Balanced Scorecard

● The balanced scorecard is a management system aimed at translating an organization's

strategic goals into a set of organizational performance objectives that, in turn, are measured,
monitored, and changed if necessary to ensure that an organization's strategic goals are met.

The four perspectives of a traditional balanced scorecard are Financial, Customer, Internal
Process, and Learning and Growth

Why is it called balanced scorecard?

The name “balanced scorecard” comes from the idea of looking at strategic measures in addition
to traditional financial measures to get a more “balanced” view of performance. The concept of
balanced scorecard has evolved beyond the simple use of perspectives, and it is now a holistic
system for managing strategy.

What is the purpose of a scorecard?

Scorecards are the performance management tool that compares strategic goals with results. This
tool allows management to implement its strategy by aligning performance with goals.

Why would a company use a Balanced Scorecard?

While financial measures tell part of the story, the Balanced Scorecard offers an overarching
view a business's strategic plan from the executive perspective. This, in turn, provides a
framework for the entire organization in terms of guiding performance.

RINA’s PART
The performance measures considered up to this point have relied only on financial
accounting measures as the means to evaluate performance. Over time, the trend has become to
incorporate both quantitative and qualitative measures and short- and long-term goals when
evaluating the performance of managers as well as the company as a whole. One approach to
evaluating both financial and nonfinancial measures is to use a balanced scorecard.
1. Vision and mission statements define the purpose of the organization and instill a sense of
belonging and identity to the employees. This motivates them to work harder in order to
achieve success. It gives the right mindset to grow business. Strategies comes follow and
should be aligned to achieve the mission and the vision.

2. An effective and successful balanced scorecard will start with the strategic plan or goals of
the organization. Those goals are then restated based on the areas of perspectives.

Objectives are high-level organizational goals. When you create an objective, you should
focus on what your organization is trying to accomplish strategically.

3. Once the strategic goals of the organization are stated for the appropriate level for which the
balanced scorecard is being created, then the measures for each of the categories of the
balanced scorecard should be defined. The variables have to be obtainable and measurable.

Measures help you understand if you’re accomplishing your objectives strategically.

4. Objectives to measures to specific target

Financial
● measures based on financial statements (income statement, balance sheet, and statement of
cash flows are required financial statements)
● Traditional measures or traditional techniques are backward looking. That is, they focus on
past financial performance rather than what managers are doing to create future shareholder
value.
Customer
● For each of the goals, there is a general measure that will be used to assess if the goal has
been met. In this example, the goal to improve customer satisfaction will be assessed using
customer satisfaction surveys. But remember, measures are only useful as a management tool
 if there is a target to work toward. In this case, the goal is to achieve an overall 95%
customer satisfaction rating.
JAZ’s PART

Internal business perspective measures

are those that evaluate management’s operational goals, such as quality control or on-time
production.

Learning and growth perspective measures

● are those that evaluate how effectively the company is growing by innovating and creating
value. This is often done through employee training.
● Balanced scorecards use both financial and nonfinancial measures to evaluate employees.
● Notice that this scorecard starts with the overall corporate mission. It then contains very
broad goals and measures in each of the four categories: financial, customer, internal, and
learning and growth.

Key Takeaway
● The Balanced Scorecard reflects the balance between short term and long-term objectives,
then the balance between financial and non-financial measures which also refers to
quantitative and qualitative measures, as well as external and internal performance
perspectives.
● The Balanced Scorecard is a management tool that provides stakeholders with a
comprehensive measure of how the organization is progressing towards the achievement of
its strategic goals.
● Well-designed balanced scorecards can be very effective at goal congruence through the
utilization of both financial and nonfinancial measures.
● The Balanced Scorecard enables the business to break goals into measures, measures into
projects, and projects into action items, just like what we have seen from the implementation
table earlier.
● Measures should always tie back to goals, giving the business the direct feedback around
how the business is doing.
● By aligning actions with strategy—and measuring the outcome of those actions—the
business gain directly relevant insights on strategic performance.

Now we have arrived at the end of our presentation, since we are the last presenter in our class,
before we proceed to your questions and the recitations, let’s have some short review or short
summary of what we have learned from the past reports, from the strategic analysis tools that we
have tackled.

First one we have SWOT Analysis, and as we know, it comprises of 4 components namely:
strengths, weaknesses, opportunities, and threats. In which both strengths and weaknesses are
categorized as internal factors since the organization has the ability to control it. On the other
hand, both opportunities and threats classified as external factors that cannot be controlled by the
organization. As mentioned by the 1st reporters, SWOT is by far the best and the most widely
used strategic planning tool.

Next one we have Porter’s Generic Strategy which consist of 3 components such as Cost
Leadership, Differentiation, and Focus. This strategic planning tool is created for the purpose of
having a competitive advantage, as well as developing an edge that would help the business to
get sales and take the lead against its competitors.

Then we have Porter’s Five Forces Analysis which was created to analyze the attractiveness and
potential profitability of an industry. This tool has 5 components: Supplier Power, Buyer Power,
Threat of Substitution, Threat of New Entrants, and Industry Rivalry.

But we have to remember that businesses, more specifically, starting businesses shall adapt and
use the Porter’s Five Forces Analysis first before Porter’s Generic Strategy since the Porter’s
Five Forces Analysis focuses on external factors which is much more necessary to give
importance to compared to Porter’s Generic Strategy that focuses internally. In here, it does not
mean that Porter’s Generic Strategy which focuses on internal factors is less important, it’s just
that, external factors are much more important for more effective and efficient internal
operations.

Also, we have Pestel Analysis that comprises of 6 components namely: Political, Economic,
Social, Technology, Environment, and Legal. And as discussed by the fourth reporters, the
purpose of Pestel Analysis is assessing the viability of new venture and identifying opportunities
and threats.

Further, we have BCG Growth-Share Mix, which consist of…

Lastly, we have the Balance Scorecard consisting of 4 components/perspective such as financial,
customer, internal, and learning and growth. Again, this tool is used to measure the performance
of the organization. As mentioned earlier by Ms. Villafuerte, this tool is created for the purpose
of ethical decision-making, evaluating employees and managers, identifying, and aligning
strategic initiatives, and focusing on the drivers’ key to future performance.