Balanced Scorecard

1. Developing a Balanced Scorecard

2. What is a “Balanced” Scorecard
 A strategic and operational tool
 Owned by the Executive
 Shared by everyone
 Balances:-
 Long and short term
 Hard and soft measures
 Leading and trailing indicators
 Internal/external perspectives
 Like writing a novel, not writing a list
 Measures support change, not monitoring

3. It is NOT
 A new idea
 An end in itself
 A playing field for internal politics
 An “initiative” of Finance, HR,
Marketing etc.
 Boardroom art
 A make-work exercise

4. Its origins
 Nolan-Norton Consultants 1990
 12 client “Organisation of the Future” study group
 Based on premise that financial measures were
insufficient for a modern business
 Principles espoused previously by:-
 Rensis Likert (The Human Organisation, 1960)
 TQM “gurus” (Deming, Crosby, Juran etc.)*
 European Foundation for Quality Management (1985)
 Maisel and McNair parallel models
* Original K&N source was part of a TQ programme

5. The EFQM Excellence Model
10%
9%
8%
9%
14%
9%
20%
6%
15%
(percentages show how each elements is scored for importance)

6. Customer
Balanced
Scorecard
Financials
Learning
& growth
Business
Processes
Kaplan and Norton model (1996)

7. Customer perspective
Corrective activity
Developmental activity
Balancing compliance
with added value
Balanced
Scorecard
Financial Measures
Key performance ratios
Financial health
Balancing leading with
trailing indicators
Learning and growth
People measures
Knowledge measures
Balancing soft and
hard indicators
Business Processes
Drumbeat
Time, cost, quality
Balancing inputs
and outputs
A question of balance?

9. Building the Balanced Scorecard
The key
question
How do you
create value?

10. A strategic tool
 Starts with strategy
 Continuous process
 Needs to become
culturally embedded

11. To be successful for our shareholders, we must be (position in market),
which means that we must return superior financial results in .......
Our customers are the people who will secure these results for us so we
must offer our customers superior value by .........
To deliver this superior value we must excel in the way we manage the
processes for .......
These processes are operated by our people. We must provide our people
with ....... to achieve excellent performance.
The story of a scorecard

12. Cause and effect chain
Strategic Objective
Financial Measure
Customer Value Measure
Process Measure
Employee Measure
What
How
How
How
May be
reversed

13. Cause and effect chain example
Become No 2 player
What
How
How
How
Market share
F
Service span offer
C
Services delivered per customer
P
Availability of data
E

15. The Balanced Scorecard
Where does it fit?

16. Where does it fit?
Culture and values (leadership/style/relationships etc.)
Rewards
Targets
Measures
Projects
Alliances
Systems
Structure
Vision
Mission and CSFs
Strategic Objectives
Balanced
Scorecard
Building
Using

17. Example Retail Strategic themes
Themes
 Broadening the
offer
 Focus on Health
and Beauty
 Friendly and Fun
 Destination of
Choice
Projects
 Pharmacy store
expansion
 New store
opening process
 Living the Mission
 Category
management
Measures
 Pharmacy store
sales growth
 Brand Penetration
(Market Research)
 Mystery Shopper
 Footfall and basket
size

18. Customer perspective
Basket Size
Mystery Shopper index
Footfall
Complaints
Balanced
Scorecard
Financial Measures
Sales Revenue growth
Return on Turnover
Cost of sales
Shrinkage
Learning and growth
Absence level
Stability index
Mission involvement index
Starfish.net ideas
Business Processes
Stock Outs
New store plan vs. actual
Strategic Projects delivery
Supply chain process time
Sample retail scorecard

19. Recruitment
Morale (absence)
Development
Staff Loyalty Complaints*
Satisfaction
Loyalty*
Market share*
Sales Growth*
Cost Controls (Sales var)
Profitability*
Driving extra sales to bottom
line*
Stock Mgt
Waste Mgt*
Stock availability
Productivity
One in Front*
PEOPLE
OPERATIONS FINANCE
CUSTOMER
only in smaller store
formats - Metro and
Express
Blue arrows indicate positive correlation. Red arrows negative. Broken line is a weaker connection
Number at arrow head indicates size of Pearson co-efficient of correlation.
Superstores used for consistency of statistic except where indicated.
-0.28
0.13
-0.20
0.1
0.27
only in Metro and
Extra Stores
-0.1
-0.1
0.11
0.17
-0.16
0.16
0.16
* No data available
for this element
0.22
Joined up thinking?

21. Using the Balanced Scorecard
Drill-down into
HR systems

22. Performance management
Age What is
valued?
Key process Key Output Culture
Pre-industrial
Age
Community
Loyalty
Belonging Contribution Social
Industrial Age Obedience
Output
Compliance Output Work-ethic
Information
Age
Knowledge
Innovation
Empowerment New value Mobility

23. Learning and growth
 Employee satisfaction
 Employee capability
 Information availability
 Knowledge growth
 Performance and reward
management systems
 Cultural measures from surveys – e.g.
leadership, communication,
recognition (enablers)

24. Success factors
 Drill-down into Systems
 Planning and objective setting
 Operational targets
 Budgeting
 Internal audit
 Continuous improvement
 Project management
 Performance
management/appraisal
 Reporting and meeting regimes
 Reward and recognition.......

25. “Unfortunately, this year’s
low score on morale in the
employee survey means our
balanced scorecard index is
below the threshold for the
bonus award”