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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