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Balanced Scorecard Fundamentals. Measuring Strategic Performance Dr. Shayne Tracy. Why Use the Balanced Scorecard?.

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balanced scorecard fundamentals

Balanced Scorecard Fundamentals

Measuring Strategic Performance

Dr. Shayne Tracy

why use the balanced scorecard
Why Use the Balanced Scorecard?
  • To maintain sustainable competitive advantage in the information age, strategic business units must broaden their base of intangible assets and the means by which performance is measured and continuously improved.
  • The balanced scorecard provides a comprehensive framework for implementing strategic plans by translating an organization’s strategy into a set of key performance indicators.
performance measures yesterday
Performance Measures Yesterday
  • Traditional measures of performance only included financial statistics based on the financial accounting model.



Non Financial







performance indicators today
Performance Indicators Today
  • The balanced scorecard focuses on an integrated system of key performance indicators for critical success factors.

Non Financial









the balanced scorecard dimensions
The Balanced Scorecard Dimensions







Vision, Values

Mission, Strategy

Learning &


the financial perspective
The Financial Perspective
  • To succeed financially, what level of financial performance do our investors expect?


    • ROI, EVA
    • Return on capital employed (ROCE)
    • Revenue growth
    • Self-financiable growth rate
    • Cash flow return on assets
    • Market/customer/product profitability growth
the customer perspective
The Customer Perspective
  • To achieve our strategy, how must we appear to our customers?


    • Market share growth
    • Customer acquisition rate
    • Customer retention rate
    • Customer satisfaction scores
    • Number of new products/services
    • Product return rate
    • Defect rate
    • On-time delivery rate
internal business processes
Internal Business Processes
  • At what business processes must we excel to satisfy our clients/customers?


    • Product-development cycle time
    • Order-to-delivery response time
    • Six sigma (PPM) quality rate
    • Revenue per employee
    • Cash conversion cycle time
    • New product/service introduction rate
    • New product/service breakeven time
learning growth perspective
Learning & Growth Perspective
  • What people and systems do we need to sustain our ability to change and improve?


    • Employee retention/turnover rate
    • Salaries/wage index
    • Training/development hours per employee
    • Strategic competency index
    • Value-added per employee dollar
    • Sustainable growth analysis
    • Knowledge productivity rate
economy effectiveness productivity and performance
Economy is concerned with inputs only

Effectiveness refers to the achievement of objectives

Productivity is the ratio of outputs to inputs

Performance is the quality of tasks and activities

total number of labour hours worked during the period

total number of good units of output for the period

number of good units of output per labour hour of input

Number of “0” defects per unit of output per labour hour

Economy, Effectiveness, Productivity and Performance
balanced scorecard workflow
Balanced Scorecard Workflow
  • Strategic Plan
  • Gap Analysis
  • Implementation of Action Plans
  • Recalibration Annually

Balanced Scorecard Planning and Implementation Workflow


Identify strategic business units to be measured

Identify and prioritize BSC perspectives

Identify customers of BSC and their requirements

Articulate strategy and mission

Define critical success factors

Determine data gathering methods

Determine source of benchmark / target data

Eliminate redundant indicators

Define relevant performance indicators w/CAR

Gather benchmark and actual data

Estimate future attainable performance

Identify causes of current and future gaps

Determine current performance gap

Align incentives and compensation with BSC performance indicators

Gain constituency acceptance of conclusions

Establish performance goals and objectives

Implement initiatives

Assess progress toward goals

Revise goals, if necessary

Validate/update benchmarks

Periodic Reappraisal

Communication and consensus at each

is critical

communication tools
Communication Tools
  • Check sheets/lists
  • Goal/Objective Action Plans
  • Project/Process Plans
  • Cause and effect diagrams
  • Histograms, Pareto diagrams
  • Control charts
  • Scatter diagrams, Bar charts
  • Frigo, Mark L., & Krumwiede, Kip R. (2000, January). "The Balanced Scorecard: A Winning Performance Measurement System," Strategic Finance. 50-54. 
  • The Society of Management Accountants of Canada. Applying the Balanced Scorecard, Strategic Management Series, Management Accounting Guideline. (1999). Mississauga, ON Canada: Author.
  • Institute of Management Accountants. Statements on Management Accounting 4DD, Tools and Techniques for Implementing Integrated Performance Management Systems. 1998. Montvale, NJ: Author.
  • Harvard Business School Press. Harvard Business Review on Measuring Corporate Performance. 1998. Boston, MA: Author.
  • Chee W. Chow, Kamal M. Haddad, & James E. Williamson. (1997, August). “Applying the Balanced Scorecard to Small Companies”, Management Accounting. 21 – 27.
  • Robert S. Kaplan, David P. Norton. 1996. The Balanced Scorecard Boston, MA: Harvard Business School Press.
  • Institute of Management Accountants. Statements on Management Accounting 4U, Developing Comprehensive Performance Indicators. 1995. Montvale, NJ: Author.