The History

Frustrated by the inadequacies of traditional performance measurement systems, some managers have
abandoned financial measures like return on equity and earnings per share. “Make operational
improvements and the numbers will follow,” the argument goes. But managers do not want to choose
between financial and operational measures. Executives want a balanced presentation of measures that
allow them to view the company from several perspectives simultaneously. During a year-long research
project with 12 companies at the leading edge of performance measurement, the authors developed a
“balanced scorecard,” a new performance measurement system that gives top managers a fast but
comprehensive view of the business.

The Balance Scorecard

The balanced scorecard includes financial measures that tell the results of actions already taken. And it
complements those financial measures with three sets of operational measures having to do with
customer satisfaction, internal processes, and the organization’s ability to learn and improve–the
activities that drive future financial performance.

Managers can create a balanced scorecard by translating their company’s strategy and mission
statements into specific goals and measures. To create the part of the scorecard that focuses on the
customer perspective, for example:

Executives at Electronic Circuits Inc. established general goals for customer performance:

 Get standard products to market sooner

 Improve customers’ time-to-market
 Become customers’ supplier of choice through partnerships and
 Develop innovative products tailored to customer needs

Managers translated these elements of strategy into four specific goals and identified a measure for
each.

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How will the decisions you make today will affect your business tomorrow?

That’s the most important question a manager can ask. But the answer to it, they often rely on financial
metrics, which can overemphasize the short-term but to win in long-term we need to take a more
BALANCED VIEW.

Here where idea of BSC came.

It uses 4 perspectives to measure company’s health:

1. The Financial Perspective – Are u doing well by your shareholders

2. Customer Perspective – Do they like your product and services
3. Internal Perspective – Can you efficiently deliver what your customers want?
4. Learning and Growth Perspective – Can you continue to improve and create value?

For each perspective, you need to list both GOALS and METRICS.
Example – Take a semiconductor company that was an early adopter of BSC.

Its financial goals were to survive, succeed and prosper. For assessment it used cashflow, quarterly sales
growth, market share and ROI.

Its customer goals were to develop innovative, tailored products, to get them to market faster, and to
become supplier of choice. To measure success, managers used percentage of sales from new products,
on time delivery rates and popularity with key customers (customer satisfaction).

Looking internally the company prioritized goals like, excellent manufacturing, producing new designs,
and introducing new products and again developed operational measures for each goal.

For its learning and growth goals, it decided to focus on developing new products, rather than improving
existing ones. The semiconductor company found that learning and innovation lead to better
competencies and processes, which in turn boosted customer satisfaction and ultimately generated
better shareholder returns.

In other words, they learned that the order of the balanced scorecard matters. When used correctly, it
reveals the real drivers of long-term success.

KRA & KPI Difference

KRA's are the key responsibility areas of a job. The KRAs are the 'what' the job is supposed to
accomplish; specific objectives are attached to each KRA (the 'how'), and KPIs (key performance
indicators), is the criteria by which you measure accomplishment of KRAs.

Goals & Objectives  Metrics (KRA’s)  KPI’s

Infra

How will the decisions made today will affect the business tomorrow?

That’s the most important question a manager can ask. But the answer to it, they often rely on financial
metrics, which can overemphasize the short-term but to win in long-term it need to take a more
BALANCED VIEW.

Here where idea of BSC came.

It uses 4 perspectives to measure company’s health:

1. The Financial Perspective – Does organization is doing well by your shareholders

2. Customer Perspective – Do customers like organization’s product and services
 3. Internal Perspective – Can the organization efficiently deliver what their customers want?
4. Learning and Growth Perspective – Can they continue to improve and create value?

For each perspective above, we need to list both GOALS and METRICS.

Example – Take an Infrastructure company- CYBERMATE

Suppose its financial goals were to survive, succeed and prosper. For assessment it used cashflow,
quarterly sales growth, market share and ROI.

Its customer goals were to develop innovative, custom-made buildings, to get them known to market
faster, and to become constructor of choice. To measure success, managers used percentage of sales
from new projects, on time delivery projects and popularity with key customers (customer satisfaction).

Looking internally the company prioritized goals like, excellent manufacturing, producing new designs,
and introducing new construction designs and again developed operational measures for each goal.

For its learning and growth goals, it decided to focus on developing new designs, rather than improving
existing ones.

My Understanding:

We can notice that learning and innovation lead to better competencies and processes, which in turn
boosted customer satisfaction and ultimately generated better shareholder returns.

In other words, I learned that the order of the balanced scorecard matters. When used correctly, it
reveals the real drivers of long-term success.