When you can measure what you are speaking about, and express it in numbers, you know something

about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.
William Thompson (Lord Kelvin), 1824-1907

What is a Balanced Score Card?
1) A measurement system 2) A strategic management system 3) A communication tool

Balanced Scorecard It was originated by Drs. Robert Kaplan and David Norton as a performance measurement framework. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. . The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action.


profit margins. Some of the most common financial measures that are incorporated in the financial perspective are EVA. cash flow. the harvest stage will be based on cash flow analysis with measures such as payback periods and revenue volume. costs. Finally. The sustain stage on the other hand will be characterized by measures that evaluate the effectiveness of the organization to manage its operations and costs. revenue growth. . net operating income etc.The Financial Perspective Financial objectives and measures for the growth stage will stem from the development and growth of the organization which will lead to increased sales volumes. etc. acquisition of new customers. growth in revenues etc. by calculating the return on investment. the return on capital employed.

g. customer satisfaction. the most profitable) customer groups. The measures that are selected for the customer perspective should measure both the value that is delivered to the customer (value proposition) which may involve time.e. The value proposition can be centered on one of the three: operational excellence. . customer intimacy or product leadership. while maintaining threshold levels at the other two. and the outcomes that come as a result of this value proposition (e.. quality. performance and service.The customer perspective defines the value proposition that the organization will apply to satisfy customers and thus generate more sales to the most desired (i. and cost. market share).

It focuses on all the activities and key processes required in order for the company to excel at providing the value expected by the customers both productively and efficiently.The internal process perspective is concerned with the processes that create and deliver the customer value proposition. Kaplan and Norton propose using certain clusters that group similar value creating processes in an organization. etc). These can include both short-term and long-term objectives as well as incorporating innovative process development in order to stimulate improvement. . innovation (by new products and services) and regulatory & social (by establishing good relations with the external stakeholders). The clusters for the internal process perspective are operations management (by improving asset utilization. customer management (by expanding and deepening relations). supply chain management. In order to identify the measures that correspond to the internal process perspective.

and the climate (organization capital) of the enterprise.The innovation and learning perspective is the foundation of any strategy and focuses on the intangible assets of an organization. whilst contributing to long-term success. . since an improvement in the learning and growth perspective will require certain expenditures that may decrease short-term financial results. mainly on the internal skills and capabilities that are required to support the value-creating internal processes. This of course will be in the long term. These three factors relate to what Kaplan and Norton claim is the infrastructure that is needed in order to enable ambitious objectives in the other three perspectives to be achieved. The Innovation & Learning Perspective is concerned with the jobs (human capital). the systems (information capital).

3.Helps to integrate various corporate programs. operators. Focusing the whole organization on the few key things needed to create breakthrough performance.Benefits of the Balanced Scorecard Kaplan and Norton cite the following benefits of the usage of the Balanced Scorecard: 1. so that unit managers. and customer service initiatives. 2.Breaking down strategic measures towards lower levels. and employees can see what's required at their level to achieve excellent overall performance . re-engineering. Such as: quality.

Long-Term Objectives ‡ Short-term objectives ± Targets to be achieved soon ± Milestones or stair steps for reaching long-range performance ‡ Long-term objectives ± Targets to be achieved within 3 to 5 years ± Prompt actions now that will permit reaching targeted long-range performance later .Short-Term vs.

Concept of Strategic Intent A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective and concentrates its competitive actions and energies on achieving that objective! .

often against long odds ‡ Involves establishing a grandiose performance target that is out of proportion to its immediate capabilities and market position but then devoting the company s full resources and energies to achieving the target over time ‡ Signals relentless commitment to achieving a particular market position and competitive standing .Characteristics of Strategic Intent ‡ Indicates firm s intent to making quantam gains in competing against key rivals and to establishing itself as a winner in the marketplace.

set business and product line objectives 3.Objectives Are Needed at All Levels 1. establish functional and departmental objectives 4. First. Next. establish organization-wide objectives and performance targets 2. Then. Individual objectives are established last .

Importance of Top-Down Objectives ‡ Guide objective-setting and strategy-making at lower levels ‡ Ensures financial and strategic performance targets for all business units. divisions. and departments are directly connected to achieving company-wide objectives ‡ Integration of objectives has two advantages ± Helps produce cohesion among objectives and strategies of different parts of organization ± Helps unify internal efforts to move a company along the chosen strategic path .

Crafting a Strategy Phase 3 of the Strategy-Making Process Strategy‡ Strategy-making involves entrepreneurship searching for opportunities ± To do new things or ± To do existing things in new or better ways ‡ Strategizing involves ± Picking up on happenings in the external environment and ± Steering company activities in new directions dictated by shifting market conditions .

. . anticipating their changing needs ‡ Scrutinizing business possibilities based on new technology ‡ Building firm s market position via acquisitions or new products ‡ Pursuing ways to strengthen firm s competitive capabilities Our strategy will be .Activities Involved in Crafting a Strategy ‡ Studying market trends and actions of competitors ‡ Listening to customers. .

Who Participates in Crafting a Company s Strategy? ‡ Chief executive officer .CFO ‡ Managers of business divisions and major product lines ‡ Key VPs for production. and other functional departments strategy-executing role ± ranging from minor to major ± for the area he or she heads! .CEO ‡ Senior corporate executives ‡ Chief financial officer . human Every company manager has a strategy-making. resources. marketing.

Strategizing: An Individual or Team Responsibility? ‡ Teams are increasingly used because ± Finding market.and customer-driven solutions is necessary ± Complex strategic issues cut across functional areas and departmental units ± Ideas of people with different backgrounds and experiences strengthen strategizing effort ± Groups charged with crafting the strategy often include the people charged with implementing it .

Fig.2: A Company s Strategy-Making Hierarchy . 2.

Levels of Strategy-Making in a Diversified Company Corporate-Level Managers Business-Level Managers Corporate Strategy Two-Way Influence Business Strategies Two-Way Influence Functional Managers Functional Strategies Two-Way Influence Operating Managers Operating Strategies .

Levels of Strategy-Making in a Single-Business Company Business-Level Managers Business Strategy Two-Way Influence Functional Managers Functional Strategies Two-Way Influence Operating Managers Operating Strategies .

Tasks of Corporate Strategy ‡ Moves to achieve diversification ‡ Actions to boost performance of individual businesses ‡ Capturing valuable cross-business synergies to provide 1 + 1 = 3 effects! ‡ Establishing investment priorities and steering corporate resources into the most attractive businesses .

or business process ‡ Detail how key activities will be managed ‡ Provide support for business strategy ‡ Specify how functional objectives are to be achieved . activity.Tasks of Functional Strategies ‡ Game plan for a strategically-relevant function.

Tasks of Operating Strategies ‡ Concern narrower strategies for managing grassroots activities and strategically-relevant operating units ‡ Add detail to business and functional strategies ‡ Delegation of responsibility to frontline managers .

Uniting the Company s Strategy-Making Effort ‡ A firm s strategy is really a collection of initiatives undertaken by managers at all levels in the organizational hierarchy ‡ All the various strategic initiatives must be unified into a cohesive. company-wide action plan ‡ Pieces of strategy should fit together like the pieces of a puzzle .

What Is a Strategic Plan? Its strategic vision and business mission A Company¶s Strategic Plan Consists of Its strategic and financial objectives Its strategy .

operations-driven activity aimed at shaping performance of core business activities in a strategy-supportive manner ‡ Tougher and more time-consuming than crafting strategy ‡ Key tasks include ± Improving efficiency of the strategy being executed ± Showing measurable progress in achieving targeted results .Implementing and Executing Strategy Phase 4 of the Strategy-Making Process Strategy‡ Action-oriented.

and operating systems Motivating people to pursue the target objectives Tying rewards to achievement of results Creating a strategy-supportive corporate culture Exerting the leadership necessary to drive the process forward and keep improving .What Does Strategy Implementation Involve? ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Building a capable organization Allocating resources to strategy-critical activities Establishing strategy-supportive policies Instituting best practices and programs for continuous improvement Installing information. communication.

Characteristics of Good Strategy Execution ‡ Involves creating strong fits between strategy and ± Organizational capabilities ± Reward structure ± Internal operating systems ± Organization s work climate and culture ‡ The stronger the fits the ± Better the execution ± Higher a company s odds of achieving its performance targets .

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