Balanced Scorecard

(BSC)
Why Is It Useful For Businesses To Use The BSC
Framework As A Strategic Framework?
DEFINITION

Balanced scorecard is a strategic planning tool

developed by Kaplan and Norton (1996) as a

response to the assumptions that organisations
only exist to satisfy stakeholders (Kaplan & Norton,
1992).
DEFINITION CONT’D

Balanced scorecard can also be defined as a

carefully selected set of measures derived from an
organisation’s strategy (Niven, 2002).
PURPOSE OF A BALANCED SCORECARD

The balanced scorecard assists managers to highlight

four dimensions and to understand cross-functional
relationships that can ultimately lead to improvement,
problem-solving and decision-making (Kaplan &
Norton, 1992, P. 21-79).
PURPOSE OF A BALANCED SCORECARD

According to (Kaplan & Norton, 1996) the balanced

scorecard can be useful throughout the organisation
to:-

● Communicate strategy throughout the

organisation;
PURPOSE OF A BALANCED SCORECARD

● Align departmental and personal goals to the

strategy;
● Link strategic objectives to long-term targets and
annual budgets; and
● Obtain feedback to learn about and improve
strategy.
 HOW DOES THE BALANCED SCORECARD
WORKS

Balanced scorecard
translates mission and
strategy into objectives and
measures, then organized
into four different
perspectives
HOW DOES THE BALANCED SCORECARD WORKS

Strategic objectives, criteria and action plans are then

formulated for each perspective. The continuous
process of the development of the Balanced
scorecard is focused on the reconciliation of these
objectives.
BALANCED SCORECARD PERSPECTIVES

These Four Perspectives Are:

1. The Financial Perspective

2. The Customer Perspective

3. The Internal Business Process

4. Learning & Growth Perspective

 BALANCED SCORECARD PERSPECTIVES

According to Kaplan and Norton , (1996) , the four

perspectives of the scorecard allow a balance between:

1. Short term and long term objectives.

2. Desired outcomes and the performance drivers of those
outcomes.
3. And, between hard objectives measures and softer, more
subjective matters.
FINANCIAL PERSPECTIVE

The financial perspective indicates whether the company’s

strategy and operations add value to shareholders. For
organisations that do not have shareholders, the financial
perspective indicates how well the strategy and operations
contribute to improving the organisation’s financial health.
(Kaplan and Norton, 1996: Wu, 2012)
CUSTOMER PERSPECTIVE

The customer perspective indicates how the

company’s strategy and operations add value to
customers. (Kaplan and Norton, 1996: Wu, 2012)
INTERNAL BUSINESS PROCESS PERSPECTIVE

The internal business process perspective indicates the

ability of the internal business processes to add value to
customers and to improve shareholder wealth. (Kaplan
and Norton, 1996: Wu, 2012)
LEARNING & GROWTH PERSPECTIVES

The learning and growth perspective indicates the

strength of the infrastructure for innovation and long-
term growth. The balanced scorecard framework derives
its power by providing a holistic view of business value
through its four perspective. (Kaplan and Norton, 1996: Wu,
2012)
BENEFITS OF THE BALANCED SCORECARD

● Helps companies focus on what has to be done in

order to create a breakthrough performance;
● Makes strategy operational by translating it into
performance, measures and targets; and
● Acts as an integrating device for a variety of
corporate programmes (Kaplan & Norton, 1996).
STRATEGY

Strategy is a plan of action to achieve defined goals, in

conditions of uncertainty, with limited resources. Its purpose
is to diagnose near term challenges so that a plan of action
can be implemented in order to overcome the impediment
and progress toward the ultimate goal. (McKeown, 2014)
BSC AND STRATEGY

The balanced scorecard provides a powerful framework for building and

communicating strategy. The business goals and objectives are visualised in
a strategy map which helps managers to think about the cause and effect
relationships between the different strategic objectives. The process of
creating a strategy map ensures that consensus is reached over a set of
interrelated strategic objectives. It means that performance outcomes as
well as key enablers or drivers of future performance are identified to
create a complete picture of the strategy.
STRATEGIC MAP

A strategy map is a diagram that is used to document the primary

strategic goals being pursued by an organization or management
team developed by Robert S. Kaplan and David P. Norton in
1996. It is typically an element of the documentation associated
with the balanced scorecard by translating strategy into actions
that models the relationship between the drivers and the desired
outcomes.
 DIAGRAM OF A STRATEGIC MAP

As shown in the diagram, for each

perspective, there is a set of objectives.
The measures within the scorecard
framework are aligned to the objectives
and targets set. An action plan is linked
to the objectives along with an
associated budget.
USEFULNESS OF BSC AS A STRATEGIC
FRAMEWORK

● It provides a framework to align everyone in the organization around a mission and

vision.

● It allows organizations to be more responsive to changes in the competitive landscape.

● It provides quantifiable metrics that show the health of an organization.

● It helps drive transparency.

● It links projects to measures, and measures to strategy.

 HUMAN RESOURCE PERSPECTIVE:-
HR BALANCED SCORECARD
The most potent action HR managers can take to ensure their
strategic contribution is to develop a measurement system
that convincingly showcases HR’s impact on business
performance.
That system is the HR Scorecard (Becker et al, 2001).
 HUMAN RESOURCE PERSPECTIVE:-
HR BALANCED SCORECARD
The HR Scorecard is a strategic HR measurement system
that helps HR Professionals to measure, manage and
improve their strategic role of the Organisation (Becker et
al, 2001).

The use of a Balanced Scorecard concept in strategic HR

helps organizations to align & manage its people effectively
towards achieving organisational goals and objectives.
 HUMAN RESOURCE PERSPECTIVE:-
HR BALANCED SCORECARD
Becker et al (2001) indicate that the Scorecard consists of
measurements of:

1. HR deliverables

2. HR policies, processes and practices

3. HR system alignment

4. HR efficiency
 HR DELIVERABLES
These identify how the HR system generates value within an
organisation. A company called HiTech is used to explain:

The Company’s Strategic Goals are Revenue Growth and

Productivity Improvement.

Deliverables can be:

● experienced, talented staff in R&D, and

● optimal staffing levels in the manufacturing units.

 HR POLICIES, PROCESSES AND PRACTICES
Such policies, processes and practices are also known as High
Performance Work Systems (HPWS). These help generate the
HR deliverables required to support the company’s strategy.
Such as:-
● Competency-based selection methods
● Retention programs for prospective and current employees
● Regular performance appraisals are also important to ensure
that employees are maintaining the required talent and
experience level
● A short recruiting cycle
 HR SYSTEM ALIGNMENT

This focuses on the specific elements of the HR system that

must reinforce each other to produce the HR deliverables. In
essence the alignment of the HR system with strategy
implementation.
● measure how well its HR system is aligned to its strategic goals
by monitoring how many new employees were selected based
on the competency model
● provide the types of benefits that will retain R&D staff
● Keep recruiting cycle time as short as possible
 HR EFFICIENCY MEASURES

Identifying the exact tasks at which HR must be efficient to

support the company’s strategic goals, i.e identifying those
strategic metrics that are designed to produce the HR deliverables.

● E.g. Identifying cost per training or cost per hire as a strategic

measure. While cost per hire might be higher than average, this
cost represents a strategic investment in the company. As it is
linked to the HR Deliverables which invariably are aligned to
implementing the Company’s strategy.
 BENEFITS OF HR SCORECARD

According to Becker et al (2001), some highlighted benefits are:

● It assesses HR’s contribution to strategy implementation and

the bottom line
● It lets HR professionals effectively manage their strategic
responsibilities
● It encourages flexibility and change
 CONCLUSION

In conclusion, the BSC framework accomplishes more than

measuring performance. Organisations have varying needs,
customers, markets as well as products and services. A
balanced scorecard plays an integral role in ensuring that the
goals and objectives are met through the use of the mission,
vision and business strategy. It is also useful tool to align
Human Resources (HR) with strategic planning.
 REFERENCES

● Becker, B., Huselid, M. and Ulrich, D. (2001) The Balanced HR Scorecard: Linking
People, Strategy and Performance. Harvard: Harvard Business School Press.
● Kaplan, R. and Norton, D., 1996. Linking the Balanced Scorecard to Strategy.
California Management Review, 39(1), pp.53-79.
● Kaplan, R, & Norton, D. 1996 :The Balanced Scorecard: Measures that Drive
Performance. Harvard Business Review (January-February), 1992, pp. 21-79.
● McKeown, N., (2014) Digital Business Strategy
● Niven, R. 2002. Balanced Scorecard Step by Step: Maximising Performance and
Maintaining Results. John Wiley and Sons Inc, New York.
● Wu, H., 2012. Constructing a strategy map for banking institutions with key
performance indicators of the balanced scorecard. Evaluation and Program Planning,
35(3), pp.303-320..