Planning with balanced scorecard

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Planning using balanced scorecard frame work

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Planning with balanced scorecard

  1. 1. © All rights reserved by euseden 2008 euseden There has been a significant shift in strategic This paper is written by priorities of organizations. Intangible assets, Sheshagiri G Hegde of euseden. He is consultant in strategy and such as capability to acquire new customers, scorecard. He can be reached brand, competencies of people, maturity of on sheshagiri@euseden.com business processes, information technology +91 99808 59339 etc have become extremely important to organizations’ success. However, companies continue to plan with financial planning & budgeting tools that provide not much insight into such aspects. The way organizations plan and manage needs substantial change. Managers need a new way of measuring execution of goals and organization’s performance at all levels. © All rights reserved by euseden, 2008
  2. 2. Budget-planning, which is the most Budget based widely used system of planning, splits the organization into either cost or Planning is not enough revenue centers. In its basic nature, it is essentially finer break-down of the annual P & L and Balanced sheet. These centers are organized around the organizational hierarchy for managing. For decades this system of planning and control has served executive leaders and managers in managing the organization. Such budget planning and control however, today, has sever limitations when it comes to business planning or strategy planning and execution. For instance, budget planning does not allow us to plan on certain key aspects such as – customer relationship, brand, human capital etc. Can we think of building business without building good brands? A good cadre of managers? A good portfolio business processes? Plan around strategy? However, budget planning does not provide any frame work for such Strategy makes more sense today than ever. planning. And we have no other Strategy is a game plan- a company, a process, system or tools to set goals division, a business unit, or even a team has. around these aspects and manage It is the plan that describes how it is going them in enterprise-wide manner. to win. At simplest level, strategy is a high Ironically, these aspects have become level business logic of its future success.. strategic for business success than control on expenses. We need a It is important that organization or business system that provides template for unit consciously builds a hypothesis for its effective planning of such aspects and success. An integrated set of objectives also help us measure the linked in cause and effect chain. This can be effectiveness of actions takes on such achieved through tools like strategy maps & aspects. Hence while budgeting is scorecards. important, it is not enough. © All rights reserved by euseden, 2008
  3. 3. Balanced Scorecard Provides integrated Framework across these perspectives essentially in a top- Balanced scorecard provides a planning and down, cause and effect logic. For instance, if measurement framework that is organized we set the objective as “ Grow aggressively” around organization’s strategic goals. As in financial perspective, we start looking for explained earlier, balanced scorecard (BSC) objectives that can cause it happen at lower takes strategy as set of strategic objectives layers of logic (Refer the above figure). across balanced perspectives. Strategy must logically explain high level game plan of the Also, managers need to define measures for organization. With tools like strategy map, all the objectives set as explained above. Due BSC helps managers to articulate their to such measures now managers can build strategy. organization wide system of strategy execution. Like financial system, this system BSC has four perspectives – financial, will facilitate goal setting for strategic customer, internal and learning & growth. perspectives and tracking of all the numbers Managers are asked to set strategic related to such strategic goals. objectives © All rights reserved by euseden, 2008 For more information on balanced scorecard and how it can help your organization visit us at www.euseden.com or email us at marketing@euseden.com

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