The Balanced Scorecard was developed by Robert Kaplan and David Norton in the early 1990s to address the limitations of solely using financial measures to measure performance. It identifies four perspectives - financial, customer, internal business processes, and learning and growth. The Balanced Scorecard translates a company's mission and strategy into objectives and measures across these four perspectives to manage and monitor performance in a more holistic way. A seven step process is used to implement the Balanced Scorecard in organizations.
The Balanced Scorecard was developed by Robert Kaplan and David Norton in the early 1990s to address the limitations of solely using financial measures to measure performance. It identifies four perspectives - financial, customer, internal business processes, and learning and growth. The Balanced Scorecard translates a company's mission and strategy into objectives and measures across these four perspectives to manage and monitor performance in a more holistic way. A seven step process is used to implement the Balanced Scorecard in organizations.
The Balanced Scorecard was developed by Robert Kaplan and David Norton in the early 1990s to address the limitations of solely using financial measures to measure performance. It identifies four perspectives - financial, customer, internal business processes, and learning and growth. The Balanced Scorecard translates a company's mission and strategy into objectives and measures across these four perspectives to manage and monitor performance in a more holistic way. A seven step process is used to implement the Balanced Scorecard in organizations.
Developed by Robert Kaplan and David Norton. Introduced in the early 1990s. Motivated in part by Wall Streets focus on quarterly earnings. Widespread adoption (hundreds of companies).
Financial Performance Measures
Financial measures are lag indicators: they report on the outcomes of past actions. Traditional financial measures fail to accurately value intangible assets such as: Customer relationships Innovative products and services Operating processes Human capital Information technology systems Organizational climate
The Balanced Scorecard
Identified Four Perspectives
Financial Customer Internal business processes Learning and growth
The Balanced Scorecard
Identified Four Perspectives Financial Increase shareholder value Revenue growth New markets, products, customers Additional sales to existing customers Productivity Reduce direct and indirect expenses Utilize assets more efficiently
The Balanced Scorecard
Identified Four Perspectives Customer Operational excellence Starbucks Customer intimacy Exceptional service Custom products and solutions Product leadership Apple
The Balanced Scorecard
Identified Four Perspectives Internal business processes Build the franchise (innovation processes) Increase customer value (customer management processes) Operational excellence (operations and logistics) Good corporate citizenship (regulatory and environmental processes)
The Balanced Scorecard
Identified Four Perspectives Learning and growth Employee capabilities and skills Technology Organizational climate
a.k.a.: KPI scorecards A checklist approach The Difference: Performance Measurement versus Strategic Management
The Balanced Scorecard
Step 1: Review the organizations mission statement. Why does the organization exist? What are the organizations core values? Step 2: Develop a strategic vision. What does the organization want to become? Identify a clear picture of the organizations overall goal.
The Balanced Scorecard
Step 3: Translate the strategy into operational terms. Step 4: Align the organization to the strategy. Align across business units Align across staff functions Align with outside stakeholders (suppliers, customers, etc.)
The Balanced Scorecard
Step 5: Make strategy everyones everyday job. Communication and education Incentive compensation Step 6: Make strategy a continual process. Link strategy to the budgeting process Step 7: Mobilize leadership for change.