Prepared by Group 4:

1
The Balanced Scorecard Customer Perspective,
Internal Processes, Learning and Growth

• Prepared by Group 4
• Andrew Molloy
• Amy Miller
• Mike Elicker

2
What is the balanced scorecard?

• Developed in the early 1990s by Dr. Robert
  Kaplan and David Norton
• "The balanced scorecard retains traditional
  financial measures. But financial measures tell
  the story of past events, an adequate story for
  industrial age companies for which investments in
  long-term capabilities and customer relationships
  were not critical for success. These financial
  measures are inadequate, however, for guiding and
  evaluating the journey that information age
  companies must make to create future value
  through investment in customers, suppliers,
  employees, processes, technology, and
  innovation."

3
What is the balanced scorecard?

• The Balanced scorecard is a management system
  that enables organizations to clarify their
  vision and strategy and translate them into
  action.
• Provides an organization with feedback of both
  the internal business processes and external
  outcomes, which allows for continuous improvement
  of strategic performance and results.
• Nerve center of an enterprise

4
What is the balanced scorecard?

• The balanced scorecard is centered on four
  performance metrics or perspectives
• Customers
• Internal processes
• Financial
• Learning and growth
• When implemented properly, each one of these
  perspectives contains four subparts consisting of
  
• Objectives
• Measures
• Targets
• Initiatives

5
What is the balanced scorecard?

• Objectives - what the strategy is to achieve in
  that perspective
• Measures - how progress for that particular
  objective will be measured
• Targets - refer to the target value that the
  company seeks to obtain for each measure
• Initiatives - what will be done to facilitate the
  reaching of the target

6
What is the balanced scorecard?

• The term scorecard signifies quantified
  performance measures and balanced signifies the
  system is balanced between
• Short-term and long term objectives
• Financial and non-financial measures
• Lagging and leading indicators
• Internal and external performance perspectives

7
What is the balanced scorecard?
8
What is the balanced scorecard?

• Kaplan and Norton defined a four-step process
  that has been used across a wide range of
  organizations
• Defining the measurement architecture
• For example will the system be used at the
  strategic business unit level rather than the
  corporate level.
• Specify strategy objectives.
• These should be carefully decided upon and
  selected as those deemed critical in achieving
  breakthrough competitive performance and limited
  in number to 15 to 20, or 3 to 4 in each
  perspective to avoid information overload.
• Choose strategic measures
• These measures should be closely related to the
  actual performance drivers and will later be used
  for evaluating the progress made toward achieving
  the objectives
• Develop an implementation plan to integrate the
  scorecard into management.

9
Customer Needs

• Who is your customer?
• What age, gender, group does our product appeal
  to?
• What services or products do they expect from
  you?
• Do we provide personal services, do your products
  serve as advertised?
• How do you listen to and learn from your
  customers?
• Do we provide feedback calls or emails?
• How do you retain and acquire new customers?
• Do we use new advertisement and how do we
  advertise?
• How do you meet customers needs?
• Do we provide help lines and how can we provide
  help to customers?
• How do you measure customer satisfaction and
  dis-satisfaction?
• Do we use surveys to find out how customers feel
  about us?

10
Customer Concerns

• There are four major categories that managers
  need to address when concerning their customers.
• Quality
• Are there often recalls or problems with defects
  with our products.
• Time
• Do we save time by limiting defects and do we
  provide fast on time delivery.
• Performance and service
• Do we perform up to customers standards and do we
  provide fast and adequate services.
• Cost
• Do we try to minimize cost when dealing with
  ordering, scheduling delivery, and paying for
  materials in order to lower cost of our products
  to our consumers.

11
Customer Perspective

• With customer perspective managers and companies
  have to be careful and make sure they are setting
  up their balance scorecard to help customers.
• Examples of things that dont concern customers
  are profit per customer, revenue per customer,
  and improve profit per customer.
• These objectives dont necessarily protean to the
  customer perspective but rather the companies
  perspective of the customer.
• Managers need to take a step back and look at how
  customers perceive your company and what they
  want to get out of your company.

12
Examples of Customers Perspective

• Two main questions that a company should ask
  itself to protean to their customers are
• How should we appear to our customers
• Do we show a promising future
• Do we show a strong sense of concern
• What is our differentiating value proposition to
  our targeted customers
• How are we different from our competitors
• What makes us better than our competitors

13
Perspectives of Kaplan and Norton

• There are four broad categories that Kaplan and
  Norton base the customer perspective around.
• Best buy
• Companies that supply services and products at
  low prices and fast service.
• Product leadership and innovation
• Companies that focus on customer that buy the
  newest and most advanced cutting edge technology.
• Customer complete solutions
• Companies that try to sell things like computers
  where customers customize them to their liking.
• Lock in
• Companies that will make a product then to buy
  accessories for that product you have to buy the
  same brand name because other brands out work
  with that product.

14
Successful balanced Scorecards

• When using critical thinking of strategy,
  objectives, and measures companies can get a feel
  for who their customers are and what they can
  offer them.
• Strategy gurus, like Michael Porter stress the
  fact that it is more important to accomplish more
  with less.
• Dont try to please everyone when setting up your
  balanced scorecard because you cant.

15
Internal Processes

• Internal business process objectives address the
  question of which processes are the most critical
  for satisfying customers and shareholders
• A firm must concentrate its efforts to excel in
  these areas
• Metrics based on this prospective allow the
  managers to know how well their business is
  running and whether its products and services
  conform to customer requirements

16
Internal Process Examples

• Cost
• Throughput
• Quality

Objective Specific Measure
Manufacturing excellence Cycle time, yield
Increase design productivity Engineering efficiency
Reduce product launch delays Actual launch date vs. plan
17
Internal Processes

• In addition to the strategic management process
  two kinds of business processes may be
  identified, these include
• Mission-oriented processes - special functions of
  government offices which often involve many
  unique problems in their processes
• Support processes - more repetitive in nature.

18
Financial Performance

• The financial performance perspective of the
  balanced scorecard addresses the question of how
  shareholders view the firm and which financial
  goals are desired from the shareholders
  perspective.
• These financial goals are dependent on the
  companys stage in the business life cycle.

19
Financial Performance Business Life Cycle

• There are three main stages to this cycle which
  include
• Growth stage -goal of the company is growth
• An example of a growth goal would be revenue
  growth.
• Sustain stage - the goal of the firm is
  profitability
• Measures in this stage may include ROE, ROCE, and
  EVA.
• Harvest stage - the goal of the firm is cash flow
  and reduction in capital requirements.

20
Financial Performance
The table below outlines possible financial
performance objectives and their metrics.
Objective Specific Measure
Growth Revenue Growth
Profitability Return on equity
Cost Leadership Unit Cost
21
Learning Growth
22

• How much a company must learn, improve, and
  innovate to meet objectives.

23
Use of the scorecard

• To set objectives
• To determine measures
• To predict outcomes
• To determine initiatives
• To gain the big picture

24
Key performance indicators include

• Illness rate/days of absence
• Employee turnover
• Gender/racial ratios
• Internal promotion

25
A learning growth example

• Objective increase internal promotions
• Measure bigger of in house promotions
• Target 10 in 2 years
• Additional classes and training

26

• A balanced scorecard system provides a basis for
  executing good strategy well and managing
  change.
• -Howard Rohm

27

• Learning growth must focus on measurable
  outcomes to move the company forward.

28

• Scorecard allows for actionable terms derived
  from company strategy.

29
Balanced Scorecard

• Makes it easier for management to carry out
  strategy.

30
4 step process

• Define measurement architecture
• Specify strategic objectives
• Choose strategic measures
• Develop implementation plan

31
Potential Benefits

• Translation of strategy into measurable
  parameters
• Communication of strategy
• Alignment of individual goals with strategic
  objectives
• Feedback of implementation results

32
Potential Disadvantages

• Lack of a well defined strategy
• Use of only lagging measures
• Use of generic metrics

33
Conclusion

• Balanced scorecard is a performance management
  system that can be used in any size organization.
• Allows management to measure financial and
  customer results, operations, and organization
  potential.