Introduction to Balanced Scorecard Development by Derek Hendrikz

Introduction to Balanced Scorecard

Development

derek

hendrikz

http://www.derekhendrikz.com/

Copyright © 2014

Derek Hendrikz Consulting

www.derekhendrikz.com



BSC Facts…

• A strategy performance management tool

• Most widely adopted performance management framework in

the world

• Made known by Drs. Robert S. Kaplan and David P. Norton during 90’s

• Created to keep score of pre-determined perspectives thus

enabling the measurement of organisational performance

• Intended to place financial measures in perspective by adding

other important organisational dimensions



Balanced Scorecard Perspectives…

1. Financial: encourages the identification of a few relevant high-level

financial measures. In particular, designers were encouraged to

choose measures that helped inform the answer to the question

"How do we look to shareholders?"

2. Customer: encourages the identification of measures that answer the

question "How do customers see us?"

3. Internal business processes: encourages the identification of

measures that answer the question "What must we excel at?"

4. Learning and growth: encourages the identification of measures that

answer the question "How can we continue to improve, create value

and innovate?"www.derekhendrikz.com


Kaplan & Norton's four steps required to design a balanced scorecard...

1. Translating the vision into operational goals;

2. Communicating the vision and link it to individual

performance;

3. Business planning; index setting

4. Feedback and learning, and adjusting the strategy

accordingly.



Theory Z...

Learning & Growth

Business Processes

Customers Finance



Models of Scorecard Development…

1. Perspectives used to translate strategic objectives

2. Perspectives used as strategic objectives

3. Perspectives cascaded throughout organisational

departments – each department having a BSC

4. Perspectives cascaded to individual performance –

each employee having a BSC



Criticism towards the BSC…

1. Generic perspectives distorts focus of organisational purpose and intent

2. Strategy relates to that which an organisation wants to change, thus

translating strategy to action only measures the performance needed for

changing the organisation (mostly +- 20% of what happens within the

organisation)

3. What is weighed by a scorecard – energy or priority?

4. Keeping score and providing feedback on aspects that constitute 20% of

work whilst 80% of work must still be done confuses employees

5. Research indicates that more than 60% of scorecards are abandoned after

development

6. Where no clear link between departmental scorecard and organisational

outputs, the BSC can actually lead to departmental silo functioning

7. Establishment of performance measures are often subjectively determinedwww.derekhendrikz.com


Organisational Strategy

Perspectives Formulation

Scorecard Development

Performance Measurement



Purpose of the Balanced Scorecard…

A organisational performance management system designed to quantify the translation of

strategy into action.



Objective of the BSC…

1. To translate strategic initiatives into quantifiable

action

2. To provide a generic performance framework

3. To create an interdependent map of organisational

functioning

4. To unify organisational energy



Introduction to Balanced Scorecard Development by Derek Hendrikz

Leadership & Management

Transcript of Introduction to Balanced Scorecard Development by Derek Hendrikz