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Balanced scorecard

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  • 1. Balanced Scorecard The Balanced Scorecard is a strategic planning and management system used to align business activities to the vision and strategy of the organization by monitoring performance against strategic goals.
  • 2. Balanced Scorecard Concept • Was first published in 1992 by Kaplan and Norton, a book followed in 1996. • Traditional performance measurement that only focus on external accounting data are obsolete. • The approach is to provide 'balance' to the financial perspective.
  • 3. Why Use a Balanced Scorecard? • Improve organizational performance by measuring what matters • Increase focus on strategy and results • Align organization strategy with workers on a day-to- day basis • Focus on the drivers key to future performance • Improve communication of the organization’s Vision and Strategy • Prioritize Projects / Initiatives
  • 4. Original Business Perspectives Adapted from The Balanced Scorecard by Kaplan & Norton  The Balanced Scorecard model suggests that we view the organization from 4 perspectives.  Then Develop metrics, collect data and analyze it relative to each of these perspectives
  • 5. Business Perspectives Questions • Financial – What must we do to create sustainable economic value? • Internal Business Process – To satisfy our stakeholders, what must be our levels of productivity, efficiency, and quality? • Learning and Growth – How does our employee performance management system, including feedback to employees, support high performance? • Customer – What do our customers require from us and how are we doing according to those requirements?
  • 6. Balanced Scorecard Measurements
  • 7. Key Implementation Success Factors • Obtaining executive sponsorship and commitment • Involving a broad base of leaders, managers and employees in scorecard development • Choose the right Scorecard Champion • Beginning interactive (two-way) communication first • Viewing the scorecard as a long-term journey rather than a short-term project • Getting outside help if needed
  • 8. Department Level Scorecard Example
  • 9. Scorecard Criticisms • Lack of a well Defined Strategy – The balanced scorecard relies on a well defined strategy and understanding of linkages between strategic objections and metrics. Without this foundation the implementation could fail. • Too much focus on the lagging measures – Focusing on only the lagging measures may cause a lack of priority or opportunity for the leading measures. • Use of Generic Metrics – Don’t just copy metrics from another firm. Identify the measures that apply to your strategy and competitive position . • Self-serving managers – Managers whose goal is to achieve a desired result in order to obtain a bonus or other self reward.
  • 10. Balanced Scorecard Benefits • Helps align key performance measures with strategy at all levels of an organization • The methodology facilitates communication and understanding of business goals and strategies at all levels of an organization • Strategic initiatives that follow "best practices" methodologies that cascade through the entire organization • Transforms an organization’s mission statement and strategic plan from a passive document into the "marching orders" for the organization on a daily basis. • It enables executives to truly execute their strategies by identifying what should be done and measured. To date, some form of a Balanced Scorecard is used by nearly 60% of Fortune 500 companies