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At the highest level, the Balanced Scorecard is
A framework that helps organizations
translate strategy into operational objectives
that drive both behavior and performance.

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Pioneers of BSC: Robert S. Kaplan and David P.
Norton
Translates an organization’s mission and strategy
into a set of performance measures that provides
the framework for implementing its strategy.
Called BSC because it balances the use of
financial and non-financial performance measures
to evaluate performance.
A performance management tool: No role in the
actual formation of strategy.

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 SKELETON FRAMEWORK OF BSC

STRATEGY

OBJECTIVES

MEASURES

TARGETS

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 Words on BSC By Kaplan and Norton:
"The BSC retains traditional financial measures. But
financial measures tell the story of past events, an
adequate story for industrial age companies for
which investments in long-term capabilities and
customer relationships were not critical for
success. These financial measures are inadequate,
however, for guiding and evaluating the journey
that information age companies must make to
create future value through investment in
customers, suppliers, employees, processes,
technology, and innovation."

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 EVOLUTION
Historically, the measurement system was on financial aspect.
Post-world War II- Intra corporation demands for reporting
and evolution of business unit performance based on
accounting info.
Last few decades - financial aspect of business unit
performance- highly developed.
Met with criticisms by many analysts.
Over emphasis on achieving & maintaining short-term
financial results.
Development of strategy review to maximize Shareholder
value.
Importance to short-run performance by exploiting customers
through high prices or lower service - Reported profitability,
but the lack of customer loyalty and satisfaction.
Thus Financial measures - inadequate for guiding and
evaluating firms.

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Basic Building Blocks Balanced Scorecard

Features:
• Double-Loop
Feedback
• Outcome
Metrics
• Management
By Facts
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 And Realize
the Vision

Financial
To Drive Financial
Results Success...

Customer
Benefits Needed to Deliver Unique
Sets of Benefits to Customers...

Internal
To Build the Strategic Capabilities..
Capabilities

Knowledge, Skills, Systems, and Tools Equip our People...

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 UNDERSTANDING THE BSC

Objectives Measures & Metrics Key characteristics of effective measures:

• Seamless Service
Satisfied • Improved Quality • Measures are part of a cause and effect
Clients • Mystery Shopper relationship
Rating
• Measures are process-focused

• Strong Leadership • Measures are balanced

Motivated • Effective Training
People • Reward & Recognition • Measures are actionable

• Measures are vertically & horizontally

aligned
• Reduce Cost
Balanced • Reduce Backlog • Measures are integrated
Growth • Best clients
• Measures encourage teamwork

• Measures focus priorities

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 EXAMPLE OF A COMPANY’S BSC

—Objectives—
Financial Perspective

1. Drive rapid revenue growth

2. Manage operating costs and profitability
3. Achieve profitability
4. Effectively utilize assets
5. Manage risk
6. Improved Shareholder Value

Customer Perspective Internal Business Process Perspective

1. Rapidly penetrate market segments

2 Sustain significant customer growth Vision 1. Develop provocative offers
3. Retain customers and 2. Build brand awareness
4. Achieve high customer satisfaction Strategy 3. Expand distribution
5. Provide extremely positive customer on-line 4. Drive incremental revenues
experience 5. Maintain technological leadership

Learning & Development Perspective

1. Sustain employee satisfaction

2. Maintain employee productivity
3. Retain employees
4. Innovate operationally
5. Measure training quantities
6. Measure training effectiveness
7. Measure and evaluate innovations

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 BSC - A DRILL DOWN APPROACH
BSC can be developed for each level of the organization - this would help
the employees to understand and follow the corporate strategy.

• The scorecard provides a mechanism

Identify Identify
for aligning the individuals’ goals with
Organization
Organizational Organizational Level
organizational goals
strategy Objectives to Scorecard
Organization
reach strategy
• Corporate level measures can be
broken down to lower level metrics
within the organization

Select CSFs Group/ Group/ Group/ • Enables local managers and

that the group Department Department Department employees to determine where to
can impact Objectives Measures & Level focus their efforts and what to do well
Group/ Department Metrics Scorecard in order to improve the organizational
effectiveness
• In this regard, scorecards can also be
Select CSFs Individual Individual
created for each level of the
that Individual Goals Measures &
has impact on Metrics & organization
Scorecard •
Individual
From the individual’s perspective, the
balanced scorecard process helps
employees to make a connection
between their behaviours and their
contribution to the business outcome

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BENEFITS
Performance Management
Communication Protocol
Risk Management
Improve PSU Governance
EVA

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CHALLENGES

IN BSC
Requires considerable amount of time on the part
of every one whose performance will be measured
– in defining corporate strategies; but most for the
selection of appropriate measures for the four
perspectives.
Large numbers of potential goals and targets -
more ways to measure them – Can lead to
disagreement.
Involve a lot of people in the organization - lack
of participation and commitment of staff.
Objectives and measures selected may be
subjective.

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 TIE-IN TO EMPLOYEE PERFORMANCE
Effective to gain a complete look at employee's work
performance, not just a partial view.
Measuring only behaviors or actions in employee performance
can lead to most of employees being appraised as Outstanding
when the organization as a whole has failed to meet its objectives.
By using balanced measures at the organizational level, and by
sharing the results with supervisors, teams, and employees,
managers are providing the information needed to align
employee performance plans with organizational goals.

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 The Premise

Measurement Communicates Values,

Priorities And Direction

The Conclusion

Measurement Must Be Linked To Strategy

Strategy
Balanced
Scorecard

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Measurement To Communicate, Not To Control
• IF we improve Leadership Capability AND give employees the Skills and Training they need to perform their jobs,
THEN we will improve Employee Satisfaction & Motivation
• Consequently, IF we improve Employee Satisfaction & Motivation, THEN Productivity will increase since Employee
Satisfaction & Motivation is a driver of Productivity
• IF we increase Productivity, THEN Cost will Decrease which will ultimately result in an Increased Return on
Investment

Reduce Cost
Increased Return on Investment Meet/ Exceed Targets

Financial Perspective
Increase Sales Increased Margin
Cost Decrease

Customer Win Win Dealer Satisfied End- Users/

Perspective Relations Customers

Progress Process Maturity/

Assessment
Internal Business Process
Perspective Improved Increased Reduced
Cycle Time Productivity Rework

Employee Satisfaction
& Motivation
Innovation and Learning
Perspective Tool Usage Skills and Training Rewards Leadership Capability

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 SUMMARY
BSC is a framework that helps organizations translate
strategy into operational objectives that drive both behavior
and performance.
It is based on the premise that measurement motivates.
It has benefits across organizations.
BSC is much more like a "NETWORK" of linked indicators.
The strategy of an organization usually is articulated around
a set of cause - effect relationships.
It provides managers with both leading indicators and
lagging indicators about their companies.

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