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 organizations
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

Internal Business Process

To satisfy our stakeholders, what must be our levels of

productivity, efficiency, and quality?

Learning and Growth

What must we do to create sustainable economic value?

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

Balanced Scorecard Example

STRATEGY
STRATEGYMAP
MAP

BALANCED
BALANCEDSCORECARD
SCORECARD

PROCESS: MANUFACTURING EXCELLENCE

PROCESS: MANUFACTURING EXCELLENCE
THEME: ROCE > xx%, VOLUME = xx,xxx units
THEME: ROCE > xx%, VOLUME = xx,xxx units
FINANCIAL
PERSPECTIVE

Long-Term Shareholder
Long-Term
Shareholder
Value ROCE
> xx%
Value ROCE > xx%

Improve
Improve
Productivity
Productivity

Grow
Grow
Revenue
Revenue

CUSTOMER
PERSPECTIVE
OFFER
OFFER PRODUCTS
PRODUCTS &
& SERVCIES
SERVCIES
THAT
THAT ARE
ARE CONSISTENT,
CONSISTENT, TIMELY
TIMELY
and
and LOW-COST
LOW-COST

Low
Low
Cost
Cost
Customer
Customer
Satisfaction
Satisfaction

World
World
Class
Class
Enhance
Enhance
Brand
Brand

INTERNAL
PERSPECTIVE
ENSURE
ENSURE OPERATIONAL
OPERATIONAL EXCELLENCE
EXCELLENCE WITH
WITH
INNOVATION
INNOVATION AS
AS WELL
WELL BEING
BEING SOCIALLY
SOCIALLY
RESPONSIBLE
RESPONSIBLE

Operational
Operational
Excellence
Excellence
Alliances with
Alliances with
SBUs
SBUs

Process
Process
Innovation
Innovation
Socially
Socially
Responsible
Responsible

LEARNING & GROWTH

PERSPECTIVE
STRATEGIC
STRATEGIC JOB
JOB &
& SYSTEMS
SYSTEMS

Skills
Skills

Info. System
Info. System

OBJECTIVES
OBJECTIVES

MEASUREMENT
MEASUREMENT

TARGET
TARGET

ACTION
ACTIONPLAN
PLAN
INITIATIVE
INITIATIVE

Operating
Operating Cost
Cost &
& Efficiency
Efficiency

Cost/Unit,
Cost/Unit, Efficiency
Efficiency

Monthly
Monthly Monitoring
Monitoring

Capacity
Capacity Utilization
Utilization

%
% Utilization
Utilization

Capability
Capability Utilization
Utilization

Trial
Trial Prod.
Prod.
Spare
Spare Parts
Parts Prod
Prod

Weekly/Monthly
Weekly/Monthly
Monitoring
Monitoring

Brand
Brand // Image
Image

Warranty
Warranty Cost
Cost

Low
Low Cost
Cost Manufacturing
Manufacturing

Man-hour
Man-hour per
per Unit
Unit

Weekly
Weekly Monitoring
Monitoring

World-Class
World-Class Quality
Quality
Standards
Standards

Defect
Defect per
per Unit
Unit

Daily
Daily Monitoring
Monitoring

World-Class
World-Class Delivery
Delivery Timing
Timing

Sales
Sales Delivery
Delivery

Daily
Daily Monitoring
Monitoring

Knowledgeable
Knowledgeable &
& Skilled
Skilled
Partner
Partner

Direct
Direct Pass
Pass Rate
Rate

Daily
Daily Monitoring
Monitoring

High
High Customer
Customer Satisfaction
Satisfaction

Market
Market Feedback
Feedback

Weekly
Weekly Monitoring
Monitoring

Reinforce
Reinforce Brand
Brand Image
Image

Sales
Sales Volume
Volume

Monthly
Monthly Monitoring
Monitoring
Prod.
Prod. &
& Sales
Sales Mtg.
Mtg.

Productivity
Productivity

Cycle
Cycle Time
Time

Hourly
Hourly Monitoring
Monitoring

Meet
Meet Daily
Daily Plan
Plan
WIP
WIP
KAIZEN
KAIZEN
ICC
ICC

Daily
Daily Monitoring
Monitoring
Daily
Daily Monitoring
Monitoring
Monthly
Monthly follow-up
follow-up
Specific
Specific Programmed
Programmed

Timely
Timely Introduction
Introduction

Weekly
Weekly Follow-up
Follow-up

Industrial
Industrial Accident
Accident
Commuting
Commuting Accident
Accident
Toxic
Toxic Waste
Waste Disposal
Disposal
ISO
ISO 9002
9002

Cross
Cross Audits
Audits
Defensive
Defensive Driving
Driving
Facility
Facility Readiness
Readiness
Certification
Certification

Delivery
Delivery
Continuous
Continuous Improvement
Improvement
NPI
NPI
Safety
Safety &
& Health
Health
Environment
Environment

Develop
Develop the
the Necessary
Necessary Skills
Skills

R&D
R&D &
& Development
Development

Information
Information Systems
Systems
Availability
Availability

ALC,
ALC, Procurement,
Procurement,
Financial
Financial

Strategic
Strategic Awareness
Awareness

Alignment
Alignment

BUDGET
BUDGET

Monthly
Monthly Monitoring
Monitoring
tt

Weekly/Monthly
Weekly/Monthly
Monitoring
Monitoring

Training
Training and
and Skill
Skill
Build-up
Build-up
Set-up,
Set-up, Test
Test and
and
Validation
Validation
Communication
Communication
Programmed
Programmed

OPEX
RM XX M
CAPEX
RM xx M

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
Dont 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 organizations 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?