Why does business need a

Balanced Scorecard

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If you cant measure it, you can cant manage it

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BSC Translate Strategy & Mission into performance measures as a strategic management system

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Once again let us see what

BSC does

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Financial Measurement attempts

Return on Investment Operating & Cash Budgets Ratios DuPont Analysis Trend Analysis Common size Statements Financial Auditing

All these tells about past than

future

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Financial Measurement

Financial Measures are inadequate for guiding and evaluating organizations trajectories through Competitive environment..Xerox

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Financial perspectives

Profitability, Operating Income Return on capital Economic value added Sales Growth Cash flow

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Financial performance measures indicates Whether an organization's strategy, implementation and execution are contributing to bottom line improvement ?

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Customer perspectives

Market Segment, Customer Satisfaction Customer Retention New customers Customer profitability Market share Account share

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Customer perspective

The Customer perspective enables business unit managers to articulate the customer and market based strategy that will deliver superior future financial returns

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Internal business perspectives

Critical processes to excel

Innovation Process Operation Process

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Internal Process perspective

The internal Business process perspective of the Balance scorecard incorporates measures for short and long term innovation & operations processes to give better value to the customers and sholders

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Learning and Growth Perspective

People Systems Procedures

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Learning & Growth perspective

The Financial, Customer and Internal Process Objectives on the BSC typically will reveal large Gaps between the existing capabilities of people Systems and procedures and what will be required to achieve break through performance

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Learning & Growth perspective

To close these Gaps, businesses will have to invest in reskilling employees, enhancing information technology and systems and aligning organizational procedures and routines

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alignment is not an easy task but it needs to be there for

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Customer perspectives

Market Segment, Customer Satisfaction Customer Retention New customers Customer profitability Market share Account share

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Linking Scorecard Measures to a Strategy

Cause and Effect Relationship Outcome Measures & Performance Drivers

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Cause and Effect Relationship

The measurement system should make the relationship among objectives and measures in the various perspectives explicit so that they can be managed and validated. The chain of cause and effect should pervade all four perspectives of Balanced Scorecard.

ROCE as Measure Driver of measure

Repeat sales Customer Loyalty Customer Satisfaction On time delivery
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Financial Perspective

Customer Perspective

ROCE
Financial Cause and effect Relationship Customer On time Delivery Internal Process Process Quality Process Cycle Time

Customer Loyalty

Learning & Growth

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Employee Skill

Performance Drivers

Activities which helps in achieving the objectives through outcome measures

ROCE
Measure

Sales Growth Customers Loyalty Quick Delivery Trained Manpower

Performance Drivers
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Lagging Indicators (Outcome Measures)

Balance Scorecard

Leading Indicators
(Performance Drivers)

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Question

Should Financial Measures be Scrapped ?

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Could be

Yes;

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In todays technologically and customer driven global competition

Financial measures provide Poor guidelines for

Success

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Customer Satisfaction Quality

Managers should focus On improving

Cycle times
Employees skills Motivation

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Sales

Impact of other 3 perspective On financial perspective

Return Physical Assets Growth

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Four Perspectives: are they sufficient

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watch interest of More perspectives Employees Suppliers community

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Strategic Positioning or competencies driven

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Strategic Positioning or competencies driven

Strategy for choosing the market & customer Segments it wish to serve, identifying critical internal processes and to excel in that to give value to the customers

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Competencies/capabilities driven

Alternatively many organizations exploit their Competencies, resources and capabilities to Give better services or product Hero Honda- engines Canon - cameras

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to sum Up.

Balance Scorecard is primarily a mechanism for Strategy implementation and nor strategy formulation It can accommodate either approach for formulating Business Strategy- starting from customer perspective or Starting from excellent internal process capabilities

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to sum Up.

What ever approach is followed to Formulate the strategy, the BSC will provide an Invaluable Mechanism for translating the strategy into specific Objectives, measures and targets and monitoring the Implementation of that strategy during Subsequent periods

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and.

Management should disclose the financial and Non financial measurement it uses in managing the business unit that quantify the effects of key activities and events. It is possible through Balance score card

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Questions

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