its customers. As discussed earlier, banks have

been introducing new products to maintain their share in this highly

competitive marked where things have been changing quite rapidly. With

growing expectations and demands of the customer, these ranges of

products will have to be both innovative and attractive.


This would include factors a such as extinction of banking

hours, provision of the wide network of ATMs, phone banking and net

banking to enable the customers to transact as per their continence.

Customer can now withdraw money at any time and from branch across

the country.

Banks traditionally involved in working capital

financing have started offering customer loans and housing loans.


Some banks have started offering travels loans as

well as finance for investing initial public offering is stocks and share to the



Retail financing is the other area where the banks

have started to concentrated. The loan formalities have been relaxed to a

great extent and sanctioning time has been speeded up. Customers can

apply for credit online and even the processing of loan application is done

online. This sector is also estimated to grow tremendously in the coming


Of course, even if objectives are well thought-out and

described, it is also important to think about causality between and within

the perspectives. And this belongs to the topic of strategy mapping,

something we will return on a regular basis. In short:

• Keep the number of strategic objectives to the critical few.

• Avoid generic objectives.

• Take time to truly understand the value proposition from the

viewpoint of the customer

• Capture customer learning, perhaps as a strategic theme.

• Ensure that internal process objectives support how the organization


• Treat the learning and growth perspective as more than an `add-on'

and fully understand the people skills you require going forward.

As a final overview of the four articles on the

architecting of the Balanced Scorecard, consider the words of Dr Norton

and Professor Kaplan in their book Strategy Maps:

"Integrating the Strategy Map with Balanced Scorecard

measure, targets and initiatives provides a complete description of how

value is created-that is, a complete description of the organization's

strategy and its successful execution."

During the 10 years since the advent of Balanced

Scorecard many changes have been made to the physical design, utility

and the design processes used to create the tool within organizations.

This Evolution of Balanced Scorecard, at least in terms of these three

parameters, can be largely attributed to empirical evidence driven

primarily by observed weaknesses in the design process rather than in the

architecture of the original idea. The need to have a design process that

made measure selection more relevant and part of the collective view of

the management team drove the major changes that can be seen in two

subsequent generations of Balanced Scorecard from the original concept.

However, while empirical developments were the mainstay of the

evolution of Balanced Scorecard, certain aspects of the evolution rationale

can be paralleled to pre-existing academic philosophies relating to

organizational management and strategic thinking. The alignment

between developments in Balanced Scorecard principles and the

theoretical aspects of control and management process are a positive

indication that the more modern ideas about Balanced Scorecard design

processes and structure are indeed `better' than the original concept

described by Kaplan and Norton, in so far as they are more likely to have

a beneficial consequence for the organization adopting the tool. However

while more recent Balanced Scorecard designs are Substantial

improvements on original ideas, there is still room for improvement.


Potential areas for field are as follows:

• A refinement in the understanding of the links between types of

management behavior and the information needed to facilitate better

management interventions. The separation of management and

strategic control is central to this development and is an area that is

well documented; however, there is a need to expand the literature

relating to appropriate mechanisms to influence management

behaviors more effectively.

• An examination into the ways of reconciling performance reporting

with performance management. It is often the case that an

organization's performance management system's data need to

have complete `coverage' of the business, for example metrics on

health and safety, operations, financial, human resources, markets

etc. However, in the practical environment this can reduce the

relevance to the local unit developing the metrics and diminish

ownership of the management system.

• A consideration of the relationship between Balanced Scorecard

application in large organizations and issues relating to intra-unit

communications. Balanced Scorecard when cascaded through an

organization can be used as a successful strategic contracting, and

Strategy communication tool however, its precise utility needs future


• An examination of the most appropriate ways to translate advances

in measurement concepts (e.g. Intellectual Capital, EVA etc.)

efficiently into the design processes adopted for BSC, without

diminishing `ownership' of the design work done by managers

unfamiliar with the new concepts. EVA and Intellectual Capital are

both appear to offer ways to `improve measurement information.

However, if the management team themselves are not comfortable

working with them, they won't design them into their Balanced

Scorecard. But if a consultant `designs it in', although potentially

beneficial, if the management team does not understand them it will

probably not own or act upon them. Interaction of the Balanced

Scorecard with other management concepts and its possible

Improvement is dependent on the skills and education of the

management team.

• Development an understand of the benefits of Balanced Scorecard

and if possible attaching capital values to pre and post case

scenarios. A key criterion for the adoption of the adoption of the

Balanced Scorecard within organizations is the ability to

demonstrate value in its adoption.

While many loose attempts to define benefits exist there is a scarcity of

concrete examples of benefit to public and private organization.

The establishment of the governance mechanism for the Balanced

Scorecard. In the Balanced Scorecard governance mechanism, it requires

banks to set up bank management committee and sees it as core. It owns

the final right of approval of the Balanced Scorecard framework,, content

and design of, so as to ensure the accordance between implementation

point of the business and banks strategy. The establishment of

performance goals assessment and feedback processes. The process

includes two aspects:

First, to understand the strategic objectives implementation by checking

the completion of the indicators in the Balanced Scorecard system of the

banks; on the other to balance scorecard design and feedback and review

processes. With constantly updating of information technology,

commercial banks will inevitably change in service model, in order to

adapt to the trend of social development. Of course, that will depend on

improvement of information security technologies, so that banks can

continue to innovative financial products, and enhance core

competitiveness. New model of banking services is based on the

connotation of the knowledge based economy and oriented in enhancing

the traditional service level of knowledge and cultural grade, and will

promote the services of thinking and mode. To update mode of banking

services can broaden the field of financial services. To achieve innovation

model, it is necessary to improve the "Smile" services, personal

mechanism and incentive mechanism. We should speed up the reform of

financial supervision, improve the level of financial supervision in order to

adapt to the development of the new banking services model and respond

to changing in financial innovation. The banking industry should also

accelerate the transformation of service delivery model to accelerate the

pace of mixed services to enhance international competitiveness.