Week 2

Basic Balanced Scorecard:

How does it do the tricks?

Dr.oec.HSG SYARIFA HANOUM, S.T., M.T., CSEP

Departement of Business Management

Institut Teknologi Sepuluh Nopember (ITS)
2023
 Why Do We Need

the Balanced Scorecard?

 To Implement Business Strategy !!!

“Less than 10% of strategies

effectively formulated are
effectively executed”
Fortune

“Business Strategy is now the

single most important issue…
and will remain so for the next
decades”
Business Week
Why Do We Need

Business Strategy ??

Strategic planning is important to an organization

because it provides a sense of direction towards
the Vision by outlining measurable goals.
Further reading……
 Where it started . . .
Introduced in 1992, by Robert Kaplan and David
Norton, with their publication in Harvard Business review
”The balanced scorecard – Measures that drive
performance”

The Balanced Scorecard is the

most commonly used framework
for ensuring that agencies
execute their strategies.

Today, about 70% of the

Fortune 1,000 companies utilize
the Balanced Scorecard to help
manage performance.

Harvard Business Review editors has named it one of the

most influential business ideas of the past 75 years.
 Strategy executions
with the Balanced Scorecard

Strategic Level

Bridging Strategic
& Operational
Level

Operational
Level
 Translating Vision and
Strategy into Four
Perspectives
FINANCIAL
“To succeed Objectives Measures Targets Initiatives
financially, how
should we
appear to our
shareholders?”

CUSTOMER INTERNAL BUSINESS PROCESS

“To satisfy our
“To achieve Objectives Measures Targets Initiatives Objectives Measures Targets Initiatives
shareholders
our vision, how Vision and and customers,
should we what business
appear to our Strategy processes must
customers?” we excel at?”

LEARNING AND GROWTH

“To achieve
Objectives Measures Targets Initiatives
our vision, how
will we sustain
our ability to
change and
improve?”
 Defining ‘balanced’
in the Balanced Scorecard

 Traditional financial reports look backward

 Reflect only the past: spending incurred, and revenues
earned
 Do not measure creation or destruction of future economic
value

 The Balanced Scorecard (BSC) came up with the idea

of ‘balance’
 Balances financial and non-financial measures
 Balances short and long-term measures
 Balances performance drivers (leading indicators) with
outcome measures (lagging indicators)

© 2004 Superfactory™. All Rights R 8

 4 Perspective
of the Balanced Scorecard
The Four Perspectives
“To achieve our Financial “To succeed financially,
vision, how should Perspective how should we appear
we appear to our 1 2 3 to our shareholders?.”
customers?.”
Objectives

Measures

Targets

Customer Initiatives
Internal Business Process
Perspective Perspective
1 2 3
1 2 3
Objectives
Objectives

Measures Business Strategy Measures

Targets
Targets

Initiatives
Initiatives

Learning and Growth

Perspective

1 2 3 “To satisfy our

“To achieve our Objectives
shareholders
Measures and customers,
vision,how will we Targets what business
sustain our ability to Initiatives processes must
we excel at?.”
change and improve”
 A Simple Strategy Map of a “Fast Food
restaurant”

Source:
“Strategy Maps”,
Kaplan & Norton,
1996
 A Complete Strategy Map of a “Low-cost
Airlines”

Source:
“Strategy Maps”,
Kaplan & Norton,
1996
 Stakeholder-driven Strategy Map of a
Government Institution
Stakeholder

Strategy Map
Detailed How success in The level of Key action
Faster Service Access statement of achieving the performance programs
what is critical to strategy will be or rate of required to
successfully measured and improvement achieve
achieving the tracked needed objectives
Self Service strategy
Internal Process

Applications

Objective
Measure Target Initiative
Lean Processes Description
Eliminate waste, 2 per setup per
Number of Lean / Six
reworks, and month each
Reworks Sigma
Process and Value other errors in Outlet Office
Map Analysis our processes
L&G

Web Enable
Technologies
Financial

Invest in IT
 Financial Perspective
The financial perspective is the common way for analysing
and comparing companies.
This perspective also provides overview of company’s
financial health.
Financial: Two directions
M E A S U R I N G S T R A T E G I C
FINANCIAL THEMES

The Power of PowerPoint | thepopp.com 16

 CUSTOMER
PERSPECTIVE
Focuses on performance objectives
that are related to the customers and
the market.
HOW DO CUSTOMERS
SEE US?

Right now, many companies or

organizations have a mission that
focuses on the customer. The mission is
to be “number one in delivering value to
customers”.
This perspective is a leading
indicator. If the customer’s not
satisfied then they’ll move to another
company that provides their needs.

Business would be sustainable if

it can create and deliver products
or services that are valued by the
customers.
 MEASUREMENT

Customer Core Customer Value

Measurement Propositions
a. Market Share
a. Product or Service
b. Customer Acquisition Attribute
c. Customer Retention b. Customer Relationship
d. Customer Satisfaction c. Image and Reputation
e. Customer Profitability

GROWTH HARVEST

• Number of new • % of repeat

customers customers
• Sales from new • % of sales growth by
customers repeat customers
 CUSTOMER CORE
MEASUREMENT

Market Share
Reflects the portion of the company controls over the
existing market, such as number of customers,
number of sales and volume of sales units.

Customer Acquisition
Measure the the rate at which business unit is able to
attract a new customers or win new business.

Customer Retention
Measure the level at which company can maintain the
relationships with customers.
CUSTOMER CORE
MEASUREMENT

Customer Satisfaction
Estimated the level of satisfaction associated with
specific performance criteria in a value proposition.

Customer Profitability
Measure the profits that company makes from selling
products or services to costumers.
 CUSTOMER VALUE
PROPOSITIONS

Product or Service
Attribute
Includes the function of the product or service, price
and quality. Companies must identify what customers
want, cause they have different preferences.

Customer Relationship
Concerning about customer’s feelings towards the
process of purchasing products offered by company.

Image and Reputation

Describe the intangible factors that attract costumers
to deal with the company.
 Internal Business Processes

 Managers identify the critical processes at which they must excel if they
are to meet the objectives of shareholders and of targeted customer
segments. Conventional performance measurement systems focus
only on monitoring and improving cost, quality, and time-based
measures of existing business processes.
 Internal business process value
chain

This model encompasses three principal business

processes:
• Innovation
• Operations
• Postsale service

Postsale
Innovation Operations Service
Process Process Process

Customer Create the Customer

Identify Build the Deliver the
Need Product/ Products/
Service
the Products/
the Need
Identified Service Services Services
Market Customer Satisfied
Offering
Operations process-time, quality,
and cost measurements

Process Time
Measurements
Measuring time at the process level.
Typically, processes like throughput
time, processing time, inspection time,
movement time, and waiting/storage Process Quality
time. Measurements
To measure quality at the process level.
Typically, processes like waste, scrap, rework, yields (ratio of good
items produced to good items entering the process), process part-
per-million defect rates, returns, and percentage of processes under
statistical process control.

Process Cost
Measurements

To measure costs at the process level.

Typically, processes like order fulfillment, purchasing, or production planning
and control use resources and activities from several responsibility centers.
Learning And Growth
Perspective
focuses on the capabilities of
people. Managers would be
responsible for developing
employee capabilities.
Key measures for evaluating
managers’ performance would
be employee satisfaction,
employee retention, and em­
ployee productivity.
Three principal categories for the learning and growth perspective:

 Human Capital: Employee capablities,

training and development of key
managers and would-be managers in
certain skills.

 Information Capital: Information

systems capabilities, access to
information among teams within various
division of the organization.

 Organization Capital: Climate for action

Motivation, empowerment, and
alignment.
 This perspective also reminds us of the relevance of
continued learning and growth goals and how they affect
the continued competitiveness of the organization
 A Comprehensive Strategy Map

Improve Shareholder Value

Financial
Perspective Revenue Growth Strategy Shareholder Value Productivity Strategy
ROCE
Build the Franchise Increase Customer Value Improve Cost Structure Improve Asset Utilization
New Revenue Sources Customer Profitability Cost per Unit Asset Utilization

Product Leadership
Customer Intimacy

Customer Value Proposition Operational Excellence

Customer Product/Service Attributes Relationship Image

Perspective Relation-
Function- ships Brand
Service
ality
Price Quality Time

“Increase “Achieve “Be a Good

“Build the Corporate Citizen”
Internal Frnchise”
Customer Value”
(Customer
Operational
Excellence” (Regulatory and
Perspective (Innovation
Processes)
Management (Operational Environmental
Processes) Processes) Processes)

A Motivated and Prepared Workforce

Learning &
Growth Strategic Competencies Strategic Technologies Climate for Action
Perspective
Source: Kaplan & Norton, The Strategy Focused Organization

© 2004 Superfactory™. All Rights R 29

 Strategic Direction
Create Environment Strategic Performance Management System
For Change

Communicate Strategies
Define Objectives
Implement BSC

Balanced Scorecard
Measure Performance
Improve Processes

Evaluate and Adjust

Linking it all together…. Continuous Improvement
Redefine Initiatives
Linking it all together….

• Activity Based Costing

• Economic Value Added
• Forecasting
Strategic • Benchmarking
Planning • Market Research
• Best Practices
Mission • Six Sigma
and
• Statistical Process Control
Vision
• Reengineering
Balanced • ISO 9000
Scorecard • Total Quality Management
• Empowerment
• Learning Organization
• Self-Directed Work Teams
• Change Management
Case Study: Coca Cola
Vision: “The Coca-Cola Company exists to refresh and
benefit everybody it touches. The fundamental
recommendation of our business is timeless, reliable, and
simple. When we bring refreshment, worth, bliss and amusing
to our partners, then we support and secure our brands,
especially Coca-Cola. That is the way to satisfy our absolute
commitment to give reliably alluring come backs to the
proprietors of our business.”

Mission: “All that we do is propelled by our persisting

mission:
• To Refresh the World in the body, brain, and soul.
• To Inspire Moments of Optimism through our brands and
our activities.
• To Create Value and Make a Difference all over the place we
Case Study: Coca Cola
The Coca-Cola Company is a pioneer in the refreshment
business with a recognized brand and reliable worldwide
presence. According to the Coca-Cola Company’s statement
of purpose and 2023 Vision, some of its objectives include:
• Increase benefit by reducing expenses through effective
and proficient production facilities;
• Focus on environment-friendly packaging development and
upholding its sustainability;
• Continue to enhance its portfolio through events and
organizations remembering customer demands;
• Increase yearly operating income by 6-8% with an aim of
doubling revenues by 2023.
Case Study: Coca Cola
Coca-Cola considers cost reduction on competition expenses
and sales development (an essential activity). In addition, It
also considers the quantity of new customers and consumer
loyalty rating.
Through the utilization of financial explanations, winning
costs, and mechanical specialists, it concentrates on internal
operations that enhance service delivery time by a method of
the reduction in the time is taken for products or services to
achieve the customers’ needs.
To improve the achievement of internal procedures that create
value for the clients and shareholders, it is important to
distinguish company abilities that can upgrade an active re-
engineering process.
The Coca Cola Company Strategy
Map
Vision:

Mission:

Financial

Customer

Internal Processes

Learning & Growth

 The End
 Thank you for coming!

Dr.oec.HSG Syarifa Hanoum, S.T.,

M.T., CSEP
syarifa@mb.its.ac.id
Department of Business Management