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Why does business need aBalancedScorecard

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If you cant measure it,you can cant manage it

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BSC Translate Strategy & Mission into performancemeasures as a strategic management system

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Once again let us see what BSC does

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Financial Measurementattempts

Return on InvestmentOperating & Cash BudgetsRatiosDuPont AnalysisTrend AnalysisCommon size StatementsFinancial Auditing

All thesetells aboutpast thanfuture

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Financial Measurement

Financial Measures are inadequate for guidingand evaluating organizations trajectories through Competitive environment……..Xerox

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Financialperspectives

Profitability,Operating IncomeReturn on capitalEconomic value addedSales GrowthCash flow

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Financial performance measures indicates……

Whether an organization's strategy,implementation and execution are contributing to bottom line improvement ?

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Customerperspectives

Market Segment,Customer SatisfactionCustomer RetentionNew customersCustomer profitabilityMarket shareAccount share

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The Customer perspective enables business unitmanagers to articulate the customer and marketbased strategy that will deliver superior futurefinancial returns

Customerperspective

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Internal business

perspectives

Critical processes to excel

Innovation ProcessOperation Process

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The internal Business process perspective of theBalance scorecard incorporates measures for shortand long term innovation & operations processesto give better value to the customers and s’holders

InternalProcess

perspective

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Learning andGrowth

Perspective

PeopleSystemsProcedures

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Learning & Growth

perspective

The Financial, Customer and Internal Process Objectives on the BSC typically will reveal largeGaps between the existing capabilities of peopleSystems and procedures and what will be required to achieve break through performance

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Learning & Growth

perspective

To close these Gaps, businesses will have to invest in reskilling employees, enhancing information technology and systems and aligningorganizational procedures and routines

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alignment is not an easy task…… but it needs to be there for……

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Customerperspectives

Market Segment,Customer SatisfactionCustomer RetentionNew customersCustomer profitabilityMarket shareAccount share

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Linking Scorecard Measures to a Strategy

Cause and Effect RelationshipOutcome Measures & Performance Drivers

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The measurement system should make the relationshipamong objectives and measures in the various perspectives explicit so that they can be managed andvalidated. The chain of cause and effect should pervadeall four perspectives of Balanced Scorecard.

ROCE as Measure

Driver of measure

Repeat salesCustomer LoyaltyCustomer SatisfactionOn time delivery

Cause and Effect Relationship

FinancialPerspective

CustomerPerspective

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Cause and effect Relationship

ROCE

CustomerLoyalty

On timeDelivery

Process CycleTime

Process Quality

Employee SkillLearning

&Growth

InternalProcess

Customer

Financial

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Performance Drivers

Activities which helps in achieving theobjectives through outcome measures

ROCE

Sales GrowthCustomers LoyaltyQuick DeliveryTrained Manpower

Measure Performance Drivers

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Balance Scorecard

LaggingIndicators(Outcome Measures)

LeadingIndicators(Performance Drivers)

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Question

Should Financial Measures be Scrapped ?

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Could be Yes;

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In today’s technologicallyand customer driven global

competition

Financial measures provide

Poor guidelines forSuccess

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Managers should focusOn improving

Customer Satisfaction

Quality

Cycle times

Employees skills

Motivation

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Impact of other 3 perspective On financial perspective

Sales

Return

Physical Assets

Growth

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Four Perspectives: are they sufficient

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More perspectives

watch interest of

EmployeesSupplierscommunity

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Strategic Positioning or competencies driven

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Strategic Positioning or competencies driven

Strategy for choosing the market & customer Segments it wish to serve, identifying criticalinternal processes and to excel in that to givevalue to the customers

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Competencies/capabilities driven

Alternatively many organizations exploit theirCompetencies, resources and capabilities toGive better services or product

Hero Honda- enginesCanon - cameras

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to sum Up….

Balance Scorecard is primarily a mechanism forStrategy implementation and nor strategy formulationIt can accommodate either approach for formulating Business Strategy- starting from customer perspective or Starting from excellent internal process capabilities

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to sum Up….

What ever approach is followed to Formulate the strategy,

the BSC will provide an Invaluable Mechanism for translating the strategy into specific Objectives, measures and targets and monitoring the Implementation of that strategy during Subsequent periods

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and….

Management should disclose the financial andNon financial measurement it uses in managingthe business unit that quantify the effects of keyactivities and events.

It is possible through Balance score card

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Questions