Balanced Scorecard

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Balanced Scorecard

• Pat Briggs

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Origins

• One of a number of quality schemes and tools used
  by organisations to improve their performance
• Created by Kaplan and Norton of Harvard Business
  School in the early 90s
• Originally adopted by organisations to improve
  their performance measurement systems

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The Philosophy

• As companies around the world transform
  themselves for competition that is based on
  information, their ability to exploit intangible
  assets has become far more decisive than their
  ability to invest in and manage physical assets.
• Kaplan and Norton Harvard Business Review 1996

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Basics

• Moves focus away from purely financial measures
  of performance
• Balances financial measures with those from three
  additional perspectives
• Customers
• Internal business processes
• Learning and growth

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Fundamentals

• Context of vision and strategy
• Balances performance from a number of different
  perspectives
• Centres around identifying Critical Success
  Factors (CSFs) for the organisation to achieve
  its objectives

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Fundamentals (cont)

• For each CSF, Key Performance Indicators (KPIs)
  are identified to measure progress in achieving
  the objectives
• For each KPI, targets and actions can be aligned
  and assigned to ensure activity is focused on
  delivering the objectives
• Initiatives can be identified which will enable
  the targets to be achieved

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Fundamentals - Chart
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Creating a Balanced Scorecard (Chart)
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Balanced Scorecard Example General (Chart)
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(No Transcript)
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Balanced Scorecard as Strategic Management system

• Links an organisations long-term strategy with
  its short-term actions through four processes
• Translating the vision
• Communication and linking
• Business planning
• Feedback and learning
• (Kaplan and Norton 1996)

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Translating the Vision

• Helps managers build a consensus around the
  organisations vision and strategy
• Translates the vision into operational terms that
  provide useful guides to action at the local
  level
• Expresses vision and strategy statements as an
  integrated set of objectives and measures that
  will support the delivery of long-term success

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Communicating and Linking

• Represents a succinct presentation of what the
  organisation is trying to achieve for
  stakeholders, customers and staff
• Facilitates the setting of goals for individuals
  and departments which are aligned to the strategy
• Can be used to link rewards to performance
  measures

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Business Planning

• Enables organisations to integrate their business
  and financial plans
• Can be used as a basis for allocating resources
  and setting priorities
• Creates a framework for managing an
  organisations various change programs and
  initiatives
• Encourages the establishment of specific
  milestones for the measures that mark progress
  toward achieving the strategic goals

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Feedback and Learning

• Assists an organisation to monitor progress from
  all 4 perspectives and evaluate strategy in light
  of performance
• Represents an essential strategic feedback system
• Allows the relationship between performance
  measures and objectives to be tested and evaluated

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Cause and Effect Relationship for a Profit
Seeking Organisation

• 1. Financial (make a profit)
• 2. Customer (by satisfying customer needs)
• 3. Internal Processes (through being able to
  deliver value)
• 4. Learning and Growth (by having the necessary
  knowledge and tools available)

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Cause and Effect Relationship for a Public
Service Organisation

• Customer (fulfil your value obligation to the
  public)
• Internal Processes (through being able to
  deliver)
• Learning and Growth (by having the necessary
  knowledge and tools available)
• Financial (by securing and prioritising the use
  of financial resources)

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Balanced Scorecard summary of strategic
applications

• Clarify and update strategy
• Communicate strategy throughout the organisation
• Align team and individual goals with the strategy
• Link strategic objectives to long-term targets
  and annual budgets
• Identify and align strategic initiatives
• Conduct periodic performance reviews to learn
  about and improve strategy

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Questions?
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BRAINSTORMING

• CSFS AND KPIS