Denise Daniella Hidajat

041911333179
AML Week 9
The Balanced Scorecard

- DEFINITION
management tool that provides stakeholders with a comprehensive measure of how the
organization is progressing towards the achievement of its strategic goals.
- ORIGINS
 Multi-company research from 1990's undertaken by R. Kaplan & D. Norton aimed
at developing alternatives to purely financially based performance management tools
(e.g. budgets)
 Early Scorecard experimentation at Analogy Devices Inc. documented from 1987
- OBJECTIVES USING BSC
1. To achieve strategic objectives.
2. To provide quality with fewer resources.
3. To eliminate non-value added efforts.
4. To align customer priorities and expectations with the customer.
5. To track progress.
6. To evaluate process changes.
7. To continually improve.
8. To increase accountability.
- TWO PRIMARY APPLICATIONS OF BSC
1. Strategic Balanced Scorecards;
a. Focus on what the organisation is trying to achieve
b. Work out what needs to happen to achieve it
c. Monitor whether it is achieved
2. Operational Scorecards;
a. Identify the most important processes to be monitored
b. Define which aspects of the process to monitor
c. Agree on what is considered best practice
- FOUR AREAS MEASURED BY BSC
1. The user perspective  CUSTOMER PERSPECTIVE  How do customers see us?
2. The finance perspective  FINANCIAL PERSPECTIVE  How do we look to
shareholders?
3. The internal process perspective  INTERNAL BUSINESS PERSPECTIVE 
What must we excel at?
Denise Daniella Hidajat
041911333179
AML Week 9
4. The learning and future perspective  LEARNING AND INNOVATION
PERSPECTIVE  Can we continue to improve and create value?

- BSC AND THE BIG PICTURE

- HOW DOES ORGANIZATION APPLY BSC?

Denise Daniella Hidajat
041911333179
AML Week 9

- CUSTOMER PERSPECTIVE  to achieve our vision, what customer needs must we

serve?
Possible Performance Measures :
a. Customer Satisfaction (Average)
b. Satisfaction Gap Analysis (Satisfaction vs. Level of Importance)
c. Satisfaction Distribution (% of each area scored)
- FINANCIAL/REGULATORY PERSPECTIVE  to satisfy our constituents, what
financial and regulatory objectives must we accomplish?
Possible Performance Measures :
a. Cost / Unit
b. Unfunded Requirements or Projects
c. Cost of Service
d. Budget Projections and Targets
- INTERNAL PERSPECTIVE  to satisfy our customers, in which business processes
must we excel?
Possible Performance Measures
a. Cycle Time
b. Completion Rate
c. Workload and Employee Utilization
d. Transactions per employee
e. Errors or Rework
Denise Daniella Hidajat
041911333179
AML Week 9
- LEARNING AND GROWTH PERSPECTIVE  to achieve our goals and accomplish
core activities, how must we learn, communicate and work together?
Possible Performance Measures
a. Employee Satisfaction
b. Retention and Turnover
c. Training Hours and Resources
d. Technology Investment
- BSC REPRESENTATION METHODS
1. Traditional BSC
a. Four levels
b. Bubbles, but no connecting lines of a map (too confusing)
c. Some partitioning of functions on a horizontal scale
2. Simple lists with metrics and goals
3. Quadrants with everything on one page
4. Popular way  list the objective in a table, with metrics
a. Assign portfolios of projects
b. Cascade the Scorecard down to the functional manager level
c. Tie “every thing” to an objective even the level of effort projects
- BSC AS A MANAGEMENT SYSTEM
 reviewed regularly to enhance operational decision-making
o Success of initiatives assessed based on DATA… not opinions
o Leading indicators evaluated to confirm accuracy of assumptions
 BSC is a “Living Document” that requires regular revision of objectives, measures
and initiatives:
o How are we doing?
o Are we measuring the right things?
o What initiatives do we need to get us where we want to go?
o Have our organizational goals changed?
- POTENTIAL PROBLEM WITH BSC
1. Excessive centralization & rigidity
2. High level of (heavily quantitative) detail - substantial set-up costs (time & money)
3. Low system agility - difficult to keep pace with turbulent business environments
4. Deals with meeting shareholder & customers’ needs, but ignores employees’ needs
Denise Daniella Hidajat
041911333179
AML Week 9
5. Testing strategic cause-and-effect assumptions = run some correlations?!
6. Weak on unintended outcomes—lack of an open-ended element
7. Any room here for emergent strategy?
8. Some of the goals are hard to create metrics for, EX : Manage requirements
9. The customer wording is too soft at times, since the metrics for satisfaction are hard to
come by in our environment
10. Lack of time for the decision makers to focus on strategy
11. Confusion between operational efficiency and strategy
12. Difficulty in creating well defined metrics and connecting them to deliverables
13. Cascading the objectives down to the staff that can deliver the results
14. Once the strategy has been defined, loosing the picture focus and delving into the
details
15. Becoming enamored with the “pretty pictures, charts and graphs”