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Balanced Scorecard
{Robert S. Kaplan and David P. Norton}
Presented By:
Bhawna Singh
Introduction
The Balanced Scorecard (or balance score card) is a strategic performance
measurement model which is developed by Robert Kaplan and David Norton.
Its objective is to translate an organization’s mission and vision into actual
(operational) actions (strategic planning).
The starting points of the balanced scorecard are the vision and the strategy that
are viewed from four perspectives
• Financial Perspective - How do we look to shareholders?
• Customer Perspective - How do customers see us?
• Internal Business Processes Perspective - What must we excel at?
• Learning and Growth Perspective - Can we continue to improve and create value?
Financial perspective
It answers the question: “How attractive must we appear to our shareholders and
financial backers?”.
This is mainly a quantitative benchmark based on figures from the past.
The delivered added value from the other three perspectives will be translated into
a financial success. This is therefore a quantification of the added value that is
delivered in the organization.
Customer perspective
Each organization serves a specific need in the market. This is done with a target
group in mind, namely its customers.
Customers determine for example the quality, price, service and the acceptable
margins on these products and/or services.
This perspective answers the question: “How attractive should we appear to our
customers?”
Internal Business Processes Perspective
From the perspective of internal processes the question should be asked what
internal processes have actually added value within the organizations and what
activities need to be carried out within these processes.
Added value is mainly expressed as the performance geared towards the customer
resulting from an optimal alignment between processes, activities and decisions.
This perspective answers the question: “What must we excel at to satisfy our
customers and shareholders/ financial backers?”
Learning and growth Perspective
An organization’s learning ability and innovation indicate whether an organization is
capable of continuous improvement and/or growth in a dynamic environment.
This dynamic environment is subject to change on a daily basis due to new legislation
and regulations, economic changes or even increasing competition.
This perspective answers the question: “How can we sustain our ability to achieve our
chosen strategy?”.
The Balance Within
As the name suggests, the equilibrium or balance is an important principle in the
balanced scorecard model.
There must be a balance between the short-term and the long-term objectives,
financial and non-financial criteria, leading and lagging indicators and external
and internal perspectives.
It is about cohesion in which an improvement in one perspective must not be an
obstacle in another perspective.
This cohesion is reflected in the model through the mutually connected arrows
between the four perspectives.
Need of the Balanced Scorecard
• The exclusive reliance on financial measures in a management system is
insufficient.
• It emphasizes the linkage of measurement to strategy and the cause and effect
linkages that describe the hypothesis of the strategy
• It reflects the changing nature of technology and the competitive advantage
• Strategy for creating value shifted from managing tangible assets to knowledge
based strategies that create and deploy an organization’s intangible assets.
Application of the Balanced Scorecard
The Balanced Scorecard concept been so well adopted by manufacturing and
service companies, nonprofit organizations and government entities around the
world since its introduction in 1992.
Most NPGOs had difficulty with the original architecture of the balanced
scorecard that places the financial perspective at the top of the hierarchy.
Thus, they place customers or constituents at the top of the hierarchy.
Private Sector Non profit Organization
Customers have two roles:
• Pay the service
• Receive the service
• Long term objective: Financial
measures.
• Donors provide the financial resources-
Pay the service
• Constituents- Receive the service
• Long term objective: For Eg, Reduction
in poverty or/and illiteracy;
improvements in the environment.
Who is the customer?
-organisations place both the donors perspective
and recipients perspective, in parallel, at the top
of their balance scorecards.
The Mission
“If we succeed, how will we look
to our financial donors?”
“To achieve out vision, how must
we look to our customers?”
“To satisfy our customers, financial donors
and mission, at what business processes
must we excel?”
“To achieve our vision, how must our
people learn, communicate and work
together?”
The Mission, rather than the financial/ shareholder objectives, drives the
organization’s strategy.
{STRATEGY}
Relationship of Balance Scorecard
to other organizational improvement initiatives.
With the emergence of Balance Scorecard in the 1990s, two other approaches-
activity-based costing and shareholder value management----were being
advocated as measurement systems to help managers improve organizational
performance.
SHAREHOLDER VALUE MANAGEMENT address two defects in traditional financial
performance measurement:
• the overinvestment problem
• the underinvestment problem
ACTIVITY BASED COSTING- Activity-based costing (ABC) was developed to correct
another defect in financial -inability of traditional costing systems to identify the
drivers of indirect and support costs .
• Operational Linkage
• Customer Profitability Linkage
• Budgeting Linkage
• Stakeholder scorecards
This scorecard defines the organisation’s goals for different
constituents, stakeholder , employees , customer, suppliers etc. and
develop appropriate measures and targets for them.
• Key performance indicator scorecards
KPIs scorecards emerge when the organization’s information
technology group triggers the scorecard design.
Some Other Scorecards

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Balance scorecard

  • 1. Balanced Scorecard {Robert S. Kaplan and David P. Norton} Presented By: Bhawna Singh
  • 2. Introduction The Balanced Scorecard (or balance score card) is a strategic performance measurement model which is developed by Robert Kaplan and David Norton. Its objective is to translate an organization’s mission and vision into actual (operational) actions (strategic planning). The starting points of the balanced scorecard are the vision and the strategy that are viewed from four perspectives • Financial Perspective - How do we look to shareholders? • Customer Perspective - How do customers see us? • Internal Business Processes Perspective - What must we excel at? • Learning and Growth Perspective - Can we continue to improve and create value?
  • 3.
  • 4. Financial perspective It answers the question: “How attractive must we appear to our shareholders and financial backers?”. This is mainly a quantitative benchmark based on figures from the past. The delivered added value from the other three perspectives will be translated into a financial success. This is therefore a quantification of the added value that is delivered in the organization. Customer perspective Each organization serves a specific need in the market. This is done with a target group in mind, namely its customers. Customers determine for example the quality, price, service and the acceptable margins on these products and/or services. This perspective answers the question: “How attractive should we appear to our customers?”
  • 5. Internal Business Processes Perspective From the perspective of internal processes the question should be asked what internal processes have actually added value within the organizations and what activities need to be carried out within these processes. Added value is mainly expressed as the performance geared towards the customer resulting from an optimal alignment between processes, activities and decisions. This perspective answers the question: “What must we excel at to satisfy our customers and shareholders/ financial backers?” Learning and growth Perspective An organization’s learning ability and innovation indicate whether an organization is capable of continuous improvement and/or growth in a dynamic environment. This dynamic environment is subject to change on a daily basis due to new legislation and regulations, economic changes or even increasing competition. This perspective answers the question: “How can we sustain our ability to achieve our chosen strategy?”.
  • 6. The Balance Within As the name suggests, the equilibrium or balance is an important principle in the balanced scorecard model. There must be a balance between the short-term and the long-term objectives, financial and non-financial criteria, leading and lagging indicators and external and internal perspectives. It is about cohesion in which an improvement in one perspective must not be an obstacle in another perspective. This cohesion is reflected in the model through the mutually connected arrows between the four perspectives.
  • 7. Need of the Balanced Scorecard • The exclusive reliance on financial measures in a management system is insufficient. • It emphasizes the linkage of measurement to strategy and the cause and effect linkages that describe the hypothesis of the strategy • It reflects the changing nature of technology and the competitive advantage • Strategy for creating value shifted from managing tangible assets to knowledge based strategies that create and deploy an organization’s intangible assets.
  • 8. Application of the Balanced Scorecard The Balanced Scorecard concept been so well adopted by manufacturing and service companies, nonprofit organizations and government entities around the world since its introduction in 1992. Most NPGOs had difficulty with the original architecture of the balanced scorecard that places the financial perspective at the top of the hierarchy. Thus, they place customers or constituents at the top of the hierarchy. Private Sector Non profit Organization Customers have two roles: • Pay the service • Receive the service • Long term objective: Financial measures. • Donors provide the financial resources- Pay the service • Constituents- Receive the service • Long term objective: For Eg, Reduction in poverty or/and illiteracy; improvements in the environment. Who is the customer? -organisations place both the donors perspective and recipients perspective, in parallel, at the top of their balance scorecards.
  • 9. The Mission “If we succeed, how will we look to our financial donors?” “To achieve out vision, how must we look to our customers?” “To satisfy our customers, financial donors and mission, at what business processes must we excel?” “To achieve our vision, how must our people learn, communicate and work together?” The Mission, rather than the financial/ shareholder objectives, drives the organization’s strategy.
  • 11. Relationship of Balance Scorecard to other organizational improvement initiatives. With the emergence of Balance Scorecard in the 1990s, two other approaches- activity-based costing and shareholder value management----were being advocated as measurement systems to help managers improve organizational performance. SHAREHOLDER VALUE MANAGEMENT address two defects in traditional financial performance measurement: • the overinvestment problem • the underinvestment problem ACTIVITY BASED COSTING- Activity-based costing (ABC) was developed to correct another defect in financial -inability of traditional costing systems to identify the drivers of indirect and support costs . • Operational Linkage • Customer Profitability Linkage • Budgeting Linkage
  • 12. • Stakeholder scorecards This scorecard defines the organisation’s goals for different constituents, stakeholder , employees , customer, suppliers etc. and develop appropriate measures and targets for them. • Key performance indicator scorecards KPIs scorecards emerge when the organization’s information technology group triggers the scorecard design. Some Other Scorecards