THE BALANCED SCORECARD Dimensions and Perspectives By David Iornem, PhD

What is a Balanced Scorecard? BSC is a measurement tool It allows the organization to assess progress in implementing strategy It allows the organization to benchmark its progress against great practices outside and inside the organization, and over time It provides a diagnostic framework for tracking relationships and impact among strategies

What is a Balanced Scorecard? BSC is a communication tool It allows an organization to articulate its chain of value creation within the organization and to the world at large. • It provides a platform for planning and communication of planning activities

What is a Balanced Scorecard? BSC is a strategic management tool • It allows an organization to see all of the drivers of organizational value and performance in a holistic conceptual framework • It creates a pathway for the creation and implementation of strategy and measurement of progress that is fully aligned throughout the organization

NATURE OF BSC Balanced Scorecard comprises an integrated system of performance measures which derive from, and support organization strategy

DIFFERENT FOLKS, DIFFERENT STROKES Different companies need different balanced scorecards Why?

2. Because they may have different strategies TWO MAIN REASONS 1. Because they may identify different measures for their strategy management. 2. Because they may have different strategies

Differences in Strategy Examples of Differences in Strategy Dell and McDonald emphasize Operational Excellence Home Depot emphasizes Customer Intimacy Intel and Sony emphasize Product Leadership

THE BALANCED CONCEPT Organizations may emphasize a particular perspective, but all have to maintain high standards in all the four perspectives, i.e. a BALANCED approach

The 4 Main Perspectives Customer Perspective Financial / Regulatory Perspective Internal Perspective Learning and Growth Perspective

The Four Perspectives of the Balanced Scorecard Innovation and Learning Perspective How should we sustain our ability to change and improve Customer Perspective How should we appear to our customers Financial Perspective How should we appear to our shareholders VISION/STRATEGY Internal Business Process Perspective At what business practices must we excel

Perspectives for NGOs and Govt organisations. Mission perspective Customer perspective Internal perspective Learning and growth perspective Financial perspective

Perspectives For a Service Organisations. Growth Leadership Acceleration (Transformational Change) Collaboration Innovation Execution Retention

BSC FOR INDIVIDUALS Financial Perspective – Investments, Savings, Returns on Savings, Risk Mgt. Learning & Growth – Continuing Education, Lifelong Learning, Continuous Education, Personal Capacity Building. Internal Process – Self-Management, Managing Time, Personal Effectiveness. Relationships (Customer) – Networks, Workplace, Wife, Children.

Customer Perspective Customer Satisfaction Satisfaction Gap Analysis (Satisfaction vs.    Level of Importance) Satisfaction Distribution (% of each area scored)  

Possible Performance Measures To achieve our vision, what customer needs must we serve?

Financial / Regulatory Perspective   Cost / Unit Unfunded Requirements or Projects Cost of Services Budget Projections and Targets

Possible Performance Measures To satisfy our constituents, what financial and regulatory objectives must we accomplish?    

Internal Perspective Cycle Time Completion Rate   Cycle Time Completion Rate Workload and Employee Utilization Transactions per employee Errors or Rework

Possible Performance Measures   To satisfy our customers, in which business processes must we excel?      

must we learn, communicate and work together? Learning and Growth   To achieve our goals and accomplish core activities, how must we learn, communicate and work together? 

Possible Performance Measures Employee Satisfaction Retention and Turnover Training Hours and Resources Technology Investment

Why Measure?   To determine how effectively and efficiently the process or service satisfies the customer. To identify improvement opportunities. To make decisions based on FACT and    DATA

Measurements Should: Translate customer expectations into goals.   Translate customer expectations into goals. Evaluate the quality of processes. Track our improvement. Focus our efforts on our customers. Support our strategies.

IMPORTANCE OF TARGETS Forrest Gump “If you don’t know where you’re going, you’re probably not gonna get there.”                              Forrest Gump      

Targets  Need to be set for all measures Should have a “solid basis” Give personnel something for which to aim   If achieved will transform the organization

Targets Careful not to develop measures/targets in       a fragmented approach:  i.e. Asking people to increase customer satisfaction has to be backed up with the knowledge, tools, and means to achieve that target.   

Initiatives  Once measures and targets are established, it is the responsibility of management to determine HOW the organization will achieve its goals. 

Initiatives  .  Measures are used to determine the effectiveness of strategic initiatives.

WHY IS IT CALLED BALANCED?  Balance is in 4 Main Ways: 1. Balance between Short and Long Term 2. Balance between 4 Perspectives 3. Balance between how others see us (perspective) and how we see ourselves (focus)

WHY IS IT CALLED BALANCED? (cont) .  4. Balance between measuring CHANGE and the SITUATION at a particular time – similar to difference between Profit Statement and a Balance Sheet.

WHY IS IT CALLED BALANCED? (cont) 5. Balance between lag and lead Performance Measures

Questions…

THANK YOU