UNIT 3

BALANCE SCORE CARD

BALANCE SCORE CARD
• A strategic performance measurement model developed by Robert
Kaplan and David Norton.
• Its objective is to translate an organization’s mission & vision into
actual (operational) actions (strategic planning).
• Organizations use this tool to:
 Communicate what they are trying to accomplish
Align the day-to-day work that everyone is doing with strategy
Prioritize projects, products, and services
Measure and monitor progress towards strategic targets
BALANCE SCORE CARD
The system connects the dots between strategy elements such as
 mission (our purpose),
 vision (what we aspire for),
 core values (what we believe in),
 strategic focus areas (themes, results and/or goals)
And operational elements such as
 objectives (continuous improvement activities),
 measures (key performance indicators, or KPIs, which track strategic
performance),
 targets (our desired level of performance),
 initiatives (projects that help you reach your targets).
PERSPECTIVES
• It looks at your organization from four
different perspectives to measure its
health.
• Each of these perspectives focuses on a
different side of your company, creating a
balanced view of your organization.
• The starting points of the BSC are the
vision & the strategy that are viewed
from four perspectives: the financial
perspective, the customer perspective,
the internal business processes &
learning & growth.
FINANCIAL PERSPECTIVE
• It answers the question:
 “Are you making money?”
 “Are your shareholders happy?”
• The financial health of your organization may be a
lagging indicator showing the result of past decisions,
but it’s still incredibly important.
• Money keeps companies alive, & the financial
perspective focuses solely on that.
CUSTOMER PERSPECTIVE
• It answers the question:
 “who actually buy your products & services?”
 “Are you winning new business?”
 “How about keeping your existing customers happy?”
 “How are you viewed in your industry compared to your
competitors?”
• Customer satisfaction is a great forward-looking indicator of success.
• The way you treat your customers today directly impacts how much
money you’ll make tomorrow.
INTERNAL BUSINESS PROCESSES
• It looks at how smoothly your business is running.
• Efficiency is important here.
• It’s all about reducing waste, speeding things up, & doing
more with less. Are there unneeded obstacles standing
between new ideas & execution? How quickly can you
adapt to changing business conditions?
• This perspective also encourages you to take a step back &
get a little philosophical about your company. Are you
providing what your customers actually want? What should
you be best at?
LEARNING AND GROWTH (ORG’L CAPACITY)
• It looks at your overall corporate culture.
 “Are people aware of the latest industry trends?”
 “Is it easy for employees to collaborate & share knowledge, or is
your company a mess of tangled bureaucracy?”
 “Does everyone have access to training & continuing education
opportunities?”
• Technology plays a major role in learning & growth. Are people
able to use the latest devices & software, or are your archaic
systems stuck running yesterday’s tech? What are you doing to
make sure your organization is staying ahead of your competition?
STACKING THE PERSPECTIVES
• In the early years of the BSC, each of the four perspectives were
shown as being independent of the others. Over time, however, people
began to discover that these perspectives affect each other in
surprising ways. It turns out that the way we order them matters.
• Modern BSC show how each perspective builds on the previous one.
• If you train your employees & build a culture of information sharing
(Learning & Growth), they’ll make your company run more smoothly
(Internal Business Processes). A better running business takes better
care of its customers (Customer) & happy customers buy more of
what you’re selling (Financial).
BSC TERMINOLOGY: STRATEGIC OBJECTIVES
• Strategic Objectives are the continuous improvement
activities that we must do to implement strategy.
• It break down the more abstract concepts like
mission & vision into actionable steps.
• Actions that your organization take should be
helping you achieve your strategic objectives.
• Ex: Increase Revenue, Improve the Customer or
Stakeholder Experience, or Improve the Cost-
Effectiveness of Our Programs.
(NOTE: A goal is a broad primary outcome;
A strategy is the approach you take to achieve a goal;
An objective is a measurable step you take to achieve a
strategy; A tactic is a tool you use in pursuing an
objective associated with a strategy.)
BSC TERMINOLOGY: STRATEGY MAPPING
• Strategy mapping is used to visualize & communicate how value is
created by the organization.
• A strategy map is a simple graphic that shows a logical, cause-&-
effect connection between strategic objectives (shown as ovals on
the map).
• Improving performance in the objectives found in the
Organizational Capacity perspective enables the organization to
improve its Internal Process perspective, which, in turn, enables the
organization to create desirable results in the Customer & Financial
perspectives.
BSC TERMINOLOGY: MEASURES (KEY
PERFORMANCE INDICATORS)
• Every strategic objective should have one or two things that you measure (KPI)
to determine how it’s performing. These measures need goals & should be
measured on a regular schedule.
Ex:
 if a strategic objective were “Increase Acquisitions,” a good measure might be
“Number of New Acquisitions.”
 If the strategic objective were “Increase Employee Expertise,” a good measure
might be “Total Departmental Training Hours.”
• It’s important to choose a very small number of measures to track. By limiting
each strategic objective to one or two measures, you’re able to focus on the
things that matter most. Tracking too many measures often means that nothing
improves.
SUMMARY
• Perspectives: A BSC is broken down into four
Perspectives.
• Strategic Objectives: Each perspective has several
Strategic Objectives.
• Strategy Map: A chart showing the relationships
between strategic objectives.
•  Measures (KPIs): Each strategic objective has one
or two Measures.
PROCESS OF BSC
• Set up a vision, mission and strategic objectives.
• Perform a stakeholder analysis to gauge the
expectations of customers and shareholders.
• Make an inventory of the critical success factors
• Translate strategic objectives into (personal) goals
• Set up KPI’s to measure the objectives
• Determine the values for the objectives that are to be
achieve
• Translate the objectives into operational activities.
NEED FOR BSC
• Increases the focus on the business strategy and its outcomes.
• Leads to improvised organizational performance through
measurements.
• Align the workforce to meet the organization's strategy on a
day-to-day basis.
• Targeting the key determinants or drivers of future
performance.
• Improves the level of communication in relation to the
organization's strategy and vision.
• Helps to prioritize projects according to the timeframe & other
priority factors.
ADVANTAGES OF BSC
• It is used to align the business activities to vision &
strategy
• It improves Internal & External communications
• It is used to monitor organizations performance
• It provides management with comprehensive picture
of operations
• It provides strategic feed back
• It improves decisions & better solutions
DISADVANTAGES OF BSC
• It doesn’t provide Recommendations
• It is not fully Efficient
• It takes time
• It is high implementation of cost
• It can show low profit