The Balanced Scorecard is a strategic planning and management system used to translate an organization's mission and strategy into a comprehensive set of performance measures. It provides top-level managers with a fast but comprehensive view of the organization from four important perspectives: financial, customer, internal business processes, and learning and growth. The document outlines the key components of a Balanced Scorecard including objectives, measures, initiatives and cause-and-effect linkages across the four perspectives. It also discusses how to cascade the Balanced Scorecard throughout an organization.

1. Performance
Management &
Balanced Scorecard
Overview
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3. What is The Balanced Scorecard
“Balanced scorecard methodology is a management tool
designed to translate an organization's mission statement and
overall business strategy into specific, quantifiable goals and to
monitor the organization's performance in terms of achieving
these goals.”
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4. The barriers to implementing Strategy
Only 10% of
organizations
execute their
strategy
Barriers to Strategy Execution
Vision Barrier People Barrier Management Ressource
Only 5% of the Only 25% of Barrier Barrier
workforce managers have 85% of executive 60% of
teams spend less
understands the incentives linked than one hour per
organizations
strategy to strategy month discussing don’t link
strategy budgets strategy
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5. The Balanced Scorecard 4 perspectives
Financial
Objectives Measures Targets
”How do we
look to
shareholders
?”
Customer Internal Business Process
Objectives Measures Targets
Vision Objectives Measures Targets
”How do our and ”What must
customers we excel
see us?” Strategy at?”
Employee Learning and Growth
Objectives Measures Targets
”How can we
continue to
improve and
create
value?”
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6. Rationale for the Balanced Scorecard
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7. Signs that you may need a new performance
measurement system
Performance is acceptable on all dimensions except profit: A focus on quality
and other measures has led to improvements in isolated areas, but not profits.
Customers don’t buy even when prices are competitive: The problem may lie in
your relative performance to competitors.
No one notices when performance measurement reports aren’t produced: Data
in the reports no longer contains meaningful information for decision makers.
Managers spend significant time debating the meaning of the measures:
Measures must be clearly linked to strategic objectives.
Share price is lethargic despite solid financial performance: Wall street needs to
learn that you are investing in long-term value creating activities.
You haven’t changed your measures in a long time: Performance measures
should be dynamic based on the organization’s strategic direction.
Time for a new
performance You have recently changed your corporate strategy: All measures should link
measurement back to your strategy.
system? Source: Michael R. Vitale and Sarah C. Mavrinac
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8. Balanced Scorecard Team Roles and
Responsibilities
Role Responsibilities
Executive sponsor • Assumes ownership for the Balanced Scorecard
• Provides background information to the team on strategy and methodology
• Maintains communication with senior management
• Commits resources (both human and financial) to the team
• Provides support and enthusiasm for the Balanced Scorecard throughout the
organizatin
Balanced Scorecard • Coordinates meetings, plans, tracks, and reports team results to all audiences
champion • Provides thought leadership on the Balanced Scorecard methodology to the team
• Provides feedback to the executive sponsor and senior management
• Facilitates the development of an effective team through coaching and support
Team members • Provide expert knowledge of business unit or functional operations
• Inform and influence their respective senior executives
• Act as Balanced Scorecard ambassadors within their unit or department
• Act in the best interests of the business as a whole
Organizational change • Increases awareness of organizational change issues
expert • Investigates change-related issues affecting the Balanced Scorecard project
• Works with the team to produce solutions mitigating change related risks
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9. Balanced Scorecard Project Plan and Timeline
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10. A simplified Communication Plan for your Balanced
Scorecard project
Audience Purposes Frequency Delivery Vehicle Communicator
Executive team • Gain commitment Biweekly Direct contact Executive
• Remove obstacles sponsor
• Report progress
• Prevent surprices
Management • Convey purpose Biweekly • E-mail Champion /
• Explain concepts • Management meetings team members
• Report progress • Articles
• Gain commitment
All employess • Convey purpose Monthly • E-mail Project team
• Introduce concepts • Newsletters members
• Eliminate • Town-hall meetings
misconceptions
• Report progress
Project team • Track progress Weekly • Team meeting Champion
• Assign tasks • Status memos
• Review expectations
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11. Translating with the Balanced Scorecard
Mission and Core Values
Our desired future state
Differentiating activities
What we must do well in order Objectives
to implement our strategy
Employee Learning
Financial Customer Internal Processes
and Growth
How strategic Measures
success is
measured and Financial Customer Internal Processes
Employee Learning and
Growth
tracked
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12. The Balanced Scorecard should contain a mix of lag
and lead measures of performance
Lag Lead
Definition Measures focusing on Measures that ”drive” or lead
result at the end of a time to the performance of lag
period, normally measures, normally
characterizing historical measuring intermediate
performance processes and activities
Examples • Market share • Hours spent with
• Sales customers
• Employee satisfaction • Proposals written
• Absenteeism
Advantages Normally easy to identify Predictive in nature, and allow
and capture the organization to make
adjustments based on results
Issues Historical in nature and do May prove difficult to identify
not reflect current and capture, often new
activities, lack predictive measures with no history at
power the organization
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13. Cause-and-effect linkages in the Balanced
Scorecard
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14. Mapping Initiatives to Objectives
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15. “Cascading” the Balanced Scorecard
“Cascading refers to the process of developing Balanced Scorecards at each
and every level of your organization. These Scorecards align with your
organization’s highest-level Scorecard by identifying the strategic objectives
and measures lower-level departments and groups will use to track their
progress in contributing to overall company goals. While some of the
measures used may be the same throughout the entire organization, in
most cases the lower-level Scorecards will include measures reflecting the
specific opportunities and challenges faced at that level.”
Paul R. Niven
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16. The Cascading Process
Mission, Values, Vision
Strategy
Financial Customer Internal Processes Employee L & G
Objectives Measures Initiatives Objectives Measures Initiatives Objectives Measures Initiatives Objectives Measures Initiatives
Financial Customer Internal Processes Employee L & G
Objectives Measures Initiatives Objectives Measures Initiatives Objectives Measures Initiatives Objectives Measures Initiatives
Financial Customer Internal Processes Employee L & G
Objectives Measures Initiatives Objectives Measures Initiatives Objectives Measures Initiatives Objectives Measures Initiatives
Team and Personal Balanced Scorecards
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17. Linking the Balanced Scorecard to Budgeting
Internal
Financial
Perspective Process
Perspective
Mission, Values, Vision Objectives, Measures
and Strategy and Targets
Employee
Customer Learning
Perspective and Growth
Perspective
Balanced
Scorecard
Balanced Scorecard Drive Budgets Cascaded Balanced Scorecards
Operating and
Capital Budgets
Investments necessary to support the achievement of Business units and departments develop Balanced
Balanced Scorecard targets across the organization drive the Scorecards based on influencing high-level objectives.
budgeting process.
Source: Paul R. Niven
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18. Public-Sector Balanced Scorecard
Mission
Customer
Who do we define as
our customer? How do
we create value for our
customer?
Customer Internal Process
Who do we define as To satisfy customers
our customer? How do while meeting
we create value for our Strategy budgetary constraints,
customer? at what business
processes must we
excel?
Employee Learning and
Growth
How do we enable
ourselves to grow and
change, meeting
ongoing legislative and
citizen demands?
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19. Commonly used Financial Measures
Commonly used Financial Measures
• Total assets • Value added per employee
• Total assets per employee • Compound growth rate
• Profits as a % of total assets • Dividends
• Return on net assets • Market value
• Return on total assets • Share price
• Revenues / total assets • Shareholder mix
• Gross margin • Shareholder loyalty
• Net income • Cash flow
• Profit as a % of sales • Total costs
• Profit per employee • Credit rating
• Revenue • Debt
• Revenue from new products • Debt to equity
• Revenue per employee • Times interest earned
• Return on equity (ROE) • Days sales in receivables
• Return on capital employed (ROCE) • Accounts receivable turnover
• Return on investment (ROI) • Days in payables
• Economic value added (EVA) • Days in inventory
• Market value added (MVA) • Inventory turnover ratio
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20. A sample of customer Measures
Customer Measures
• Customer satisfaction • Win rate (sales closed / sales contacts)
• Customer loyalty • Customer visits to the company
• Market share • Hours spent with customers
• Customer complaints • Marketing cost as a percentage of sales
• Complaints resolved on first contact • Number of ads placed
• Return rates • Number of proposals made
• Response time per customer request • Brand recognition
• Direct price • Response rate
• Price relative to competition • Number of trade shows attended
• Total cost to customer • Sales volume
• Average duration of customer relationship • Share of target customer size
• Customer lost • Sales per channel
• Customer retention •
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21. Internal Process Measures
Internal Process Measures
• Average cost per transaction • Breakeven time
• On-time delivery • Cycle time improvement
• Average lead time • Continuous improvement
• Inventory turnover • Warranty claims
• Environmental emissions • Lead user identification
• Research and development expenses • Products and services in the pipeline
• Community involvement • Internal rate of return on new projects
• Patents pending • Waste reduction
• Ratio of new products to total offerings • Space utilization
• Stock outs • Downtime
• Labor utilization rates • Planning accuracy
• Response time to customer requests • Time to market of new products/services
• Defect percentage • New products introduced
• Rework • Customer database availability
• Number of positive media stories
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22. Employee Learning and Growth Measures
Employee Learning and Growth
• Employee participation in professional or • Quality of work environment
trade associations
• Training investment per customer • Employee productivity
• Average years of service • Number of Scorecards produced
• Percentage of employees with advanced • Health promotion
degrees
• Number of cross-trained employees • Training hours
• Absenteeism • Personal goal achievement
• Turnover rate • Timely completion of performance
appraisals
• Employee satisfaction • Leadership development
• Participation in stock ownership plans • Communication planning
• Lost time accidents • Reportable accidents
• Value added per employee • Percentage of employees with computers
• Motivation index • Strategic information ratio
• Outstanding number of applications for • Cross-functional assignments
employment
• Diversity rates • Knowledge management
• Empowerment index -number of managers • Ethics violations
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