Robert S. Kaplan and David P. Norton
Harvard Business Review , January-February 1992
The Balanced Scorecard-Measures that Drive
Performance
Presented By:
DINESH BARGOTRA
12 - MBA - 13
Contents
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Introduction
Customer Perspective
Internal Business Perspective
Innovation and Learning Perspective
Financial Perspective
ECI’s Balanced Business Scorecard
Conclusion
Introduction
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Organization’s measurement system strongly affects the behavior of managers and employees.
Traditional financial measures can give misleading signals for continuous improvement and innovation.
Traditional financial measures fit with not today but Industrial era.
No single measure can provide a clear performance target or focus attention of the business.
Managers want a balanced presentation of both financial and operational measures. Operational : Cycle time, Defect rates…etc.
Introduction
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BSC, a set of measures that gives managers a
fast but comprehensive view of the business, is
devised.
BSC consists of financial measures and
operational measures.
Operational measures : customer satisfaction,
internal process, the organization’s innovation &
improvement
Managers are able to view performance in
several areas.
Airplane cockpit VS Management
Introduction
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Customer Perspective
Innovation & Learning Perspective
Internal Perspective
1. Customer Perspective
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Many companies today have a corporate mission that focuses on the customer.
BSC demands translating companies’ general mission on customer into specific measures.
To put BSC to work, company should articulate goals for time, quality, performance & service, cost and then translate into specific measures. Example : ECI
Get standard products to market sooner
Improved customers’ time to market
Become customers’ supplier of choice through partnerships with them
Develop innovative products tailored to customer needs
1. Customer Perspective
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Customers’ concerns tend to fall into time, quality, performance & service, and cost. Lead time : the time required for the company to
meet its customers’ needs Existing products : from the time the company receives an
order to the time it actually delivers the products New products : how long it takes to bring a new product
from the product definition to shipments
Quality The defect level of incoming products as perceived and
measured by the customer On time delivery & the accuracy of delivery forecasts
Performance & service : contribution to creating value for customer
2. Internal Business Perspective
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The measure of what the company must do
internally to meet its customers’ expectations is
also important.
Excellent customer performance derives from
processes, decisions, and actions in organization.
Mangers need to focus on those critical internal
operations to satisfy customer needs.
The internal measures stem from the process that
have the greatest impact on customer satisfaction.
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Companies identify and measure core
competencies & technologies to ensure market
leadership.
ECI : submicron technology capability
Companies decide what processes &
competencies they excel at and specify measures
for each.
ECI’s goal for internal business perspective
Manufacturing exellence
Design productivity
New product introduction
Managers must devise measures that are
influenced by employees’ actions.
2. Internal Business Perspective
3. Innovation & Learning Perspective
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The targets for success keep changing.
Intense global competition requires Companies make continual improvements to their
existing products and processes Companies have the ability to introduce entirely
new products with expanded capabilities.
A company’s ability to innovate, improve, and learn ties directly to the company’s value.
The role of continuous improvement in customer satisfaction & internal business process is important.
ECI’ innovation measures focus on the ability to develop and introduce standard products rapidly.
4. Financial Perspective
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Financial performance measures indicate whether
strategy & execution are contribute to
improvement.
The previous three perspectives are not linked
with financial perspective automatically.
Example
1. Quality & cycle-time improvement (internal improvement)
2. Existing of excess capacity or inventory
3. The lack of sales plan or capacity of putting to work of
managers
4. Disappointing financial results like the increase of debt
4. Financial Perspective
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The company understand a linkage between
financial perspective and the previous three
perspective.
If the linkage is not well, the linkage among the
four perspective has to be redesigned.
Companies should specify how improvements in
time, quality, performance & service, and cost will
lead to higher market share & margins.
The ECI’s goal for financial perspective consists
of survive, succeed, and prosper.
ECI ’s Balanced Business Scorecard
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Conclusion
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Can not be implemented without senior managers
who have vision & priorities of company
Puts strategy and vision, not control, to the
members
Designed to pull people toward the overall vision
Help managers transcend traditional notions
about functional barriers
Ultimately lead to improved decisions making and
problem solving
Keeps companies looking-and moving-forward
instead of backward
Conclusion
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Only The existing financial measures are to
evaluate the enterprise’s activities of the past.
BSC can allow managers to see the past, the
present , and the future.
BSC help managers have the well-balanced view
of the performances of the enterprises.
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