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Building a Balanced Score Card

Steps for implementation
Benefits of balanced score card to my organization
Major challenges in implementation and how to resolve them

Building a Balanced Score Card

The main objective of creating and implementing a balanced scorecard is to increase efficiency
and productivity .Whereas, a highly effective balanced scorecard may offers following benefits.

This enables organizations to: Identify or reassess value drivers who are key to achieving
the mission of department and division.
Enable leadership to manage more effectively and respond to dynamic changes more
quickly.
Focus attention on the few activities that will deliver wide spread results.
Helps to improve departmental performance.

According to Robert Kaplan and David Norton, who wrote a 1992 Harvard Business Review article
on The Balanced Scorecard Measures That Drive Performance, the balanced scorecard
measures an organizations activities in terms of its vision and strategies. Basically, it gives
managers a comprehensive view of business performance. In Kaplans and Nortons words, If you
cant measure it, you cant manage it, and When performance is measured, performance
improves.
It is important to accentuate that the balanced scorecard is to be used as a communication and
learning system and not as a controlling system i.e. the balanced score card should be
implemented at each level of organization i.e. running through the organization from top to bottom
with highly customized objectives and measures. Everyone should have their own scorecard and
it should be consistent with their role and what they are being asked to achieve on behalf of their
team. There should be scorecards for executives of every level.
Kaplan and Norton recommend a nine-step process for creating and implementing the balanced
scorecard in an organization.
Design of a balanced scorecard is all about the allocation of a small number of financial and nonfinancial measures and assigning organization targets to them, so that when they are reviewed it is
possible to determine whether current performance is at par with the projected figures.in case of
any deviations managers get alerted, so that they can be encouraged to focus their attention on
these areas, and put every effort to improve performance within the part of the organization they
lead.
Before Creating Scorecards, it is advisable to diagnose the Current Situation dedicated teams
need to be set out to diagnose the situation by assessing the current business environment, track
the individual metrics such as (employee satisfaction, customer service, financial measures, and
process excellence and efficiency) as well as set of metrics etc. so that a fair conclusion can be
drawn on trouble area.
Steps for implementation
Following are the guiding framework to help introduce the balanced scorecard into an organization
Step 1. Project initiation process to get stakeholder and management buy-in. provided there
should be clarity of mission and vision, it will focus on an analysis of key issues and challenges,
usually using a SWOT analysis to identify what needs to be done to achieve the desired results in
the current and predicted environment. It also involves communication and training plans aliened
to the balanced scorecard process so that everyone knows what to expect.
Step 2. Decide on the elements of organizations strategy, including strategic objectives based
upon the four perspectives. This draws attention on Customer needs and financial necessities;
how the organization intends to deliver against these strategy through Internal Processes and

Learning & Growth. Strategic objectives are basic building blocks for deciding upon a future plan
of action and define the organizations strategic intent. Objectives are initiated and categorized by
perspective and linked in cause-and-effect relationships to form a strategy map.
Step 3. Development of performance measures for each strategic objective. Identify the measures
is develop the baseline and benchmarking data and define targets. It is important to identify a
basket of measures so that qualitative and quantitative measures are considered.
Step 4. A set of agreed upon initiatives in the form of programs and projects get developed to
ensure that targets are met and strategic objectives achieved. To build accountability all over the
organization, ownership of measures and initiatives is assigned to named individuals who become
the sponsors or in project management terms, the responsible owners.
Step 5. The implementation process begins by applying a performance measurement system to
gather and provide the right performance information to the right people at the right time. A good
measurement and feedback system will help people make better decisions because it offers quick
access to performance data.
Step 6. The corporate-level scorecard is scaled down or converted into departmental and team
scorecards, meaning the organizational level scorecard (may termed as Level 1 Score card ) is
translated into Level 2 scorecards (i.e. Departmental) and then to team (Level Three) and
individual scorecards (Level Four). Thus this Cascading of Organizational Score card converts
high-level strategy into lower-level objectives, measures, and operational plans. It is the key to
organizational alignment around strategy. Team and individual scorecards link day-today work with
department objectives and corporate strategy. Performance measures are developed for all
objectives at all organizational levels. As the scorecard management system is scaled down
through the organization, objectives become more working and tactical, as do the performance
measures. Accountability follows the objectives and measures, as ownership is defined at each
level.
Step 7. An emphasis has been put on the results and the initiatives needed to produce the desired
results is communicated throughout the organization.
Step 8. An evaluation of the completed scorecard is carried out and a report is produced. During
this evaluation, the organization search for answer to some generic questions such as, Are we
getting results?; Are our strategies working?; Are we measuring the right things?; Has our
environment changed? and Are we line up resources properly?. reports are expect to be on a
regular basis (monthly or quarterly) and include a visual element such as
red , green light
reporting system to focus attention on critical and urgent areas where performance is at greatest
risk.
Benefits of balanced score card to my organization

Overcoming Challenges The balanced scorecard helps organizations overcome various

internal and external challenges such as how to measure Organizational performance
effectively? How to evaluate and nourish the intangible assets and deciding an effective
plan implementation strategy. Thus filling the gap created by the traditional financial
measures of performance as they neither reflect current business environment nor
encourage long-term thinking. Intangible assets create most of the value generated in
organizations and the balanced scorecard provides metrics for the effective use of these
assets. Successful strategy implementation is a major challenge for all organizations.
Vision, people, resource and management barriers can spoil the strategy.

Components: The balanced scorecard measures performance from four interrelated

perspectives: financial, customer, internal business processes, and learning and growth.
With the improvement in employee learning, internal business processes improve. Thus
creating best possible products and services which results in higher customer satisfaction
and higher market share which can be captured by the financial measures.
New Management Processes: The balanced scorecard helps create management
processes that tie short-term inventiveness with long-term goals. It starts with
transformation of the vision and the strategy into operational stages. Subsequently
communicating the operational terms among various departments. The business planning
process helps managers choose the most effective alternatives toward organizational
goals. Last but not the least the feedback and learning process helps the organization to
adapt dynamic environments. Thus ensuring the long-term survival of the organization
The Personal Scorecard: Most businesses rely on their executives to perform operational
tasks. Motivated and effective employees are the foundation of customer satisfaction.
Highly customized Personal scorecards which is actually a variant of Balanced Score card
translates the companys scorecard into tangible aims for individual executives. They are
tailored to each individuals roles and strengths thus helps to create synergies among
employees and encourages cooperation and specialization.
Scorecard ensures that the organization has the right measures. A logically structured
score card helps everyone know what should be measured, what belongs on the scorecard
and what does not.
Scorecards encourage balanced performance. Executing todays work is absolutely crucial,
but so is implementing the strategic initiatives that prepare the enterprise for tomorrow.
The Balanced scorecard is designed to offer a comprehensive view of how the enterprise is
doing and where its going, the scorecard will help to see if any key factors are missing.
Scorecards encourage good management. As noted earlier, scorecards make it possible to
readily monitor all the measures in a complex organization.
Scorecards communicates the performance of an organization to those who has interest in
its affairs. Strong scorecards helps to articulate about how the complex variables are being
balanced and optimized as a group. This allows the organization to present a convincing
picture of performance that is unvarnished by focus on an individual issue.

Major challenges in implementation of BSC

Scorecard balance is important because in its absence one could not be able to stay focused on
the long term goals which can lead to problems. For example, when solo focus is given to on-time
delivery, product quality could suffer dramatically to meet deadlines. However, concern should be
raised on how this balance is achieved. Using the balanced scorecard's traditional structure of
financial, customer, internal business process, and learning and growth (See Figure 1), A natural
balance can be established which is much more powerful than forcing balance throughout the
organizational.
1. very often organizations do not understand what exactly the Balanced Scorecard is and
what its implementation involves, regardless of whether they implement the BSC
themselves or whether they hire a consultant from the outside. Implementing Key
Performance Indicators (KPIs) is not the same as implementing the Balanced Scorecard.
2. Lack of executive sponsorship No initiative in an organization, regardless of its potential,
has any chance of success without a sponsor in top management if top management does
not support the BSC initiative, and, more importantly, does not appreciate its role in solving
real-life problems, the BSC will show mediocre results and will probably fail.

3. If a company wants to implement the Balanced Scorecard properly and reap all the benefits
this concept may bring, people should first learn about it. Due to its seeming simplicity,
executives often conclude that thorough education and training are not required. Such a
conclusion will permanently harm the BSC initiative and lead to failure.
4. A lack of education of top management and team members in charge of building the BSC
will certainly be a big challenge. Thus the essence of any BSC initiative is to lead people
throughout the organization to implement the strategy.
5. Inadequate IT support: to effectively assist the companys strategic discussion and learning
processes, the Balanced Scorecard should be continually updated with current and
operationally relevant information thus Operating and maintaining the Scorecard requires
continuous inputs.
6. An inadequate project team: relying exclusively on lower level executives to conduct the
BSC initiative is a potential reason for failure because of their indecision and insecurity.
7. Not involving the whole organization: The members of the project team should not be the
only people involved in the Balanced Scorecard. The Scorecard is a tool which should
improve communication within an organization. It need to cover the organization as a
whole.
8. Inadequate KPIs: BSC developers sometimes confuse enablers and performance drivers.
In the process of building the BSC, some existing measures may be found unnecessary
and will be omitted from the new tool. This will save effort and will allow focus to be placed
on the real essence of the strategy
Conclusion
BSC should not only be a collection of financial and non-financial measures divided in to
different perspectives, but it should reflect the strategy or future course of action of the
organization. So anyone can understand the strategy by only looking at the scorecard yet most
of the organization fails on this parameter. Strategy score cards with their graphical
presentation on Strategy maps provides a clear and logical way to describe the strategy which
communicates about the desired outcomes and means to achieve them . Thus enable all
organizational units and employees to understand the strategy and identify how they can
contribute by remain aliened to the strategy.