Balanced Scorecard

What Is a Balanced Scorecard?

A Measurement
System?

A Management
System?

A Management
Philosophy?
 Balance Scorecard
• It’s a way of looking at your
organization that focuses on your big-
picture strategic goals. It also helps
you choose the right things to
measure so that you can reach those
goals.
• The name “balanced scorecard” comes
from the idea of looking at strategic
measures in addition to traditional financial
measures to get a more “balanced” view
of performance.
 Perspectives
• GOALS & PERFORMANCE MEASURES
– Financial perspective
• How do we look to shareholders?
– Customer perspective
• How do customers see us?
– Internal Business perspective (BPR)
• What must we excel at?
– Innovation & Learning perspective
• Can we continue to improve & create value?
 Example:
anonymous semiconductor company
• FINANCIAL perspective
GOALS MEASURES
Survive Cash flow
Succeed Quarterly sales
Growth
Operating income by division
Prosper Increase in market share
Increase in Return on Equity
 CUSTOMER perspective
GOALS MEASURES
New products % sales from new products
% sales from proprietary products
Responsive On-time delivery
supply (customer definition)
Preferred Share of key accounts’ purchases
suppliers Ranking by key accounts
Customer # of cooperative engineering
partnerships efforts
INTERNAL BUSINESS perspective
GOALS MEASURES
Technology Benchmark vs. competition
capability
Manufacturing Cycle time
excellence Unit cost
Yield
Design Silicon efficiency
productivity Engineering efficiency
New product Schedule: Actual vs. Planned
innovation
 INNOVATION & LEARNING
perspective
GOALS MEASURES
Technology Time to develop next generation
leadership
Manufacturing Process time to maturity
learning
Product focus % products equalling 80% of
sales
Time to market New product introduction vs.
competition
 Strategic Readiness
• Strategy map: framework to link intangible assets
to shareholder value creation
– Through the 4 perspectives
• 3 Intangible Asset categories essential to
implement strategy (Learning & Growth)
– Human Capital
• Skills, training, knowledge
– Information Capital
• Databases, information systems, networks,
- Organizational Capital
• Culture, leadership, alignment with goals, knowledge sharing
Strategy Map: Intangible assets link
to Internal Process
• Intangible assets make up Learning & Growth perspective
• Map to Internal Process perspective
– Operations Management
• Produce & deliver products & services
– Customer Management
• Enhance customer value
– Innovation
• Create new products & services
– Regulatory & Social
• Improve communities & the environment
• Customer perspective
– Price, quality, availability, selection, functionality, service, partnership, brand
• Financial perspective
– Productivity strategy
• Improve cost structure
• Increase asset utilization
– Revenue growth strategy
• Enhance customer value
• Expand revenue opportunities
Consumer Bank (anonymous)
example: Human Capital
Information Capital Readiness
Organization Capital Readiness
 Learning & Growth for
Employees
GOALS
Increase employee process ownership Employee survey scores
Improve information flows
Increase employee identification of
potential supply chain disruptions
RISK-RELATED GOALS
Increase employee awareness
Increase supplier accountability
Increase employee awareness of
supply chain risks & other enterprise
risks
MEASURES
Changes in information reports
Frequencies across supply chain
partners
Compare actual disruptions with
reports of potential disruption drivers
Number of employees attending risk
management training
Supplier contract provisions on risk
Number of departments participating in
supply chain risk identification &
assessment workshops
 Internal Business Processes
GOALS
Reduce waste across supply chain
Shorten time from start to finish
Achieve unit cost reductions
RISK-RELATED GOALS
Reduce probability & impact of threats
Identify specific tolerances for key
processes
Reduce number of exchanges of
supply chain risks to other enterprise
processes
MEASURES
Pounds of scrap
Time from raw material purchase to
product/service delivery to customer
Unit costs per product/service
delivered
% of target costs achieved
Number of employees attending risk
management training
Number of process variances
exceeding specified acceptable risk
tolerances
Extent of risks realized in other
functions from supply chain process
risk drivers
 Customer Satisfaction
GOALS
Improve product/service quality
Improve timeliness of product/service
delivery
Improve customer perception of value
RISK-RELATED GOALS
Reduce customer defections
Monitor threats to product/service
reputation
Increase customer feedback
MEASURES
Number of customer contact points
Time from customer order to delivery
Customer scores of value
Number of customers retained
Extent of negative coverage of quality
in press
Number of completed customer
surveys about delivery comparisons to
other providers
 Financial Performance
GOALS
Higher profit margins
Improved cash flows
Revenue growth
RISK-RELATED GOALS
Reduce threats from price competition
Reduce cost overruns
Reduce costs outside the supply chain Warranty claims incurred
from supply chain processes
MEASURES
Profit margin by supply chain partner
Net cash generated over supply chain
Increase in customers & sales per
customer
% annual return on supply chain
assets
Number of customer defections due to
price
Surcharges paid
Holding costs incurred
Overtime charges applied
Legal costs paid
Sales returns processed
A Good Balanced Scorecard
Tells the Story of Your
Strategy

•• Every
Every measure
measure is
is part
part of
of aa chain
chain of
of cause
cause and
and effect
effect linkages
linkages
•• A
A balance
balance exists
exists between
between outcome
outcome measures
measures and
and the
the
performance
performance drivers
drivers or
or desired
desired outcomes
outcomes