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Balanced Score Card

Presented By :Sarthak Omer (PGSF1443)

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Introduced in 1992 by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework

The Balanced Scorecard is the most commonly used framework for ensuring that companies execute their strategies

Where it started……..

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A Balanced Scorecard monitors the performance of all or part of an organization, towards strategic goals

It is used in business, industry, government, and nonprofit organizations worldwide to align business activities

It gives a framework and helps planners identify what should be done and measured

What is Balance Scorecard?

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Increase focus on strategy and results

Align organization strategy with the work people on day-to-day basis

Improve communication of the organization’s Vision and Strategy

To provide a more reliable basis for awarding incentive based pay

Why Implement a Balanced Scorecard ?

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To give managers a comprehensive view of the performance of an employee and business

Employee Satisfaction

To survive and prosper in today’s world

It provides feedback to both the internal business processes and external outcomes in order to continuously improve strategic performance and results

Why Implement a balanced Scorecard ?

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Four Strategic Perspectives

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Examines company’s implementation and execution

of its strategy

Three possible stages as described by Kaplan and Norton

Rapid Growth Sustain Harvest

Financial

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Customer Satisfaction

Retention

Marketing

Product/Service in the eyes of the customer

Customer

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Metrics based on this perspective allow the managers to know how well their business is running

Innovation - Measures how well the company identifies the customer’s future needs

Operations – Measures quality ,costs, technology & plant infrastructure

Internal Business Process

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Training

Forward Focused

Concerned with -Human capital -Information capital -Organizational capital

Learning and Growth

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Process

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Philips

Balanced Score Card

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Philips is world leader in healthcare, lifestyle and lighting

Philips integrates technologies and design into

people life

Mission :Improve the quality of people’s lives through timely introduction of meaningful innovations

Philips

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During the mid-90s, Netherlands based Royal Philips reported losses

Due to rapid changes in the external environment and growing competition of Asian companies like LG and Samsung

Led to the Company initiating High manufacturing costs Initiating job cuts Selling unprofitable businesses

Issues

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The initiative to implement the Balanced Scorecard came from the top management at its HQ in the Netherlands

Need to shift focus from high-volume business to high-value business

They realized they had to make operationsFlexibleInnovative

Why Balance Scorecard ?

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This led the Company to introduce a program called Business Excellence through Speed and Teamwork (BEST) in July 1999

The Balanced Scorecard was one of the tools of the BEST

There were four perspectives in Philips' Balanced Scorecard:CompetenceProcessesCustomersFinance

Implementation

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They used Balanced Scorecard strategy across Philips’ divisions with more than 1,20,000 employees spread across 150 countries

They established the Critical Success Factor’s (CSFs)

Philips used the traffic light system to measure the level of achievement of the key indicators:Green light – Target that had been metAmber – Performance in line with the targetRed – A problem area

Implementation

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The Balanced Scorecard was used as an instrument toEvaluate actual performance against

targets Monitor future plans

It enabled employees understand the existing policies and plans for the future

Achieving revenue growth, employee satisfaction, customer satisfaction were the common indicators in all business units

Measuring Results

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