The balanced scorecard is a strategic management tool developed in the early 1990s by Robert Kaplan and David Norton to provide a more holistic view of an organization beyond just financial measures by including additional perspectives such as customer, internal business processes, and learning and growth; it helps organizations translate their strategy into actionable objectives and measures across multiple perspectives and provides feedback to improve performance over time.

1. Introduction to Balanced Scorecard
An internal strategic management tool

2. Introduction to Balanced Scorecard
• Developed by
– Robert Kaplan (Harvard) and David Norton
– early 90s
• Earlier measurements focused mainly on financial
measures
• The balanced scorecard is a strategic management
system (not only a measurement system)
– Internal assessment, improvement and reporting system
– Key is the link to the strategic plan
• System to turn strategy into action

3. • The balanced scorecard retains traditional
financial measures. But financial measures tell the
story of past events, an adequate story for
industrial age companies for which investments in
long-term capabilities and customer relationships
were not critical for success. These financial
measures are inadequate, however, for guiding
and evaluating the journey that information age
companies must make to create future value
through investment in customers, suppliers,
employees, processes, technology, and
innovation. Kaplan & Norton

4. How does a Balanced Scorecard help?
• Comprehensive view of the organization
– Covers financial and non-financial perspectives
– Covers short-term and long-term planning and measurement
• Lag and lead indicators
• Translating the vision
– Forces managers to agree on metrics for operationalizing company vision
• Communicating and linking
– Connects individual and departmental performance measures to corporate vision
• Business Planning
– Integration of functions so that budgets support long term goals
• Feedback and Learning
– Helps course correction and rethink measures

5. Perspectives
• The balanced scorecard suggests that we view the
organization from four perspectives:
– The learning growth perspective
– The business process perspective
– The customer perspective
– The financial perspective
• Develop metrics, collect data and analyze relative
to each of these perspectives

7. Learning and Growth Perspective
• Development of the human resources
– This perspective supports the concept that people are
a company's main resource and most valuable asset
– metrics defined for this perspective must measure
various aspects of employee improvement, growth,
and satisfaction.
• personnel training and improvement
• cultivation of corporate culture
• organizational development, including the nurturing of
corporate experts, gurus, and mentors
• setting up of fast and efficient knowledge transfer
infrastructure
• opening up of communication lines among personnel

8. Business Processes Perspective
• Internal business processes
– These metrics, which measure various aspects
(efficiency, speed, quality, etc.) of how well the
company's products, services and internal
support systems are produced or delivered

9. The Customer Perspective
• Focus on customer satisfaction.
– Rigorous data analysis to understand the
customer
– Difficult to reflect the true sentiment of the
customer

10. Financial Perspective
• Indicates if the transformation of strategy leads
to economic success
• Define the financial performance that the
strategy is to achieve
– Revenue growth
– Cost reduction
• Cost reduction from energy efficiency
• Measures the effectiveness of the other
perspectives

11. Characteristics of good metrics
• reflect the true present status of the company from many
different perspectives
• provide constructive feedback to various company
processes, leading to continuous improvement
• show trends in company performance over time,
facilitating adjustments to changes
• quantify many things, making analyses more accurate and
solutions more effective

12. Close the loop
• Once the metrics have been defined and
implemented
• scorecard data becomes available
• follow-through becomes imperative
• Movements in the metrics must be analyzed to
identify their causes
• Causes that produce positive (negative) changes
must be sustained or enhanced (eliminated)