Balanced Scorecard (BSC)
Topics that are covered:-
*Introduction
*Relevance
*Application
*Example
Introduction
The Origin:
• Art Schneiderman - The originator of BSC in 1987.
• Art Schniederman participated in an unrelated research study in 1990
led by Dr. Robert S. Kaplan in conjunction with US management
consultancy Nolan-Norton, and during this study described his work on
Balanced Scorecard. Subsequently, Kaplan and David P. Norton
included anonymous details of this use of balanced scorecard in their
1992 article on Balanced Scorecard.
• “Kaplan and Norton suggested that organizations should focus their
efforts on a limited number of specific, critical performance measures
which reflect stakeholders key success factors”
Introduction (contd1)
The background:
• No single measures can give a broad picture of the organization's health.
• So instead of a single measure why not a use a composite scorecard involving a
number of different measures.
• Kaplan and Norton devised a framework based on four perspectives – financial,
customer, internal and learning and growth.
• The organisation should select critical measures for each of these perspectives.
Gap Fulfilled:
• A system of corporate appraisal which looks at financial and non-financial
elements from a variety of perspectives.
• An approach to the provision of information to management to assist strategic
policy formation and achievement.
• It provides the user with a set of information which addresses all relevant areas
of performance in an objective and unbiased fashion.
• A set of measures that gives top managers a fast but comprehensive view of the
business.
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Relevance
• Organizations Often Have A Gap Between Strategy and Action
Strategy Is a Step In a Continuum
MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan
STRATEGIC OUTCOMES
Satisfied Delighted Efficient and Effective Motivated & Prepared
SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
Relevance (contd1)
(Applying Balanced Scorecard)
• Balanced Scorecard acts as a bridge to close that gap
MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SCORECARD
Implementation & Focus
STRATEGIC INITIATIVES
What we need to do
PERSONAL OBJECTIVES
What I need to do
STRATEGIC OUTCOMES
Satisfied Delighted Efficient and Effective Motivated & Prepared
SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
The gap has substantially reduced after using BSC
Relevant to all the sectors(contd2)
Private Sector:
• Many major corporations have adopted, or are in the process of implementing, the balanced
scorecard as their framework for executing strategy and monitoring performance.
• It has been found to be an effective way to achieve that most elusive of executive goals: execution.
• Also it has been accepted by most of the business departments of colleges and universities as a part
of their management curriculum.
Government Agencies:
• Ultimate Customers of government, The Taxpayers , are demanding more accountability for the
use of their funds. They want to see tangible results from all government agencies, at all levels.
• The balanced scorecard is the only framework readily available that can align strategy,
performance and budgeting to meet these requirements.
• Therefore, government agencies are increasingly looking to the balanced scorecard approach.
Non-Profit Organizations:
• Nonprofit organizations are committed to a mission, and they need to focus their limited
resources efficiently in order to achieve mission effectiveness and value for their members and
sponsors.
• The balanced scorecard system has a multiple focus on several perspectives, including financial
performance. For a nonprofit organization, profit is not a determining goal of strategy; but good
stewardship is important
• In this case, the balanced scorecard provides a comprehensive framework that will help
association directors and managers better define strategies, track performance, and provide data to
show their various stakeholder groups how well they are performing in terms of mission value
and outcomes.
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Application Of Balanced Scorecard
Applying the Balanced Scorecard system company-wide should be to obtain
successful realisation of the strategic plan/vision.
A Balanced Scorecard should result in:
• Improved processes
• Motivated/educated employees
• Enhanced information systems
• Monitored progress
• Greater customer satisfaction
• Increased financial usage
There are many software packages on the market that claim to support the
usage of Balanced Scorecard system.
For any software to work effectively it should be:
• Compliant with your current technology platform
• Always accessible to everyone - everywhere
• Easy to understand/update/communicate
Application Of Balanced Scorecard (contd1)
• It is of no use to anyone if only the top management keep the objectives in their
drawers/cupboards and guard them like the Holy Grail.
• Feedback is essential and should be ongoing and contributed to by everyone
within the organization.
• And it should be borne in mind that Balanced Scorecards do not necessarily
enable better decision-making!