Objective

Explain What is the Balanced Scorecard

Describe the Three Generations of Balanced
Scorecards
Explain the Importance of Balanced
Scorecard
Describe the Various Perspectives of
Balanced Scorecard
Describe the Various Parameters of Balanced
Scorecard
Explain What is Performance Management
Explain the Steps in Building a Balanced
Scorecard
Describe the Balanced Scorecard System
Elements
Explain the Steps for Implementation of BSC
Explain What is the BSC Designer
List the Tips for Implementing Balanced Card
List the Pitfalls of Balanced Scorecard

Introduction

David Pelham is a
major stakeholder
in Globus Inc., an
MNC.

Introduction

He is greatly interested
in the performance of
Globus Inc.

Introduction

So, what gives an

overall picture about
the performance of a
company?

Introduction

The answer is a
Balanced
Scorecard.

What is the Balanced Scorecard

The 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.
The Balanced Scorecard:
Balances financial and non-financial
measures
Balances short and long-term measures
Balances performance drivers (leading
indicators) with outcome measures
(lagging indicators)
Should contain just enough data to give a
complete picture of organizational
performance and no more!
Leads to strategic focus and
organizational alignment

What is the Balanced Scorecard?

The Balanced Scorecard framework is shown in the given diagram.

The balanced scorecard

translates the
organization's strategy
into four perspectives,
with a balance between
the following:
between internal
and external
measures
between objective
measures and
subjective measures
between
performance results
and the drivers of

Financial
Perspecti
ve

Customer
Perspecti
ve

Vision
and
Mission

Learning
& Growth
Perspecti
ve

Internal
Process
Perspecti
ve

History of Balanced Scorecard

But modern Balanced Scorecard
designs also have a number of
features that clearly differentiate
them from earlier examples.

In essence the Balanced

Scorecard has remained
unchanged since these early
papers, having at its core a
limited number of measures
clustered into groups and an

The changes in the balanced

scorecard have been an
evolution through three
distinct generations of
Balanced Scorecard design.

Balanced Scorecard Goes Beyond the Financial

Perspective

Let us look at each perspective in detail.

Learning & Growth

Perspective
Business Process
Perspective
Customer Perspective
Financial Perspective

Customer Perspective
- includes measures
such as customer
satisfaction, customer
retention, and market
share in target
segments.

Parameters

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Parameters: Objectives, Measures, Targets, and

Initiatives

These can be organized for each perspective in a table as shown

below.

Objectives Measures Targets

Initiatives

Financial

Customer

Process

Learning

Performance Criteria
Performance
Criteria helps to
translate job
requirements into
levels of acceptable
or unacceptable
employee
behaviour.

It is essential to
define
Performance
Criteria for
conducting a
performance
appraisal.

Hence,
performance
criteria is an
important
determinant of
performance.

Principles of a Strategy Focused

Organization
Translate
Strategy

Everyone
s JOB

Continual
Process

Strategy
Focused
Organizati
on

Organizati
on
Alignment

Executive
Leadershi
p

Organization
Alignment
Corporate Role
Corporate-strategic
Business Unit (SBU)
Strategic Business
Unit (SBU) - Shared
Services
External Partners

Characteristics of Balanced Scorecard

The core characteristic of the Balanced

Scorecard and its derivatives are the
presentation of a mixture of financial and
operational measures each compared to a
'target'
value
within
a single
report.
The report
is not
meant
to beconcise
a

replacement for traditional financial or

operational reports but a succinct summary
that captures the information most relevant
to
those
There
arereading
variousit.
versions of the tool in
circulation which differ due to the methods
by which this 'most relevant' information is
determined, that is, the design processes
used to select the content.

Design of Balanced Scorecard

There are four steps required to design a Balanced Scorecard
which are included in Kaplan & Norton's writing on the subject in
the late 1990s, where they assert four steps as being part of the
Balanced Scorecard design process:
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Steps in Building a Balanced Scorecard

1
2
3

Process 1:
o Strategy formulation. Prepare vision and
mission statements

Process 2:
o Identify the Objectives of the
organization

Process 3:
o Deciding for the measurements and Targets.
Creating performance indicators.

Balanced Scorecard System Elements

Engaged Leadership, Interactive Communications and
Change Management
Developing a scorecard system is transformational for an
organization, as it is about changing hearts and minds. Leaders who
are engaged in the discovery process, communication via two-way
dialogue, and planning and managing change are important first
steps in the process.
Organization Mission, Vision, and Values
Critical to an aligned organization are a well defined mission, a
shared vision, and organization values that are built on strong
personal values. Most organizations have these components, but
often there is no connecting tissue among the components that allow
employees to get it easily. A compelling and clear picture of the
future (the shared vision) is where the scorecard development
process starts. The employee buy-in follows as hearts and minds are
engaged in creating and executing the organizations strategies.
Performance Information Reporting
Automated data collection and reporting processes are used to
visualize performance information and better inform decision making

Steps for Implementation of Balanced

Step 6:
Step 8:
Step
ScorecardStep 4:
Step 2:
Collaborati
on

Step 1:
nitiation

Gain
consensus

Step 3:
Gain
Inputs

Expand
consensu
s

Step 5:
Individual
reactions

Selection of
metrics

Step
7:
Finishi
ng
touche
s

10:
Periodic
reviews

Step 9:
Roll-out

Step 2: Collaboration:
The next step requires teamwork and collaboration
where the different perspectives of different people
and their expertise are required. The implementation
of a balanced scorecard is not a one-person job and
wont produce buy-in.

Step
11:
Evolutio
n

Adaptation of the Balanced Scorecard Framework to Non-Profit

and Government Organizations

Typical Balanced Scorecard Project

Schedule