Balanced Scorecard
A Comprehensive Guide
Upendra Kartik

What is a Balanced Scorecard?

What is Balanced Scorecard?
• The Balanced scorecard is a management system that enables
organizations to clarify their vision and strategy and translate them
into action.
• Provides an organization with feedback of both the internal business
processes and external outcomes, which allows for continuous
improvement of strategic performance and results.
• Nerve center of an enterprise

Measurement, Management and Balance
Management :
The association and synchronization of the activities of an enterprise in
accordance with certain defined systems and in achievement of
defined objectives.
Measurement :
A way of monitoring and tracking the progress of strategic objectives
• Measurement is a decision support system for management
• Measurements are a natural and inherent part of the management
process

What is Balanced Scorecard?
• The term “scorecard” signifies quantified performance measures and
“balanced” signifies the system is balanced between:
• Short-term and long term objectives
• Financial and non-financial measures
• Lagging and leading indicators
• Internal and external performance perspectives

What is Balanced Scorecard?

Vision and
Strategy
Objectives Measures Targets Initiatives
FINANCIAL
“To succeed
financially, how
should we
appear to our
shareholders?”
Objectives Measures Targets Initiatives
LEARNING AND GROWTH
“To achieve our
vision, how will
we sustain our
ability to
change and
improve?”
Objectives Measures Targets Initiatives
CUSTOMER
“To achieve our
vision, how
should we
appear to our
customers?”
Objectives Measures Targets Initiatives
INTERNAL BUSINESS PROCESS
“To satisfy our
shareholders
and customers,
what business
processes must
we excel at?”
The Four Perspectives
What is Balanced Scorecard?

The Evolution of Balanced Scorecard
• The concept of the balanced scorecard was first touted in the Harvard
Business Review in 1992 in a paper written by Robert S Kaplan and
David P Norton.
• The paper introduced the idea of focusing on human issues as well as
financial ones, and measuring performance across a much wider
spectrum than businesses had done before.
• Kaplan and Norton published their ideas in full in The Balanced
Scorecard: Translating Strategy into Action in 1996 and it became a
business bestseller.

BSC and other Quality Systems
• Baldrige subcategories mirror BSC:
• Customer-focused results
• Financial and market results
• Human resource results
• Organizational effectiveness
• Changes in Baldrige methodology followed soon after Curt Riemann,
first Director of Baldrige National Quality Program, attended BSC
presentations in early 90s.
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BSC, Baldrige and EFQM
EFQM criteria:
• Leadership (10%)
• People (9%)
• Policy & strategy (8%)
• Partnerships & resources
(9%)
• Processes (14%)
• People results (9%)
• Customer results (20%)
• Society results (6%)
• Key perf. results (15%)
Baldrige categories
• Leadership (12%)
• Human resource focus (8.5%)
• Strategic planning (8.5%)
• Process management (8.5%)
• Customer & market focus (9%)
• Information & analysis (8.5%)
• Business results (45%)
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The Four Perspectives of Balanced
Scorecard
 The balanced scorecard is centered on four performance metrics or
perspectives:
• Customers
• Internal processes
• Financial
• Learning and growth
 When implemented properly, each one of these perspectives contains
four subparts consisting of
• Objectives
• Measures
• Targets
• Initiatives

• Objectives - what the strategy is to achieve in that perspective
• Measures - how progress for that particular objective will be measured
• Targets - refer to the target value that the company seeks to obtain for
each measure
• Initiatives - what will be done to facilitate the reaching of the target
The Four Perspectives of Balanced
Scorecard

Linking the BSC to organizational
strategy
Vision
Mission
Business Planning and Strategy
Goals and
Objectives
Balanced
Scorecard
Corporate Measurement
and
Reporting System
The balanced scorecard is an integral part of business planning and strategy

Advantages of Balanced Scorecard
• Translation of strategy into measurable parameters
• Communication of strategy
• Alignment of individual goals with strategic objectives
• Helps align key performance measures with strategy at all levels of an
organization.
• Provides management with a comprehensive picture of business operations.
• Facilitates communication and understanding of business goals and strategies at
all levels of an organization.
• Maximized Cooperation - Team members are focused on helping one another
succeed.
• It provides strategic feedback and learning.
• Initiatives are continually measured and evaluated against industry standards

Company Strategy - Sample

Example of Balanced Scorecard
STRATEGY MAP BALANCED SCORECARD
MEASUREMENT
PROCESS: MANUFACTURING EXCELLENCE
THEME: ROCE > xx%, VOLUME = xx,xxx units
OBJECTIVES TARGET
ACTION PLAN
INITIATIVE BUDGET
FINANCIAL
PERSPECTIVE
Improve
Productivity
OFFER PRODUCTS & SERVCIES
THAT ARE CONSISTENT, TIMELY
and LOW-COST
Long-Term Shareholder
Value ROCE > xx%
Grow
Revenue
CUSTOMER
PERSPECTIVE
•Operating Cost & Efficiency
•Capacity Utilization
•Capability Utilization
•Brand / Image
• Cost/Unit, Efficiency
•% Utilization
• Monthly Monitoring
• Weekly/Monthly
Monitoring
• Monthly Monitoring
• Weekly/Monthly
Monitoring
•Low Cost Manufacturing
•World-Class Quality
Standards
•World-Class Delivery Timing
•Knowledgeable & Skilled
Partner
•High Customer Satisfaction
•Reinforce Brand Image
• Man-hour per Unit
• Defect per Unit
• Sales Delivery
• Direct Pass Rate
• Market Feedback
• Sales Volume
• Weekly Monitoring
• Daily Monitoring
• Daily Monitoring
• Daily Monitoring
• Weekly Monitoring
• Monthly Monitoring
Prod. & Sales Mtg.
Low
Cost
World
Class
ENSURE OPERATIONAL EXCELLENCE WITH
INNOVATION AS WELL BEING SOCIALLY
RESPONSIBLE
INTERNAL
PERSPECTIVE
Customer
Satisfaction
Enhance
Brand
Operational
Excellence
Process
Innovation
Alliances with
SBUs
Socially
Responsible
•Productivity
•Delivery
•Continuous Improvement
•NPI
•Safety & Health
•Environment
• Cycle Time
• Meet Daily Plan
• WIP
• KAIZEN
• ICC
• Timely Introduction
• Industrial Accident
• Commuting Accident
• Toxic Waste Disposal
• ISO 9002
• Hourly Monitoring
• Daily Monitoring
• Daily Monitoring
• Monthly follow-up
• Specific Programmed
• Weekly Follow-up
• Cross Audits
• Defensive Driving
• Facility Readiness
• Certification
STRATEGIC JOB & SYSTEMS
LEARNING & GROWTH
PERSPECTIVE
Skills Info. System
•Develop the Necessary Skills
•Information Systems
Availability
• R&D & Development
• ALC, Procurement,
Financial
• Training and Skill
Build-up
• Set-up, Test and
Validation
• Trial Prod.
• Spare Parts Prod
•Warranty Cost t

The Financial Perspective

What is the Financial Perspective?
• The financial performance perspective of the balanced
scorecard addresses the question of
• How shareholders view the firm and
• which financial goals are desired from the shareholder’s
perspective.
• These financial goals are dependent on the company’s stage in
the business life cycle.

Financial Performance: Business Life
Cycle
• There are three main stages to this cycle which include:
• Growth stage -goal of the company is growth
• Sustain stage - the goal of the firm is profitability
• Harvest stage - the goal of the firm is cash flow and reduction in
capital requirements.

Linking Financial Objectives to Business
Unit Strategy
Harvest
Sustain
Growth
• Customer and product line
profitability
• % unprofitable customers
• Cross selling
• Customer and product line
profitability
• Cost reduction
• Sales growth rate
• % revenue from new
customers, products and
services

Strategic Theme for Financial Perspective
Financial
objectives
Revenue
growth
and Mix
Cost
Reduction
Asset
utilization

Strategic Theme for Financial Perspective
Revenue growth and mix.
This is mainly about reaching new customers and markets,
expanding products and services, introducing new pricing policies
etc.
Productivity improvement/cost reduction.
This may include reduction of indirect costs, sharing common
resources with other departments, lowering direct costs.
Investment strategy/assets utilization
This may include greater utilization of fixes assets base and
improving return on investment

Financial Perspective Example

The Customer Perspective

Customer Needs
• Who is your customer?
• What age, gender, group does our product appeal to?
• What services or products do they expect from you?
• Do we provide personal services, do your products serve as advertised?
• How do you listen to and learn from your customers?
• Do we provide feedback calls or emails?
• How do you retain and acquire new customers?
• Do we use new advertisement and how do we advertise?
• How do you meet customers’ needs?
• Do we provide help lines and how can we provide help to customers?
• How do you measure customer satisfaction and dis-satisfaction?
• Do we use surveys to find out how customers feel about us?

Customer Perspective
• Companies identify the customer and market segments in which they have
chosen to compete. These segments represent the sources that will deliver
the revenue component of the company's financial objectives.
• The customer perspective enables companies to align their core customer
outcome measures- satisfaction, loyalty, retention, acquisition, and
profitability-to targeted customers and market segments.
• Customer perspective enables to identify and measure,
the value propositions they will deliver to targeted customers and market
segments.

Customer perspective
• Market share
• Customer retention
• Customer acquisition
• Customer satisfaction
• Specific performance criteria
• Defined value proposition
• Customer profitability
• Profitability by account
• Net of any special account-specific expenses
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Market Segmentation
• Existing and potential customers are not homogeneous.
• Customers have different preferences and value the attributes of the
product or service differently.
• A strategy formulation process, using in-depth market research, should
reveal the different market or customer segments, and their preferences
like price, quality, functionality, image, reputation, relationship, and
service.
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Market Segmentation – Example
Example of market segmentation, Pioneer Petroleum, a major U.S. refiner and retail marketer of
gasoline and automobile lubricants,
1. Road Warriors: 16% of buyers
Higher-income middle-aged men who drive 25,000-50,000 miles a year . . . buy premium gasoline with a
credit card . . . Purchase sandwiches and drinks from the convenience store . . . will sometimes wash
their cars at the carwash.
2. True Blues: 16% of buyers
Usually men and women with moderate to high incomes who are loyal to a brand and sometimes to a
particular station . . . frequently buy premium gasoline and pay in cash.
3. Generation F3: 27% of buyers
Fuel, Food, and Fast: Upwardly mobile men and women-half under 25 years of age-who are constantly on the
go . . . drive a lot and snack heavily from the convenience store.
4. Homebodies: 21 % of buyers
Usually housewives who shuttle their children around during the day and use whatever gasoline station is
based in town or along their route of travel.
5. Price Shoppers: 20% of buyers
Generally aren't loyal to either a brand or a particular station, and rarely buy the premium line . . . frequently
on tight budgets
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30
Customer
Profitability
Market
Share
Customer
Retention
Customer
Acquisition
Customer
Satisfaction
Performance Drivers for Customer
Satisfaction

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Performance Drivers for Customer
Satisfaction
Market Share
Reflects the proportion of business in a given market (in terms of number of
customers, dollars spent, or unit volume sold) that a business unit sells.
Customer Acquisition
Measures, in absolute or relative terms, the rate at which a business unit attracts or
wins new customers or business.
Customer Retention
Tracks, in absolute or relative terms, the rate at which a business unit retains
or maintains ongoing relationships with its customers.
Customer Satisfaction
Assesses the satisfaction level of customers along specific performance criteria
within the value proposition.
Customer Profitability
Measures the net profit of a customer, or a segment, after allowing for the unique
expenses required to support that customer.

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The Customer Value Proposition
Customer Value
Proposition
Product / service
Attributes
Image &
Reputation
Customer
Relationship
Quality Price Time Functionality

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The Customer Value Proposition
.
Product and Service Attributes:
It encompass the functionality of the product/service, its price, and its quality
Customer Relationship:
It includes the delivery of the product/service to the customer, including the
response and delivery time, and how the customer feels about purchasing from the
company.
Image and Reputation:
It reflects the intangible factors that attract a customer to a company

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Customer Perspective Example
.

Internal Business Process
Perspective

Internal Processes
• Internal business process objectives address the question of which
processes are the most critical for satisfying customers and
shareholders
• A firm must concentrate its efforts to excel in the processes that are key to
customers or stakeholders.
• Metrics based on Internal processes prospective allow the managers
to know how well their business is running and whether its products
and services conform to customer requirements
• Companies typically develop their objectives and measures for
Internal Business Process perspective after formulating objectives
and measures for the financial and customer perspectives

Internal Process Examples
• Cost
• Throughput
• Quality
Objective Specific Measure
Manufacturing excellence Cycle time, yield
Increase design productivity Engineering efficiency
Reduce product launch delays Actual launch date vs. plan

Internal Business Process Value
Chain
• Most existing performance measurement systems focus on improving
existing operating processes.
• Balanced Scorecard recommend that managers define a complete internal-
process value chain
• Traditional performance measurement systems focus on controlling and
improving existing responsibility centres and departments.

Customer
Need
Identified
Identify
The Market
Create
Product /
Service
Build
The
Product/
Service
Deliver
Product /
Service
Customer
Need
Satisfied
Service the
Customer
Innovation Process Operations Process Post Sale Process
Internal Business Process Value
Chain

Manufacturing Cycle Effectiveness
• A metric used by organizations attempting to move to just-in-time production
flow processes is manufacturing cycle effectiveness (MCE), defined as:
MCE =
Processing Time
Throughput Time
This ratio is less than 1
Throughput Time = Processing Time + Inspection Time + Movement Time +
Waiting/Storage Time

Internal Business Process
Perspective Example

Learning and Growth
Perspective

• “How much a company must learn, improve, and innovate to meet
objectives.”
• Learning & growth must focus on measurable outcomes to move the
company forward
Learning and Growth Perspective

• The Learning & Growth Perspective focuses on the intangible assets of an
organization, mainly on the internal skills and capabilities of the employees that
are required to support the value-creating internal processes. The Learning &
Growth Perspective focuses on:
• Human Capital-Jobs and people issues
• Information Capital- Systems and technology issues
• Organization capital- Organizational climate and quality of work-life
Learning and Growth Perspective

Use of the scorecard:
• To set objectives
• To determine measures
• To predict outcomes
• To determine initiatives
• To gain the big picture

Key performance indicators include:
• Illness rate/days of absence
• Employee turnover
• Gender/racial ratios
• Internal promotion %

Learning & Growth perspective
• Core measurements
• Employee productivity
• Employee satisfaction
• Employee retention
• Enablers
• Staff competencies
• Technology infrastructure
• Climate for action/change
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Drivers of Learning and Growth
48
= ƒ People Tools Climate, ,
Organization
Learning &
Growth
Typical Learning & Growth Objectives
Skills
& Competencies
•Engineering skills
•Training to required levels
•Program Management skills
Knowledge
& Technology Assets
•Technologies
•Databases
•Experience captured
•Best practices
Climate for
Action
•Leadership
•Alignment
•Results Oriented
•Teaming

A learning & growth example:
• Objective: increase internal promotions
• Measure: bigger % of in house promotions
• Target: +10% in 2 years
• Additional classes and training

Implementation and Roles

• Establish and Communicate strategy
• Allocating Resources
• Define departmental teams
• Setting Individual Goals & Directions
• Providing Feed Back
System for Implementing BSC

• Vision & Strategies not actionable
• Strategies not linked to departmental and Individual Goals
• Strategies not linked to Long term/short term Resource Allocation
• Feedback that is tactical not strategic
Barriers to effective Implementation
of BSC

•Goal alignments from
top to bottom
•Education and open communication
about strategy
•Compensation is linked
To Strategy
Different Management System for
Strategic Implementation
Clarifying & Translating
The Strategy & Vision
Planning &
Target Setting
Communicating
And Linking
Strategic Feedback
&
Learning
Balance
Scorecard
•Stretch targets are established and accepted
•Strategic initiatives are clearly identified
•Investments are determined by strategy
•Annual Budgets are linked to long term planning
•The strategy is the reference point for the entire management process
•The shared vision is the foundation for strategic planning
•Feedback system used to test
The hypothesis on which strategy
Is based
•Team problem solving
•Strategy development is a
Continuous Process

Implementing the Balanced
Scorecard
Task 1. Select the appropriate Organizational Unit
Task 2. Identify SBU/Corporate Linkages
Task 3. Conduct First Round of Interviews
Task 4. Synthesis Session
Task 5. Executive Workshop
Task 6. Sub Groups Meetings
Task 7. Executive Workshop: ii nd Round
Task8. Develop Implementation Plan
Task 9. Executive Workshop: iii rd Round
Task10.Finalize the Implementation Plan

Frame for implementation

Upendra Kartik, with 14 years of rich and valuable experience was engaged Leadership roles
in Business Management, Organizational Consulting and Quality Management in diversified
sectors. He Successfully lead projects in improving productivity, process optimization, and
Cost reduction using Six Sigma, Lean and Project Management methodologies in the fields of
Education, Insurance, Manufacturing and Healthcare that helped clients to save about $50
Million USD. He created Quality, Leadership, HR and Technology frameworks that are been
successfully implemented across 3 organizations around the globe.
Highlights:
• Managed projects in Education, Healthcare, Insurance and Manufacturing using Lean, Six
Sigma, BSC, ISO and EFQM methodologies.
• Coached more than 2000+ participants around the globe in many training events and
international forums.
• Introduced innovative learning tools and services to healthcare and education.
• Lead Six Sigma Black Belt projects in Operations, Training, HR and Sales functions.
• Established Quality and HR functions in Insurance, Healthcare and Educational sectors.
Roles held:
 EXL Service, Assistant Vice President
 Saudi Harmony Consulting: Chief Consultant
Clientele Served
 Ministry of Education,
KSA
 Al-Obeikan, KSA
 Al-wafa Hospital, KSA
 Bharat Petroleum, IND
 Wipro ePeripherals, IND
 National Informatics
Centre, IND
 Larsen & Toubro, IND
 King Fahad Medical City,
KSA
About Author

ThankYou