Why it is difficult to implement strategy?

Strategy implementation becomes difficult as organizations face

one or more of these challenges…
 The Balanced Scorecard-
a performance measurement system.

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Architects of Balance Scorecard - Robert Kaplan & David Norton
The Balanced Scorecard- Corporate Concept
Customer Internal
Innovation & Indicator Business
Learning Process
Indicator Indicator

Financial
Indicator

10/17/08 hmahesh45@yahoo.com; VIM Pune 3

Balance Scorecard – Tool to implement Strategy
Better ROI
Customer  DPS
Satisfactio
n

New
Skill Processes
Enhanceme
10/17/08 hmahesh45@yahoo.com; VIM Pune 4
 The Balanced Scorecard - Indicators
Balanced Scorecard measure the company’s
performance on following four grounds/aspects
SIMULTENEOUSLY
1. The Learning and Innovation
This perspective includes employee training
and corporate cultural attitudes related to
both individual and corporate self-
improvement. Skill Enhancement, Process
improvement
2. The Internal Business Process
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 . New Processes, New
Products, Cycle time
10/17/08 hmahesh45@yahoo.com; VIM Pune 5
 The Balanced Scorecard - Indicators

3. The Customer Perspective

This perspective emphasizes customer
focus and customer satisfaction.
Customer Retention, Customer satisfaction
index.
4. The Financial Perspective
Kaplan and Norton do not disregard the
traditional need for financial data.
Timely and accurate financial data will
always be a priority. Profit margins, ROA, Cash
Flow
BS incorporates all significant controls in one frame.
That’s why this control tool is called BALANCED.

10/17/08 hmahesh45@yahoo.com; VIM Pune 6

 Balanced Scorecard –
Cause Effect Relationship Among Indicators
Indicators -
Innovative Internal Customer Financial
and Business
Learning Process

Examples-

Employee Productivity Cost Growth in

training effective revenue.
product

Test Better Assured Growth in

marketing production acceptance market
planning

Customer
R& D New product retention Assured
Achieveme line (gets market share
nt hooked to
10/17/08 hmahesh45@yahoo.com; VIM Pune 7
the Co).
 The Balanced Scorecard –
Measures/Indicators categorized as

 1. Driver Measures - Leading Indicators e.g.

cycle time
- Show progress in key areas,
- How well the goal is being achieved,
- Encourages the employees to
improve upon, - Applied at lower level &
- Indicate
incremental
2. Outcome changes.
Measures - Lagging Indicators e.g.
ROA
- They tell what has happened..
- They show final result of the strategy.

Both are linked together. OM takes care of strategy

tself where as DM takes care of implementation of strategy
10/17/08 hmahesh45@yahoo.com; VIM Pune 8
 The Balanced Scorecard –
Essential Factors -
 It should includes all critical factors of organization’s
strategy.
 Show relationships among measures in cause- effect
manner.
 Provide a broad base view of the Company.
 It should address different stakeholders of the
Co.
 Clearly specify Driver and Outcome measures and
relationship between them.
 Give due consideration to balance of Internal and
External measures
 BSC must be strategy specific i.e. organization
specific.
 Measures must be linked from top to bottom and
must
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be tiedhmahesh45@yahoo.com;
to responsibility VIM Pune
center 9
Balanced Scorecard – to sum up……..

“ Balance Scorecard is
a management system
rather than mere
a measurement system
which enables organization
to clarify its vision and strategy
and translate it into action.”

10/17/08 hmahesh45@yahoo.com; VIM Pune 10

Balance Scorecard ­ Success stories
 All the best for your exam.

Thanks………

10/17/08 hmahesh45@yahoo.com; VIM Pune 12