Chapter 6 balanced score card

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Theory In Action
The Balanced ScoreCard
Robert Kaplan and David Norton point out that a firm’s methods of
measuring performance will strongly influence whether and how the firm pur-
sues its strategic objectives. the “balanced score- card,” that they argue can
motivate breakthrough improvements in product, process, customer, and
market development. The Balanced ScoreCard emphasizes four perspectives
the firm should take in formulating goals that target critical success factors
and in defining measures:
JULHANDRI AMIN

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Theory In Action
The Balanced ScoreCard
1. Financial perspective. Goals might include such things as “meet shareholder’s expectations” or
“double our corporate value in seven years.” Measures might include return on capital, net cash
flow, and earnings growth.
2. Customer perspective. Goals might be to “improve customer loyalty,” “offer best-in-class
customer service,” or “increase customer satis- faction.” Measures might include market share,
percentage of repeat purchases, customer satis- faction surveys, and so on.
3. Internal perspective. Goals might include such things as “reduce internal safety incidents,”
“build best-in-class franchise teams,” or “improve inventory Management.
4. Innovation and learning perspective. Goals might include such things as “accelerate and
improve new product development” or “improve employee skills.”

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Theory In Action
Kaplan and Norton acknowledge that the bal- anced scorecard model often
has to be adapted to fit different markets and businesses, but many firms
(including IBM, Philips Electronics, Apple, and Advanced Micro Electronics) in
many different indus- tries (including electronics, petrochemicals, and health
care) are finding the balanced scorecard useful.b In fact, a 2002 survey by Bain
& Company found that approximately 50 percent of Fortune 1,000 compa-
nies in the United States and 40 percent in Europe use some version of the
balanced scorecard.

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FigureThe Balanced
ScoreCard
Source: Reprinted by permission of
Harvard Business Review. Exhibit from
“Putting the Balanced Scorecard toWork,”
by R. Kaplan and D. Norton, September–
October 1993. Copyright © 1993 by the
Harvard Business School Publishing
Corporation; all rights reserved.

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Summary Of Chapter
The balanced scorecard is a measurement system that encourages the firm to
con- sider its goals from multiple perspectives (financial, customer, business
process, and innovation and learning), and establish measures that
correspond to each of those perspectives.