The Balanced ScorecardMeasures that Drive Performance

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The Balanced Scorecard-Measures that Drive
Performance

• Robert S. Kaplan and David P. Norton
• Harvard Business Review January-February 1992
  pp.71-79

POSMIS Lab Junyoung Kim 2006.01.31
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Contents

• Introduction
• Customer Perspective
• Internal Business Perspective
• Innovation and Learning Perspective
• Financial Perspective
• ECIs Balanced Business Scorecard
• Conclusion
• Question Answer

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Introduction(1/3)

• Organizations measurement system strongly
  affects the behavior of managers and employees.
• Traditional financial measures can give
  misleading signals for continuous improvement and
  innovation.
• Traditional financial measures fit with not today
  but Industrial era.
• No single measure can provide a clear performance
  target or focus attention of the business.
• Managers want a balanced presentation of both
  financial and operational measures.
• Operational Cycle time, Defect ratesetc.

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Introduction(2/3)

• BSC, a set of measures that gives managers a fast
  but comprehensive view of the business, is
  devised.
• BSC consists of financial measures and
  operational measures.
• Operational measures customer satisfaction,
  internal process, the organizations innovation
  improvement
• Managers are able to view performance in several
  areas.
• Airplane cockpit VS Management

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Introduction(3/3)
Customer Perspective
Internal Perspective
Innovation Learning Perspective
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Customer Perspective(1/2)

• Many companies today have a corporate mission
  that focuses on the customer.
• BSC demands translating companies general
  mission on customer into specific measures.
• To put BSC to work, company should articulate
  goals for time, quality, performance service,
  cost and then translate into specific measures.
• Example ECI
• Get standard products to market sooner
• Improved customers time to market
• Become customers supplier of choice through
  partnerships with them
• Develop innovative products tailored to customer
  needs

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Customer Perspective(2/2)

• Customers concerns tend to fall into time,
  quality, performance service, and cost.
• Lead time the time required for the company to
  meet its customers needs
• Existing products from the time the company
  receives an order to the time it actually
  delivers the products
• New products how long it takes to bring a new
  product from the product definition to shipments
• Quality
• The defect level of incoming products as
  perceived and measured by the customer
• On time delivery the accuracy of delivery
  forecasts
• Performance service contribution to creating
  value for customer

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Internal Business Perspective(1/2)

• The measure of what the company must do
  internally to meet its customers expectations is
  also important.
• Excellent customer performance derives from
  processes, decisions, and actions in
  organization.
• Mangers need to focus on those critical internal
  operations to satisfy customer needs.
• The internal measures stem from the process that
  have the greatest impact on customer
  satisfaction.

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Internal Business Perspective(2/2)

• Companies identify and measure core competencies
  technologies to ensure market leadership.
• ECI submicron technology capability
• Companies decide what processes competencies
  they excel at and specify measures for each.
• ECIs goal for internal business perspective
• Manufacturing exellence
• Design productivity
• New product introduction
• Managers must devise measures that are influenced
  by employees actions.

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Innovation Learning Perspective

• The targets for success keep changing.
• Intense global competition requires
• Companies make continual improvements to their
  existing products and processes
• Companies have the ability to introduce entirely
  new products with expanded capabilities.
• A companys ability to innovate, improve, and
  learn ties directly to the companys value.
• The role of continuous improvement in customer
  satisfaction internal business process is
  important.
• ECI innovation measures focus on the ability to
  develop and introduce standard products rapidly.

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Financial Perspective(1/2)

• Financial performance measures indicate whether
  strategy execution are contribute to
  improvement.
• The previous three perspectives are not linked
  with financial perspective automatically.
• Example
• 1. Quality cycle-time improvement
  (internal improvement)
• 2. Existing of excess capacity or inventory
• 3. The lack of sales plan or capacity of putting
  to work of managers
• 4. Disappointing financial results like the
  increase of debt

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Financial Perspective(2/2)

• The company understand a linkage between
  financial perspective and the previous three
  perspective.
• If the linkage is not well, the linkage among the
  four perspective has to be redesigned.
• Companies should specify how improvements in
  time, quality, performance service, and cost
  will lead to higher market share margins.
• The ECIs goal for financial perspective consists
  of survive, succeed, and prosper.

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ECI s Balanced Business Scorecard
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Conclusion(1/2)

• Can not be implemented without senior managers
  who have vision priorities of company
• Puts strategy and vision, not control, to the
  members
• Designed to pull people toward the overall vision
• Help managers transcend traditional notions about
  functional barriers
• Ultimately lead to improved decisions making and
  problem solving
• Keeps companies looking-and moving-forward
  instead of backward

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Conclusion(2/2)

• Only The existing financial measures are to
  evaluate the enterprises activities of the past.
• BSC can allow managers to see the past, the
  present , and the future.
• BSC help managers have the well-balanced view of
  the performances of the enterprises.

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Question Answer