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Balanced

Why does business need a


Scorecard

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If you cant measure it,
you can cant manage it

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BSC Translate Strategy & Mission into performance
measures as a strategic management system

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Once again let us see what BSC does

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Financial Measurement
attempts

Return on Investment
Operating & Cash Budgets
All these
Ratios
tells about
DuPont Analysis past than
Trend Analysis future
Common size Statements
Financial Auditing

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Financial Measurement

Financial Measures are inadequate for guiding


and evaluating organizations trajectories
through Competitive environment……..Xerox

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Financial
perspectives

Profitability,
Operating Income
Return on capital
Economic value added
Sales Growth
Cash flow

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Financial performance measures indicates……

Whether an organization's strategy,


implementation and execution are contributing
to bottom line improvement ?

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Customer
perspectives

Market Segment,
Customer Satisfaction
Customer Retention
New customers
Customer profitability
Market share
Account share

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Customer
perspective

The Customer perspective enables business unit


managers to articulate the customer and market
based strategy that will deliver superior future
financial returns

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Internal
business
perspectives

Critical processes to excel

Innovation Process
Operation Process

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Internal
Process
perspective

The internal Business process perspective of the


Balance scorecard incorporates measures for short
and long term innovation & operations processes
to give better value to the customers and s’holders

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Learning and
Growth
Perspective

People
Systems
Procedures

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Learning &
Growth
perspective

The Financial, Customer and Internal Process


Objectives on the BSC typically will reveal large
Gaps between the existing capabilities of people
Systems and procedures and what will be
required to achieve break through performance

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Learning &
Growth
perspective

To close these Gaps, businesses will have to


invest in reskilling employees, enhancing
information technology and systems and aligning
organizational procedures and routines

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alignment is not an easy task……
but it needs to be there for……

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Customer
perspectives

Market Segment,
Customer Satisfaction
Customer Retention
New customers
Customer profitability
Market share
Account share

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Linking Scorecard Measures to a Strategy

Cause and Effect Relationship


Outcome Measures & Performance Drivers

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Cause and Effect Relationship

The measurement system should make the relationship


among objectives and measures in the various
perspectives explicit so that they can be managed and
validated. The chain of cause and effect should pervade
all four perspectives of Balanced Scorecard.

Financial
ROCE as Measure
Perspective

Driver of measure

Repeat sales
Customer Loyalty Customer
Customer Satisfaction Perspective
On time delivery

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ROCE
Financial

Cause and effect


Relationship Customer
Loyalty
Customer
On time
Delivery

Internal Process Process Cycle


Process Quality Time

Learning
Employee Skill
&
Growth
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Performance Drivers

Activities which helps in achieving the


objectives through outcome measures

Sales Growth
Customers Loyalty
ROCE Quick Delivery
Trained Manpower

Measure Performance Drivers


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Lagging
Indicators
(Outcome Measures)

Balance Scorecard

Leading
Indicators
(Performance Drivers)

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Question

Should Financial Measures be Scrapped ?

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Could be Yes;

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Financial measures
In today’s technologically
provide
and customer driven global
Poor guidelines for
competition
Success

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Customer Satisfaction

Quality
Managers should focus
Cycle times
On improving
Employees skills

Motivation

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Sales

Return
Impact of other 3 perspective
On financial perspective Physical Assets

Growth

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Four Perspectives: are they sufficient

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watch interest of

More perspectives Employees


Suppliers
community

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Strategic Positioning or competencies driven

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Strategic Positioning or competencies
driven

Strategy for choosing the market & customer


Segments it wish to serve, identifying critical
internal processes and to excel in that to give
value to the customers

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Competencies/capabilities driven

Alternatively many organizations exploit their


Competencies, resources and capabilities to
Give better services or product

Hero Honda- engines


Canon - cameras

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to sum Up….

Balance Scorecard is primarily a mechanism for


Strategy implementation and nor strategy formulation
It can accommodate either approach for formulating
Business Strategy- starting from customer perspective
or Starting from excellent internal process capabilities

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to sum Up….

What ever approach is followed to Formulate the


strategy,

the BSC will provide an Invaluable Mechanism


for translating the strategy into specific Objectives,
measures and targets and monitoring the
Implementation of that strategy during Subsequent
periods

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and….

Management should disclose the financial and


Non financial measurement it uses in managing
the business unit that quantify the effects of key
activities and events.

It is possible through Balance score card

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Questions

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