2011]

SUBMITTED BY:-

BALANCE
RANDHIR KUMAR
HUMAN Reg. No.- 0906247167
RESOUR MBA 2nd YEAR (2009-11)
CE SCORECARD
 CERTIFICATE

This is to certify that RANDHIR KUMAR pursing MBA(2009-11) from

Regional College Of Management (A),Bhubaneswar, bearing Registration No.-
0906247167, has successfully completed her Dissertation project titled
“HUMAN RESOURCE BALANCE SCORECARD” under my guidance in
partial fulfillment of his MANAGEMENT DEGREE IN BUSINESS
ADMINISTRATION.

This is an original work of his own and this project report has not
been submitted to any other institute/university for the award of any degree or
diploma.

(Faculty Guide)
Prof. Amaresh C. Nayak

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 ACKNOWLEDGEMENT

As I am giving finishing touch to the present piece of work and

look back to catalogue my felling toward all those who have
help me in endeavour, I first begin the acknowledgment with a
prayer to God, as we must all say almighty be praised for he
saw us through every crucial task.

I am extremely grateful to my project guide Mr. AMARESH C.

NAYAK (Faculty Marketing, RCM) for assisting and guiding
me throughout the project. I am very grateful to RCM for
providing me the opportunity of taking up such a practical
project which gave me a firsthand useful experience.

Last but not the least; I also like to thanks all the respondents &
my friends for giving me their precious time, relevant
information and experience without which the project would
have been a different story.

RANDHIR KUMAR

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 INDEX

Sr. No. Particulars Page. No.

1 INTRODUCTION: Balanced Scorecard 5

2 NEED FOR THE BALANCED SCORECARD 10

3 4 MAJOR PERSPECTIVES OF A BSC 13

4 The Four Perspectives: Cause and Effect relationship 17

5 BUILDING AND IMPLEMENTING THE SYSTEM USING A 22

BALANCED SCORECARD

6 THE BSC MODEL 25

7 FEATURES OF A GOOD BSC 27

8 ADVANTAGES OF BSC 28

9 DISADVANTAGES OF BSC 29

10 UTILISING THE BALANCED SCORECARD AS A STRATEGIC 30

MANAGEMENT TOOL

11 RESEARCH METHODOLOGY 33

12 CONCLUSION 35

13 REFERENCES 36

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 INTRODUCTION

Balanced Scorecard

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 a strategic planning and management system that is used extensively
in business and industry, government, and nonprofit organizations worldwide to align business
activities to the vision and strategy of the organization, improve internal and external
communications, and monitor organization performance against strategic goals. It was originated
by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance
measurement framework that added strategic non-financial performance measures to traditional
financial metrics to give managers and executives a more 'balanced' view of organizational
performance.  While the phrase BALANCED SCORECARD was coined in the early 1990s, the
roots of the this type of approach are deep, and include the pioneering work of General Electric
on performance measurement reporting in the 1950’s and the work of French process engineers
(who created the TABLEAU DE BORD – literally, a "dashboard" of performance measures) in
the early part of the 20th century.

The balanced scorecard has evolved from its early use as a simple performance measurement
framework to a full strategic planning and management system. The “new” balanced scorecard
transforms an organization’s strategic plan from an attractive but passive document into the

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"marching orders" for the organization on a daily basis. It provides a framework that not only
provides performance measurements, but helps planners identify what should be done and
measured. It enables executives to truly execute their strategies.

This new approach to strategic management was first detailed in a series of articles and books by

Drs. Kaplan and Norton. Recognizing some of the weaknesses and vagueness of previous
management approaches, the balanced scorecard approach provides a clear prescription as to
what companies should measure in order to 'balance' the financial perspective. The balanced
scorecard is a management system (not only a measurement 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.

In a nutshell, the need to link financial and non-financial measures of performance and
identifying key performance measures led to the emergence of “Balanced Score Card” approach
developed by Norton and Kaplan (1992) in the U.S. The Balanced score card is defined as “an
approach to the provision of information to management to assist strategic policy formulation
and achievement. It emphasized the need to provide the user with a set of information, which
addresses all relevant areas of performance in an objective and unbiased fashion”.

Kaplan and Norton identified four perspectives representing the important facets of the
organization. These were:

1. Financial perspective (how do we look to shareholders)

2. Customer perspective (how the customer see us)
3. Internal business perspective (what we excel at?)
4. Innovation & Learning perspective (can we continue to improve and create value)

The idea behind the four perspectives represents a balanced view of any organization and by
creating measures under each of these headings all the important areas of business would be

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covered. It is important to note that the balanced score card itself is just a frame work and it
doesn’t say what the specific measures should be. It is a matter for people within the
organization to decide upon. The set of measures for each organization or even sections with the
organization will be different. Much of the success of score card depends on how the measures
are agreed, the way they are implemented and how they are acted upon. So the process of
designing a score card is as important as the score card itself.

Characteristics

The characteristic of the Balanced Scorecard and its derivatives is the presentation of a mixture
of financial and non-financial measures each compared to a 'target' value within a single concise
report. The report is not meant to be a replacement for traditional financial or operational reports
but a succinct summary that captures the information most relevant to those reading it. It is the
method by which this 'most relevant' information is determined (i.e. the design processes used to
select the content) that most differentiates the various versions of the tool in circulation.

As a model of performance, the BSC is effective in that "it articulates the links between leading
inputs (human and physical), processes, and lagging outcomes and focuses on the importance of
managing these components to achieve the organization's strategic priorities",[2]

The first versions of Balanced Scorecard asserted that relevance should derive from the corporate
strategy, and proposed design methods that focused on choosing measures and targets associated
with the main activities required to implement the strategy. As the initial audience for this were
the readers of the Harvard Business Review, the proposal was translated into a form that made
sense to a typical reader of that journal - one relevant to a mid-sized US business. Accordingly,
initial designs were encouraged to measure three categories of non-financial measure in addition
to financial outputs - those of "Customer," "Internal Business Processes" and "Learning and
Growth." Clearly these categories were not so relevant to non-profits or units within complex
organisations (which might have high degrees of internal specialisation), and much of the early
literature on Balanced Scorecard focused on suggestions of alternative 'perspectives' that might
have more relevance to these groups.

Modern Balanced Scorecard thinking has evolved considerably since the initial ideas proposed in
the late 1980s and early 1990s, and the modern performance management tools including
Balanced Scorecard are significantly improved - being more flexible (to suit a wider range of

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organisational types) and more effective (as design methods have evolved to make them easier to
design, and use).

History
The first balanced scorecard was created by Art Schneiderman (an independent consultant on the
management of processes) in 1987 at Analog Devices, a mid-sized semi-conductor company.
[3]
 Art Schneiderman 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.
[4]
 Kaplan and Norton's article wasn't the only paper on the topic published in early 1992 [5] but the
1992 Kaplan and Norton paper was a popular success, and was quickly followed by a second in
1993.[6] In 1996, they published the book The Balanced Scorecard.[7] These articles and the first
book spread knowledge of the concept of Balanced Scorecard widely, but perhaps wrongly have
led to Kaplan and Norton being seen as the creators of the Balanced Scorecard concept.

While the "balanced scorecard" concept and terminology was coined by Art Schneiderman, the
roots of performance management as an activity run deep in management literature and practice.
Management historians such as Alfred Chandler suggest the origins of performance management
can be seen in the emergence of the complex organisation - most notably during the 19th Century
in the USA.[8] More recent influences may include the pioneering work of General Electric on
performance measurement reporting in the 1950s and the work of French process engineers (who
created thetableau de bord – literally, a "dashboard" of performance measures) in the early part
of the 20th century. The tool also draws strongly on the ideas of the 'resource based view of the
firm'[9] proposed byEdith Penrose. However it should be noted that none of these influences is
explicitly linked to original descriptions of Balanced Scorecard by Schneiderman, Maisel, or
Kaplan & Norton.

Kaplan and Norton's first book, The Balanced Scorecard, remains their most popular. The book
reflects the earliest incarnations of Balanced Scorecard - effectively restating the concept as
described in the second Harvard Business Review article. Their second book, The Strategy
Focused Organization, echoed work by others (particularly in Scandinavia [10]) on the value of
visually documenting the links between measures by proposing the "Strategic Linkage Model"
or strategy map. Since then Balanced Scorecard books have become more common - in early
2010 Amazon was listing several hundred titles in English which had Balanced Scorecard in the
title.

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Design
Design of a Balanced Scorecard ultimately is about the identification of a small number of
financial and non-financial measures and attaching targets to them, so that when they are
reviewed it is possible to determine whether current performance 'meets expectations'. The idea
behind this is that by alerting managers to areas where performance deviates from expectations,
they can be encouraged to focus their attention on these areas, and hopefully as a result trigger
improved performance within the part of the organisation they lead.

The original thinking behind Balanced Scorecard was for it to be focused on information relating
to the implementation of a strategy, and perhaps unsurprisingly over time there has been a
blurring of the boundaries between conventional strategic planning and control activities and
those required to design a Balanced Scorecard. This is illustrated well by the four steps required
to design a Balanced Scorecard included in Kaplan & Norton's writing on the subject in the late
1990s, where they assert four steps as being part of the Balanced Scorecard design process:

1. Translating the vision into operational goals;

2. Communicating the vision and link it to individual performance;
3. Business planning; index setting
4. Feedback and learning, and adjusting the strategy accordingly.
These steps go far beyond the simple task of identifying a small number of financial and non-
financial measures, but illustrate the requirement for whatever design process is used to fit within
broader thinking about how the resulting Balanced Scorecard will integrate with the wider
business management process. This is also illustrated by books and articles referring to balanced
scorecards confusing the design process elements and the balanced scorecard itself. In particular,
it is common for people to refer to a “strategic linkage model” or “strategy map” as being a
balanced scorecard.

Although it helps focus managers' attention on strategic issues and the management of the
implementation of strategy, it is important to remember that the balanced scorecard itself has no
role in the formation of strategy. In fact, balanced scorecards can comfortably co-exist with
strategic planning systems and other tools.

NEED FOR THE BALANCED SCORECARD (BSC)

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The balanced scorecard is a way of Measuring organizational, business unit or department
success;

 Balancing long and short term actions;

 Balancing different measures of success and
o Financial
o Customer
o Internal Operations
o Human Resource Systems & Development (Learning & growth)

 A way of tying strategy to measures of action

The Need for the scorecard

The objective of any measurement system should be to motivate all managers and employees to
implement successfully the business units strategy. Those companies that can translate their
strategy into measurement system will be able to execute their strategy because they
communicate their objectives and their targets. The communication makes managers and
employees focus on the critical drivers enabling them to align investments, initiatives and actions
accomplishing strategic goals.

Historically, the measurement system for any business has been financial. Accounting was
considered to be the language of business .Innovations in measuring the financial performance of
the industrial age companies played a vital role in their successful growth. And financial
innovations, such as the Return on Investment (ROI) metric, and operating and cash budgets,
were critical to the success of these corporations.

However, an over emphasis on achieving and maintaining short-term financial results can cause
companies to over invest in short-term fixes and to under invest in long-term value creation,
particularly in the intangible and intellectual assets that generate future growth. The pressure for
short-term financial performance often causes companies to reduce the resources spent on new
product development, process improvements, human resource development, Information

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technology, databases and systems as well as customer and market development. In the short run,
the financial accounting model reports these spending cutbacks as increases in reported income,
even when the reductions have cannibalized a company’s stock of assets and its capabilities for
creating future economic value. In short, these organizations use the financial and non-financial
performance only for tactical feedback and control of short-term operations.

Linking Strategy with Performance Measures

The essential thrust of the balanced scorecard is based on the fundamental proposition that within
organizations what gets measured gets done however, organizations dont always get what they
measure. If measurement, by itself, had that much impact on human behavior, then anyone that
had weighing scales would never get fat.

An appropriate measurement system is one that energizes employees in the context of what the
organization is trying to do. Thus, the logical starting point for the development of any
performance measurement system for an organization must be a clear statement of mission,
objectives and resultant strategy. An organization’s mission is its basic function in society and is
the reason why the organization exists. Related to this are the objectives to be achieved and they
represent a precise statement of purpose for a specific period. Basically a strategy is a shared
understanding about how the organization’s mission is to be achieved in a competitive
environment. Strategic thinking will focus on customers and competitors as well as internal
capabilities and resources. It will include reference to the firm’s competitiveness, quality of
output and levels of customer service. In turn, specified performance measures allow all
employees understand what the strategy is and how their performance is linked to that overall
strategy. The relationship between Mission, Objectives, Strategy and Performance Measures is
depicted in Fig.1.

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 Fig.1

There are at least three reasons why organizations should, and often do, measure their
performance:

1. To align mission, strategy, values and behavior

2. To improve the right things
3. To numerically define the meaning of success

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 4 MAJOR PERSPECTIVES OF A BSC

The aim of the Balanced Scorecard is to direct, help manage and change in support of the longer-
term strategy in order to manage performance. The scorecard reflects what the company and the
strategies are all about. It acts as a catalyst for bringing in the ‘change’ element within the
organization. This tool is a comprehensive framework which considers the following
perspectives and tries to get answers to the following questions –
1. Financial Perspective - How do we look at shareholders?
2. Customer Perspective - How should we appear to our customers?
3. Internal Business Processes Perspective - What must we excel at?
4. Learning and Growth Perspective - Can we continue to improve and create value?

Hence, from the above lines we can say that this tool has considered not only the financial results
to be important but also those factors which actually drive an organization towards future
successes as mentioned earlier. The tool has given stress on the other areas which are required to
‘balance’ the financial perspective in order to get a total view about the organizational
performance and improve the same. The framework tries to bring a balance and linkage between
the –
(a) Financial and the Non-Financial indicators,
(b) Tangible and the Intangible measures,
(c) Internal and the External aspects and
(d) Leading and the Lagging indicators.

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  The Learning & Growth Perspective

This perspective includes employee training and corporate cultural attitudes related to both
individual and corporate self-improvement. In a knowledge-worker organization, people -- the
only repository of knowledge -- are the main resource. In the current climate of rapid
technological change, it is becoming necessary for knowledge workers to be in a continuous
learning mode. Government agencies often find themselves unable to hire new technical
workers, and at the same time there is a decline in training of existing employees. This is a
leading indicator of 'brain drain' that must be reversed. Metrics can be put into place to guide
managers in focusing training funds where they can help the most. In any case, learning and
growth constitute the essential foundation for success of any knowledge-worker organization.

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Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like
mentors and tutors within the organization, as well as that ease of communication among
workers that allows them to readily get help on a problem when it is needed. It also includes
technological tools.

 The Business Process Perspective

This perspective refers to internal business processes. Metrics based on this perspective allow the
managers to know how well their business is running, and whether its products and services
conform to customer requirements (the mission). These metrics have to be carefully designed by
those who know these processes most intimately; with our unique missions these are not
something that can be developed by outside consultants.

In addition to the strategic management process, two kinds of business processes may be
identified: a) mission-oriented processes, and b) support processes. Mission-oriented processes
are the special functions of government offices, and many unique problems are encountered in
these processes. The support processes are more repetitive in nature, and hence easier to measure
and benchmark using generic metrics.

 The Customer Perspective

Recent management philosophy has shown an increasing realization of the importance of

customer focus and customer satisfaction in any business. These are leading indicators: 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, even though
the current financial picture may look good.

In developing metrics for satisfaction, customers should be analyzed 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

Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate
funding data will always be a priority, and managers will do whatever necessary to provide it. In
fact, often there is more than enough handling and processing of financial data. With the
implementation of a corporate database, it is hoped that more of the processing can be
centralized and automated. But the point is that the current emphasis on financials leads to the
"unbalanced" situation with regard to other perspectives.

There is perhaps a need to include additional financial-related data, such as risk assessment and
cost-benefit data, in this category.

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 The Four Perspectives: Cause and Effect Relationship
The four perspectives as mentioned above are highly interlinked. There is a logical connection
between them. The explanation is as follows : If an organization focuses on the learning and the
growth aspect, it is definitely going to lead to better business processes. This in turn would be
followed by increased customer value by producing better products which ultimately gives rise
to improved financial performance.

A strategy is a set of hypotheses about cause and effect. The chain of cause-and- effect should
pervade all four perspectives of the Balanced Scorecard therefore a properly constructed
Balanced Score Card should tell the story of the company's strategy.(figure 2)

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 Figure 2

Performance Drivers

A good Balanced Score Card should also have a mix of outcome measures (lagging indicators)
and performance drivers (leading indicators). Outcome measures without performance drivers do
not communicate how the outcomes are to be achieved or give an early indication about whether
the strategy is being implemented successfully. Conversely performance drivers without
outcome measures (may achieve short term operational improvements) fail to reveal whether
operational improvements have translated into expanded business with enhanced financial
performance. Example (Figure 3)

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 Figure 3

A completed organizational score card needs to have the following components:

 Strategic Themes Identified

 Strategic Objectives Identified
 Measures for the execution of the strategic objectives
 Competitive Bench Marks for the measures selected
 Short Term and Long term targets for identified measures
 Initiatives aligned to the Strategic objectives for execution and review.

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Once the organizational score card is prepared and finalized the scorecard is to be used as an
effective method of alignment see (figure 4). Departmental, Process, and Individual score cards
aligned to corporate score card will translate your strategy to daily management.

Links to Six Sigma

Six Sigma is a unique variability reduction management strategy for Business improvement. The
most powerful aspect of Six Sigma is in the application of the rigorous DMAIC philosophy to
projects to achieve higher customer satisfaction and Business results. While Six Sigma helps
organizations in elimination of waste in their pursuit to excellence the Balanced Score Card lays
the foundation for the implementation of an effective Six Sigma strategy.

When one attempts to view the evolution of various measurement systems you could see that
Balanced Score Card encompasses Financial, Strategic and Operational measurements. See
(Figure 5).It is clear to visualize that implementation of Balanced Score Card followed by the

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deployment of Six Sigma is a better approach towards Six Sigma deployment. While the proven
statistical tool set of Six Sigma operates at the operational level the Balanced Score Card
provides the rationale for identification of areas for improvement.

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 BUILDING AND IMPLEMENTING THE SYSTEM USING A
BALANCED SCORECARD

Step One of the scorecard building process starts with an assessment of the organization’s
Mission and Vision, challenges (pains), enablers, and values. Step One also includes preparing a
change management plan for the organization, and conducting a focused communications
workshop to identify key messages, media outlets, timing, and messengers.

In Step Two, elements of the organization’s strategy, including Strategic Results, Strategic
Themes, and Perspectives, are developed by workshop participants to focus attention on
customer needs and the organization’s value proposition.

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In Step Three, the strategic elements developed in Steps One and Two are decomposed into
Strategic Objectives, which are the basic building blocks of strategy and define the organization's
strategic intent. Objectives are first initiated and categorized on the Strategic Theme level,
categorized by Perspective, linked in cause-effect linkages (Strategy Maps) for each Strategic
Theme, and then later merged together to produce one set of Strategic Objectives for the entire
organization.

In Step Four, the cause and effect linkages between the enterprise-wide Strategic Objectives are
formalized in an enterprise-wide Strategy Map. The previously constructed theme Strategy Maps
are merged into an overall enterprise-wide Strategy Map that shows how the organization creates
value for its customers and stakeholders.

In Step Five, Performance Measures are developed for each of the enterprise-wide Strategic
Objectives. Leading and lagging measures are identified, expected targets and thresholds are
established, and baseline and benchmarking data is developed.

In Step Six, Strategic Initiatives are developed that support the Strategic Objectives. To build
accountability throughout the organization, ownership of Performance Measures and Strategic
Initiatives is assigned to the appropriate staff and documented in data definition tables.

In Step Seven, the implementation process begins by applying performance measurement

software to get the right performance information to the right people at the right time.
Automation adds structure and discipline to implementing the Balanced Scorecard system, helps
transform disparate corporate data into information and knowledge, and helps communicate
performance information. In short, automation helps people make better decisions because it
offers quick access to actual performance data.

In Step Eight, the enterprise-level scorecard is ‘cascaded’ down into business and support unit
scorecards, meaning the organizational level scorecard (the first Tier) is translated into business
unit or support unit scorecards (the second Tier) and then later to team and individual scorecards
(the third Tier). Cascading translates high-level strategy into lower-level objectives, measures,
and operational details. Cascading is the key to organization alignment around strategy.

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Team and individual scorecards link day-to-day work with department goals and corporate
vision. Cascading is the key to organization alignment around strategy. Performance measures
are developed for all objectives at all organization levels. As the scorecard management system
is cascaded down through the organization, objectives become more operational and tactical, as
do the performance measures. Accountability follows the objectives and measures, as ownership
is defined at each level. An emphasis on results and the strategies needed to produce results is
communicated throughout the organization.

In Step Nine, an Evaluation of the completed scorecard is done. During this evaluation, the
organization tries to answer questions such as, ‘Are our strategies working?’, ‘Are we measuring
the right things?’, ‘Has our environment changed?’ and ‘Are we budgeting our money
strategically?’

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 THE BSC MODEL

The Model – An Explanation

Hence, from the aforesaid model, it is clear that the following are to be done so as
to utilize the Balanced Scorecard as a strategic management tool :
1. The major objectives are to be set for each of the perspectives.
2. Measures of performance are required to be identified under each of the objectives which
would help the organization to realize the goals set under each of the perspectives. These would
act as parameters to measure the progress towards the objectives.
3. The next important step is the setting of specific targets around each of the identified key areas
which would act as a benchmark for performance appraisal.
Hence, a performance measurement system is build around these critical factors.Any deviation in
attaining the results should raise a red signal to the management which would investigate the
reasons for the deviation and rectify the same.

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4. The appropriate strategies and the action plans that are to be taken in the various activities
should be decided so that it is clear as to how the organization has decided to pursue the pre-
decided goals. Because of this reason, the Balanced Scorecard is often referred to as a blueprint
of the company strategies.
An example will help to understand it better. Some of the objectives together with a
measurement measures are given.

Hence, the above paragraphs show that all the four areas have been given equal importance in
measuring performance level. The measures and the objectives, however, depend upon the type
of business the organization is in. The financial indicators are complemented by the non-
financial ones. Since, objectives and goals are set for each of the critical success factors under
each of the heads, it brings about a focus on the strategic vision. Thus, all activities would be

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directed towards achievement of the longterm goals which have been set by the top management.
The identification of the key result areas (KRAs) help an organization in moving towards the
right strategic direction. This tool creates a link between objectives, measures, targets and
initiatives. It is, therefore, absolutely clear that the Balanced Scorecard acts as a focal point for
the organisation’s efforts, designing and communicating priorities to the managers, employees,
investors and the customers.

FEATURES OF A GOOD BALANCED SCORE CARD

1. It tells the story of a company’s strategy, articulating a sequence of cause and effect
relationships.
2. 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.
3. A balanced score card emphasizes non-financial measures as a part of program to achieve
future financial performance
4. The balanced score card limits the number of measures identifying only the most critical
areas. The purpose in to focus manager’s attention on measures that most affect the
implementation of strategy.
5. The balanced score card highlights less than optimal trade offs that managers may make
when they fail to consider operational and financial measures together.

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 ADVANTAGES OF BSC

The balanced scorecard tool is being used by several organizations throughout the world because
of certain advantages it has been able to deliver as below:

 It translates vision and strategy into action.

 It defines the strategic linkages to integrate performance across organizations.
 It communicates the objectives and measures to a business unit.
 It aligns the strategic initiatives in order to attain the long-term goals.
 It aligns everyone within an organization so that all employees understand how they
support the strategy.
 It provides a basis for compensation for performance.
 The scorecard provides a feedback to the senior management if the strategy is working.
 Focusing the whole organization on the few key things needed to create breakthrough
performance.
 Helps to integrate various corporate programs. Such as: quality, re-engineering, 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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 DISADVANTAGES OF BSC

 It is not easy to implement this tool because it involves a lot of subjectivity.

 The tool is much more complex compared to the other tools

 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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 Tata Motors is the first Indian
company to be inducted in the
Balance Scorecard Hall of
UTILISING THE BALANCED Fame.,Joining the thirty-member elite
club of organizations including Hilton
SCORECARD AS A STRATEGIC Hotels, BMW Financial Services, U.S.
Army, Korea Telecom, Norwegian Air
MANAGEMENT TOOL Force and the city of Brisbane for
achieving excellence in company
performance.
The tool has become a weapon for organizations to
identify the pressure points, conflicting interests,
objectives setting, prioritization of objectives, planning and budgeting. The four main important
steps that need to be taken care of are –
1. Translating the Vision
It is to be remembered that the vision of any organization should be understood by each and
every employee of the organization. If it is understood by the top management only, then it is
definite that the organization will fail to realize its goals. Hence, before starting with the strategic
implementation process, the organizations needs to be clear about the reason for its existence,
where it wants to see itself after a certain number of years and properly decide its business
definition. The managers should build a consensus around the organisation’s vision and strategy.
The strategies, in fact, emanate from the vision and mission of the company which means that a
linkage is formed between the strategies of the different business units and the vision of the
organization. The lofty statements must be translated into an integrated set of objectives and
measures. Thus, by using this tool, the overall strategic objectives for the company gets clarified
which helps to achieve consensus across different business units on the overall strategic
objectives for the company.
2. Communicating and Linking
Just communicating the vision and the strategies is not an end in itself.

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The strategic goals and the measures to be set in the different areas have to be decided upon. The
long-term strategic goals have to be translated into both departmental and individual goals which
should be aligned to each other in order to realize the long-term goals. In fact, each and everyone
at different levels in the organizational hierarchy needs to be educated about the action plans and
reasons for accepting the same. The tool contains three levels of information:
(i) It describes the corporate objectives, measures and the targets
(ii) It helps in deciding the business unit targets and
(iii) It helps in framing the departmental and the individual objectives which will help in
attaining the objectives of the business unit directly which would lead to the attainment of the
corporate goals. The employees are given the freedom to decide their measures, objectives and
the targets attainment of which would move the organization in the right strategic direction. Then
the compensation level is linked to the performance level which in reality involves a lot of
subjectivity.
3. Business Planning
This step helps in the resource allocation process. One has to keep in mind that objectives form
an important criteria in deciding the quantum of resources that are required to be allocated to the
various departments, activities and the processes. No strategy can bring successful results to an
organization if the allocation is not in line with what is required to meet the results. This
allocation is dependent on the budgeted estimates which are decided on the basis of the said
objectives. Hence, through this step the Balanced Scorecard tries to bring about an integration
between strategic planning and the budgeting exercise. The short-term milestones are also
needed to be figured out which in totality brings about a linkage between strategic goals and the
budgets. This procedure helps in actualizing what has been set by the organization. Thus, this
step brings about a shift from the ‘thinking’ exercise to the ‘doing’ stage and the organization
tries to achieve the long-term goals through the short-term actions.

4. Feedback and Learning

The first three steps as mentioned above help in the strategic implementation process. But, for
knowing whether the organization is in a position to achieve the strategic goals and whether it is
in the right track, the process of feedback and learning is essential. The strategic learning
consists of acquiring knowledge about which way the organization is moving to, testing whether

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the premises considered before hold true even now and finally making adjustments wherever
required. The corrective measures are required so that the necessary rectifications are made
which will help an organization pursue the correct path.
Another point is that an organization gets to know whether the cause-and-effect relationships
among the different perspectives really hold true, to what extent they are strongly linked and also
whether positive results are being obtained. In case, an organization realizes the existence of a
gap in the cause effect relationships, an immediate correction would be required so that a
positive relationship can be build among the various factors. Thus, the tool with its specification
of the causal relationships between performance drivers and objectives allows corporate and the
business unit objectives executives to use their periodic review sessions in order to evaluate the
validity of the unit’s strategy and the quality of its execution. Also, this feedback and learning
exercise may force an organization to change the measures set in each of the perspectives and
adopt those, which if attained would ensure the success of the corporate and the business
strategies.

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 RESEARCH METHODOLOGY

Research approach

There are several different research approaches a project can have. In this project we have
chosen to have a descriptive approach to in the best way possible fulfill the project’ purpose. A
descriptive approach in a project aims to describe how reality looks and through collection
and analysis of data draw conclusions.

Research method

There are two different ways data can be collected according to Jarl Backman - the
quantitative method and the qualitative method. The quantitative method is characterised by a
numerical observations such as experiments, tests, polls and questionnaires. The qualitative
method on the other hand can be distinguished by the lack of use of numbers. Instead there is
a focus on the written word where the spoken or written is collected into a text with an aim to
create a deeper understanding among the readers. Although qualitative researches are less
extensive they go deeper down in each area.

Data collection

There are two main types of data which can be collected during a research project: primary
data and secondary data. Primary data is information collected by the researchers themselves
for a specific purpose whereas secondary data is information collected by someone else and
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then reported in their own publication.

Primary data

In order to answer the questions asked when formulating the problem we needed to make an
empirical study to find out how the balanced scorecard is used as a communication tool in a
company. When deciding how to carry out the study we looked at what method would give
us the most information and the best picture of how the organisation worked with the balanced
scorecard as a tool. The conclusion was to make personal interviews with employees
within an organisation working with the balanced scorecard together with gathering data on
what the day to day work with the tool looks like.

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 Personal interviews were chosen as an instrument since they give the respondent an
opportunity to pose questions while providing an immediate answer. We believe that
personal interviews reflect the respondents’ opinions and their understanding in a better way
than questionnaires.

Secondary data

Secondary data is what is first used in a study since it is cheaper and easier to collect. The
already gathered data gives the researcher a picture of the subject and creates a possibility to
link other theories and information together. Although secondary data is the most cost- and
time-efficient way of gathering information there is always the risk of data being distorted
13
when repeated once again, particularly if one author quotes another. Throughout the
gathering of information for the project we have always tried to go back to the original source
when one author refers to someone else in their book or article to make sure that the reader
will not receive third-hand information.

Since the approach of this project is descriptive, not only of a company, but also of the
theories of the balanced scorecard and communication and how they interlink much of the data
the project is based on have to be secondary. We want to create a clear picture with the reader
of what the balanced scorecard is before moving on into how it can be used as a
communication tool. This means that the theories we used to describe the concept and
combined into a model to compare Kungälv Hospital with, were all collected from books,
either written by Kaplan and Norton, the creators of the balanced scorecard, or by people
who have studied the model and drawn their own conclusions of the use of it.

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 CONCLUSION

The Balanced Scorecard is therefore a very important strategic management tool which helps an
organization to not only measure the performance but also decide the strategies which are needed
to be adopted so that the long-term goals are achieved. Thus, in other words, the application of
this tool ensures the consistency of vision and action which is the first step towards the
development of a successful organization. Also, its proper implementation can ensure the
development of competencies within an organization which will help it to develop a competitive
advantage without which it cannot expect to outperform its rivals.

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 bibliography

REFERENCES

www.valuebasedmanagement.net.

http://en.wikipedia.org

www.thebalancedscorecard.com

www.managementhelp.org

ucsfhr.ucsf.edu/files/implementationguide.doc

www.managementparadise.com

www.citehr.com

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