BALANCED SCORECARDBALANCED SCORECARD

The Balanced Scorecard is a The Balanced Scorecard is a measure of the key elements of a measure of the key elements of a company’s strategy, ranging from company’s strategy, ranging from continuous improvement and continuous improvement and partnerships, to team work and partnerships, to team work and global scale.global scale.

Organisations design their unique Organisations design their unique balanced scorecard based upon their balanced scorecard based upon their unique constraints. A company’s unique constraints. A company’s performance depends on how it performance depends on how it measures its performancemeasures its performance..

Managers cannot afford to rely on Managers cannot afford to rely on either financial or operational either financial or operational measures exclusively. measures exclusively.

No single measure provides a clear No single measure provides a clear performance target focusing on the performance target focusing on the critical areas of a business. Thus critical areas of a business. Thus there is a need for balanced there is a need for balanced representation of both financial and representation of both financial and operational measures.operational measures.

Kaplan and Norton have devised a Kaplan and Norton have devised a balanced scorecard- a set of balanced scorecard- a set of measures that give top managers a measures that give top managers a quick but comprehensive view of quick but comprehensive view of the business. The balanced the business. The balanced scorecard consists of –scorecard consists of –a)financial measures that measure a)financial measures that measure the actions already taken.the actions already taken.b)The scorecard also contains b)The scorecard also contains operational measures such as operational measures such as customer satisfaction, internal customer satisfaction, internal processes and the organisation’s processes and the organisation’s innovation and improvement innovation and improvement activities.activities.

The balanced scorecard can be The balanced scorecard can be compared with dials and indicators compared with dials and indicators in an airline cockpit.in an airline cockpit.Pilots need detailed information of Pilots need detailed information of many aspects of flight for navigating many aspects of flight for navigating and flying an airplane.and flying an airplane.

These information is necessary to These information is necessary to get an idea of the current and get an idea of the current and predicted environment..predicted environment..Relying on an single measure can be Relying on an single measure can be fatal.fatal.

Just like a pilot, a manager should be Just like a pilot, a manager should be able to view performance in several able to view performance in several areas at the same time.areas at the same time.

Using a balanced scorecard, managers can look Using a balanced scorecard, managers can look at the business in terms of four dimensions. The at the business in terms of four dimensions. The balanced scorecard answers four basic balanced scorecard answers four basic questions-questions-

1. HOW DO CUSTOMERS SEE US?1. HOW DO CUSTOMERS SEE US?2.WHAT MUST WE EXCEL AT?2.WHAT MUST WE EXCEL AT?3.CAN WE IMPROVE AND CREATE VALUE?3.CAN WE IMPROVE AND CREATE VALUE?4.HOW DO WE LOOK TO SHAREHOLDERS?4.HOW DO WE LOOK TO SHAREHOLDERS?

1. HOW DO CUSTOMERS SEE US?1. HOW DO CUSTOMERS SEE US?

WHAT MUST WE EXCEL AT?WHAT MUST WE EXCEL AT?

GOALS MEASURES

Technology capability Manufacturing geometry vs. competition

Manufacturing excellence Cycle time/ unit cost/yield

Design productivity Efficiencies

New product introduction Actual introduction schedule vs. plan

CAN WE IMPROVE AND CAN WE IMPROVE AND CREATE VALUECREATE VALUEGOALS MEASURES

Technology leadership

Time to develop next generation

Manufacturing learning

Process time to maturity

Product focus Percent of products that equals 80% sales

Time to market New product introduction vs. competition

HOW DO WE LOOK TO HOW DO WE LOOK TO SHAREHOLDERS?SHAREHOLDERS?

GOALS MEASURES

Survive Cash flow

Succeed Quarterly sales growth and operating income by division

Prosper Increased market share and ROI

Many firms use balanced scorecard as a Many firms use balanced scorecard as a strategy toolstrategy tool It brings many elements of a company’s It brings many elements of a company’s strategy in a single report.strategy in a single report.

The balanced scorecard is appropriate The balanced scorecard is appropriate for organisations of today to be on track for organisations of today to be on track and move confidently into the future. and move confidently into the future. The scorecard keeps strategy and The scorecard keeps strategy and vision at the centervision at the center