Balanced scorecard

What is Balanced
Scorecard?
Balanced scorecard is an innovative multi-dimensional
corporate performance scorecard developed by Robert S.
Kaplan and David P Norton in 1992.
Balanced scorecard is a strategic management tool that
is used to align business activities to the vision and
strategies of an organization by monitoring performance
against strategic goal.
The Balanced Scorecard is a strategic performance
management framework that allows organizations to
define their strategic priorities and then design indicators
and measures to monitor how well they are executing
them.
The balanced scorecardprovides organizations with the
ability to clarify vision and strategy and translate them
into action.

Contd
It's a performance measurement tool
that added strategic non-financial
performance measures to traditional
financial metrics to give managers
and executives a more "balanced"
view of organizational performance
and help them to align the
organizations' activities to their
strategy to achieve their goals.

Four Perspectives

Kaplan and Norton recommend that managers

gather information from four important
perspectives:
The financial perspective: How do we look
to the stakeholders?
The customer's perspective: How do
customers see us?
The internal business perspective: What
must we excel at?
The
innovation
and
learning
perspective: Can we continue to improve
and create value for our services?

The financial
perspectives

The customer
perspectives

The internal process

perspectives

Learning and growth

perspectives

Balanced Scorecard Approach of Walmart

Financial perspective
Objective

Measure

Target

Action

Increase
revenues/total assets.

Revenue/total assets
percent. .

Increase
Revenue/total assets
by 8% during the
next year.

Increase revenues;
make a more
thorough use of
assets.

Increase
revenues/employee.

Revenue/employee

Increase
revenue/employee by
5 % during next two
years.

Increase employee
efficiency through
training and
technology.

Increase return on
investment.

Return on
investment..

Increase return on
investment by 2%
every year for three
years. .

Reduce operating
costs, and achieve
economies of scale
through bulk
purchases.

Objective

Customer service
perspective
Measure
Target
Action

Increase average
Average customer
customer size of Wal- size.
Mart.

Increase customer
size by 5% every
year for next five
years.

Increase customer
rating of Wal-Mart

Increase customer
The prices at Walrating by 10% in one Mart should be the
years time.
lowest in the market.

Customer rating.

Reduce number of
Customer
customer complaints. Complaints.

Reduce the number

of customer
complaints received
by 4% every year for
three years.

Provide a wider
variety of products to
customers.

Improve quality
control of products
stocked and improve
customer service.

Internal business process

perspective
Objective

Measure

Target

Action

Reduce administrative
expense/total revenues.

Administrative
expenses/total revenue.

Reduce Administrative
expenses/total revenue
by 2% every year for
next five years.

Train the employees so

that they become more
efficient.

Reduce lead time from

online orders to
delivery.

Average time taken.

Reduce time taken by 5

% in every year for
next three years.

Use automatic packing

and handling
technology for speeding
up.

Reduce waiting time for

customers at counters.

Average waiting time.

Reduce the average

waiting time by 15%
within one year.

Change the layout of

the store so that more
checkout counters are
opened.

Objective

Learning and growth

perspective
Measure
Target
Action

Increase training
Average training
hours per employee. . hours per employee.

Increase training
hours per employee
by 5% each year for
the next three years.

Hire outside trainers.

Managers should
increase their time
spent for training.

Reduce employee
turnover rate.

Employee turnover
rate.

Reduce employee
turnover rate by 3%
each year for next
thee years.

Increase employee
participation in
decision making.
Also, increase job
rotation.

Increase use of
employees view

Empowerment index. Increase

Give more decision
empowerment index making authority to
by 5% every year for employees.
at least three years.

Managing strategy: Four

process
The Balanced Scorecard is not a tactical or an
operational measurement system but a strategic
management system that innovative companies are
using to manage their strategy over their long run
by using the measurement focus of the scorecard to
accomplish critical management processes such as:
clarify and translate their vision and strategy;
communicate and link strategic objectives and
measures;
plan, set targets, and align strategic initiatives;
enhance strategic feedback and learning;

Managing strategy: Four

process

 The first new processtranslating the visionhelps

managers build a consensus around the organizations vision and
strategy. Despite the best intentions of those at the top, lofty
statements about becoming best in class, the number one
supplier, or an empowered organization dont translate easily
into operational terms that provide useful guides to action at the
local level. For people to act on the words in vision and strategy
statements, those statements must be expressed as an integrated
set of objectives and measures, agreed upon by all senior
executives, that describe the long-term drivers of success.
The second processcommunicating and linkinglets
managers communicate their strategy up and down the
organization and link it to departmental and individual objectives.
Traditionally, departments are evaluated by their financial
performance, and individual incentives are tied to short-term
financial goals. The scorecard gives managers a way of ensuring
that all levels of the organization understand the long-term
strategy and that both departmental and individual objectives are
aligned with it.

 The third processbusiness planningenables

companies to integrate their business and financial
plans. Almost all organizations today are
implementing a variety of change programs, each
with its own champions, gurus, and consultants,
and each competing for senior executives time,
energy, and resources. Managers find it difficult to
integrate those diverse initiatives to achieve their
strategic goalsa situation that leads to frequent
disappointments with the programs results. But
when managers use the ambitious goals set for
balanced scorecard measures as the basis for
allocating resources and setting priorities, they can
undertake and coordinate only those initiatives that
move them toward their long-term strategic
objectives.

 The fourth processfeedback and learninggives

companies the capacity for what we call strategic
learning. Existing feedback and review processes focus
on whether the company, its departments, or its
individual employees have met their budgeted financial
goals. With the balanced scorecard at the center of its
management systems, a company can monitor shortterm results from the three additional perspectives
customers, internal business processes, and learning
and growthand evaluate strategy in the light of
recent performance. The scorecard thus enables
companies to modify strategies to reflect real-time
learning.

Reasons to sustain a Balanced

scorecard programme

The Strategy mapping (Cause-andeffect Map)

Linking the four

perspectives

Thank You