Balanced Scorecard

Kaplan & Norton: HBR

July-August 2005: repeat of 1992 seminal article
Feb 2004: Strategy Map
Oct 2005: Examples
March 2006: Implementation examples
Finland 2010

Perspectives
GOALS & PERFORMANCE MEASURES
Financial perspective
How do we look to shareholders?

Customer perspective
How do customers see us?

Internal Business perspective (BPR)

What must we excel at?

Innovation & Learning perspective

Can we continue to improve & create value?
Finland 2010

Example:
anonymous semiconductor company
FINANCIAL perspective
GOALS
Survive

MEASURES
Cash flow

Succeed

Quarterly sales
Growth
Operating income by division

Prosper

Increase in market share

Increase in Return on Equity
Finland 2010

CUSTOMER perspective
GOALS
New products

MEASURES
% sales from new products
% sales from proprietary products

Responsive
supply

On-time delivery
(customer definition)

Preferred
suppliers

Share of key accounts purchases

Ranking by key accounts

Customer
partnerships

# of cooperative engineering
efforts
Finland 2010

INTERNAL BUSINESS perspective

GOALS
Technology
capability

MEASURES
Benchmark vs. competition

Manufacturing
excellence

Cycle time
Unit cost
Yield

Design
productivity

Silicon efficiency
Engineering efficiency

New product
innovation

Schedule: Actual vs. Planned

Finland 2010

INNOVATION & LEARNING

perspective
GOALS
Technology
leadership

MEASURES
Time to develop next generation

Manufacturing
learning

Process time to maturity

Product focus

% products equalling 80% of

sales

Time to market New product introduction vs.

competition
Finland 2010

2004 article: Strategic Readiness

Strategy map: framework to link intangible
assets to shareholder value creation
Through the 4 perspectives

3 Intangible Asset categories essential to

implement strategy (Learning & Growth)
Human Capital
Skills, training, knowledge

Information Capital
Databases, information systems, networks, infrastructure

Organizational Capital
Culture, leadership, alignment with goals, knowledge sharing
Finland 2010

Strategy Map: Intangible assets link

to Internal Process

Intangible assets make up Learning & Growth perspective

Map to Internal Process perspective

Operations Management

Customer Management

Improve communities & the environment

Customer perspective

Create new products & services

Regulatory & Social

Enhance customer value

Innovation

Produce & deliver products & services

Price, quality, availability, selection, functionality, service, partnership, brand

Financial perspective

Productivity strategy

Improve cost structure

Increase asset utilization

Revenue growth strategy

Enhance customer value

Expand revenue opportunities

Finland 2010

Consumer Bank (anonymous)

example: Human Capital

Finland 2010

Information Capital Readiness

Finland 2010

Organization Capital Readiness

Finland 2010

SCM & BSC

Beasley, Chen, Nunez & Wright, Strategic Finance 87:9 [2006]
CATEGORY

Purpose

Aim

Learning & Growth for

Employees

To achieve our vision

How will we sustain our

ability to change &
improve?

Internal Business
Processes

To satisfy our
stakeholders &
customers

Where must we excel in

our business processes?

Customer Satisfaction

To achieve our vision

How should we appear to

our customers?

Financial Performance

To succeed financially

How should we appear to

our stakeholders?

Finland 2010

Learning & Growth for

Employees
GOALS

MEASURES

Increase employee process ownership

Employee survey scores

Improve information flows

Changes in information reports

Frequencies across supply chain
partners

Increase employee identification of

potential supply chain disruptions

Compare actual disruptions with

reports of potential disruption drivers

RISK-RELATED GOALS
Increase employee awareness

Number of employees attending risk

management training

Increase supplier accountability

Supplier contract provisions on risk

Increase employee awareness of

supply chain risks & other enterprise
risks

Number of departments participating in

supply chain risk identification &
assessment workshops

Finland 2010

Internal Business Processes

GOALS

MEASURES

Reduce waste across supply chain

Pounds of scrap

Shorten time from start to finish

Time from raw material purchase to

product/service delivery to customer

Achieve unit cost reductions

Unit costs per product/service

delivered
% of target costs achieved

RISK-RELATED GOALS
Reduce probability & impact of threats

Number of employees attending risk

management training

Identify specific tolerances for key

processes

Number of process variances

exceeding specified acceptable risk
tolerances

Reduce number of exchanges of

supply chain risks to other enterprise
processes

Extent of risks realized in other

functions from supply chain process
risk drivers

Finland 2010

Customer Satisfaction
GOALS

MEASURES

Improve product/service quality

Number of customer contact points

Improve timeliness of product/service

delivery

Time from customer order to delivery

Improve customer perception of value

Customer scores of value

RISK-RELATED GOALS
Reduce customer defections

Number of customers retained

Monitor threats to product/service

reputation

Extent of negative coverage of quality

in press

Increase customer feedback

Number of completed customer

surveys about delivery comparisons to
other providers

Finland 2010

Financial Performance
GOALS

MEASURES

Higher profit margins

Profit margin by supply chain partner

Improved cash flows

Net cash generated over supply chain

Revenue growth

Increase in customers & sales per

customer
% annual return on supply chain
assets

RISK-RELATED GOALS
Reduce threats from price competition

Number of customer defections due to

price

Reduce cost overruns

Surcharges paid
Holding costs incurred
Overtime charges applied

Reduce costs outside the supply chain Warranty claims incurred

from supply chain processes
Legal costs paid
Sales returns processed
Finland 2010

Gaudenzi & Borghesi

The International Journal of Logistics Management 17:1 [2006]

AHP in balanced scorecard style

Develop formula to evaluate risk within
departments

Focus on top level criteria

On-time delivery
Completeness
Correctness
Damage/defect free products
Finland 2010

Gaudenzi & Borghesi Weights

Criteria
On-time
delivery
Completeness
Correctness
Damage-defect
free

Mean
100
90
75
50
315

weights Extreme1 weights Extreme2 Weights

0.317
100
0.402
50
0.215
0.286
0.238
0.159

66
50
33
249

Finland 2010

0.265
0.201
0.133

100
50
33
233

0.429
0.215
0.142

Weights: Contingent upon

On-time first vs. Completeness
firstfirst Completeness first
Criteria
On-time
On-time delivery
Completeness
Correctness
Damage-defect free

0.36
0.29
0.21
0.14

Finland 2010

0.22
0.43
0.21
0.14

On-time delivery evaluation

Manager subjective scores
On-time
delivery
Completeness
Correctness
Defect free
Value scores

Procurement

Warehouse

Mfg

Trans.

0.5

Order
Cycle
1

0.36

0.5

0.29
0.21
0.14

0
1
0.5
0.28

0.5
1
1
0.675

1
1
1
1

1
1
1
0.82

1
0.5
0
0.395

Finland 2010

Completeness evaluation
Managerial subjective scores
On-time
delivery
Completeness
Correctness
Defect free
Value scores

Procurement

Warehouse

0.22

0.5

0.43
0.21
0.14

0
1
0.5
0.28

0.5
1
1
0.675

Finland 2010

Order Mfg Trans

Cycle
1
0.5
0
1
1
1
1

1
1
1
0.5
1
0
0.89 0.535

Other Business Scorecards in

Broader Perspectives
Internal auditing in accounting
Campbell, Adams, Campbell & Rose
Financial Executive 22:1 [2006]

Mental health governance

Sugarman & Kakabadse
The International Journal of Clinical Leadership 16
[2008]

Finland 2010

Marketing natural gas vehicles

Janssen, Lienin, Gassmann & Wokaun, Transportation Research Part
A 40 [2006]

INDICATORS
1. Ratio of natural gas vehicles per
compress natural gas fueling stations
2. Type coverages (how many different
natural gas vehicle types were available)
3. Natural gas vehicle investment pay-back
time
4. Sales per type
5. Subsidies par automobile
Finland 2010