ENGINEERED BALANCED SCORECARD

Fadi N. Al-abbadi
Industrial Engineering Department
Faculty of Engineering and Technology, University of Jordan
Jordan
E-mail: fadi_ju@yahoo.com

ABSTRACT and effectively communicate priorities within

This paper presents a general overview of the
Balanced Scorecard (BSC) and its history and
evolution through the past years .In this paper a set
of excel spread sheets are developed to ease the
process of implementing the BSC, these sheets are
supported with guidelines and tips to get the
maximum benefit of them, and they are arranged in a
sequential form to be obeyed through any BSC
project.
KEYWORDS
Balanced Scorecard, Performance management,
Strategic theme, Strategic map, Lead measures, Lag
measures
1. INTRODUCTION
During the 1980s, it began to be argued that an
organization’s strategic policies could be used to
inform and justify the choice of non-financial
measures. This observation was concurrent with an
emerging awareness of the existence of formal
control systems within organizations - particularly
associated with the control of strategic activity.
One response to these various factors was the
Balanced Scorecard: a simple if initially rather vague
concept that has become both well known and (in
various forms) widely adopted. Kaplan and Norton
presented Balanced Scorecard as an integrative
device that would encourage and facilitate the use of
non-financial information by senior managers of
organizations, with the choice of non-financial
measure being driven primarily by ‘strategic’
considerations.
organizations. This was expected to directly enable
improved performance by workers within the
organization.
The balanced scorecard (BSC) is a Performance
Management System that enables organizations to
clarify their vision and strategy and translate them
into action. It also provides feedback around both the
internal business processes and external outcomes in
order to continuously improve strategic performance
and results.
BSC can be used in any size of organization to align
vision and mission with customer requirements and
day-today work, manage and evaluate business
strategy, monitor operation efficiency improvements,
build organization capacity, and communicate
progress to all employees.
2. BACKGROUND AND LITERATURE
REVIEW
2.1. BSC Perspectives
BSC views the organization from 4 distinct
perspectives which are:
• Financial Perspective:

They argued that when equipped with this better

information, managers would be able to deliver
improved strategic performance. The brevity and
focus of the Balanced Scorecard was also presented
as having value with respect to the need to efficiently
 Proceedings of the ICCIE 2004, April 12-16, 2004, Lausanne, Switzerland

This perspective is based on financial data that is existing employees. This is a leading indicator of
timely and accurate, funding data will always be a 'brain drain' that must be reversed. Metrics can be put
priority, and managers will do whatever necessary to into place to guide managers in focusing training
provide it. In fact, often there is more than enough funds where they can help the most. In any case,
handling and processing of financial data. With the learning and growth constitute the essential
implementation of a corporate database, it is hoped foundation for success of any knowledge-worker
that more of the processing can be centralized and organization.
automated. But the point is that the current emphasis
on financials leads to the "unbalanced" situation with
regard to other perspectives. There is perhaps a need
to include additional financial-related data, such as
risk assessment and cost-benefit data, in this
category. Special attention must be paid to any
possible “skewing” of the financial perspective.
• Customer Perspective:

Recent management philosophy has shown an

increasing realization of the importance of customer
focus and customer satisfaction in any business.
These are leading indicators: if customers are not
satisfied, they will eventually find other suppliers
that will meet their needs. Poor performance from
this perspective is thus a leading indicator of future
decline, even though the current financial picture
may look good.
In developing metrics for satisfaction, customer
profiles should be analyzed in terms of kinds of
customers and the kinds of processes for which we
are providing a product or service to those customer
groups.
• Internal Business Processes Perspective:
This perspective refers to internal business processes.
Metrics based on this perspective allow the managers
to know how well their business is running, and
whether its products and services conform to
customer requirements (the mission). These metrics
have to be carefully designed by those who know
these processes most intimately.
• Learning and Growth Perspective:
Figure 1: BSC Perspectives
2.2. BSC Generations
The firs version of the balanced scorecard that was
developed in 1980s and published by Kaplan and
Norton in 1992, was called the first generation BSC;
it Focused on strategy and vision, but said little about
how t design or use effectively, and Said little about
how measure selection activity could be done.
The practical difficulties associated with the design
of 1st Generation Balanced Scorecards were
significant, in part because the definition of a BSC
was initially vague as discussed
above. But the difficulties also stemmed from the
issues presented by the design questions posed by
1st Generation Balanced Scorecard - in particular the
need to filter, and cluster.

This perspective includes employee training and

The attitudinal approach to measure selection
corporate cultural attitudes related to both individual
proposed initially by Kaplan and Norton (e.g. “To
and corporate self-improvement. In a knowledge-
succeed financially, how should we appear to our
worker organization, people - the only repository of
shareholders?”) was quickly recognized by Kaplan
knowledge - are the main resource. In the current
and Norton as weak, and quickly replaced by the
climate of rapid technological change, it is becoming
concept of ‘strategic objectives’ (Kaplan and Norton,
necessary for knowledge workers to be in a
continuous learning mode. Organizations often find
1993): short sentences which clarified the nature of
themselves unable to hire new technical workers, and
the ‘Goals’ described in their 1992 paper. The
at the same time there is a decline in training of
 Proceedings of the ICCIE 2004, April 12-16, 2004, Lausanne, Switzerland

innovation was to suggest that there should be a associated with one or more measures and
direct mapping between each of the several ‘strategic assigned to one of four perspectives.
• An attempt is made to visually document the
objectives’ attached to each perspective and one or
major causal relationships between strategic
more performance measures. Although subtle,
objectives, laying out the results in a
this extra step in the measure selection process
‘strategic linkage model’ or ‘strategy map’
transforms the design process from that initially
diagram.
proposed, since it helped particularly with the
filtering issue - the strategic objective itself gave a The totality of these enhancements resulted in the
justification for the selection of one measure over ‘2nd Generation Balanced Scorecards’.
another out of the many possible candidates for
inclusion in each perspective.
The second key innovation concerned causality, early
attempts to define causality
were weak, and in the period between 1992 and
1996, work focused on finding ways to show
causality between measures. Measure-based linkages
provided a richer model of causality than
before, but presented conceptual problems - for
example, encouraging the use of various forms of
analysis to validate measure selection based on
numerical correlations between measures. Such
methods may be efficient at selecting measures, but
are difficult to integrate
with the need for the Balanced Scorecard design to
reflect the consensus views of the potential users
of the device noted as a key characteristic above. Figure 2: Strategy Map
Nonetheless, over time the idea of strategic linkage
became an increasingly important element of
Balanced Scorecard design methodology, and in the The 3rd Generation Balanced Scorecard model is
mid 1990’s Balanced Scorecard documentation based on a refinement of 2nd Generation design, with
began to show graphically linkages between the new features intended to give better functionality and
strategic objectives themselves (rather than the more strategic relevance while addressing
measures) with causality linking across the the practical issues associate with a 2nd Generation
perspectives toward key objectives relating to design approach.
financial performance. The origin of the
At the time, developments stem from the issues relating to the
diagrams showing linkages between objectives were validation of strategic objective selection and target
called ‘strategic linkage models’ - more recently setting. These triggered the development in the late
they have been called ‘strategy maps’. 1990’s of a further design element - the
‘Destination Statement’.
Collectively the changes in design described here
represent a materially different definition of what Destination Statements were initially created towards
comprises a Balanced Scorecard compared to that the end of the design
described above as a 1st Generation Balanced process by challenging the managers involved to
Scorecard. In particular, it is noted that two key imagine the impact on the organization of the
enhancements to the definition given earlier: achievement of the strategic objectives chosen earlier
in the design process. This integrative process
• Measures are chosen to relate to specific helped identify inconsistencies in the profile of
strategic objectives, the design aim being to objectives chosen caused by the potential limitations
identify about 20-25 strategic objectives each inherent in the use of only four perspectives, as
mentioned earlier, and the final document was found
 Proceedings of the ICCIE 2004, April 12-16, 2004, Lausanne, Switzerland
to be useful in validating the targets chosen for some
measures.
The idea that it would be useful for
an organization to have access to a clear statement
concerning what the organization is trying to
achieve was not new: the innovation here was simply
to realize that such a statement could act as a
useful reference point for the target setting process.
3. BSC TEMPLATES
Templates are commonly used as a tool to assist in
building the Balanced Scorecard.
For example, we can use a template to construct the
Strategic Map for each Strategic Theme. This Excel
Workbook contains several templates to help at
developing a Balanced Scorecard. The templates are
clean, simple spreadsheets that you can modify
easily. Additionally, the templates are arranged in
sequence according to the flow of the development
process.
The generated sheets are as following:
• Goals Establishment sheet
• Themes Checklist sheet
• Strategic map sheet
• Measurement definition sheet
• Measurement summary sheet
• Lag/Lead comparison sheet
• Summary sheet
Here under a full description of each sheet and
how it is going to be used in terms of its
guidelines and tips.
3.1. Goals Establishment Sheet
The first development step for a Balanced Scorecard
begins with a set of strategic goals. Goals need to be
expressed in concrete terms for establishing an end-
result or destination. Goals will serve as our anchor
for driving much of the remaining process in building
our scorecard. Goals tend to validate the mission and
vision of the organization. You can refer to past
performance within the organization to establish a
goal or look at where the industry is moving.
Competitive benchmarking is also useful in
establishing overall organizational goals.
3.2. Themes Checklist Sheet
Once the strategic themes are completed, it is
preferred to check it against some criteria, which
were found according to the existing best
practice.
These criteria include the following:
• There are no more than five strategic themes
• Strategic themes are realistic and achievable
within the organization
• Themes support and connect with strategic
goals
• Themes convey a positive impact upon the
organization
• Themes place focus and direction on what is
important
• Each theme is distinct and different.
• Themes are strategic in scope and not tactical
day to day
• Themes are consistent with the mission and
vision of the organization
• Themes have an impact on the financial
objectives of the organization.
To get the best results of this checking, it is
recommended to follow the tips below:
1. Refer back to the strategic information you
collected per Template # 1. This should help you
develop a set of strategic themes. If these sources fail
to clearly define your strategic themes, then
interview upper level managers to determine the
strategic themes
2. Start by looking at internal perspectives within the
organization - some common themes should emerge,
such as innovation in product development
3. Themes can embrace several strategic objectives
and cover all four perspectives with the Balanced
Scorecard (Financial / Customer / Internal
Processes / Learning & Growth)
 Proceedings of the ICCIE 2004, April 12-16, 2004, Lausanne, Switzerland

4. Themes may run somewhat contrary to one 1. Update Frequency: M for Monthly, Q for
another; such as reduce the number of new programs Quarterly, A for Annual, etc.
vs. increase revenue growth. If this occurs, make sure
2. Degree of Reliability: V for Very Reliable, M for
everyone has a clear understanding of what the
Medium Reliability, L for Low Reliability
organization is trying to accomplish
3. Sets Objective: Degree of usefulness in
3.3. Strategic Map Sheet establishing objective - High, Medium or Low
This sheet enables you to link the resulted objectives 4. Ability to Benchmark: H for High, M for Medium,
in a cause and effect relation. L for Low
Simply, Place each strategic objective within this 5. Responsibility Location: Team, Project,
template, draw lines to connect the objectives within Department, Manager, etc.
this map. You should have a strategic map for each 6. Degree of Fit: (within the organization) High,
of your strategic themes. Make sure you have upper Medium or Low
level management "buy-in" on each strategic map
before moving forward. 7. Degree of Support: Available support (IT, Finance,
etc.) in place - Yes or No
3.4. Measurement Definition Sheet
3.6. Lag/Lead Comparison Sheet
This sheet is dedicated for defining the measures that
are going to be used, and it obeys the following A good balanced scorecard should consist of both
steps: outcome and driver type measurements. The two
upper perspectives (Financial and Customer) will
• Define a measurement for each strategic have mostly outcome type measurements. The lower
objective two perspectives (Internal Processes and Learning &
• Define the sources for the measurement Growth) will include some driver type
measurements. The Learning & Growth perspective
• Define how the measurement is derived and may include several driver type measurements. This
reported worksheet categorizes your measurements and
The Measurement
following table summarizes the forms of compares the two types of measurements.
measures and Advantage
there Disadvantage
advantages and
Type The following table shows the advantages and
M eas u rem e n t disadvantages.
Outcomes
A d v an tag e
Objective and
D isad v an ta g e
Focused on past, disadvantages of each type:
F o rm easy to capture not current
S im ple a nd e as y to O nly as g oo dPredictive
as th e s traand
te gic
N um bers Difficult to derive
un dersta nd Drivers obje ctive leading the
and support
A llow s c om binin g H ard to un deorganization
rs tand w h at is
Ind ex
s evera l m ea s urem en tshapp en ing
G o od m eas u re for tim e
P erc entages M a y b e no t be us ed c o rre c tly
s pan
G o od m eas u re for C an b e s ub jec tive o n ho w it
R ating s
qu alitative inform a tio n w as de riv ed
M ea su re s c ritical M a y requ ire ad d ition a l
R atios
re lation sh ips ana lys is to reac h c o nc lus io n
R ank in gs
C lo s e gap s fo r top N ot a ppro priate for low er Table 2: Measurement Types
ra nk ed com pa nies ran ke d c om p an ie s

3.7. Summary Sheet

This sheet summarizes all of the critical components
of your balanced scorecard. This spreadsheet can be
Table 1: Measurement Forms modified to report a comparison of actual results
against targets. A final column is added to
3.5. Measurement Summary Sheet summarize budgets for each program.
Summarize the attributes associated with each
measurement in the Balanced Scorecard.
The following tips and guidelines should be obeyed:
 Proceedings of the ICCIE 2004, April 12-16, 2004, Lausanne, Switzerland

4. CONCLUSIONS
In this paper we presented a set of spread sheets that
are going to be of great help in implementing BSC
project. The method of creating theses sheets obeyed
the best practices in the world and the practical past
studies in that field.

5. APPENDICES
See the related excel workbook.

REFERENCES

Lawrie, G., Cobbold, I., (2004), “Development of the 3rd

Generation Balanced Scorecard”.
Lenoldi, R., (2004), “Developing and Implementing a
Balanced Scorecard: A Practical Approach”.
Morsiawa, T., (2002), “Building Performance
Measurement Systems with Balanced Scorecard”
Niven, P., (2002), “Maintaining the Balanced Scorecard”.
Rohm, H., Halbach, L., (2005), “Developing and Using
Balanced Scorecard Performance Systems”.