MATHEMATICS

SCIENCE
SCIENCE

ENGLISH
ENGLISH

BEHAVIOR

HAPPINESS

FINANCIAL
FINANCIAL
STABILITY
STABILITY

FAMILY

KNOWLEDGE
KNOWLEDGE
&&CAREER
CAREER

HEALTH

What is a Scorecard?
A scorecard is an easy-to-understand
generic format for:

Describing and communicating the

organizations strategic intentions;
Discussing activities that are motivated by the
strategic aims; and
Monitoring and rewarding such activities

FINANCIAL
FINANCIALPERSPECTIVE
PERSPECTIVE
How do we look to shareholders?
How do we look to shareholders?

CUSTOMER
CUSTOMER
PERSPECTIVE
PERSPECTIVE

INTERNAL
INTERNALBUSINESS
BUSINESS
PERPECTIVE
PERPECTIVE

How
Howdo
docustomers
customerssee
seeus?
us?

What must we excel at?

What must we excel at?

INNOVATION
INNOVATION&&LEARNING
LEARNING
PERPECTIVE
(DEVELOPMENT)
PERPECTIVE (DEVELOPMENT)
Can we continue to Improve and create value?
Can we continue to Improve and create value?

Learning & Growth (Development) Perspective

Comes from people, systems and

procedures the infrastructure that the
organization must continually build to
deliver value to customers and
shareholders, in an environment of
intense global competition.

Process Perspective
Identifies the critical Internal
business processes in which
the organization must excel all
these have the greatest impact
on customer satisfaction and
financial objectives.
The inclusion of innovation
measures gives the organization
drivers for long term financial
success

Customer Perspective
Identifies the customer and market
segment or niche in which the
business will compete and measures
performance in the targeted areas.

Financial Perspective
Financial measures are important in summarizing the
measurable economic consequences of actions already
taken. They indicate whether a companys strategy and its
execution are contributing to bottom-line considerations.

The Balanced Scorecard

Used as customized communication tools within a
management control system

First proposed in 1992 by

Robert S. Kaplan, a Harvard Business School
Professor and
David P. Norton, President of Massachusetts
based Consultancy Firm

What the scorecard accomplishes:

Translating the Vision

Communicating and Linking

Business Planning
Giving Feedback and
Learning

The Balanced Scorecard

Describes business activity from four (usually)
different perspective
Uses a small number of measures for each,
Where the description may refer to the current performance
of a business or to its goal for the next period

Objective Setting for Results

CORPORATE or STRATEGIC
PLANS
DIVISION BUSINESS PLANS

DEPARTAMENTAL GOALS

UNIT OR TEAM GOALS

INDIVIDUAL PERFORMANCE OBJECTIVES

Is the
BALANCED
SCORECARD
another performance report
that simply combines financial
and non-financial metrics?

There is more to the Scorecard

The 4 perspective aim for a complete
description of what one needs to know about the
business

There is a time dimension

It shows both internal and external aspects of the
business

The scorecard is linked through cause and

effect assumptions

THE BALANCED SCORECARD LINKS PERFORMANCE MEASURE

FINANCIAL PERSPECTIVE
FINANCIAL PERSPECTIVE
How do we look to shareholders?
Profitability, growth, deft, equity, cash
flow, operating profit
How do we look to shareholders?

CUSTOMER PERSPECTIVE
Customer satisfaction indices
New clients service
Response Time
Market Share
How do customers see us?

INTERNAL BUSINESS
PERPECTIVE
INTERNAL
BUSINESS
(Process)
PERPECTIVE
Efficiency
What
must we excelCost
at?
Manufacturing
What must we excel at?

INNOVATION
& LEARNING
INNOVATION
& LEARNING
PERPECTIVE
(DEVELOPMENT)
PERPECTIVE
(DEVELOPMENT)
New Skills,
New Products
Can we continue
to Improve
and create value?
Can we continue to Improve and create value?

FINANCIAL
FINANCIALPERSPECTIVE
PERSPECTIVE
How do we look to shareholders?
How do we look to shareholders?

CUSTOMER
CUSTOMER
PERSPECTIVE
PERSPECTIVE

INTERNAL
INTERNALBUSINESS
BUSINESS
PERPECTIVE
PERPECTIVE

How
Howdo
docustomers
customerssee
seeus?
us?

What must we excel at?

What must we excel at?

INNOVATION
INNOVATION&&LEARNING
LEARNING
PERPECTIVE
(DEVELOPMENT)
PERPECTIVE (DEVELOPMENT)
Can we continue to Improve and create value?
Can we continue to Improve and create value?

To succeed financially

We need to satisfy our customers

We need to excel at business process

We need to learn in terms of internal processes and

value proportions

Customer Concerns tend to fall into

categories:
Market segment or niche identified
Time (lead time, delivery)
Quality (defects)
Performance (benchmarking)
Service
Cost

Internal Business Perspective means

Critical Operations that enables the company to satisfy
customer needs
Critical technologies or core competencies

Innovation & Learning (development) Perspective:

Ability and willingness to change
Comes from people, systems, & procedures
E.g. product-focus and market leadership
Management information for decisions

Financial Perspective
Survive; Cash Flow

To succeed: Sales growth, operating income

To prosper: Increased market share, ROE

Ex. Car Manufacturing

Category: profitability (40% weight)
Primary measurement: Operating profit
2002 Target: 0.1% of ROE
Category: Market Dev.: (20% weight)
Primary measurement: Market share
2002 Target: 20.5%
Category: Mnfg. Productivity 920%)
Primary measurement A: Hours per vehicle
(HPV) Harbour Report Market share
2002 Target: 95 HPV
Primary measurement B: <fng. Cost
(exc. Material and warranty)
2002 Target: P85.5 T/unit

Car Manufacturing
Category: Quality (20% weight)
Primary measurement A: Customer Sat. In.
2002 Target: 1 Rank up fr. Previous survey
Primary measurement B: Sales Sat. Index
2002 Target: 2 Rank up fr. Previous survey

Primary measurement C: Claims Ratio

2002 Target : 12 %

What strategy must be

achieved and what is
critical to its success

OBJECTIVE
Financial

Broaden revenue mix

Customer

Increase customer
satisfaction

Internal

Develop new
products

How success will be

measured and tracked

MEASURES

Key action programs

required to achieve
objectives

TARGET

Key actions
required to achieve
objectives

INITIATIVES

10% Product A

* Sales Promotions

40% Product B

* New channel

50% Product C

* Marketing

Revenue mix

Customer
retention

% revenue from
new
products

95%

* Frequent Buyer's
club

1999 - 15%

* R and D Program

2000 - 50%

* Customer mailing

2001 - 60%

It is easy to create a Scorecard

But to create a manageable scorecard is something else
Identify Vision

Identify Strategies

Define vision for the organization

Which strategies shall we follow?

Which shall we focus?

Identify Critical success factors

and perspective

Identify Measures
Define vision for the organization

Evaluate
How do we evaluate our
scorecard?

Which should we measure in each

perspective?

Critical Action Plans

Which actions should be
initiated to reach our targets?

Follow up and
Manage
How do we follow-up update
and maintain our scorecard?

VARIANTS
FROM THE ORIGINAL
FOUR-PERSPECTIVE
Kaplan & Norton
SCORECARD

Is there a need for additional perspective?

Like:

Employees or Human Resources

Environment

Partners
(Stakeholders)

MATHEMATICS
FINANCIAL
PERSPECTIVE

FINANCIAL
CUSTOMER
STABILITY
PERSPECTIVE

Development
perspective

KNOWLEDGE
INTERNAL
BUSINESS
& CAREER

PERSPECTIVE

Human resources

In some organizations, it was the development (learning and

growth) perspective that was converted into an HR perspective
on grounds that development was essentially a matter of human
performance

FINANCIAL
MATHEMATICS
PERSPECTIVE

FINANCIAL
CUSTOMER
STABILITY
PERSPECTIVE

INTERNAL
KNOWLEDGE
&BUSINESS
CAREER
PERSPECTIVE

Human resources

Some service industries limited their scorecards to 3 perspective

attributing the effects of improved competencies and attitudes on
customer satisfaction and profits

FINANCIAL
MATHEMATICS
PERSPECTIVE

FINANCIAL
CUSTOMER
STABILITY
PERSPECTIVE

HUMAN
KNOWLEDGE
RESOURCES
& CAREER
PERSPECTIVE

HR Measures are already included in the 4 perspective

FINANCIAL
MATHEMATICS
PERSPECTIVE

INTERNAL
KNOWLEDGE
&BUSINESS
CAREER
PERSPECTIVE

FINANCIAL
CUSTOMER
STABILITY
PERSPECTIVE

DEVELOPMENT
PERPERSTIVE
HUMAN
RESOURCES

FINANCIAL
MATHEMATICS
PERSPECTIVE

INTERNAL
KNOWLEDGE
&BUSINESS
CAREER
PERSPECTIVE

FINANCIAL
CUSTOMER
STABILITY
PERSPECTIVE

DEVELOPMENT
PERPERSTIVE

HR Measures are already included in the 4 perspective

FINANCIAL

FINANCIAL
INTELLECTUAL
STABILITY
CAPITAL

KNOWLEDGE
HUMAN
CAPITAL
& CAREER

FINANCIAL
CUSTOMER
STABILITY
CAPITAL

KNOWLEDGE
INNOVATION
& CAPITAL
CAREER

PROCESS
MATHEMATICS
CAPITAL

The HR scorecard
By Becker, Huselid, & Urich
FINANCIAL
PERSPECTIVE

HR SYSTEM
ALIGNMENT

HR DELIVERABLES

In R and D
Extend to which a
validated competency
model serves as the
basis for hiring,
developing, managing
and rewarding
employees
Percentage of the
workforce that is
regularly assessed via
a normal performance
appraisal

Percentage of selection
decisions based on competency
model
Percentage of hires made at
elite level
Extent to which appropriate
retention policies have been
developed and implemented
HR alignment Index above
80%

Percentage of employees
who have the requisite
technical competencies
Percentage of turnover
among high performing R
and D scientists
Percentage of open job
requisition in
manufacturing

IMPACT
Lower R and D
cycle time

In Manufacturing
Recruiting cycle time at or
below 14 days

HR EFFICIENCY

HR alignment Index above 80%

Cost per hire

Developing your own HR Scorecard Planning the Training

Program
Total Quality and other High
MATHEMATICS
Performance Work Systems

FINANCIAL
Human
Resource
Management
STABILITY and
Development

Employment
Relations,
KNOWLEDGE
Labor&Standards
and Social
CAREER
Compliance

Health & Safety Workplace

Management and Good
Housekeeping

Some Applications of the Scorecard

Management Control (totally based on scorecard)

Scorecards used as format for discussing strategies

only
Scorecard used as a tool for sorting/classifying existing
measures to provide an overview
Scorecards introduced as a substitute for budget

Customized scorecards for different

organizational levels

Some Applications of the Scorecard

Scorecards for projects with a fairly long lifespan

Scorecards for separate corporate functions e.g. HR
Scorecards for reporting performance e.g. annual reports
Scorecards for Government and Non-Profit Organizations

A complete Organizational Scorecards will have

the following components:
Strategic teams identified
Strategic objectives identified
Measures of the execution of the strategic objectives
Competitive benchmarks for the measures selected
Short-term and long-term targets for identified measures

Initiatives aligned to the strategic objectives for

implementation and review

Once completed, the Scorecard is to be

used as a method for aligning initiatives
Human Resources to translate strategy
to daily management.

The Traditional approach promotes fragmentation &

silos
Big Boss
Boss

Me

You

Them

Them

Them

Them

Them