2. “When you can measure what you are speaking
about, and express it in numbers, you know something
about it; but when you cannot measure it, when you
cannot express it in numbers, your knowledge is of a
meager and unsatisfactory kind....”
Lord Kelvin
Irish Mathemetician
3. What is Balanced Scorecard Model
Balanced Scorecard model is a performance measurement system
developed at the Harvard Business School in 1992 by Dr. Robert
Kaplan, an Accounting Professor at Harvard and Dr. David Norton, a
Business Consultant
Both commercial and not-for-profit organizations have tasted success
by employing the BSC model since then
Harvard Business review recently hailed BSC Model as one of the
75 most influential ideas of the 20th century
4. Overview of Performance Measurement Systems
A performance measurement system enables an enterprise to
Plan, Measure, and Control its performance according to a pre-defined
strategy
It not only says where the organization is and what is the performance, but
also aids in understanding where the organization is heading to and helps in
continual improvement
5. Balanced Scorecard Model
We can describe the Balanced Scorecard as a carefully selected
set of quantifiable measures representing a tool for leaders to
use in communicating to employees and external stakeholders
the outcomes and performance drivers by which the
organization will achieve its mission and strategic objectives.
6. Balanced Scorecard Model ( Contd..)
Balanced Scorecard Model provides a holistic measurement of the
enterprise by taking the following four perspectives
Financial Perspective
Customer Perspective
Internal Business Process Perspective
Learning and growth Perspective
7. Cause and effect Relation in BSC
All the four perspectives follow a cause and effect
relationship in a way that some perspective act as an
ingredient leading to some other
Eg: Revenue Growth (Financial Perspective) can be
attained through improved customer satisfaction
(Customer Perspective) which can be produced through
value added services (Internal Process Perspective), whose
modalities can be designed only through introspection and
data analysis (Learning and Growth Perspective)
8. BSC as a Measurement System
Through these perspectives, the leading and lagging performance measures
or indicators are identified
Lag Indicators are those performance measures that give a review of the
happenings in the past. They are outcomes of actions taken previously
Lead Indicators are drivers of future performance of the enterprise.
9. Leading and Lagging Performance
Measures examples
P
A
S
Leading Performance Measures T
• Employee Competency development
• Customer Satisfaction
• Product development
Lagging Performance Measures
• On time Delivery
• Revenue Growth
• Profitability
F • Market capitalization
U
T
U
R
E
10. Points to note..
It is normal for enterprises to have as low as four to as many as several
hundred performance measures while designing a BSC model
However, it is better to have not more than 25 measures for an enterprise to
produce and enjoy the optimum benefits of the BSC model
Internal business process perspective measures should have greater
weight in the model as the organizational strategy is primarily employed
through the business processes
All the other three models should have more or less equal weights
11. An example for Measures and weights
Perspective #of Metrics Weight
Financial 5 22%
Customer 5 22%
Learning and Innovation 5 22%
Internal Processes 9 34%
24 measures 100%
12. Uses of BSC Model
“If directors were getting a Balanced Scorecard, they
would be much more likely to be informed about their
companies on an ongoing basis. The Scorecard’s emphasis
on strategy (linking it to all activities, day-to-day and
long-term) could help directors stay focused.”
Jay .W. Lorsch
Harvard University professor
