The Balanced Score Card

Dr. Hesham Dinana

?What is the BSC

The balanced scorecard is a management system
(not only a measurement system)
It enables organizations to clarify their vision and strategy and translate
. them into action
It provides feedback around both the internal business processes and
external outcomes in order to continuously improve strategic
. performance and results
When fully deployed, the balanced scorecard transforms strategic
planning from an academic exercise into the nerve center of an
.enterprise

Balance the Perspectives

Financial
Financial

How
Howdo
dothe
theshareholders
shareholderssee
seeus?
us?

Yesterday

Today

ROCE
ROCE
Market Share
Market Share
Cash Flow
Cash Flow

Customer
Customer

Internal
InternalProcesses
Processes

InInorder
orderto
toreach
reachour
ourvision,
vision,how
how
should
our
customers
perceive
should our customers perceiveus?
us?

Which business processes we need to

Which business processes we need to
focus
focuson
onto
tosatisfy
satisfyour
ourcustomers
customers
and
shareholders?
and shareholders?

Pricing
Pricing
Delivery time
Delivery time
Quality level
Quality level
Satisfaction
Satisfaction

Tomorrow

Through-put time
Through-put time
Number of defects
Number of defects

Learning
Learning&&Growth
Growth
InInorder
orderto
toreach
reachour
ourvision,
vision,how
how
should
we
develop
ourselves,
should we develop ourselves,our
our
products
and
our
processes?
products and our processes?
Number of incentives
Number of incentives
Employee retention
Employee retention
Fit to required profile
Fit to required profile

The Learning & Growth

Perspective
This perspective includes employee training and
corporate cultural attitudes related to both
.individual and corporate self-improvement
learning' is more than 'training'; it includes things'
like mentors and tutors within the organization,
technological tools, ease of communication
among workers that allows them to readily get
. help on a problem when it is needed

The Business Process

Perspective
Metrics based on this perspective allow the
managers to know how well their business is
running, and whether its products and services
conform to customer requirements (the
. mission)
In addition to the strategic management process,
two kinds of business processes may be
identified: a) mission-oriented processes, and b)
. support processes

The Customer Perspective

if customers are not satisfied, they will eventually find other
suppliers that will meet their needs. Poor performance
from this perspective is thus a leading indicator of future
decline, even though the current financial picture may
. look good
In developing metrics for satisfaction, customers should be
analyzed in terms of kinds of customers and the kinds of
processes for which we are providing a product or
.service to those customer groups

The Financial Perspective

Timely and accurate Financial data will always be a
priority, and managers will do whatever
. necessary to provide it
the current emphasis on financials leads to the
"unbalanced" situation with regard to other
.perspectives
There is perhaps a need to include additional
financial-related data, such as risk assessment
.and cost-benefit data, in this category

Linking BSC Components

Objective

Measure

Financial
Broaden Revenue Mix

Revenue Mix

Increase Customer
Satisfaction

Customer Retention

Internal
Processes

Develop New
Products

Revenue from%
new products

Learning &
Growth

Develop New Skill

Customer

Cross-training

Target
Product A 10%
Product B 40%
Product C 50%

95%

15% 2003
50% 2004
60% 2005

90%

Strategies
Sales Promotion
New Marketing
Channels

Frequent Buyers Club

R&D Program
Customer Surveys
Custom Training
Knowledge Library

Objections to the BSC

The costs outweigh the benefits. What will we find that we didn't already know
But some tasks will be labor intensive: metrics definition, software
development, data collection
We have only limited control over results. Why should we be held
accountable for things we can't control
The results will be used against us
Management will misuse or misinterpret the results. The process will be gamed
They will score us by inappropriate or unfair standards
It's too big and ambitious and expensive to deploy a performance
measurement system in this entire organization