Download - Balance Scored Card
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 1/26
1© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Robert S. KaplanHarvard Business School
The BALANCED SCORECARD
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 2/26
2© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
What Is a Balanced Scorecard?
A MeasurementA Measurement
System?System?
A ManagementA Management
System?System?
A ManagementA Management
Philosophy?Philosophy?
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 3/26
3© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Translating Vision and Strategy: Four Perspectives
Vision and
Strategy
Objectives Measures Targets InitiativesFINANCIAL
“To succeed
financially, how
should we
appear to our
shareholders?”
Objectives Measures Targets Initiatives
LEARNING AN GRO!T"
“To achieve our
vision, how will
we sustain our
ability to
change and
improve?”
Objectives Measures Targets Initiatives
C#STOMER
“To achieve our
vision, how
should we
appear to our
customers?”
Objectives Measures Targets Initiatives
IT!"#$ %&'I!'' (")*!''
“To satisfy our
shareholders
and customers,
what business
processes must
we e+cel at?”
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 4/26
© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
-
The Balanced Scorecard Focuses on Factors thatCreate Long-Term Value
•Traditional financial reports look backward– Reflect only the past: spending incurred and revenues earned
– Do not measure creation or destruction of future economic value
• The Balanced Scorecard identifies the factors that create long-term economic value
in an organization for e!ample:
– "ustomer #ocus: satisfy retain and ac$uire customers in targeted segments
– Business %rocesses: deliver the value proposition to targeted customers
• innovative products and services
• high-$uality fle!ible and responsive operating processes
• e!cellent post-sales support
– &rganizational 'earning ( )rowth:
•
develop skilled motivated employees*• provide access to strategic information
• align individuals and teams to business unit ob+ectives (rocesses
*ustomers
(eople
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 5/26
.© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
The Four Perspectives Apply to MissionDriven As Well As Profit Driven Organizations
•,hat must we do to satisfy our financial
contributors•,hat are our fiscal obligations
•,ho is our customer•,hat do our customers e!pect from us
•
,hat internal processes must we e!cel atto satisfy our fiscal obligations our
customers and the re$uirements of our
mission
•.ow must our people learn and develop
skills to respond to these and future
challenges
Profit Driven
Profit Driven Mission Driven
Mission Driven
•,hat must we do to satisfy our
shareholders
•,hat do our customers e!pect from us
•
,hat internal processes must we e!cel atto satisfy our shareholder and customer
•.ow must our people learn and develop
skills to respond to these and future
challenges
Financial Perspective
Customer Perspective
Internal Perspective
Learning & Growth
Perspective
/nswering these $uestions is the first step to develop a Balanced
Scorecard
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 6/26
/© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
The Balanced Scorecard Framework Is Readily Adapted toNon-Profit and Government Organizations
The Mission, rather than the financial / shareholder objectives,
drives the organization’s strategy
"If we succeed, how willwe look to our financial
donors?
!o achieve our vision, howmust our people learn,
communicate, and work together?
The Mission
!o satisfy our customers,financial donors and mission,
what #usiness processes must we e$cel at?"
o achieve our vision,how must we look to
our customers?
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 7/260© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
%ustomer Perspective
&inancial Accounta#ility Perspective
Internal Process Perspective
'earning and (rowthPerspective
)educe%rime
Increase
Perceptionof Safety
Availa#ility of
Safe,%onvenientransportation
Maintain
%ompetitivea$ )ates
Improve
Service*uality
Promote
+conomicpportunity
Strengthen-eigh#orhoods
+nhance.nowledge
Management%apa#ilities
%loseSkills (ap
AchievePositive
+mployee%limate
Streamline%ustomer
Interactions
ImproveProductivity
IncreasePositive
%ontacts
Secure&unding/Service
Partners
+$pand-on0%ity&unding
Ma$imi1e
2enefit/%ost
(row a$
2ase
MaintainAAA
)ating
Promote%ommunity
2ased
Pro#lemSolving
T$e City o% C$ar&otte Cor'orate(&eve& Lin)age Mode&
IncreaseInfrastructure
%apacity
Promote2usiness
Mi$
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 8/26© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Why are Companies Adopting a BalancedScorecard?
• C$ange
ormulate and communicate a new strategy
for a more competitive environment
•Gro*t$Increase revenues, not ust cut costs and
enhance productivity
• I+'&e+ent
rom the 14 to the 14,444- !very employee
implements the new growth strategy in their
day5to5day operations
he)evenue(rowthStrategy
“Improvestabi lity by broadeningthe sources ofrevenuef romcurrentcust omers”
heProductivityStrategy
“I mproveoperatingefficiency byshifti ngcustomers tomorecost effectivec hannels ofdistri bution”
0mproveReturns
0mprove &perating1fficiencyBroadenRevenue2i!
0n c re a se " u sto mer"onfidencein&ur#inancial /dvice
0ncrease"ustomer Satisfacti onThroughSuperior 1!ecution
0ncrease1mployee%roductivi ty
/ccess toStrategic0nformation
DevelopStrategicSkills
/lign %ersonal)oals
Financial Perspective
Customer Perspective
Internal Perspective
LearningPerspective
"ross-Sel l the%roduct 'ine
Shift to /ppropriate"hannel
%rovideRapidResponse
D e ve l o p 3 e w%roducts 2inimize%robl ems
4nderstand"ustomer Segments
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 9/266© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Why Do We Need a Balanced Scorecard?To Implement Business Strategy!
“!ess than "#$ of strategies
effectively formulated are
effectively e%ecuted”
&ortune
“'usiness (trategy is no) thesingle most important issue*
and )ill remain so for the ne%t
five years”
'usiness +ee
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 10/2614© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Our Research Has Identified Four Barriersto Strategic Implementation
Today,s Manage+ent Syste+s !ere esigned to Meet T$e Needs o% Stab&e
Industria& Organi-ations T$at !e,re C$anging Incre+enta&&y
You Can’t Manage Strategy With a System Designed for Tactics
Only 5% of the work force
understands the strategy
60% of organizations don’t link
budgets to strategy
Only 25% of managers have
incentives linked to strategy
85% of eecutive teams s!end less
than one hour !er month discussing
strategy
. o% /0 co+'anies
%ai& to e1ecute
strategy
T$e 2eo'&e 3arrier
T$e Vision 3arrier
T$e Manage+ent 3arrier
T$e Resource 3arrier
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 11/2611© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Balanced Scorecard “Early Adaptors” Have ExecutedTheir Strategies Reliably and Rapidly
4#SM5R6
3445
67 inprofita#ility
3448
3447
3449
63 in profita#ility
63 in profita#ility
63 in profita#ility
Mobi&
3445
2ro'erty 5 Casua&ty
Retai& 3an) 3445 Profits : ;$
344<34483447
Profits : ;=$Profits : ;35$Profits : ;34$
3ro*n 5 Root Engineering
4Roc)*ater6
3445'osingmoney 3447
63 in growthand profita#ility
Profit Stock
;>98M loss
Stock Price : ;84
344<
344834473449
;38M
;7M;=M;4=M
;9<
;33<;3<7;>8
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 12/2612© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
The BSC “Early Adaptors” Have Executed TheirStrategies Reliably and Rapidly
T$e So&ution !as A&ready T$ere
3eat t$e Odds
. o% /0 co+'anies %ai&
to e1ecute t$eir
strategies
Fast
7 to 8 years to ac$ieve
brea)t$roug$ resu&ts
•The %'* helped create focus and alignment to unloc7 the
organi8ation9s “hidden assets”
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 13/2613© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
S)A+(@
BMA- )+SB)%+S
2BSI-+SS B-IS +C+%BI+ +AM
I-&)MAI-+%-'(@
2BD(+S A-D %APIA'I-+SM+-S
The Balance Scorecar process allows an organi!ation to
align an focus all its resources on its strateg"
Question:How can complex organizationsachieve results like this in such
short periods of time?
Question:How can complex organizationsachieve results like this in such
short periods of time?
AnswerE
/lignment5
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 14/261© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
How Do They Do It?
1- # (rocess to "obilize the )rgani8ation and $ead )ngoing *hange
2- 'corecards That #escribe the $trategy
3- $in7ing 'corecard to *reate an Organization lignment - *ontinuous &ommunication to !mpower the :or7force
.- #ligning (ersonal 'oals( )ncentives( and &om!etencies :ith the
'trategy
/- ligning *esources, %udgets and Initiatives :ith the 'trategy
0- # eedbac7 (rocess That !ncourages +earning and !+perience
'haring
T$e Seven Ingredients o% "ig$&y Success%u& 3a&anced ScorecardT$e Seven Ingredients o% "ig$&y Success%u& 3a&anced Scorecard
2rogra+s2rogra+s
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 15/261.© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
3F 'eadership &rom theop
– -reate the -limate for -hange
– -reate a -ommon &ocus for -hange .ctivities
– ationalize and .lign the 0rganization
5F Bnlock and &ocus iddenAssets
– eengineer +or 1rocesses
– -reate 2no)ledge (haring 3et)ors
>F Make Strategy +veryoneGsHo#
– -omprehensive -ommunication to -reate .)areness
– .lign 4oals and Incentives
– Integrate 'udgeting )ith (trategic 1lanning
– .lign esources and Initiatives
<F Make Strategy a%ontinuous Process
– (trategic &eedbac That 5ncourages!earning
– 5%ecutive Teams Manage (trategicThemes
– Testing 6ypotheses, .dapting, and!earning
The Ingredients of Highly Successful BalancedScorecard Programs
S)A+(@
1!ecutive
'eadership
&ormulate&ormulate
-avigate-avigate%ommunicate%ommunicate
+$ecute+$ecute
' e a d e
r s h i
p f r o
m T o p
S t r a t e g y 0 s 1
v e r y o n e 6 s
7 o b
4 n l o c k . i d d
e n / s s e t s
S t r a t e g y : /
"
o n t i n u o u s
% r o
c e s s
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 16/261/© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
A Good Balanced Scorecard Tells the Storyof Your Strategy
• 1very measure is part of a chain of cause and effect linkages
• / balance e!ists between outcome measures and the
performance drivers or desired outcomes
• 1very measure is part of a chain of cause and effect linkages
• / balance e!ists between outcome measures and the
performance drivers or desired outcomes
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 17/2610© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
The Problem: Most of Today’s Feedback SystemsAre “Controls” Oriented
%orrectionApplied
arianceDetected
Management
&eed#ack %ontrol 'oop
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 18/261© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
corrections result
input output
PioneerGs 2alanced Scorecard
Strategic MeasuresStrategic #Jectives
#inancially Strong
Delight the "onsumer
,in-,in Relationship
Safe ( Reliable
"ompetitive Supplier
)ood 3eighbor
8uality
2otivated ( %repared
Return on "apital 1mployed
2ystery Shopper Rating
Dealer 9 %ioneer )ross %rofit Split
2anufacturing Reliability 0nde!
Days /way from ,ork Rate
'aid Down "ost vs Best "ompetitiveRatable Supply
1nvironmental 0nde!
8uality 0nde!
Strategic "ompetency /vailability
& I - A - % I A '
% B S "
I - " + ) - A '
' (
Performance
Strategic Learning – Some Basic Concepts…
)eplacing the #udget with the 2alanced Scorecard is a step inthe right directionK
It creates strategic focus #ut not strategic learning
0nitiatives ( %rograms
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 19/2616© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Strategic Feedback Creates Strategic Learning
PioneerGs 2alanced Scorecard
Strategic MeasuresStrategic #Jectives
#inancially Strong
Delight the "onsumer
,in-,in Relationship
Safe ( Reliable
"ompetitive Supplier
)ood 3eighbor
8uality
2otivated ( %repared
Return on "apital 1mployed
2ystery Shopper Rating
Dealer 9 %ioneer )ross %rofit Split
2anufacturing Reliability 0nde!
Days /way from ,ork Rate
'aid Down "ost vs Best "ompetitiveRatable Supply
1nvironmental 0nde!
8uality 0nde!
Strategic "ompetency /vailability
& I - A - % I A '
% B S "
I - " + ) - A '
' (
Performance
0nitiatives ( %rograms
0mproveReturns
0mprove&perating1fficiencyBroadenRevenue
2i!
0ncrease"ustomer"onfidencein&ur #inancial
/dvice
0ncrease"ustomer SatisfactionThrough
Superior 1!ecution
0ncrease1mployee%roductivity
/ccesstoStrategic0nformation
DevelopStrategicSkills
/lign%ersonal)oals
Financial Perspective
Customer Perspective
Internal Perspective
Learning Perspective
"ross-Sellthe%roduct'ine
Shiftto/ppropriate"hannel
%rovideRapidResponse
Develop3ew%roducts 2inimize%roblems
4nderstand"ustomerSegments
strategic learning
loop
operational control loop
The Strategy
T.1
2/3/)1213T
211T03)
;Team %roblemSolving<
results
dialog
update
the
strategy
reallocate
priorities
03S0).T
./R=1ST03)
;Testing hypothesesand capturing
learning<
#&''&,-4%
/"T0&3
;"losing the loop<
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 20/26
24© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
A New Structure for Corporate Governance– Executive Team TakesResponsibility for Managing the Strategic Cross-Functional Themes
2oard of Directors
%+
%ase StudyEelecomm
-ew2usiness
(rowth
2usinessProcess%ouncil
ProfessionalDevelopment)oundta#le
StrategicManagement
System
%ommercialServices
)etailServices
% %&StrategicPlanning
uman)esources
(trategic Themes
Traditional 0rganization 7nits
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 21/26
21© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
3F 'eadership &rom theop
– -reate the -limate for -hange
– -reate a -ommon &ocus for -hange .ctivities
– ationalize and .lign the 0rganization
5F Bnlock and &ocus iddenAssets
– eengineer +or 1rocesses
– -reate 2no)ledge (haring 3et)ors
>F Make Strategy +veryoneGsHo#
– -omprehensive -ommunication to -reate .)areness
– .lign 4oals and Incentives
– Integrate 'udgeting )ith (trategic 1lanning
– .lign esources and Initiatives
<F Make Strategy a%ontinuous Process
– (trategic &eedbac That 5ncourages!earning
– 5%ecutive Teams Manage (trategicThemes
– Testing 6ypotheses, .dapting, and!earning
The Ingredients of Highly Successful BalancedScorecard Programs
S)A+(@
1!ecutive
'eadership
&ormulate&ormulate
-avigate-avigate%ommunicate%ommunicate
+$ecute+$ecute
' e a
d e r s h i
p f r o
m T o p
S t r a t e g y 0 s 1
v e r y o n e 6 s
7 o
b
4 n l o c k . i d d
e n / s s e t s
S t r a t e g y : /
"
o n t i n u o u s
% r o
c e s s
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 22/26
22© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Not all Environments are Appropriate for a BalancedScorecard
•2alanced Scorecard must #e driven from the topE
– %+/% as sponsor
– +$ecutive leadership team commitment
•A clear sense of purpose is reLuired toE
– Drive change
– %larify and gain consensus a#out strategy
– 2uild a senior e$ecutive team
– &ocus the organi1ationE align programs and investments
– Integrate cross0functionally
– +ducate and empower the organi1ation
•he dynamics of the senior e$ecutive team will determine whetherthe 2alanced Scorecard #ecomes a strategic management system
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 23/26
23© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Key Pitfalls to Avoid
• Middle management task force
• -ot driven #y senior e$ecutiveteam
• nly one or a few individualsinvolved
• oo long a developmentprocess allowing the !#est to#e the enemy of the !goodN
• Delay introduction #ecause ofmissing measurements
• Static not dynamic process
• reating the 2S% as an +IS
• Measurement to controlO not tocommunicate
• Management dictating actionsvsF employee improvisation toachieve desired outcomes
• &or management only, not
shared with all employees
Process Philosophy
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 24/26
2© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
,-. /+&.# $&O*.&*# "'."., $1$,."
Significant results can #e achieve in relativel" short perios of time$$$
Implement a framework to align and focus theorgani1ation from top to #ottom on its strategy
Identify the related key change initiatives reLuiredto reali1e the strategy and mo#ili1e theorgani1ation
%reate feed#ack processes at all levels to evaluateprogress against strategy, monitor and manageissues and priorities, and measure performanceand contri#ution to the #usinessF
'++)A(+
'+A)-I-(
S)A+(@
A'I(-M+-
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 25/26
2.© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Balanced Scorecard References
Book: The 'alanced (corecard8 Measures that 9rive1erformance
.BR /rticles >7an-#eb ?@A* Sept-&ct ?@* 7an-#eb ?@C
"ases: >2obil "hemical Bank "harlotte "itibank
,ells #argo=ideos: 2easuring "orporate %erformance
"D-R&2 Simulation: ;Balancing Eour "orporate Scorecard<
•%hone: >FGG CCF-CHFG or >CIH J@C-IJJ@
•#a!: >CIH J@K-C@FK
•0nternet: wwwhbspharvardedu
7/24/2019 Balance Scored Card
http://slidepdf.com/reader/full/balance-scored-card 26/26
For Further Information
wwwF#scolFcom
elE BSAN 9=3F>84F5959
%esearchPu#lications
etworking Conferences
Training
Implementation
'isit (ur )e#site
ur MissionE
“To facilitate the )orld)ide
a)areness, use, enhancement
and integrity of the 'alanced(corecard as a valueadded
management process”