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The Balanced Scorecard
Method
MANISH KUMAR GAURAV
MANISH KUMAR GUPTA
SUSHOVAN BEJ
Definition
 The balanced scorecard is a strategic planning and management system that is
used extensively in business and industry, government, and non profit
organizations worldwide to align business activities to the vision and strategy of
the organization, improve internal and external communications, and monitor
organization performance against strategic goals.
 Balance Score card is the management tool that looks beyond short term
financial position of an organisation as a measure of its performance. By
incorporating a variety of perspectives into its organisational outlook its gives a
more holistic view of performance.
 It was originated by Dr. Robert Kaplan (Harvard Business School) and Dr. David
Norton as aperformance measurement framework to give managers and
executives a more 'balanced' view of organizational performance.
Balanced Scorecard Perspectives
4© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
The Four Perspectives Apply to Mission Driven As
Well As Profit Driven Organizations
• What must we do to satisfy our
stakeholders?
• Who is our customer?
• What do our customers expect from
us?
• What internal processes must we excel
at to satisfy our regulatory and social
obligations, our customers and the
requirements of our shareholder?
• How must our people learn and
develop skills to respond and
participate in these and future
challenges?
Profit DrivenProfit Driven Vision DrivenVision Driven
• What must we do to satisfy our
shareholders?
• What do our customers expect from
us?
• What internal processes must we
excel at to satisfy our shareholder and
customer?
• How must our people learn and
develop skills to respond to these and
future challenges?
Financial Perspective
Customer Perspective
Internal Perspective
Learning & Growth
Perspective
Importance of asking right questions.
Management Strategy Process
Translating Vision
 The aim is to make consensus around the organization’s vision and
strategy.
 For employees to act on words in vision and strategy statements,
those statements must be expressed as an integrated set of
objectives.
Communicating And Linking
 The scorecard gives managers a way of ensuring that all levels of
organisation understand the long term strategy and that both
departmental and individual objectives are aligned with it.
Business Planning
 Balanced Scorecard helps managers to allocate resources and set priorities to
those initiatives that move them towards their Vision.
Feedback And Learning
 It emphasises on whether a company, it’s departments, or it’s individual
employees have met their goals or not.
Balanced Scorecard Method
Balanced Scorecard Perspective
Each perspective of the Balanced Scorecard
includes objectives, measures of those
objectives, target values of those measures and
initiatives.
Objectives – to be achieved. Ex. Profitable
growth
Measures – parameters used to measure the
progress towards achieving objective. Ex.
Profitable growth measured by net margin
growth
Targets – targets for the measures. Ex. 5% growth
in net margin
Initiatives – actions to achieve targets. Ex. More
advertisements
Objectives Measures Targets Initiatives
Financial
Performance
Customer
Value
Internal
Business
Performance
Learning and
Growth
Methodology of Balance Scorecard
Method
 Articulate the business’s vision and strategy
 Identify the performance categories that best link the business’s vision and strategy to its results
(such as financial performance, operations, innovation, employee performance)
 Establish objectives that support the business’s vision and strategy
 Develop effective measures and meaningful standards, establishing both short-term milestones
and long-term targets
 Ensure companywide acceptance of the measures
 Create appropriate budgeting, tracking, communication and reward systems
 Collect and analyse performance data and compare actual results with desired performance
 Take action to close unfavourable gaps
Balanced Scorecard Example
For any manufacturing company, to improve its profitability.
Source : Bain n Company
Balanced Scorecard Example
Uses of Balance Scorecard Method
 Clarify or update a business’s strategy
 Link strategic objectives to long-term targets and annual budgets
 Track the key elements of the business strategy
 Incorporate strategic objectives into resource allocation processes
 Facilitate organizational change
 Compare performance of geographically diverse business units
 Increase companywide understanding of the corporate vision and strategy
Advantages
 Structured approach to analyse the perspectives
 Align organisation strategy with daily operation basis
 Work for the long term objectives through short term actions
The balanced scorecard is not a piece of software. Unfortunately, many people
believe that implementing software amounts to implementing a balanced
scorecard.
Automation adds structure and discipline to implementing the Balanced
Scorecard system, helps transform disparate corporate data into information
and knowledge, and helps communicate performance information.
The balanced scorecard method - strategy

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The balanced scorecard method - strategy

  • 1. The Balanced Scorecard Method MANISH KUMAR GAURAV MANISH KUMAR GUPTA SUSHOVAN BEJ
  • 2. Definition  The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and non profit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals.  Balance Score card is the management tool that looks beyond short term financial position of an organisation as a measure of its performance. By incorporating a variety of perspectives into its organisational outlook its gives a more holistic view of performance.  It was originated by Dr. Robert Kaplan (Harvard Business School) and Dr. David Norton as aperformance measurement framework to give managers and executives a more 'balanced' view of organizational performance.
  • 4. 4© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. The Four Perspectives Apply to Mission Driven As Well As Profit Driven Organizations • What must we do to satisfy our stakeholders? • Who is our customer? • What do our customers expect from us? • What internal processes must we excel at to satisfy our regulatory and social obligations, our customers and the requirements of our shareholder? • How must our people learn and develop skills to respond and participate in these and future challenges? Profit DrivenProfit Driven Vision DrivenVision Driven • What must we do to satisfy our shareholders? • What do our customers expect from us? • What internal processes must we excel at to satisfy our shareholder and customer? • How must our people learn and develop skills to respond to these and future challenges? Financial Perspective Customer Perspective Internal Perspective Learning & Growth Perspective Importance of asking right questions.
  • 6. Translating Vision  The aim is to make consensus around the organization’s vision and strategy.  For employees to act on words in vision and strategy statements, those statements must be expressed as an integrated set of objectives.
  • 7. Communicating And Linking  The scorecard gives managers a way of ensuring that all levels of organisation understand the long term strategy and that both departmental and individual objectives are aligned with it.
  • 8. Business Planning  Balanced Scorecard helps managers to allocate resources and set priorities to those initiatives that move them towards their Vision.
  • 9. Feedback And Learning  It emphasises on whether a company, it’s departments, or it’s individual employees have met their goals or not.
  • 11. Balanced Scorecard Perspective Each perspective of the Balanced Scorecard includes objectives, measures of those objectives, target values of those measures and initiatives. Objectives – to be achieved. Ex. Profitable growth Measures – parameters used to measure the progress towards achieving objective. Ex. Profitable growth measured by net margin growth Targets – targets for the measures. Ex. 5% growth in net margin Initiatives – actions to achieve targets. Ex. More advertisements Objectives Measures Targets Initiatives Financial Performance Customer Value Internal Business Performance Learning and Growth
  • 12. Methodology of Balance Scorecard Method  Articulate the business’s vision and strategy  Identify the performance categories that best link the business’s vision and strategy to its results (such as financial performance, operations, innovation, employee performance)  Establish objectives that support the business’s vision and strategy  Develop effective measures and meaningful standards, establishing both short-term milestones and long-term targets  Ensure companywide acceptance of the measures  Create appropriate budgeting, tracking, communication and reward systems  Collect and analyse performance data and compare actual results with desired performance  Take action to close unfavourable gaps
  • 13. Balanced Scorecard Example For any manufacturing company, to improve its profitability. Source : Bain n Company
  • 15. Uses of Balance Scorecard Method  Clarify or update a business’s strategy  Link strategic objectives to long-term targets and annual budgets  Track the key elements of the business strategy  Incorporate strategic objectives into resource allocation processes  Facilitate organizational change  Compare performance of geographically diverse business units  Increase companywide understanding of the corporate vision and strategy
  • 16. Advantages  Structured approach to analyse the perspectives  Align organisation strategy with daily operation basis  Work for the long term objectives through short term actions The balanced scorecard is not a piece of software. Unfortunately, many people believe that implementing software amounts to implementing a balanced scorecard. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information.