Planning using balanced scorecard frame work

1. © All rights reserved by euseden 2008
euseden
There has been a significant shift in strategic
This paper is written by
priorities of organizations. Intangible assets,
Sheshagiri G Hegde of euseden.
He is consultant in strategy and
such as capability to acquire new customers,
scorecard. He can be reached
brand, competencies of people, maturity of
on sheshagiri@euseden.com
business processes, information technology
+91 99808 59339
etc have become extremely important to
organizations’ success. However, companies
continue to plan with financial planning &
budgeting tools that provide not much
insight into such aspects.
The way organizations plan and manage
needs substantial change. Managers need a
new way of measuring execution of goals
and organization’s performance at all levels.
© All rights reserved by euseden, 2008

2. Budget-planning, which is the most
Budget based widely used system of planning, splits
the organization into either cost or
Planning is not enough revenue centers. In its basic nature, it
is essentially finer break-down of the
annual P & L and Balanced sheet.
These centers are organized around
the organizational hierarchy for
managing. For decades this system of
planning and control has served
executive leaders and managers in
managing the organization.
Such budget planning and control
however, today, has sever limitations
when it comes to business planning
or strategy planning and execution.
For instance, budget planning does
not allow us to plan on certain key
aspects such as – customer
relationship, brand, human capital
etc. Can we think of building business
without building good brands? A
good cadre of managers? A good
portfolio business processes?
Plan around strategy? However, budget planning does not
provide any frame work for such
Strategy makes more sense today than ever.
planning. And we have no other
Strategy is a game plan- a company, a
process, system or tools to set goals
division, a business unit, or even a team has.
around these aspects and manage
It is the plan that describes how it is going
them in enterprise-wide manner.
to win. At simplest level, strategy is a high
Ironically, these aspects have become
level business logic of its future success..
strategic for business success than
control on expenses. We need a
It is important that organization or business
system that provides template for
unit consciously builds a hypothesis for its
effective planning of such aspects and
success. An integrated set of objectives
also help us measure the
linked in cause and effect chain. This can be
effectiveness of actions takes on such
achieved through tools like strategy maps &
aspects. Hence while budgeting is
scorecards.
important, it is not enough.
© All rights reserved by euseden, 2008

3. Balanced
Scorecard
Provides
integrated
Framework
across these perspectives essentially in a top-
Balanced scorecard provides a planning and
down, cause and effect logic. For instance, if
measurement framework that is organized
we set the objective as “ Grow aggressively”
around organization’s strategic goals. As
in financial perspective, we start looking for
explained earlier, balanced scorecard (BSC)
objectives that can cause it happen at lower
takes strategy as set of strategic objectives
layers of logic (Refer the above figure).
across balanced perspectives. Strategy must
logically explain high level game plan of the
Also, managers need to define measures for
organization. With tools like strategy map,
all the objectives set as explained above. Due
BSC helps managers to articulate their
to such measures now managers can build
strategy.
organization wide system of strategy
execution. Like financial system, this system
BSC has four perspectives – financial,
will facilitate goal setting for strategic
customer, internal and learning & growth.
perspectives and tracking of all the numbers
Managers are asked to set strategic
related to such strategic goals.
objectives
© All rights reserved by euseden, 2008
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