Balanced Scorecard Fundamentals
Measuring Strategic
Performance
Dr. Shayne Tracy
Why Use the Balanced Scorecard?
To maintain sustainable competitive advantage
in the information age, strategic business units
must broaden their base of intangible assets
and the means by which performance is
measured and continuously improved.
The balanced scorecard provides a
comprehensive framework for implementing
strategic plans by translating an organization’s
strategy into a set of key performance
indicators.
Performance Measures Yesterday
Traditional
measures of
performance External
only included
financial FOCUS
statistics Non Financial
based on the MEASURES
financial Financial
Internal
accounting
model. Historical Future
TIMEFRAME
Performance Indicators Today
The balanced
scorecard
focuses on an
integrated Non Financial
system of key MEASURES
performance Financial
External
FOCUS
indicators for Historical Future
Internal
critical success TIMEFRAME
factors.
The Balanced Scorecard Dimensions
Financial
Perspective
Customer Vision, Values Internal
Perspective Mission, Strategy Processes
Learning &
Growth
The Financial Perspective
To succeed financially, what level of
financial performance do our investors
expect?
Examples:
ROI, EVA
Return on capital employed (ROCE)
Revenue growth
Self-financiable growth rate
Cash flow return on assets
Market/customer/product profitability growth
The Customer Perspective
To achieve our strategy, how must we
appear to our customers?
Examples:
Market share growth
Customer acquisition rate
Customer retention rate
Customer satisfaction scores
Number of new products/services
Product return rate
Defect rate
On-time delivery rate
Internal Business Processes
At what business processes must we
excel to satisfy our clients/customers?
Examples:
Product-development cycle time
Order-to-delivery response time
Six sigma (PPM) quality rate
Revenue per employee
Cash conversion cycle time
New product/service introduction rate
New product/service breakeven time
Learning & Growth Perspective
What people and systems do we need to
sustain our ability to change and
improve?
Examples:
Employee retention/turnover rate
Salaries/wage index
Training/development hours per employee
Strategic competency index
Value-added per employee dollar
Sustainable growth analysis
Knowledge productivity rate
Economy, Effectiveness, Productivity
and Performance
Economy is concerned total number of labour
with inputs only hours worked during the
period
Effectiveness refers to the total number of good units
achievement of objectives of output for the period
Productivity is the ratio of number of good units of
outputs to inputs output per labour hour of
input
Performance is the quality
Number of “0” defects per
of tasks and activities unit of output per labour
hour
Balanced Scorecard Workflow
Strategic Plan
Gap Analysis
Implementation of Action Plans
Recalibration Annually
Balanced Scorecard Planning and Implementation Workflow
ENSURE SENIOR
MANAGEMENT COMMITMENT
Identify strategic Identify and Identify customers
Articulate strategy Define critical
business units to be prioritize BSC of BSC and their
and mission success factors
measured perspectives requirements
Determine data Determine source of Eliminate Define relevant
gathering methods benchmark / target redundant performance
data indicators indicators w/CAR
Gather benchmark Identify causes of Estimate future
Determine current
and actual data current and future attainable
performance gap
gaps performance
Align incentives and
Gain constituency Establish performance
compensation with Implement Assess progress
acceptance of goals and objectives
BSC performance initiatives toward goals
conclusions
indicators
Revise goals, if Validate/update
necessary benchmarks
Periodic Reappraisal Communication and
consensus at each
is critical
Communication Tools
Check sheets/lists
Goal/Objective Action Plans
Project/Process Plans
Cause and effect diagrams
Histograms, Pareto diagrams
Control charts
Scatter diagrams, Bar charts
Resources
Frigo, Mark L., & Krumwiede, Kip R. (2000, January). "The Balanced Scorecard: A
Winning Performance Measurement System," Strategic Finance. 50-54.
The Society of Management Accountants of Canada. Applying the Balanced
Scorecard, Strategic Management Series, Management Accounting Guideline.
(1999). Mississauga, ON Canada: Author.
Institute of Management Accountants. Statements on Management Accounting
4DD, Tools and Techniques for Implementing Integrated Performance Management
Systems. 1998. Montvale, NJ: Author.
Harvard Business School Press. Harvard Business Review on Measuring Corporate
Performance. 1998. Boston, MA: Author.
Chee W. Chow, Kamal M. Haddad, & James E. Williamson. (1997, August).
“Applying the Balanced Scorecard to Small Companies”, Management Accounting.
21 – 27.
Robert S. Kaplan, David P. Norton. 1996. The Balanced Scorecard Boston, MA:
Harvard Business School Press.
Institute of Management Accountants. Statements on Management Accounting 4U,
Developing Comprehensive Performance Indicators. 1995. Montvale, NJ: Author.
