Balanced Scorecard

Managing
Corporate
Performance
with Balanced
Scorecard
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Contents :
1. Corporate Performance Scorecard
2. Strategy Map Framework
3. Four Perspectives in Balanced Scorecard
4. Identifying Key Performance Indicators
5. Strategy Map in Corporate Functions (HR, IT,

Finance and Marketing)
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Performance Management Framework
Vision Strategy Map

Mission
Strategy
Key
Performance
Indicators
Company
strategy
Identifying
Defining
Measuring
Monitoring
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Reporting 3
Performance Management Component
Three critical components for effective process of
performance management
Performance management
cycle is continuous and
Performance consistent
Management
Process
Performance Performance
Management Management
Infrastructure Culture
Logistic support and Culture that is based

performance management on performance
administration accountability
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Performance Management Cycle
STRATEGY
Set Measures and Target
Reward and Coach Plan and Execute
Monitor and Evaluate
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Managing Performance with
Balanced Scorecard
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.
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Managing Performance with
Balanced Scorecard
• Balances financial and non-financial measures

• Balances short and long-term measures
• Balances performance drivers (leading indicators)
with outcome measures (lagging indicators)
• Leads to strategic focus and organizational
alignment.
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4 Perspectives in Balanced Scorecard
Financial Perspective
The Strategy If we succeed, how will
we look to our
shareholders?
Customer Perspective
To achieve our vision,
how must we look to our
customers?
Internal Perspective
To satisfy our customers,
which processes must we
excel at?
Learning & Growth

Perspective
To achieve our vision, how

must our organization learn
and improve?
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Strategy and Balanced Scorecard
Mission –
Why We
Exist Strategic
Strategy Outcomes
Map :
Translate the Satisfied
Vision – Strategy Shareholders
What We Strategy :
Our Game Delighted
Want to Be
Plan Customers
Excellent
Balanced Processes
Values – Scorecard :
What’s Measure and Motivated
Important Focus Workforce
to Us
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Strategy Map Framework
• The strategy map framework is presented in the

following slides.
• This framework describes the types of strategic

target that should be presented in each perspective,
namely the financial perspective, customers, internal
business process, and learning & growth perspective.
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Strategy Map Framework
Long-term Shareholder
Value
Cost Efficiency Revenue Growth

Financial
Price Quality Service Availability Brand
Customer
Operations Customer Regulatory

Innovation
and Social
Management Management Processes
Processes
Processes Processes
Internal Process
Learning & Growth
Human Capital Organization Capital Information Capital
Financial Perspective
• In private companies, the financial perspective is the

main objective (ultimate goal) – without having to
sacrifice the interests of other relevant stakeholders
(community, environment, government, etc.)
• In the financial perspective, the strategic goal is the

long-term shareholder value.
value This goal is driven by
two factors, namely : revenue growth and cost
efficiency.
Strategic Objectives in Financial
Long-term
Shareholder Value
Cost Efficiency Revenue Growth
Improve Cost Structure Expand Revenue

Opportunities
Increase Asset Utilization Enhance Customer Value
Customer Perspective
• This perspective is very instrumental, because without

customers, how can a company survive?
• Customer perspective covers the following elements:

• Customer acquisition
• Customer retention
• Customer profitability
• Market share
• Customer satisfaction
Strategic Objectives in Customer
Customer Retention Customer Profitability
Customer Satisfaction Market Share
Customer Acquisition
Price Quality Service Availability Brand
Internal Process Perspective
• This perspective reflects the processes in key business

that should be optimized in order to meet the needs of
the customers.
• There are four main themes in this perspective, namely:
• Operations Management Process
• Customer Management Process
• Innovation Process
• Regulatory and Social Process
Strategic Objectives in Internal Process
Operations Customer Regulatory

Innovation
Management Management and Social
Processes
Processes Processes Processes
Processes that Processes that Processes that Processes that

produce and enhance customer create new improve
deliver products value products and communities and
and services services the environment
• Supply • Selection • New Ideas • Environment

• Production • Acquisition • R&D Portfolio • Safety & Health
• Distribution • Retention • Design/ Develop • Employment
• Growth • Launch • Community
Learning & Growth Perspective
• This perspective reflects the capability that a company should have,

namely:
• Human Capital
• Organization Capital
• Information Capital
• This perspective shows us that good human resource development
system, organizational system and information system forms a solid
foundation for improving company performance.
Strategic Objectives in
Learning & Growth
Organization Information
Human Capital
Capital Capital
• Skills • Culture • Systems

• Knowledge • Leadership • Database
• Attitude • Organization • Networks
Development
Strategy Map Template
• The following slide displays the strategy map

template comprising of four perspectives:
financial, customer, internal business process,
and learning & growth.
Strategy Map Template
Enhance Long-term
Shareholder Value
Improve
Increase Revenue Growth
Cost Efficiency
Financial
Build High Expand Enhance

Performance Products Market Share Brand Image
Customer
Achieve Drive Demand Implement Good

Manage Dramatic
Operational through Customer Environmental
Growth through
Excellence Relation Policy
Innovation
Management
Internal Process
Learning & Growth

Develop Strategic Build Learning Expand Capabilities with
Competencies Culture Technology
Key Performance Indicators (KPI)
KPI = Measurement or
Vision indicator that provides
information on how far we
Mission Strategy have succeeded in
and Values achieving the strategic
objectives
Strategic Objectives
Key Performance
Indicators
Finance
Key Performance
Customer
Indicators
Internal Business
Process Key Performance
Indicators
HR
Development
KPI Guidelines
Guidelines in Formulating the KPI
• The measure of success must show clear, specific and

measurable performance indicators.
• The measure of success should be declared explicitly and in

detail so that it is clear what is being measured.
• Costs to identify and monitor the measure of success should

not exceed the value that will be known from the measurement.
KPI Guidelines
Relevant to the Does KPI have a linkage with the strategic

Strategic Objective objectives?
Controllable Are the KPI achievements still under control?
Actionable Can any action be taken to improve the

performance?
Simple Is the KPI easy to explain?
Credible Is the KPI not easy to manipulate?
KPI Family Dimension
Productivity Measures employee output (units/

transactions/ dollars), the uptime levels and
how employees use their time (sales-to-
assets ratio, dollar revenue from new
customers, sales pipeline).
Quality Measures the ability to meet and/or exceed

the requirements and expectations of the
customer (customer complaints, percent
returns, DPMO -- defects per million
opportunities).
Profitability Measures the overall effectiveness of the

management organization in generating
profits (profit contribution by
segment/customer, margin spreads).
Timeliness Measures the point in time (day/week/

month) when management and employee
tasks are completed (on-time delivery,
percent of late orders).
Process Measures how effectively the management

Efficiency organization incorporates quality control, Six
Sigma and best practices to streamline
operational processes (yield percentage,
process uptime, capacity utilization).
Resource Measures how effectively the management

Utilization organization leverages existing business
resources such as assets, bricks and mortar,
investments (sales per total assets, sales per
channel, win rate).
Cost Measures how successfully the management

Savings organization achieves economies of scale and
scope of work with its people, staff and
practices to control operational and overhead
costs (cost per unit, inventory turns, cost of
goods).
Growth Measures the ability of the management

organization to maintain competitive economic
position in the growth of the economy and
industry (market share, customer
acquisition/retention, account penetration).
KPI Category Dimension
The actual raw data value as measured (e.g., Direct

sales volume).
The comparison of the changes in

Percent
performance of one value relative to the
same value at a different time, geography,
etc. (e.g., percentage change in sales vs.
last year).
The comparison of one value relative to another to

Simple
provide a benchmark for comparison of Ratio
performance (e.g., average sales per day).
A combination of several separate measures

Index
added together that result in an overall indicator
of performance (e.g., (company sales
growth)/(industry sales growth) for a specific
geography).
The addition of the weighted averages of several Composite

similar measures that result in an overall composite Average
indicator of performance (e.g., customer satisfaction
composite is mixture of results from surveys, focus
groups and product returns).
Multiple measures such as mean, variance,

Statistics
standard deviation and variance that capture the
spread and distribution of the performance
measures (e.g., sales distribution by demographics,
geography, channel).
Integration between Corporate and
Division/Department
Vision
Mission
Strategy
Corporate
Scorecard
The Division Scorecard
is built by referring to the
Division corporate scorecard
Scorecard
Corporate and Division Scorecard
Corporate
Finance
Financial
Corporate
Marketing
Customer
Production
Supply Chain
R&D
Internal Process
Learning & Growth

Corporate HR
Info
Technology
• Division Scorecard is formulated by looking at the four

perspectives in Corporate Scorecard.
• As shown in the previous slides, the learning & growth

perspective provides guidelines for developing scorecard at
the Human Resource and IT divisions, while the internal
process perspective provides guidelines for developing
scorecard at the supply chain division or R&D.
Sample from GE
Level of OrganizationLighting Business
Financial Customer Group
Internal Process Learning & Growth
Corporate Scorecard Increase profit margin Improve customer Increase inventory turns Increase level of
satisfaction level Improve internal process employee competency
Division Scorecard Optimize cost of production Improve customer Increase inventory turns Increase level of
Reduce inventory levels satisfaction level Improve internal process employee competency
Plant Scorecard Optimize cost of production Increase percent of Increase inventory turns Number of "on the
Increase yields ratio on time delivery Reduce number of defects job training" delivered
Increase labor productivity Reduce customer per million Number of performance
Reduce inventory levels complaints per million Improve quality incoming coaching session
materials
Maintain optimum equipment
speed
Frontline Employee Reduce waste Reduce equipment downtime Number of "on the
Scorecard Reduce overtime Reduce number of poor job training" attended
Increase production rates solders Number of performance
Reduce number of cracked coaching session
bulbs attended
The above example shows how the scorecard at corporate level is

cascaded to division level, and further to plant level and employee level.
Division Strategy Map Template
• The strategy map for HR Division, Information Technology

Division, Finance Division, and Marketing Division are
presented in the following slides.
End of Material

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Managing

1. Corporate Performance Scorecard

2. Strategy Map Framework

3. Four Perspectives in Balanced Scorecard

4. Identifying Key Performance Indicators

5. Strategy Map in Corporate Functions (HR, IT,

Vision Strategy Map

Logistic support and Culture that is based

Set Measures and Target

Reward and Coach Plan and Execute

Monitor and Evaluate

Balanced Scorecard is a management tool that

• Balances financial and non-financial measures

Learning & Growth

To achieve our vision, how

• The strategy map framework is presented in the

• This framework describes the types of strategic

Cost Efficiency Revenue Growth

Price Quality Service Availability Brand

Operations Customer Regulatory

Learning & Growth

Human Capital Organization Capital Information Capital

• In private companies, the financial perspective is the

• In the financial perspective, the strategic goal is the

Cost Efficiency Revenue Growth

Improve Cost Structure Expand Revenue

• This perspective is very instrumental, because without

• Customer perspective covers the following elements:

Customer Retention Customer Profitability

Customer Satisfaction Market Share

Price Quality Service Availability Brand

• This perspective reflects the processes in key business

• There are four main themes in this perspective, namely:

• Operations Management Process

• Customer Management Process

• Regulatory and Social Process

Operations Customer Regulatory

Processes that Processes that Processes that Processes that

• Supply • Selection • New Ideas • Environment

• This perspective reflects the capability that a company should have,

• Skills • Culture • Systems

• The following slide displays the strategy map

Build High Expand Enhance

Achieve Drive Demand Implement Good

Learning & Growth

Guidelines in Formulating the KPI

• The measure of success must show clear, specific and

• The measure of success should be declared explicitly and in

• Costs to identify and monitor the measure of success should

Relevant to the Does KPI have a linkage with the strategic

Controllable Are the KPI achievements still under control?

Actionable Can any action be taken to improve the

Simple Is the KPI easy to explain?

Credible Is the KPI not easy to manipulate?

Productivity Measures employee output (units/

Quality Measures the ability to meet and/or exceed

Profitability Measures the overall effectiveness of the

Timeliness Measures the point in time (day/week/

Process Measures how effectively the management

Resource Measures how effectively the management

Cost Measures how successfully the management

Growth Measures the ability of the management

The actual raw data value as measured (e.g., Direct