The Balanced
Scorecard
Planning for long-run
organizational success
The Balanced Scorecard:
A Good Idea in 1992
Balanced Scorecard in 1992
“The Balanced Scorecard –
Measures that Drive
Performance”
Harvard Business Review,
1992
The Balanced Scorecard:
A Great Idea by 2002
Balanced Scorecard by 2002
21 translations
17
translations
50% usage in Fortune 500
Harvard Business Review “Hall of Fame”
50,000+ BSC on-line members
Balanced Scorecard Hall of Fame Implemented
Strategies and Achieved Breakthrough Results…
Fast
Mobil
3 years
Saatchi & Saatchi
+ $2b
• Last to first
• Cash flow +$1.2b
• ROI 6% --> 16%
ATT Canada
3 years
+ $7b
2-5 years
Cigna
Brown & Root
2-5 years
3 years
• #1 in growth &
profitability
+ $3b
Duke Children’s
City of Charlotte
3 years
• Customer Satisfaction = 70%
• Public Official Award
• Customer Satisfaction #1
• Cost/Case
33%
Wells Fargo
Southern Garden
3-5 years
• # Customers 450%
• Best Online Bank
• Least Cost Producer
2 years
Chemical Bank
3 years
• 99% Merged Target
Asset Retention
UPS
Hilton Hotels
• Customer Satisfaction
• Market Revenue Index
• Revenues
• Net Income
9%
33%
2 years
3 years
3 years
Question:
How can complex organizations
achieve results like this in such
short periods of time?
Answer:
Alignment!
The Balanced Scorecard process allows an organization
to align and focus all its resources on its strategy
BUSINESS UNITS
EXECUTIVE TEAM
STRATEGY
INFORMATION
TECHNOLOGY
HUMAN RESOURCES
BUDGETS AND CAPITAL
INVESTMENTS
© 1998 Renaissance Worldwide, Inc. and
Robert S. Kaplan, All rights reserved.
A Gap Exists Between Mission-Vision-Strategy
and Employees’ Everyday Actions
MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan
TOTAL QUALITY MANAGEMENT
What we must improve
EMPOWERMENT / PERSONAL OBJECTIVES
What I need to do
The Balanced Scorecard Links Vision and
Strategy to Employees’ Everyday Actions
MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SCORECARD
Translate, Focus and Align
STRATEGIC INITIATIVES
What are the priorities
TOTAL QUALITY MANAGEMENT
What we must improve
EMPOWERMENT / PERSONAL OBJECTIVES
What I need to do
STRATEGIC OUTCOMES
Satisfied
SHAREHOLDERS
Delighted
CUSTOMERS
Efficient and Effective
PROCESSES
Motivated & Prepared
WORKFORCE
Balanced Scorecard

Balance between

Financial measures of performance

Long-range competitive abilities
Balanced Scorecard

Four aspects of firm performance




Financial
Customer
Internal business
Innovation and learning
Financial Perspective

How do we look to stockholders?

Survive

Succeed

Prosper
Customer Perspective

How do our customers see us?

New products

Responsiveness

Quality
Internal Business Perspective

At what must we excel currently?

Manufacturing/service excellence

New product/service introduction
Innovation and Learning
Perspective

Can we continue to improve and create
value?



Technological leadership
Time to market
Employee training and satisfaction
Perspectives are Interrelated

Innovation pleases customers which are
necessary for good financial results

Good financial results make financing
improvements possible
The Complete Balanced Scorecard Strategy Map
Improve Shareholder Value
Financial
Perspective:
the drivers of
shareholder
value
Shareholder Value
ROCE
Productivity Strategy
Improve Cost
Structure
Increase Asset
Utilization
 Cost per Unit
Internal
Perspective:
how value is
created and
sustained
Learning & Growth
Perspective: role for
intangible assets –
people, systems,
climate and culture
Enhance Customer
Value
 Customer
Profitability
 Asset Turnover
•Market and Account Share 
Customer
Perspective:
the
differentiating
value
proposition
Revenue Growth Strategy

Customer Acquisition
Customer Retention

Create Value from
New Products &
Services
 New Revenue
Sources
Customer Satisfaction
Product Leader
Customer Solutions
Customer Value Proposition
Product/Service Attributes
Price
Quality
Time
Operations Theme
(Processes that Produce
and Deliver Products
& Services)
Low Total Cost
Relationship
Function
Service
Customer
Management
Theme
(Processes that
Enhance Customer
Value)
Image
Relations
Brand
Innovation Theme
(Processes that
Create New
Products and
Services)
Regulatory and
Society Theme
(Processes that
Improve the
Environment
and
Communities)
Human, Information, and Organizational Capital
Strategic
Competencies
Strategic
Technologies
Climate for
Action
Overall Concepts

Not just a set of measures

Measures must relate to strategy


Critical success factors
Measures are interrelated

Must understand how the perspectives influence each other
Overall Concepts

Not a quick process

Implementation requires




Thought
Analysis
Data-gathering
Time
Overall Concepts

Thought

What is our strategy?

What is critical to implementing the strategy?

How can we measure our progress?
Overall Concepts

Analysis

What are the linkages between functions?

What drives the achievement of goals?

What measures correlate with the drivers?
Overall Concepts

Data-gathering

What data is available? What isn’t?

How should it be gathered? Reported?
Overall Concepts

Time

Cannot be done in an afternoon

Successful implementation may take several months

Never-ending process
Implementation Steps

Initiative must start at the top

Only senior management has grasp of overall strategy


And the authority to make strategic decisions
Doomed without commitment from the top
Implementation Steps

Requires teamwork, collaboration

Different perspectives, expertise required

Not a one-person job

Won’t produce buy-in
Implementation Steps

Interview senior managers

Input on strategic objectives

Input on critical success factors

Input on possible measures
Implementation Steps

Gain consensus


Senior managers develop tentative scorecard as a group
Individual reactions

Suggested refinements
Implementation Steps

Expand consensus


Larger group refines tentative scorecard
Finishing touches

Consensus on vision, objectives, measures, targets,
implementation program, etc.
Implementation Steps

Selection of metrics





Must relate to strategic goals
May not be “exact”
May come from external sources
Not too many
Not too few
Implementation Steps

Roll-out

Link to data bases and information system

Communicate to employees

Develop scorecards for lower levels
Implementation Steps

Periodic reviews





Has strategy changed?
Are the objectives valid?
Are the activities valid?
Are the measures valid?
The scorecard evolves with the organization
The Road to Disaster

Senior management not committed


No one else will be either
Lack of consensus

Lack of commitment
The Road to Disaster

Consultants

Good


Provide needed expertise
Bad

Take over the project

Consensus, commitment of employees is lost
The Road to Disaster

Failure to communicate

Employees don’t understand:



Strategy
Their roles
Importance of the scorecard measures
The Road to Disaster

Lack of “push-down”

Lower levels operating as before

Operations are not tied to corporate scorecard

Scorecard is ignored at lower levels
The Road to Disaster

Carve it in stone

It won’t be perfect, ever


Must evolve
Delay implementation until perfect

See above
The Road to Disaster

The compensation issue


Powerful motivator of performance
Poorly designed scorecard will not show
strategic improvements even if individual
measures show progress
The Scorecard as a Change
Agent

Four steps




Translating the vision into action
Communicating and linking
Business planning
Feedback and learning
Translating the Vision

Strategy must be reduced to a set of
objectives and measures which can be
operationalized

“We want to be the best” won’t do
Communicating and Linking

Corporate strategy must be communicated to
all levels

Lower levels must have objectives linked to
corporate objectives
Business Planning

Integrate the financial plan with the business
plan

Use the scorecard to allocate resources to critical
activities

Avoids the short-term spending mentality
Feedback and Learning

Monitor short-term results to determine if
progress is being made toward long-term
objectives

May need to refine measures, activities,
objectives, even strategy
Mobil NAM&R Strategy Map
Increase ROCE to 12%
Financial
Perspective
Revenue Growth Strategy
Increase Customer
Profitability Through
Premium Brands
New Sources of NonGasoline Revenue
Customer
Perspective
 Share of
Targeted
Segment
 Mystery
Shopper
Score
 Non-Gasoline
Revenue & Margin
Become Industry
Cost Leader
 Volume vs. Industry
 Premium Ratio
 Cash Flow
“Win-Win Dealer Relations”
Basic




Maximize Use of
Existing Assets
 Cash Expense (cpg)
vs. Industry
“Delight the Consumer”
Differentiators
Clean
Safe
Quality Product
Trusted Brand
Speedy
Purchase
“Build the Franchise”
Internal
Perspective
Productivity Strategy
ROCE
Net Margin (vs. industry)
Friendly Helpful
Employees
“Increase Customer Value”
Create NonGasoline
Products &
Services
Understand
Consumer
Segments
 New Product
Acceptance Rate
“Achieve Operational Excellence”
Improve
Hardware
Performance
 Yield Gap
 Unplanned
Downtime
Best-In-Class
Franchise
Teams
More
Consumer
Products
Recognize
Loyalty
On-Spec
On-Time
Improve
Inventory
Management
“Be a Good Neighbor”
Improve
Environmental,
Health and
Safety
 Inventory
Levels
 Run-Out Rate
Industry Cost
Leader
 Activity Cost
vs. Competition
 Dealer Quality
Rating
Help Develop
Business
Skills
 Environment
Incidents
 Safety Incidents
A Motivated and Prepared Workforce
Climate for Action
Learning &
Growth
Perspective
• Aligned
• Personal Growth
 Personal BSC
 Employee Feedback
Competencies
• Functional Excellence
• Leadership Skills
• Integrated View
 Strategic Skill
Coverage Ratio
 Dealer Profit
Growth
 Dealer
Satisfaction
Technology
• Process Improvement
 Systems Milestones
The Balanced Scorecard Framework Is Readily
Adapted to Non-Profit and Government
Organizations
The Mission
"If we succeed, how will
we look to our
taxpayers (or donors)?”
”To achieve our vision,
how must we look to
our customers?”
“To satisfy our customers,
financial donors and mission,
what business processes
must we excel at?"
“To achieve our vision, how
must our people learn,
communicate, and work
together?”
The Mission, rather than the financial / shareholder
objectives, drives the organization’s strategy
Boston Lyric Opera Strategy Map
Our mission is to ensure the long-term future of opera in Boston and New England by (1) producing the highest quality professional productions of diverse opera
repertoire that are artistically excellent as well as musically and theatrically innovative; (2) developing the next generation of opera talent; (3) engaging and educating
a diverse community about opera to become enthusiastic audience members, educators, supporters, and volunteers.
(HBS Case #9-101-111)
National/International Opera Scene
Supporters/Subscribers
CUSTOMER
Target
Generous and Loyal
Contributors/
Prospects
Focus on
Board
Investment and
Recruitment
Build Artistic
Reputation
for High
Standards
Launch Unique
Residency
Program for
Artists
Enhance Customer Relationships
INTERNAL
BUSINESS
PROCESSES
Streamline
Ticketing/Gift
Acknowledgement
Processes
Increase
One-on-One
Contact
Improve
Board Support
Systems
Provide
Staff with
Skill
Training
Promote
Collaborations
Insure Operational Excellence
Develop
Web-based
Service/
Products
Contract
“Best”
Talent
Develop Strategic Job Competencies
LEARNING
AND
GROWTH
Present
Diverse
Repertory
Community
Leverage Board
Effectiveness with
Education and
Fundraising Training
Develop
Innovation
Review
Process
Increase Brand Awareness
Increase Cost
Efficiency/Quality
Assurance
Increase
Revenue
Systematize
Financial
Processes
Launch
Comprehensive
PR Campaign
Develop
New
Products/
Program
Strengthen Strategic Alignment
Build Growth-Enabling Infrastructure
Develop
Strategic
Communications
Plan
Create
HR Plan
Incorporate
Milestone
Evaluations
Fiscal Health
FINANCIAL
Focus on
Educ./Comm.
Programs for
Greater Boston
Build
Community
Support
Build
Multi-Year
Support
Invest in
Strategic
Technologies
Growth Planning
Create
Long-Term
Investment
Strategy
Develop
Realistic
Pro Formas
Institutionalize
Multi-Year
Budgeting
Develop
Administrative
Residency
Program
Typical Balanced Scorecard
Project Schedule
Week
Task 1: Define Strategic
Architecture
Project Kickoff
Task 2: Draft the Balanced
Scorecard
Workshop I
Task 3: Develop Measures,
High Level Targets &
Initiatives
Workshop II
Task 4: Develop
Implementation Plan
Workshop III
1
2
3
4
5
6
7
8
9
10
11 12
2 Wks
4 Wks
4 Wks
2 Wks
13 14
15
16
Balanced Scorecard Project Team
BSCol
Engagement
Officer/
Principal
(part-time)
BSCol
Project
Leader
(full-time)
BSCol
Project
Team
1-2
Consultants
(full-time)
Executive
Sponsor/
Steering
Committee
• Overall project ownership
• Consultations/pre-presents
as needed
• 2 days/week
Client
Project
Leader
Client
Core
Team
Staff
knowledgeable
of business
strategies and
organization
Executive
Leadership
Team
• 1-2 staff
• 2-3 days/week
• Briefings with others
as needed
• 3 half- to full-day
workshops
• One 90-minute
briefing/
interview
• Consultations/
pre-presents
as needed
How are Organizations Doing on the
Journey?
A survey of online members of the BSCol:
500 responses; 250 reported, “Yes, we have BSC.”
50% of these: too early to tell about impact.
Of the 125 who had sufficient experience with the program:
Achieved breakthrough results
Some progress
No or limited results
15%
64%
21%
(n = 19)
(n = 80)
(n = 26)
What Separates the Winners
from the Losers?
Executive Team has created a
sense of urgency
Strategy translated to a strategy
map and Balanced Scorecard
Corporate/Business Unit
measures are linked & aligned
Employees are aware of the
strategy
Individual and team goals are
aligned with the strategy
The BSC is an integral part of the
strategic planning process
The budget is driven by the
strategy
Breakthrough Results
Some Progress
No Results
84%
53%
20%
84%
41%
0%
72%
39%
0%
56%
32%
0%
42%
26%
0%
100%
40%
0%
42%
29%
0%
For further information, visit www.bscol.com
Our Mission:
“To facilitate the worldwide awareness,
use, enhancement, and integrity of the
Balanced Scorecard as a value-added
management process”
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