BALANCED SCORECARD

DR. MANJISHTHA MAITRA

What is a “Balanced” Scorecard
• A strategic and operational tool
• Owned by the Executive
• Shared by everyone
• Balances:-
– Long and short term
– Hard and soft measures
– Leading and trailing indicators
– Internal/external perspectives
• Like writing a novel, not writing a list
• Measures support change, not monitoring
It is NOT
• A new idea
• An end in itself
• A playing field for internal politics
• An “initiative” of Finance, HR,
Marketing etc.
• Boardroom art
• A make-work exercise
Balanced Scorecard : Synonym
for Managing Performance
•Introduced in 1992, by Robert Kaplan and David
Norton, the Balanced Scorecard is the most
commonly used framework for ensuring that
companies execute their strategies

•Today, about 70% of the Fortune 1,000 companies

utilize the Balanced Scorecard to help manage
performance.
Balanced Scorecard Links Vision & Strategy
to Personal Objectives

VISION
What we want to be

STRATEGY
Our game plan

BALANCED SCORECARD
Translate, Focus and Align
TRANSFORMATION OBJECTIVES
What we must improve
PERSONAL OBJECTIVES
What I need to do

STRATEGIC OUTCOMES

Satisfied Delighted Efficient and Effective Motivated & Prepared

SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
 Value Creation: Intangible Assets
Training

Service Customer Customer

Revenue
Quality Confidence Retention

Information
Technology

• Intangible Assets Do Not Have A Direct Impact on Financial Results — They Have
Second- or Third-Order Impacts
• Conventional approach to managing financial & operational indicators insufficient
• Balanced Approach to Strategy Implementation should includes focus on
customer/stakeholder & learning, growth & innovation
• Understanding & managing/leveraging inter-relationships between the above areas
necessary for value creation
Balanced Scorecard as a Tool
for Business Excellence
Malcolm
Malcolm Baldrige
Baldrige Balanced
Balanced Scorecard
Scorecard

Leadership
Leadership Learning
Learning &
& Growth
Growth Perspective
Perspective

Human
Human Resource
Resource Capital
Capital Learning
Learning &
& Growth
Growth Perspective
Perspective

Business
Business Results
Results Targets,
Targets, Financial
Financial Perspective
Perspective

Process
Process Management
Management Internal
Internal Process
Process Perspective
Perspective

Strategic
Strategic Planning
Planning Strategy
Strategy Map
Map

Customer
Customer Focus
Focus Customer
Customer Perspective
Perspective
 The Excellence Model

9%
9%

10% 14%
8% 20%
15%

9% 6%

(percentages show how each elements is scored for importance)

 Kaplan and Norton model
(1996)
Customer

Balanced Business
Financials Scorecard Processes

Learning
& growth
 Necessity of balance
Customer perspective
Corrective activity
Developmental activity
Balancing compliance
with added value
Financial Measures
Business Processes
Key performance ratios
Balanced Time, cost, quality
Financial health
Scorecard Balancing inputs
Balancing leading with
and outputs
trailing indicators
Learning and growth
People measures
Knowledge measures
Balancing soft and
hard indicators
 Building the Balanced
Scorecard

The key question is how do you create

value?
 A strategic tool
• Starts with strategy
• Continuous process
• Needs to become culturally embedded
 Strategy Implementation
Process
Stage Business Design Rollout Institutionalization
Process
Health Check

Activity Identification & Development of Implementation of

Institutionalization
definition of areas of solution and solution across all
of the process
improvement testing units

Output Strategic
Strategic Direction Strategy Sustained Strategy
Guidelines
A successful Balanced Scorecard
program starts with a recognition
that it is not a “metrics” project, it’s
a “change” process.
Scorecard Design & Rollout
Mobilize
change through executive leadership
Integrate
improvement
Translate BALANCED programmes
the strategy to operational terms
with scorecard
STRATEGY

SCORECARD

Align Change
the organization to create synergies
people, make strategy eve
 Translate : Strategy into 4
Components Vision and
Strategy

What are the financial objectives for growth and productivity? Financial
What are the major sources of growth? Perspective

Who are the target customers that will generate the revenue growth? Customer
What are the objectives and how do we measure success with them? Perspective

Brand / product development, sales, service, operations, logistics..

Internal
Activities needed to create the required customer value proposition
Perspective
and differentiation and the desired financial outcomes

Organization infrastructure, skills, capabilities, knowledge

of employees, working climate.. Learning and
growth
The ability to execute internal business processes in new
Perspective
differentiated ways
 Translate : Terminator Zero
Unhappiness
Mission
To ensure that the all causes of Unhappiness for Customer are
Terminated in order for the bank to vie for Service Leadership

Customer Financial
•Customer Complaints •Cost of Complaints
•Customer Feedback Scores •% of Business through Cross Selling
•Repeat Contacts •Average Revenue Per Customer
•Request Closure beyond 24 Hours

Internal Processes
•Performance
•Quality
•Productivity
•% Complaints to Transactions
•Branch Contacts with Customers, Delivery Success Rate %

Research, Education & Teaching

•Patent Score for Process Improvements
•SWIFT Training to Branches, Terminator Workshops
 Align : Flow of the Scorecard Along
The Organization
Plant Head :Weekly Value Loss Scorecard & Analysis

Department Maintenance PC/QC Weekly

Weekly Weekly Scorecard
Scorecard Scorecard

Review Review Review

Production Packing Daily Maintenance PC/QC Daily

Daily Scorecard Daily Scorecard Scorecard
Scorecard

Review Review Review Review

Production Packing Shift

Shift Scorecard
Scorecard

Review Review
 Change : Minds Path Matrix
…No shortcuts possible...

The Four States of Mind! Minds Path Matrix

Incompetent Competent Incompetent Competent
Conscious

Conscious
Support Coach Understanding Usage
Unconscious

Unconscious
Direct Delegate Compliance Culture
 Scorecard’s Role in
Transformation
• Scorecard is an indispensable tool to manage &
monitor a transformation/business performance
improvement programme
• Scorecard Implementation needs to be supported
by functional/departmental initiatives
• Scorecard supported by a Transformation Initiative
drives Business Results
 Mobilize : Top Management
Commitment
1.Creating the Climate for Change
Unfreeze the organization
Show the need for change
2. Creating the Leadership Team
Breaking down functional bias
3. Creating the Vision and Strategy
BSC as a “visioning process”
BSC to clarify the strategy
4. Creating Team Accountability
Accountability for cross-functional strategic themes at Executive Team level
Where does the Balanced
Scorecard fit?
 Where does it fit? Building
Using
Balanced
Scorecard
Vision
Mission and CSFs
Strategic Objectives
Measures

Alliances

Structure
Rewards

Systems
Projects
Targets

Culture and values (leadership/style/relationships etc.)

Using the Balanced Scorecard to
drill-down into the HR Systems
• Drill-down into Systems
– Planning and objective setting
– Operational targets
– Budgeting
– Internal audit
– Continuous improvement
– Project management
– Performance management/appraisal
– Reporting and meeting regimes
– Reward and recognition.......