BALANCED SCORECARD

Balanced Scorecard
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How would you feel about boarding the plane after the following
conversation with the pilot?

Q: I am surprised to see you operating the plane with only a single

instrument. What does it measure ?

A: Airspeed .I am really working on airspeed of this flight.

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Q 2: That is Good. Airspeed certainly seems important. But what about

altitude. Would not an altimeter be helpful?

A: I have worked on altitude for the last few flights and I have
gotten pretty good on it. Now I have to concentrate on proper
air speed.

Q: But I notice you don’t have a fuel gauge. Would not that be useful ?

A: You are right; fuel is significant, but I cannot concentrate on doing

too many things at the same time.
So on flight I am focusing on air speed. Once I get to be excellent at
Air speed, as well as altitude, I intend to concentrate on Fuel
consumption on the next set of flights.
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Q: to the participants
Would you like to board this plane after having this discussion ?

A: Perhaps not.

What could be the reasons?

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Navigating an ORGANISATION is as complex as of an aero plane

They also require instrumentation to guide their organizations

… like pilots have to guide an aero plane

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Would you be satisfied as manager getting one dimensional

Information about your organization ?

Perhaps not, therefore

You need instrumentations/ information to navigate in this

competitive world

C) provides managers with the instrumentations they need to Navigate futur

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BSC translates an organizational mission and strategy into

comprehensive set of performance measures that provides the
frame work for strategic measurement & Management system.

4 Balanced Perspectives

ØInternal Business Processes

ØLearning & Growth
ØFinancial
ØCustomers
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Financial Control
Develop Customer Relationship
ROCE
Introduce innovative products/services
Prod Control
Quality products at low cost
Profitability
Employee development and motivation
Physical Capital
Deploy information technology

Industrial Age Information Age

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Information Age

New Operating Improvement

Environment initiatives

Total Quality Management

Cross Functional JIT-Production and Distribution
Links to customers and Suppliers Time based Competition
Customer Segmentation Lean Production/Lean Enterprise
Global Scale Building Customer-focused Org
Innovation Activity Based Cost Management
Knowledge Workers Employee Empowerment
Reengineering
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Balanced Scorecard
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History
Alignment & Enterprise
Measurement
Communicatio Strategic
&
n Management-
Reporting-1992
1996 2000
Articles in HB Review
Acceptance and Acclaim
§The BSC-Measures that
Drive performance---1992 §BSC Translated in 18 languages
§
§Selected by HBR as most
§Putting BSC to work-1993
Important management
Practice in 75 years
§Using BSC as a Strategic
Management System-1996
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A balance scorecard translate a organization’s

mission and strategy into set of performance
measures that provide the framework for
implementing its strategy
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Balance Scorecard as a Management System

 Clarify missionSCORECARD
BALANCED &
Mission Vision
Vision statement

Develop Strategic Goals

Strategic Goals

Derive Balanced Scorecard

Sub-Goals
Sub-Goals
Financial
• Sub-Goals
Map Sub-Goals to
Methodology Customer Internal Business
each quadrant of the • Sub-Goals
• Sub-Goals
Balanced Score Card
Overview Learning & Growth
• Sub-Goals

For each BSC Quadrant

- identify measurement areas

Indicators
- develop measurement goals
- postulate indicators

Trouble Reports
- identify data elements
Module

Data Elements
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4
Perspectives

Internal
Business Learning
Process &
Perspective Growth Financial
Perspectiv
e Perspecti Customer
ve
Perspectiv
e
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BSC Perspective on Performance

FINANCIAL

Initiatives
Measures
Objective

Targets
How do we
look to
shareholders?

CUSTOMER INTERNAL BUSINESS

Initiatives
Measures
Objective

PROCESS

Initiatives
Measures
Objective
Targets

Targets
How do our
Vision
customers and What must
see us? Strategy we excel at?

LEARNING and
GROWTH
Initiatives
Measures
Objective

Targets

Can we
continue to
improve and
create value?
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4
Perspectives

Internal
Business
Process
Perspective

This perspective focuses on internal operations

that create value for customers that ,in turn,
furthers the financial perspective by increasing
the shareholder value
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4
Perspectives
Internal
Business
Process
Perspective

3 sub
Process
es

Operations Process
Innovation Process Postsales-Service
Process
Producing &
Creating Products Providing service and
delivering
Services &Processes Support to the customer
Existing products that
To meet the demand After the sale of a
Will meet the needs
Of Customers product or service
Of Customers
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4
Perspectives
Learning &
Growth
Perspective

This perspective identifies the capabilities the

organization must excel at to achieve superior
internal processes that create value for
Customers and shareholders
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4
Perspectives

Financial

Perspective

Financial Perspective Evaluate

the Profitability of the Strategy
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4
Perspectives

Customer

Perspective

Customer Perspective identifies Targeted

Customer and market Segments and Measures
the Organization’s success in these Segments
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INTERNAL BUSINESS PROCESS PERSPECTIVE

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Learning and Growth Perspective

Objective Measures Initiatives Target Actual

Performance Performance

Align Employees & Employee Satisfaction Employee 80% employees 88%

Organisational Rating participation to build given top two
Goals team work ratings
Develop Process % employees trained in Employee Training 90% 92%
Skills Process & Quality Program
management
Empower Workforce % workers empowered to Supervisors as 80% 80%
manage the process coaches rather than
decision makers
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 The Customer Perspective (How the Customer see us)



 In today’s world customer is God



 If customers are not satisfied, they will eventually find other

suppliers that will meet their needs


 Poor performance from this perspective is thus a leading indicator

of future decline


 Customers should be analysed in terms of kinds of customers and

the kinds of processes for which we are providing a product or
service to those customer groups.
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 The Financial Perspective(How Do We Look To Shareholders)



 timely and accurate financial data is always a priority



 Excessive emphasis on financials leads to the "unbalanced" situation

with regard to other perspectives


 we need to include additional financial-related data, such as risk

assessment and cost-benefit data, in this category.
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Right
Measures
 BALANCED SCORECARD
Cause & Relationship
Diagram
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Strategy
Map
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9 steps to
success
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Features of a good balanced
scorecard
 It tells the story of a company’s strategy,
articulating a sequence of cause and effect
relationships.


 It helps to communicate the strategy to all

members of the organization by translating the
strategy into coherent and linked set of
understandable and measurable operation targets.


 A balanced score card emphasizes non-financial

measures as a part of program to achieve future
financial performance


 The purpose in to focus manager’s attention on

measures that most affect the implementation of
strategy.
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Advantages of balanced
scorecard
It translates vision and strategy into action.
 It defines the strategic linkages to integrate
performance across organizations.
 It aligns the strategic initiatives in order to
attain the long-term goals.
 It provides a basis for compensation for
performance.
 The scorecard provides a feedback to the senior
management if the strategy is working.
 Helps to integrate various corporate programs. Such
as: quality, reengineering and customer service
initiatives.
 Breaking down strategic measures towards lower
levels, so that unit managers, operators, and
employees can see what's required at their level
to achieve excellent overall performance.
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Drawbacks of Balanced
Scorecard
 It is not easy to implement this tool
because it involves a lot of subjectivity


 The measures that need to be taken is

contingent upon the kind of environment,
industry and the business the organization
is in


 A lot of refinement is still required to be

done so that it becomes understandable to
every stakeholder associated with the
organization
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Make Strategy a continuous Process
Strategy

60% OF Org Strategic Learning

Don’t link
Strategy & Loop 85% of Mgt
teams
budgets Spends less
than
Balanced 1 hr per month
Scorecard On strategy
issues
78% orgs lock
Budgets to an Budget 92% of orgs
Annual cycle Do not report
On lead
Management Control indicators
Loop

Performanc
Input e Output
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Questions
???