The document provides an introduction to the balanced scorecard framework. It describes the balanced scorecard as a strategic planning and management system that is used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. The balanced scorecard suggests that organizations must consider four perspectives - financial, customer, internal business process, and learning and growth. It advocates measuring performance from all four of these perspectives rather than relying solely on traditional financial accounting measures.
8. COMPANIES USUALLY..
Focus on financial measures, like cost and profit.
Concentrate on short-term profits and risk long-term
performance.
Fail to consider other key areas that impact long-term
performance.
9. Financial measures are important, but don’t tell the whole
story.
The problem with focusing solely on one measure, is that it
may present a false reality.
Hence, the balanced scorecard.
10. A BRIEF HISTORY LESSON
The balanced scorecard framework was first introduced by Doctors David P.
Norton and Robert S. Kaplan in 1992.
Their aim was to address the challenges associated with only measuring financial
performance.
They realised that analysing a company’s financial outlook alone is insufficient.
Mainly because this approach is only able to generate reports of the past —
what happened last month, last quarter, last year.
The doctors wanted to look to the future, and derive a toolset that can actively
affect financial performance. Thus, the balanced scorecard framework was born.
The name “balanced scorecard” comes from the idea of looking at strategic
measures in addition to traditional financial measures to get a more “balanced”
view of performance.
13. BETTER PLANNING
First, a balanced scorecard allows for better strategic planning, as it gives
organisations a way to “connect the dots” between big picture strategy elements such
as:
• Vision (aspiration)
• Mission (purpose)
• Strategic priorities (high-level plans)
And more tactical operational elements such as:
• Strategic objectives (continuous improvement activities)
• Measures & targets (KPIs and performance benchmarks)
• Initiatives (projects that help you reach your objectives and targets)
14. BETTER COMMUNICATION
The balanced scorecard framework is easy to map out on a
single sheet of paper. This fact makes communicating
strategy quite simple.
15. Performance reports are much more useful when using a
structured approach like the balanced scorecard. This is
because management will always know exactly what to
report on at all times. They’ll also be able to visualise
performance in a powerful, intuitive way.
BETTER REPORTING
17. STEP 1: LOOK AT YOUR BUSINESS
FROM FOUR PERSPECTIVES
The Balanced Scorecard looks at an organisation from four
different perspectives to measure its health. Each of these
perspectives focuses on a different side of the company,
creating a balanced view of the organisation.
18. LEARNING AND GROWTH
The learning and growth perspective looks at the
overall corporate culture.
• Are people aware of the latest industry
trends?
• Is it easy for employees to collaborate and
share knowledge, or is your company a
mess of tangled bureaucracy?
• Does everyone have access to courses and
trainings?
And the overall technology stack of a company.
• Are people able to use the latest devices
and software, or are your archaic systems
stuck running yesterday’s tech?
• What are you doing to make sure your
organisation is staying ahead competition?
LEARNING AND
GROWTH
19. The internal processes perspective looks at
how smoothly the business is running.
Efficiency is key here. It’s all about reducing
waste, speeding things up, and doing more
with less.
• Are there any obstacles standing
between new ideas and execution?
• How quickly can you adapt to changing
business conditions?
This perspective also encourages you to take
a step back and get a little philosophical
about your company.
• Are you mastering the processes that
affect your customers?
• Which processes bring the most value?
INTERNAL PROCESSES
INTERNAL PROCESSES
20. CUSTOMER
The customer perspective focuses on the
people who actually buy your products and
services.
• Are you winning new business?
• How about keeping your existing
customers happy?
• How are you viewed in your industry
compared to competitors?
It can also be used to address stakeholders
internal to the company.
• Are employees satisfied with the work
environment?
• Are employees motivated?
CUSTOMER
21. FINANCIAL
Just because you’re taking a balanced
look at your organisation it doesn’t
mean that you want to ignore
traditional financial measures. Quite
the contrary, the financial
perspective is a major focus of the
balanced scorecard.
• Are you making money?
• Are you cutting costs?
The financial health of your
organisation may be a lagging
indicator showing the result of past
decisions, but it’s still incredibly
important.
FINANCIAL
22. STACKING THE PERSPECTIVES
The Balanced Scorecard shows how
each perspective builds on the
previous one.
• Happy customers buy more of
what you’re selling (Financial)
• A better running business takes
better care of its customers
(Customer)
• They’ll make your company run
more smoothly (Internal
Processes)
• If you train your employees and
build a culture of information
sharing (Learning and Growth)
FINANCIAL
CUSTOMER
INTERNAL PROCESS
LEARNING AND
GROWTH
23. STEP 2: CHOOSE STRATEGIC OBJECTIVES
The next step in creating a balanced scorecard is choosing
several strategic objectives for each perspective.
Strategic objectives are the actions we must implement
into your daily activities in order to see improvements in
your strategic priorities.
They break down abstract concepts like mission and vision
into actionable steps.
24. All of your strategic objectives should
begin with an action word. Improve,
Reduce, Increase, Optimise, Maximise,
Minimise. These are all great words
that involve doing something.
We’re looking for strategic objectives
that you’re going to care about for
quite a while. This isn’t about one-time
events or deadlines. It’s about
consistent improvement. It’s “Improve
Win Percentage” not “Win the Premier
League in 2020”
There’s no use focusing on something
that you can’t affect. For example, a
lower federal interest rate may help
your business, but it’s not something
you can control. If it’s not actionable,
keep it off your balanced scorecard.
Some things are just too difficult to
quantify. These things are bad
candidates for strategic objectives. If
you can’t do a brand recognition
survey, don’t choose “Improve Brand
Recognition” as a strategic objective.
STARTS WITH A VERB ENDLESS
ACTIONABLE MEASURABLE
25. STEP 3: CONSTRUCT YOUR STRATEGY MAP
After you’ve chosen several strategic objectives for each
perspective, you can layer them on top of the four
perspectives.
One of the most powerful elements in the balanced
scorecard methodology is the use of strategy mapping to
visualise and communicate how value is created by the
organisation.
A strategy map is a simple graphic that shows a logical,
cause-and-effect connection between strategic objectives.
26. In the strategy map, each strategic objective is represented by a shape. Different objectives are
linked to each other through arrows that show the cause-effect chain. By following the arrows, you
can see how the objectives in the lower perspectives drive the success of the higher ones.
LEARNING AND
GROWTH
INTERNAL
PROCESSES
CUSTOMER
FINANCIAL
Increase
Revenue
Increase
Profitability
Decrease
Operating
Costs
Improve
Clarity of
Offering
Improve
Market
Perception
Improve
Customer
Satisfaction
Improve
Offering
Selection
Improve
Information
Services
Improve
Stock
Reliability
Improve
Cost
Control
Improve
Knowledge
and Skills
Improve
Technology
Improve
Supply
Chain
28. SET STRATEGIC INITIATIVES
Strategic initiatives are projects (new or existing) that are
designed to help your organisation achieve strategic
objectives and have a significant organisation-wide impact.
They are managed like any other project, meaning they are
explicitly defined in terms of owner, schedule, resources
needed, action steps, progress, and expected results.
Some strategic initiatives are short-term, taking only a few
days to implement, while others can take years to be fully
implemented.
29. STEP 4: MEASURE YOUR SUCCESS
The final building blocks of a balanced scorecard are measures.
Every strategic objective should have one or two things that you
measure to determine how an objective is performing. These
measures are vital and should be tracked on a regular basis.
Strategic KPIs monitor the implementation and effectiveness of
an organisation’s strategies, and determine the gap between
actual and targeted performance.
For example, if you have a strategic objective to “Increase
Acquisitions” a good measure might be “Number of New
Acquisitions”.
30. LEADING VS LAGGING INDICATORS
Leading Indicator:
• An indicator of performance that
might predict future success.
Examples:
• User guide usage
• Calories per day
• Using safety equipment
Lagging Indicator:
• An indicator of past performance
that measures how we
performed.
Examples:
• Customer satisfaction
• Weight
• Number of deaths
31. LEARNING
AND
GROWTH
INTERNAL
PROCESSES
CUSTOMER
FINANCIAL
Increase
Revenue
Increase
Profitability
Decrease
Operating
Costs
Improve
Clarity of
Offering
Improve
Market
Perception
Improve
Customer
Satisfaction
Improve
Offering
Selection
Improve
Information
Services
Improve
Stock
Reliability
Improve
Cost
Control
Improve
Knowledge
and Skills
Improve
Technology
Improve
Supply
Chain
BUSINESS OBJECTIVES AND STRATEGY MAP MEASURES TARGETS INITIATIVES
VISION
MISSION
STRATEGIC
PRIORITY
STRATEGIC
RESULT
Transforming society through the provision of ultra-high speed mobile information services
The number one provider of ultra-high speed mobile information networks across the UK and Europe
Content Partnerships Customer Service Brand Awareness
Strong supply chain for
entertainment and information
services, exclusive agreements
Clarity in offering that surpasses
anything in the market today,
best user interface
Reinvigorated brand based on
successes, attract a wider and
younger audience
• Net profit
• Operating costs
• Revenue in target
markets
• ↑ 5% per year
• ↓ 3% per year
• ↑ 12% per year
• Implement new
financial accounting
system
• Simplify billing
operations
• % Market share
index
• % Customer
satisfaction index
• % Focus group user
index
• ↑ 3% per year
• 85% this year
• > 90% each
focus session
• Competitive end user
requirements market
studies for new UK
regions
• New products as
% of sales
• Brand awareness
score
• Cost efficiency index
• 12% this year
• ↑ 5% per year
• > 90% each
reporting period
• Create improved
offering selection
process
• Training programme
for new offerings and
user interface
• Employee
development plans
• Technology training
index
• Supply chain
efficiency index
• 95% this year
• 90% efficient
• Product and
marketing training
programme
• 2 year football and
news supply
agreements
32. TIME FOR AN EXAMPLE
LET’S CREATE A PERSONAL BALANCED
SCORECARD.
35. Improve knowledge about
efficient debt repayment
Optimise tracking and
management of monthly
budget
LEARNING AND
GROWTH
INTERNAL
PROCESSES
MISSION: DEBUT FREE LIVING WITHIN 10 YEARS
36. Improve knowledge about
efficient debt repayment
Optimise tracking and
management of monthly
budget
Improve family dynamics
LEARNING AND
GROWTH
INTERNAL
PROCESSES
CUSTOMER
MISSION: DEBUT FREE LIVING WITHIN 10 YEARS
37. Improve knowledge about
efficient debt repayment
Optimise tracking and
management of monthly
budget
Improve family dynamics
Decrease debt towards
financial institutions
LEARNING AND
GROWTH
INTERNAL
PROCESSES
CUSTOMER
FINANCIAL
MISSION: DEBUT FREE LIVING WITHIN 10 YEARS