Balanced Scorecard: A Road Map

for Executing Strategy

Companies today are in the midst of a revolutionary transformation as Industrial age competition
is shifting to Information age competition. The cut-throat competition that businesses faced in
the last two decades has made them to look for improvement initiatives like Total Quality
Management, Just-in-Time (JIT) systems; Activity based cost management, Employee
empowerment and Re-engineering. Though these initiatives resulted in enhanced shareholder
value, their structure was disjointed and focused on the short-term survival and growth. The
programs centered on achieving breakthrough performance merely by monitoring and controlling
financial measures of past performance. This collision between the irresistible force to build
long-range competitive capabilities and the immovable object of the historical-cost financial
accounting model has led to a new blend the balanced scorecard.

The Balanced Scorecard is an approach to measurement. The term was coined by Robert S. and
David P. Norton in an article titled "The Balanced Scorecard -- Measures that Drive
Performance," that appeared in the Jan/Feb 1992 issue of Harvard Business Review.

The balanced scorecard is a management 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 nerve center of an enterprise. The relationship
between Mission, Objectives, Strategy and Performance Measures is depicted below:

About half of major companies in the US, Europe and Asia are using Balanced Scorecard
Approaches. The exact figures vary slightly but the research groups suggest that over 50% of
large US firms had adopted the BSC by the end of 2000. A study finds that about 44% of
organizations in North America use the Balanced Scorecard and a study in Germany,
Switzerland, and Austria finds that 26% of firms use Balanced Scorecards. The widest use of the
Balanced Scorecard approach can be found in the US, the UK, Northern Europe and Japan. In
corporate India, the Balanced Scorecard adoption rate is 45.28 %.

Here are some examples of successful implementation of balance scorecard:

1. Ever wonder what a scorecard launch would look like in an organization of more than 1.5
million people that operates all over the world? Take a peek at the U.S. Army’s scorecard
initiative. With a new emphasis on strategy, the Army launched an enterprise wide Balanced
Scorecard effort in October 2001, which would reflect the organization’s strong mission
orientation.

In just six months, the Army’s scorecard effort gained remarkable ground for an organization of
such heft, reach, and complexity. Within that time frame, the Army built its “Level 0”
(enterprisewide) scorecard. Then it cascaded the scorecard to “Level 1” (36 major commands,
secretariats, and staff areas, such as Medical Command, Logistics, and Forces Command) and
“Level 2” (250 subordinate commands that support the Level 1 organizations). Result: more than
300 scorecards — each of them linked to the Level 0 master. Though the Army’s scorecard
implementation has just begun, the organization is already seeing some promising changes.

2. Higher education institutions have embraced the balanced scorecard as a way to remain
competitive in a rapidly evolving sector dedicated to providing quality education to students and
creating research incubators for professors. This example of a balanced scorecard shows how the
balanced scorecard has permeated into each department to coordinate the delivery of quality
education.

Financial Customer Internal Process Innovation and

Perspective Perspective Perspective Learning Perspective
Profitability Understand needs Personnel expense as Influence in the
a percentage of net community
sales
Efficiency Ease of ordering Net sales/square foot Know how-to use
selling space tools
Leverage Variety/availability Net sales/student full Manage workload
time equivalent
Professional Advancement
opportunities
Courteous Valuable training

3. Providing care in a hospital emergency department is fast-paced and physically demanding

and draws upon a multitude of technologies and interpersonal skills. The scorecards compare
patient outcomes in the various hospitals to discover best practices that can be used to improve
patient outcomes and experiences.

Financial Patient satisfaction Clinical Utilization System Integration

Performance and and Outcomes and Change
Condition
% of management and Overall Impressions Return visit rate Clinical data
operational support collection and
hours dissemination
% of registered nurse Communication Internal coordination
hours of care
% total worked hours Consideration Use of clinical
information
technology
Responsiveness Use of standardized
protocols
Healthy work
environment
4. A balanced scorecard of a nonprofit can look very different from a commercial enterprise as it
undertakes activities that serve altruistic ends. This is a great example of the perspectives and
objectives of a service organization, whose mission is to operate as a steward for humanity in
providing shelter and community health services to adults in need.

Financial Customer Internal Process Innovation and

Perspective Perspective Perspective Learning Perspective
Actively seek funding Provide support, Learn from our clients Hire, retain, and train
to deliver new or guidance, and in order to advocate to align resources and
expanded services or leadership in your solutions within our competencies
programs fields of expertise community
Diversify funding mix Provide us with Proactively engage Nurture a culture that
opportunities to stakeholders to supports and
contribute communicate who we advocates the
are and importance of
our capabilities work/life balance
Maintain break even Listen to my needs Minimize negative Foster a culture that
budget and ensure and be there when and workplace embraces innovation,
adequate reserves where I need you environmental factors teamwork, leadership,
(number of violent and knowledge-
incidents) sharing

5. In case of corporate alliance, the balanced scorecard management system can help
companies switch their alliance management focus from contributions and operations to strategy
and commitment. Brussels based Pharmaceuticals Company Solvay, has formidable
competencies in the drug discovery process. But the average cost of bringing new drugs to
market has escalated to more than $1 billion per successful compound, making it harder for
Solvay to capitalize on its research skills. Clinical trials require access to patients, physicians,
and health care organizations, areas where Solvay has less of an advantage. Executives believed
that Solvay could be more efficient and achieve better results if it could outsource the
management of all clinical trial work to a single partner. Solvay began the transition to this
model by choosing Quintiles, one of its existing suppliers, to perform all stages of the trial
process. In 2001 the two companies moved from a transactional relationship to a preferred
partnership. Under the terms of the agreement, Solvay consolidated a significant number of its
outsourced projects under Quintiles in return for reductions in Quintiles’s normal prices. The two
companies formed a joint clinical team for each compound in order to manage strategic and
operational aspects of conducting clinical trials.
Here is a chart to present the strategy map to manage execution of their alliance strategy:

Wins for Solvay Pharmaceuticals

Compounds to market; maximized value of portfolio
Wins for Quintiles
Expanded revenue base; milestone payments
Following BSC practice, these objectives into five strategic themes:

Living the alliance: Ensure that we have the right culture (including trust), communication,
leadership, people development, IT, and rewards and recognition.
Collaboration: Create the transparency we desire and make the best use of resources and services
across organizations and third parties.
Speed and process innovation: Do things right; leverage our global expertise; and improve the
start up and management of studies to achieve breakthrough results.
Growth: Create the right portfolio of new products; collaborate on decisions to develop
compounds; improve investment management; and accelerate the flow of compounds into the
clinical development phase.
Value for both: Create value for both organizations by jointly driving all these activities.

The example above describes the experience of using balanced scorecard techniques to create
alliance value. But this experience is not unique. Infosys, the Indian IT services provider, has
built more than two dozen “relationship scorecards” with customers and uses these in quarterly
meetings with executives in its client organizations.

The implementation of the Balanced Scorecard as a performance management tool & as well as a
strategic management tool, has led to the identification of cost reduction opportunities in the
organization, which, in turn, has resulted in the improvement in the bottom line.

Looking at examples of balanced scorecards is the best place to start…