The balanced scorecard method

1. The Balanced Scorecard
Method
MANISH KUMAR GAURAV
MANISH KUMAR GUPTA
SUSHOVAN BEJ

2. Definition
 The balanced scorecard is a strategic planning and management system that is
used extensively in business and industry, government, and non profit
organizations worldwide to align business activities to the vision and strategy of
the organization, improve internal and external communications, and monitor
organization performance against strategic goals.
 Balance Score card is the management tool that looks beyond short term
financial position of an organisation as a measure of its performance. By
incorporating a variety of perspectives into its organisational outlook its gives a
more holistic view of performance.
 It was originated by Dr. Robert Kaplan (Harvard Business School) and Dr. David
Norton as aperformance measurement framework to give managers and
executives a more 'balanced' view of organizational performance.

3. Balanced Scorecard Perspectives

4. 4© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
The Four Perspectives Apply to Mission Driven As
Well As Profit Driven Organizations
• What must we do to satisfy our
stakeholders?
• Who is our customer?
• What do our customers expect from
us?
• What internal processes must we excel
at to satisfy our regulatory and social
obligations, our customers and the
requirements of our shareholder?
• How must our people learn and
develop skills to respond and
participate in these and future
challenges?
Profit DrivenProfit Driven Vision DrivenVision Driven
• What must we do to satisfy our
shareholders?
• What do our customers expect from
us?
• What internal processes must we
excel at to satisfy our shareholder and
customer?
• How must our people learn and
develop skills to respond to these and
future challenges?
Financial Perspective
Customer Perspective
Internal Perspective
Learning & Growth
Perspective
Importance of asking right questions.

5. Management Strategy Process

6. Translating Vision
 The aim is to make consensus around the organization’s vision and
strategy.
 For employees to act on words in vision and strategy statements,
those statements must be expressed as an integrated set of
objectives.

7. Communicating And Linking
 The scorecard gives managers a way of ensuring that all levels of
organisation understand the long term strategy and that both
departmental and individual objectives are aligned with it.

8. Business Planning
 Balanced Scorecard helps managers to allocate resources and set priorities to
those initiatives that move them towards their Vision.

9. Feedback And Learning
 It emphasises on whether a company, it’s departments, or it’s individual
employees have met their goals or not.

10. Balanced Scorecard Method

11. Balanced Scorecard Perspective
Each perspective of the Balanced Scorecard
includes objectives, measures of those
objectives, target values of those measures and
initiatives.
Objectives – to be achieved. Ex. Profitable
growth
Measures – parameters used to measure the
progress towards achieving objective. Ex.
Profitable growth measured by net margin
growth
Targets – targets for the measures. Ex. 5% growth
in net margin
Initiatives – actions to achieve targets. Ex. More
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Objectives Measures Targets Initiatives
Financial
Performance
Customer
Value
Internal
Business
Performance
Learning and
Growth

12. Methodology of Balance Scorecard
Method
 Articulate the business’s vision and strategy
 Identify the performance categories that best link the business’s vision and strategy to its results
(such as financial performance, operations, innovation, employee performance)
 Establish objectives that support the business’s vision and strategy
 Develop effective measures and meaningful standards, establishing both short-term milestones
and long-term targets
 Ensure companywide acceptance of the measures
 Create appropriate budgeting, tracking, communication and reward systems
 Collect and analyse performance data and compare actual results with desired performance
 Take action to close unfavourable gaps

13. Balanced Scorecard Example
For any manufacturing company, to improve its profitability.
Source : Bain n Company

14. Balanced Scorecard Example

15. Uses of Balance Scorecard Method
 Clarify or update a business’s strategy
 Link strategic objectives to long-term targets and annual budgets
 Track the key elements of the business strategy
 Incorporate strategic objectives into resource allocation processes
 Facilitate organizational change
 Compare performance of geographically diverse business units
 Increase companywide understanding of the corporate vision and strategy

16. Advantages
 Structured approach to analyse the perspectives
 Align organisation strategy with daily operation basis
 Work for the long term objectives through short term actions
The balanced scorecard is not a piece of software. Unfortunately, many people
believe that implementing software amounts to implementing a balanced
scorecard.
Automation adds structure and discipline to implementing the Balanced
Scorecard system, helps transform disparate corporate data into information
and knowledge, and helps communicate performance information.