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Balanced Scorecard. Objective. Provide a more complete and balanced view of corporate performance Give senior managers a concise but comprehensive view of the business Balanced Scorecard (BSC) approach described by Kaplan and Norton. Premise. “Measurement motivates”. Measurable Items.

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  • Provide a more complete and balanced view of corporate performance
  • Give senior managers a concise but comprehensive view of the business
  • Balanced Scorecard (BSC) approach described by Kaplan and Norton
  • “Measurement motivates”
measurable items
Measurable Items
  • Broadened set of measurable items to complement financial measures
  • Multiple measures provide balanced perspective
  • Included customer, internal process, and learning and growth measures
  • Traditional financial metrics are backward-looking
  • Now look at “leading indicators” that are predictors of future success
performance perspectives
Performance Perspectives
  • Customer perspective
  • Internal perspective
  • Innovation and learning perspective
  • Financial perspective
use of bsc
Use of BSC
  • BSC is deployed in more than half the Fortune 500 companies*

Intelligent Enterprise, July 2002

what is the bsc

Learning & Growth


Internal Business Process

To achieve our vision, how will we sustain our ability to change and improve?

To succeed financially, how should we appear to our shareholders?

To satisfy our shareholders and customers, what business processes must we excel at?














To achieve our vision, how should we appear to our customers?





What is the BSC?


customer perspective
Customer Perspective
  • Who are our customers?
  • What is our value proposition?
    • Operational excellence (Wal-Mart)
    • Product leadership (Nike)
    • Customer intimacy (Nordstrom)
internal process perspective
Internal Process Perspective
  • What are our key processes?
  • Should be based on our value proposition
    • Operational excellence (Wal-Mart)
    • Product leadership (Nike)
    • Customer intimacy (Nordstrom)
learning and growth perspective
Learning and Growth Perspective
  • Do we have key skills and information systems?
  • Where are the gaps?
financial perspective
Financial Perspective
  • Profitability...
developing objectives customers
Developing Objectives - Customers
  • Who are our customers, and what is our value proposition in serving them?
    • Customer intimacy – increase customer retention
developing objectives internal processes
Developing Objectives – Internal Processes
  • To satisfy our customers and shareholders, at what processes should we excel?
    • Customer objective processes
developing objectives financial
Developing Objectives - Financial
  • What financial steps are necessary to ensure the execution of our strategy?
    • Cost-leadership – lower unit costs
developing objectives internal employee learning
Developing Objectives – Internal Employee Learning
  • What capabilities and tools do our employees require to help them execute our strategy?
    • Skill gap
    • Information systems
commonly used financial measures
Total assets

Total assets per employee

Profits as a % of total assets

Return on total assets

Revenues/total assets

Gross Margin

Net Income

Profit as a % of sales

Profit per employee


Revenue from new products



Commonly Used Financial Measures
commonly used customer measures
Customer Satisfaction

Customer Loyalty

Market Share

Customer Complaints

Return rates

Response time

Direct Price

Price relative to competition

Total cost to customer

Customers lost

Customer retention

Customer acquisition costs

Number of customers

Commonly Used Customer Measures
commonly used internal process measures
Average cost per transaction

On-time delivery

Average lead time

Patents pending


Labor utilization rates

Response time to requests

Defect percentage

Breakeven time

Cycle time

Warranty claims

Waste reduction

Commonly Used Internal Process Measures
commonly used learning and growth measures
Employee participation

Training investment

Average years of service

Turnover rate

Employee suggestions

Motivation index

Diversity rates

Quality of work environment

Training hours

Reportable accidents

Ethics violations

Commonly Used Learning and Growth Measures
subsidiary scorecard example
Subsidiary ScorecardExample
  • Consolidated ROA
  • Subsidiary on-time goals by month
  • Subsidiary baggage handling goals by month
  • Subsidiary operational dependability goalby month
link measurements to strategy
Link Measurements to Strategy
  • Define mission and strategy
  • Determine how performance will differ if I succeed with vision
  • Determine Critical Success Factors
  • Determine critical measurements
  • 3-4 measures per perspective
  • Frequency of measurement
  • Establishing targets
  • Performance measurement
  • Incentive systems
building a balanced scorecard
Building a Balanced Scorecard
  • Preparation
  • Interviews (first round)
  • Executive workshop (first round)
  • Interviews (second round)
  • Executive workshop (second round)
  • Implementation
  • Periodic reviews
first generation bsc
First Generation BSC
  • BSC software developed and designed as reporting or management dashboard tools
  • First applications to integrate financial and non-financial reporting
  • “Red, yellow, green” reporting of achievement of targets
goal of first generation bsc reporting
Goal of First Generation BSC Reporting
  • Quickly understand health of organization
  • Focus attention on areas requiring attention
evolution of bsc
Evolution of BSC
  • Use BSC to help implement and manage strategy
strategy focused organization
Strategy-Focused Organization
  • Executive leadership to lead change
  • Translate strategy into operational terms
  • Align organization to strategy
  • Make strategy everyone’s job
  • Make strategy a continual process
  • BSCol Functional Standards
  • Balanced Scorecard Institute