Balanced scorecard

Balanced scorecardWhat is Balanced Scorecard?Balanced scorecard is an innovative multi-dimensional corporate performance scorecard developed by Robert S. Kaplan and David P Norton in 1992.Balanced scorecard is a strategic management tool that is used to align business activities to the vision and strategies of an organization by monitoring performance against strategic goal.The Balanced Scorecard is a strategic performance management framework that allows organizations to define their strategic priorities and then design indicators and measures to monitor how well they are executing them. The balanced scorecardprovides organizations with the ability to clarify vision and strategy and translate them into action.ContdIt's a performance measurement tool that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more "balanced" view of organizational performance and help them to align the organizations' activities to their strategy to achieve their goals.

Four Perspectives

Kaplan and Norton recommend that managers gather information from four important perspectives:The financial perspective: How do we look to the stakeholders?The customer's perspective: How do customers see us?The internal business perspective: What must we excel at?The innovation and learning perspective: Can we continue to improve and create value for our services?

The financial perspectives

The customer perspectives

The internal process perspectives

Learning and growth perspectives

Balanced Scorecard Approach of Walmart

Financial perspectiveObjective Measure Target Action Increase revenues/total assets. Revenue/total assets percent. . Increase Revenue/total assets by 8% during the next year. Increase revenues; make a more thorough use of assets. Increase revenues/employee. Revenue/employee Increase revenue/employee by 5 % during next two years. Increase employee efficiency through training and technology.Increase return on investment. Return on investment..Increase return on investment by 2% every year for three years. . Reduce operating costs, and achieve economies of scale through bulk purchases. Customer service perspectiveObjective Measure Target Action Increase average customer size of Wal-Mart.Average customer size. Increase customer size by 5% every year for next five years. Provide a wider variety of products to customers. Increase customer rating of Wal-MartCustomer rating. Increase customer rating by 10% in one years time. The prices at Wal-Mart should be the lowest in the market.Reduce number of customer complaints.Customer Complaints.Reduce the number of customer complaints received by 4% every year for three years. Improve quality control of products stocked and improve customer service. Internal business process perspectiveObjective Measure Target Action Reduce administrative expense/total revenues. Administrative expenses/total revenue. Reduce Administrative expenses/total revenue by 2% every year for next five years. Train the employees so that they become more efficient. Reduce lead time from online orders to delivery. Average time taken. Reduce time taken by 5 % in every year for next three years. Use automatic packing and handling technology for speeding up.Reduce waiting time for customers at counters. Average waiting time.Reduce the average waiting time by 15% within one year. Change the layout of the store so that more checkout counters are opened. Learning and growth perspectiveObjective Measure Target Action Increase training hours per employee. . Average training hours per employee. Increase training hours per employee by 5% each year for the next three years. Hire outside trainers. Managers should increase their time spent for training. Reduce employee turnover rate. Employee turnover rate. Reduce employee turnover rate by 3% each year for next thee years. Increase employee participation in decision making. Also, increase job rotation. Increase use of employees view Empowerment index. Increase empowerment index by 5% every year for at least three years. Give more decision making authority to employees. Managing strategy: Four processThe Balanced Scorecard is not a tactical or an operational measurement system but a strategic management system that innovative companies are using to manage their strategy over their long run by using the measurement focus of the scorecard to accomplish critical management processes such as:clarify and translate their vision and strategy;communicate and link strategic objectives and measures; plan, set targets, and align strategic initiatives; enhance strategic feedback and learning;Managing strategy: Four process

The first new processtranslating the visionhelps managers build a consensus around the organizations vision and strategy. Despite the best intentions of those at the top, lofty statements about becoming best in class, the number one supplier, or an empowered organization dont translate easily into operational terms that provide useful guides to action at the local level. For people to act on the words in vision and strategy statements, those statements must be expressed as an integrated set of objectives and measures, agreed upon by all senior executives, that describe the long-term drivers of success.The second processcommunicating and linkinglets managers communicate their strategy up and down the organization and link it to departmental and individual objectives. Traditionally, departments are evaluated by their financial performance, and individual incentives are tied to short-term financial goals. The scorecard gives managers a way of ensuring that all levels of the organization understand the long-term strategy and that both departmental and individual objectives are aligned with it.The third processbusiness planningenables companies to integrate their business and financial plans. Almost all organizations today are implementing a variety of change programs, each with its own champions, gurus, and consultants, and each competing for senior executives time, energy, and resources. Managers find it difficult to integrate those diverse initiatives to achieve their strategic goalsa situation that leads to frequent disappointments with the programs results. But when managers use the ambitious goals set for balanced scorecard measures as the basis for allocating resources and setting priorities, they can undertake and coordinate only those initiatives that move them toward their long-term strategic objectives.

The fourth processfeedback and learninggives companies the capacity for what we call strategic learning. Existing feedback and review processes focus on whether the company, its departments, or its individual employees have met their budgeted financial goals. With the balanced scorecard at the center of its management systems, a company can monitor short-term results from the three additional perspectivescustomers, internal business processes, and learning and growthand evaluate strategy in the light of recent performance. The scorecard thus enables companies to modify strategies to reflect real-time learning.

Reasons to sustain a Balanced scorecard programme

The Strategy mapping (Cause-and-effect Map)

Linking the four perspectives

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