Balanced Scorecard

Fundamentals

Measuring Strategic
Success
Why use the balanced scorecard?
 To maintain sustainable competitive advantage
in the information age, strategic business units
must broaden their base of intangible assets
and the means by which performance is
measured and continuously improved.
 The balanced scorecard provides a
comprehensive framework for implementing
strategic plans by translating an organization’s
strategy into a set of key performance
indicators.
Performance Measures Yesterday
 Traditional
measures of
performance External
only included
financial FOCUS
statistics Non Financial

based on the MEASURES

financial Financial
Internal

accounting
model. Historical Future

TIMEFRAME
Performance Indicators Today
 The balanced
scorecard
focuses on an
integrated Non Financial

system of key MEASURES

performance Financial
External
FOCUS
indicators for Historical Future
Internal

critical success TIMEFRAME

factors.
The Balanced Scorecard Template

Financial
Perspective

Customer Vision & Internal

Perspective Strategy Processes

Learning &
Growth
The Financial Perspective
 To succeed financially, what level of
financial performance do our investors
expect?
 ROI, EVA
 Return on capital employed (ROCE)
 Revenue growth
 Self-financiable growth rate
 Cash flow return on assets
 Market/customer/product profitability growth
The Customer Perspective
 To achieve our strategy, how must we
appear to our customers?
 Market share growth
 Customer acquisition rate
 Customer retention rate
 Customer satisfaction scores
 Number of new products/services
 Product return rate
 Defect rate
 On-time delivery rate
Internal Business Processes

 At what business processes must we

excel to satisfy our partners?
 Product-development cycle time
 Order-to-delivery response time
 Six sigma (PPM) quality rate
 Revenue per employee
 Cash conversion cycle time
 New product/service introduction rate
 New product/service breakeven time
Learning & Growth Perspective
 What people and systems do we need to
sustain our ability to change and
improve?
 Employee retention/turnover rate
 Salaries/wage index
 Training/development hours per employee
 Strategic competency index
 Value-added per employee dollar
 Sustainable growth analysis
 Knowledge productivity rate
 Economy, Effectiveness, and
Productivity
 Economy is  total number of labor
concerned with hours worked during
inputs only the period
 Effectiveness  total number of good
refers to the units of output for the
achievement of period
objectives
 Productivity is the  number of good units
ratio of outputs to of output per labor
inputs hour of input
Balanced Scorecard Workflow
 Plan
 Gather
 Analyze
 Implement
 Recalibrate
 Balanced Scorecard Planning and Implementation Workflow
SECURE SENIOR
MANAGEMENT COMMITMENT

Identify strategic Identify and Identify customers

Articulate strategy Define critical
business units to be prioritize BSC of BSC and their
and mission success factors
measured perspectives requirements

Determine data Determine source of Eliminate Define relevant

gathering methods benchmark / target redundant performance
data indicators indicators w/CAR

Gather benchmark Identify causes of Estimate future

Determine current
and actual data current and future attainable
performance gap
gaps performance

Align incentives and

Gain constituency Establish performance
compensation with Implement Assess progress
acceptance of goals and objectives
BSC performance initiatives toward goals
conclusions
indicators

Revise goals, if Validate/update

necessary benchmarks
Periodic Reappraisal Communication and
consensus at each
is critical
Communication Tools
 Check sheets
 Cause and effect diagrams
 Histograms
 Pareto diagrams
 Control charts
 Scatter diagrams
 Bar charts
Resources
 Frigo, Mark L., & Krumwiede, Kip R. (2000, January). "The Balanced Scorecard: A
Winning Performance Measurement System," Strategic Finance. 50-54. 
 The Society of Management Accountants of Canada. Applying the Balanced Scorecard,
Strategic Management Series, Management Accounting Guideline. (1999). Mississauga,
ON Canada: Author.
 Institute of Management Accountants. Statements on Management Accounting 4DD,
Tools and Techniques for Implementing Integrated Performance Management Systems.
1998. Montvale, NJ: Author.
 Harvard Business School Press. Harvard Business Review on Measuring Corporate
Performance. 1998. Boston, MA: Author.
 Chee W. Chow, Kamal M. Haddad, & James E. Williamson. (1997, August). “Applying the
Balanced Scorecard to Small Companies”, Management Accounting. 21 – 27.
 Robert S. Kaplan, David P. Norton. 1996. The Balanced Scorecard Boston, MA: Harvard
Business School Press.
 Institute of Management Accountants. Statements on Management Accounting 4U,
Developing Comprehensive Performance Indicators. 1995. Montvale, NJ: Author.
 www.balancedscorecard.org
 www.bscol.com
 www.bscnews.com
 www.balancedscorecard.com