The Balanced Scorecard
Approach
What is a Balanced
Scorecard?
The Balanced Scorecard is a strategic planning
and management system used to align business
activities to the vision and strategy of the
organization by monitoring performance against
strategic goals.
Balanced Scorecard Concept
Was first published in 1992 by Kaplan and
Norton, a book followed in 1996.
Traditional performance measurement that only
focus on external accounting data are obsolete.
The approach is to provide 'balance' to the
financial perspective.
Why Use a Balanced
Scorecard?
Improve organizational performance by
measuring what matters
Increase focus on strategy and results
Align organization strategy with workers on a
day-to-day basis
Focus on the drivers key to future performance
Improve communication of the organization’s
Vision and Strategy
Prioritize Projects / Initiatives
4 Original Business
Perspectives
The Balanced
Scorecard model
suggests that we
view the
organization from
4 perspectives.
Then Develop
metrics, collect
data and analyze it
relative to each of
these perspectives
Adapted from The Balanced Scorecard by Kaplan & Norton
4 Business Perspectives
Questions
Financial
What must we do to create sustainable economic value?
Internal Business Process
To satisfy our stakeholders, what must be our levels of
productivity, efficiency, and quality?
Learning and Growth
How does our employee performance management
system, including feedback to employees, support high
performance?
Customer
What do our customers require from us and how are we
doing according to those requirements?
Balanced Scorecard
Measurements
Key Implementation Success
Factors
Obtaining executive sponsorship and
commitment
Involving a broad base of leaders, managers
and employees in scorecard development
Choose the right Scorecard Champion
Beginning interactive (two-way) communication
first
Viewing the scorecard as a long-term journey
rather than a short-term project
Getting outside help if needed
alanced Scorecard Example
STRATEGY MAP BALANCED SCORECARD ACTION PLAN
STRATEGY MAP BALANCED SCORECARD ACTION PLAN
PROCESS: MANUFACTURING EXCELLENCE
PROCESS: MANUFACTURING EXCELLENCE OBJECTIVES MEASUREMENT TARGET INITIATIVE BUDGET
THEME: ROCE > xx%, VOLUME = xx,xxx units OBJECTIVES MEASUREMENT TARGET INITIATIVE BUDGET
THEME: ROCE > xx%, VOLUME = xx,xxx units
FINANCIAL
PERSPECTIVE •Operating
•Operating Cost
Cost && Efficiency
Efficiency ••Cost/Unit,
Cost/Unit, Efficiency
Efficiency ••Monthly
Monthly Monitoring
Monitoring
Long-Term Shareholder
Long-Term Shareholder ••Weekly/Monthly
Weekly/Monthly
Value ROCE > xx% •Capacity
•Capacity Utilization
Utilization •%
•% Utilization
Utilization
Value ROCE > xx% Monitoring
Monitoring
••Trial
Trial Prod.
Prod.
•Capability
•Capability Utilization
Utilization ••Spare ••Monthly
Monthly Monitoring
Monitoring
Improve Grow Spare Parts
Parts Prod
Prod
Improve Grow ••Weekly/Monthly
Productivity Revenue •Brand
•Brand // Image •Warranty
•Warranty Cost tt Weekly/Monthly
Productivity Revenue Image Cost Monitoring
Monitoring
CUSTOMER
PERSPECTIVE •Low
•Low Cost
Cost Manufacturing
Manufacturing ••Man-hour
Man-hour per
per Unit
Unit ••Weekly
Weekly Monitoring
Monitoring
OFFER
OFFERPRODUCTS
PRODUCTS && SERVCIES
SERVCIES •World-Class
•World-Class Quality
Quality ••Defect
Defect per
per Unit
Unit ••Daily
Daily Monitoring
Monitoring
THAT
THAT ARE
ARE CONSISTENT,
CONSISTENT, TIMELY
TIMELY Standards
Standards
and
and LOW-COST
LOW-COST •World-Class ••Sales ••Daily
•World-Class Delivery
Delivery Timing
Timing Sales Delivery
Delivery Daily Monitoring
Monitoring
Low World •Knowledgeable
•Knowledgeable && Skilled
Skilled
Low World ••Direct
Direct Pass
Pass Rate
Rate ••Daily
Daily Monitoring
Monitoring
Cost Class Partner
Cost
Customer
Class
Enhance
Partner
•High ••Market ••Weekly
OPEX
OPEX
Customer Enhance •High Customer
Customer Satisfaction
Satisfaction Market Feedback
Feedback Weekly Monitoring
Monitoring
Satisfaction
Satisfaction
Brand
Brand •Reinforce ••Sales
••Monthly
Monthly Monitoring
Monitoring RM
RM XX
XX M
M
•Reinforce Brand
Brand Image
Image Sales Volume
Volume Prod.
Prod. && Sales
Sales Mtg.
Mtg.
INTERNAL
PERSPECTIVE •Productivity
•Productivity ••Cycle
Cycle Time
Time ••Hourly
Hourly Monitoring
Monitoring CAPEX
CAPEX
ENSURE
ENSURE OPERATIONAL
OPERATIONAL EXCELLENCE
INNOVATION
INNOVATION AS
AS WELL
EXCELLENCE WITH
WELL BEING
WITH
BEING SOCIALLY
SOCIALLY
•Delivery
•Delivery
••Meet
Meet Daily
••WIP
WIP
Daily Plan
Plan ••Daily
Daily Monitoring
••Daily
Monitoring
Daily Monitoring
Monitoring
RM
RM xx
xx M
M
RESPONSIBLE
RESPONSIBLE ••KAIZEN
KAIZEN ••Monthly
Monthly follow-up
follow-up
•Continuous
•Continuous Improvement
Improvement ••ICC
ICC ••Specific
Specific Programmed
Programmed
Operational Process
Operational Process •NPI
•NPI ••Timely
Timely Introduction
Introduction ••Weekly Follow-up
Weekly Follow-up
Excellence Innovation
Excellence Innovation ••Industrial ••Cross
Alliances with Socially •Safety Industrial Accident
Accident Cross Audits
Audits
Alliances with Socially •Safety && Health
Health ••Commuting ••Defensive
SBUs Responsible Commuting Accident
Accident Defensive Driving
Driving
SBUs Responsible ••Toxic
Toxic Waste
Waste Disposal
Disposal ••Facility
Facility Readiness
Readiness
•Environment
•Environment ••ISO
ISO 9002
9002 ••Certification
Certification
LEARNING & GROWTH
PERSPECTIVE ••Training
Training and
and Skill
Skill
•Develop
•Develop the
the Necessary
Necessary Skills
Skills ••R&D
R&D&& Development
Development Build-up
Build-up
STRATEGIC
STRATEGIC JOB
JOB&& SYSTEMS
SYSTEMS •Information
•Information Systems
Systems ••ALC,
ALC, Procurement,
Procurement, ••Set-up,
Set-up, Test
Test and
and
Availability
Availability Financial
Financial Validation
Validation
Skills Info. System ••Communication
Communication
Skills Info. System •Strategic
•Strategic Awareness
Awareness ••Alignment
Alignment Programmed
Programmed
Balanced Scorecard Strategy
Map
Department Level Scorecard
Example
Scorecard Potential Pitfalls &
Criticisms
Scorecard Potential Pitfalls &
Criticisms
Lack of a well Defined Strategy
The balanced scorecard relies on a well defined strategy and
understanding of linkages between strategic objections and
metrics. Without this foundation the implementation could fail.
Too much focus on the lagging measures
Focusing on only the lagging measures may cause a lack of
priority or opportunity for the leading measures.
Use of Generic Metrics
Don’t just copy metrics from another firm. Identify the measures
that apply to your strategy and competitive position .
Self-serving managers
Managers whose goal is to achieve a desired result in order to
obtain a bonus or other self reward.
Balanced Scorecard Benefit
Re-Cap
Helps align key performance measures with strategy at all levels of
an organization
The methodology facilitates communication and understanding of
business goals and strategies at all levels of an organization
Strategic initiatives that follow "best practices" methodologies that
cascade through the entire organization
Transforms an organization’s mission statement and strategic plan
from a passive document into the "marching orders" for the
organization on a daily basis.
It enables executives to truly execute their strategies by identifying
what should be done and measured.
To date, some form of a Balanced Scorecard is used by nearly 60% of
Fortune 500 companies
Thank You for Your Time
Questions?