BSC is a system that attempts to link share-holder interest in return on capital with a system of performance management that is linked

to ongoing, operational activities and processes within the company. BSC reflects a multi-dimensional perspective including short-term and long-term results; internal and external challenges; financial and non-financial measures as well as past and future performances. Thus for a company to achieve good results today and sustain it into the future, the company must understand its markets and customers; learn, innovate and grow to meet its customers expectations. This must also be reflected in terms of how it organizes its structure, system,process,resources and the entire value-chain leading to cost-cutting and revenue enhancement capabilities which would lead to customer satisfaction, trust, goodwill and loyalty and the ultimate achievement of share-holder value in terms of share prices, ROCE, dividend payouts etc.

The uniqueness of BSC is that it is a management tool, measurement tool, implementation tool, control tool, evaluation tool, motivational tool and a learning tool. The BSC allows managers to look at the business from four different comprehensive perspectives by asking the following questions: Who are our customers and are we making them happy and satisfied?[Customer Perspective]. What are the critical success factors we need to excel at so as to add value and remain competitive [Internal Business Process Perspective]. To achieve sustained competitive advantage and create future value, how do we change and improve? [ Learning, Growth and Innovation Perspective]. Finally, to satisfy the interest and add economic value to share-holders wealth, how do we appear to them? [Financial perspective].
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As an illustration, consider for example a company that wishes to pursue a Growth Strategy. From the Financial Perspective, the Objective may be defined as To increase sales or grow revenue through introducing new products. The performance measure may be the percentage of revenue from the sale of new products. The target/Standard for the measure may be 20%[that is 20% of the total revenues from the coming year must be from the sale of new products]. Finally, the Initiative should describe how the above are to be accomplished and this must include ALL the three remaining Perspectives namely: the Customer, Internal Business Process and the Growth and Infrastructure capabilities of the organization. Thus at the end, strategy does not only become visible and comprehensive, but also becomes functional, operational, inter-linked and owned by every player within the organization.
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FINANCIAL PERSPECTIVES
OBJECTIVES MEASURES

REVENUE GROWTH Increase the number of new products Percentage of revenues from new products Create new applications Percentage of revenues from new applications Develop new customers & markets Percentage of revenues from new sources Adopt a new pricing strategy Product and customer profitability COST REDUCTION Reduce unit product cost Unit product cost Reduce unit customer cost Unit customer cost Reduce distribution channel cost Cost per distribution channel ASSET UTILISATION Improve asset utilization Return on investment Economic value added

CUSTOMER PERSPECTIVE
OBJECTIVES

MEASURES

CORE OBJECTIVES Increase market share Market share(% of market share) Increase customer retention Percentage growth, existing customers Percentage of repeating customers Increase customer acquisition Number of new customers Increase customer satisfaction Ratings from customer surveys Increase customer profitability Customer profitability CUSTOMER/PERFORMANCE VALUE Decrease price Price Decrease post-purchase cost Post-purchase costs Improve product functionality Ratings from customer surveys Improve product quality Percentage of returns Increase delivery reliability On-time delivery percentage Improve product image & reputation Ratings from customer surveys
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INTERNAL BUSINESS PROCESS PERSPECTIVE

OBJECTIVES MEASURES OPERATIONS Quality costs Output yields Percentage of defective units Unit costs trends Output/inputs Cycle time Velocity(units produced/time)

Increase process quality

Increase Process efficiency

Decrease process time

POSTSALES SERVICE Increase service quality Increase service efficiency Decrease service time

First-pass yields Costs trends Output/inputs Cycle time

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LEARNING GROWTH AND INNOVATION PERSPECTIVE OBJECTIVES MEASURES

INNOVATION
Increase the number of new products
Increase proprietary products Number of new products/total products R &D expenses Percentage revenue from proprietary products Number of patents pending

LEARNING & GROWTH Increase employee capabilities

Employee satisfaction ratings Employee turnover percentage Hours of training Employee productivity(revenue/employee) Suggestions per employee Suggestions implemented per employee Percentage of process with real-time feed back capability Percentage of customer-facing employees with online access to customer and product information

Increase motivation and alignment

Increase information system capabilities

Implementing a successful BSC requires Four rigorous activities namely:

MAKE THE STRATEGY EXPLICIT

The starting point in producing a BSC is identifying the strategic requirements for success in the firm. Typically, they should relate to products leadership, market size, growth and resources.

CHOOSE THE OBJECTIVES AND MEASURES

The objectives and performance measures should be selected that clearly relate to the achievement of the strategies identified above and the relationship between them must be clearly understood.

DEFINE AND REFINE

Management reporting systems and procedures need to be set up to collect, collate, process, track, summarize and report on data and information on performance measures regularly. This requires also that variances on key measures are immediately identified and promptly acted upon.

DEAL WITH PEOPLE

It should involve all people within the organization. From corporate level, functional level, operational level and unit level so that everybody would have ownership.
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