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Balanced Scorecard Overview and Insights

The Balanced Scorecard is a framework that helps organizations translate strategy into operational objectives across four perspectives: financial, customer, internal processes, and learning and growth. It aims to balance financial measures with operational and strategic measures. The scorecard links strategic objectives to measures across all important areas and motivates performance. An example scorecard for an airline company outlines objectives and metrics across the four perspectives.

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lakshay chawla
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80 views2 pages

Balanced Scorecard Overview and Insights

The Balanced Scorecard is a framework that helps organizations translate strategy into operational objectives across four perspectives: financial, customer, internal processes, and learning and growth. It aims to balance financial measures with operational and strategic measures. The scorecard links strategic objectives to measures across all important areas and motivates performance. An example scorecard for an airline company outlines objectives and metrics across the four perspectives.

Uploaded by

lakshay chawla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

BALANCED SCORE CARD

INTRODUCTION (D
Pioneered by Robert Kaplan and David Norton (1990):lt is a Strategy and Performance management
System

In a performance measurement and control system financial measures alone are inadequate for
strategic decision-making as they are unable to ensure goal congruence between management
decisions and actions.
Classic financial measures (return on assets, return on sales, and return on capital employed) fail
to distinguish between 'excellent' and 'non-excellent' firms.
Investment analysts who considered both financial and non-financial measures were more
accurate in their earnings forecasts than those who considered only financial indicators.
A performance management system therefore should have strategic focus and should include
both financial and operating measures.

BSC aims to control performance measures and thus leads to managing the measures rather than
performance of the people whose performance is measured.

At the highest level, the Balanced Scorecard is A framework that helps


organizationstranslate strategy into operational objectives tha't drive
both behavior and performance
What Is a Balanced Scorecard?

The Premise Behind the Balanced Scorecard Is that Measurement Motivates Behavior

Balanced Scorecard Perspectives

Financial: What are the financial perspectives that would help us understand the effectiveness
and efficiency of our financial processes?
Customer: Who are our customers? What do our customers expect or demand from us? What
is our value proposition in serving them?
Internal Process: What must we excel at in order to continue to add value for our customers?
What are the processes we have/need to best execute our strategies?
Learning & development: What is the level/content of employee skills needed to meet our
mission/value? What information systems needs to support these processes? What
organizational climate (culture) supports this success?
/
The Balanced Scorecard Is Based on an Understandino of the
Basic Building Blocks of the Strategy 0

1. The economic model of

~-- key levers driving financial


performance
-
, Productivrty )
egy

Sources of Productivity

2. The value proposition of


target customers

3. The value chain of core


'Buid the ·Make lhe . "Otlliver the ·service business processes
8 r3M" Sale· Producr Exe ~ptionally"

4. The critical enablers of


performance improvement,
change and learning

BSC Example:

Financial
Profitability • Profitability • Market Value • 30% CAGR
• More • Seat Revenue • 20% CAGR
Customers
• Plane Lease • 5% CAGR
• Fewer lanes _. .,' Cost
• Flight is on - • DGCA On Time • #1 • Quality
time Arrival Rating management
• Lowest prices • Customer • #1 • Customer
Ranking (Market loyalty
Survey) program
Internal • Fast ground • On Ground Time • 30 Minutes • Cycle time
turnaround • On-Time • 90% optimization
Departure program

Learning • Ground crew • % Ground crew • yr. 1 70% • ESOP


alignment trained yr. 3 90%
• Ground crew
yr. 5 100%
• % Ground crew training
stockholders

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