1. The Balanced Scorecard—Measures that Drive Performance
“What you measure is what you get”
Robert Kaplan & David Norton, 1992

2. The problem
“Traditional financial accounting measures (e.g., return-on-investment) can give misleading signals for continuous improvements and innovation—activities today’s competitive environment demands”
Traditional financial performance measures worked well for the industrial era, but they are out of step with the skills and competencies companies as mastering today

3. What to do? Rely on a single measure?
Forget the financial measures! Improve operational measures like cycle time and defect rates…
No!

4. Multiple measures
No single measure can provide a clear performance target or focus attention on the critical areas of the business
Managers want a balanced presentation of both financial and operational measures

5. The solution Balanced scorecard
A set of measures that gives top managers a fast but comprehensive view of the business
Financial measures (results of action already taken)
Operational measures (drivers of future financial performance)
Customer satisfaction
Internal processes
Innovation and improvement

7. Linking performances Customer perspective Internal perspective
How do customers see us?
Internal perspective
What must we excel at?
Innovation and learning perspective
Can we continue to improve and create value?
Financial perspective
What do we look to shareholders?

8. A good balance
The balanced scorecard gives senior managers information from four different perspectives yet it minimizes information overload by limiting the number of measures used
Forces managers to focus on the handful of measures that are most critical instead of allowing them to continue adding new measures

9. Customer perspective— How do customers see us?
To be the number one in delivering value to customers—mission statement, but how?
Translate that mission into specific measures
Four categories
Time need to meet customers’ needs
Time to market
Quality of products
Defect level of incoming products
Performance & Service
Is your product creating value?
Cost
What is the cost of your product?

10. Internal perspective— What must we excel at?
What do we need to do well, internally, to be the number one in delivering value to customers?
Measures that have great impact on customer satisfaction
We need to be
Technology capable
Excellent in manufacturing
Productive in design
First to introduce products

11. Innovation & Learning— Can we continue to improve and create value?
What do we need to do to innovate, improve, and learn so that we can continue to be the number one in delivering value to customers?
Measures that focus on your ability to develop and introduce new ideas rapidly
We need to
Create more value to customers
Improve operating efficiencies continually
Launch new products

12. Financial Perspective— How do we look to shareholders?
What do we need to do to survive, succeed, and prosper so that we can continue to be the number one in delivering value to customers?
Measures that focus on your financial health
Examples include
Cash flow
Quarterly sales growth and operating income by division
Increased market share

13. Robert Kaplan: The Balanced Scorecard

14. In Class Exercise
Get with your group members for this class and start sketching your “team” balanced scorecard. In doing so, think about the following:
What is your mission, as a team?
Who are/is your customer(s)?
What measures make sense for you?
Financial, operational (customer satisfaction, internal processes, & innovation) or both?
Link your performances
Are the four perspectives applicable for you?
Find a good balance (develop metrics that are specific and most critical)

16. Conclusion What you measure is what you get
A balanced scorecard puts strategy and vision, not control, at the center! It establishes goals but assumes that people will adopt behaviors and take whatever actions are necessary to arrive at those goals. The measures are designed to pull people toward the overall mission
The balanced scorecard keeps companies looking—and moving forward instead of backward

17. Example