The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.
A Strategy-Focused Organization translates strategy into action when it organizes a “strategy map” framework of cause and effect between its strategic objectives, then operationalizes these objectives with measures which, considered as a group, comprise a Balanced Scorecard. This “hypothesis” about how the strategy will create value involves objectives drawn from, at a minimum, four perspectives: Financial, Customer, Internal Process, and Learning and Growth.
Corporate Performance Management, sometimes referred to as Business or Enterprise Performance Management encompasses the relationships and processes that exist between strategic planning on the one hand and the tactical and day-to-day implementation of those plans on the other. These are related through measurement and monitoring and incorporate feedback from one level to another, both in financial and operational terms. BSC therefore incorporates both ‘hard’ measures such as sales, profits, budgets and other data; as well as ‘soft’ measures like competencies and skills that enable the fulfillment of tasks that support both short and log-term goals. BSC is the suite of applications that enable all of these elements to be tied to together to support the corporate vision in a holistic manner.
In technical terms, BSC as a whole consists of Financial Performance Management (budgeting, forecasting, planning, consolidation and so forth), Operational Performance Management, analytic applications, scorecarding and dashboards, and business intelligence capabilities though, arguably, it could also be extended to include such things as business activity monitoring, and these functions are supported by a variety of capabilities including business modelling, metric management, and guided analysis amongst others. In essence, all of these functions should come together to provide a single cohesive whole, though companies implementing BSC should be able to do so in an incremental fashion.
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Regarding organizations using BSC in mumbai,
I am not aware of, but it may be useful to
ring HR DEPARTMENTS in corporations like
LARSEN & TOUBRO, HINDUSTAN LEVER ETC ETC
and seek an appointment to see them.
hope this is useful to you
As rightly said by LEO, BSC helps the cos to set their Vision and Mission in a balanced and unbiased way. The latest trend in organizations is to implement Balanced Score Card (BSC) or the SMART Principle in the system for the objective of setting up individual tasks and targets.
BSC incorporates four balanced views. They are:
FINANCIAL- How well do we look to our stakeholders.
CUSTOMER- How well do we satisfy our Internal & External customer’s needs.
INTERNAL BUSINESS PROCESS- How well do we perform at key Internal Processes.
LEARNING & GROWTH- Are we able to sustain Innovation, Change & Continuous Improvement-
Hope this helps
In 1992, Robert S. Kaplan and David P. Norton began publicizing the balanced scorecard through a series of journal articles and then in the 1996 book The Balanced Scorecard. Since the original concept was introduced, balanced scorecards have become a fertile field of theory and research, and many practitioners have diverted from the original Kaplan & Norton articles. Kaplan & Norton themselves revisited the scorecard with the benefit of a decade's experience since the original article.
Implementing the scorecard typically includes four processes:
1. Translating the vision into operational goals;
2. Communicate the vision and link it to individual performance;
3. Business planning;
4. Feedback and learning and adjusting the strategy accordingly.
Actual usage of the balanced scorecard
Kaplan and Norton found that companies are using the scorecard to:
• Drive strategy execution
• Clarify strategy and make strategy operational
• Identify and align strategic initiatives
• Link budget with strategy
• Align the organization with strategy
• Conduct periodic strategic performance reviews to learn about and improve strategy.
In 1997, Kurtzman found that 64 percent of the companies questioned were measuring performance from a number of perspectives in a similar way to the balanced scorecard.
Balanced scorecards have been implemented by government agencies, military units, corporate units and corporations as a whole, nonprofits, and schools; many sample scorecards can be found via Web searches, though adapting one organization's scorecard to another is generally not advised by theorists, who believe that much of the benefit of the scorecard comes from the implementation method
The four perspectives
The grouping of performance measures in general categories (perspectives) is seen to aid in the gathering and selection of the appropriate performance measures for the enterprise. Four general perspectives have been proposed by the BSC. These are:
The financial perspective examines if the company’s implementation and execution of its strategy are contributing to the bottom-line improvement of the company. It represents the long-term strategic objectives of the organization and thus it incorporates the tangible outcomes of the strategy in traditional financial terms. The three possible stages as described by Kaplan and Norton (1996) are rapid growth, sustain and harvest. Financial objectives and measures for the growth stage will stem from the development and growth of the organization which will lead to increased sales volumes, acquisition of new customers, growth in revenues etc. The sustain stage on the other hand will be characterized by measures that evaluate the effectiveness of the organization to manage its operations and costs, by calculating the return on investment, the return on capital employed, etc. Finally, the harvest stage will be based on cash flow analysis with measures such as payback periods and revenue volume. Some of the most common financial measures that are incorporated in the financial perspective are EVA, revenue growth, costs, profit margins, cash flow, net operating income etc.
The customer perspective defines the value proposition that the organization will apply in order to satisfy customers and thus generate more sales to the most desired (i.e. the most profitable) customer groups. The measures that are selected for the customer perspective should measure both the value that is delivered to the customer (value position) which may involve time, quality, performance and service and cost and the outcomes that come as a result of this value proposition (e.g., customer satisfaction, market share). The value proposition can be centered on one of the three: operational excellence, customer intimacy or product leadership, while maintaining threshold levels at the other two.
The internal process perspective is concerned with the processes that create and deliver the customer value proposition. It focuses on all the activities and key processes required in order for the company to excel at providing the value expected by the customers both productively and efficiently. These can include both short-term and long-term objectives as well as incorporating innovative process development in order to stimulate improvement. In order to identify the measures that correspond to the internal process perspective, Kaplan and Norton propose using certain clusters that group similar value creating processes in an organization. The clusters for the internal process perspective are operations management (by improving asset utilization, supply chain management, etc), customer management (by expanding and deepening relations), innovation (by new products and services) and regulatory & social (by establishing good relations with the external stakeholders).
The learning and growth perspective is the foundation of any strategy and focuses on the intangible assets of an organization, mainly on the internal skills and capabilities that are required to support the value-creating internal processes. The learning and growth perspective is concerned with the jobs (human capital), the systems (information capital), and the climate (organization capital) of the enterprise. These three factors relate to what Kaplan and Norton claim is the infrastructure that is needed in order to enable ambitious objectives in the other three perspectives to be achieved. This of course will be in the long term, since an improvement in the learning and growth perspective will require certain expenditures that may decrease short-term financial results, whilst contributing to long-term success.
Key performance indicators
According to each perspective of the balanced scorecard there are a number of KPIs that can be used such as:
o Cash flow
o Financial Result
o Return on capital employed
o Return on equity
o Delivery Performance to Customer - by Date
o Delivery Performance to Customer - by Quantity
o Customer satisfaction rate
o Customer retention
• Internal Business Processes
o Number of Activities
o Opportunity Success Rate
o Accident Ratios
o Defect Rates
• Learning & Growth
o Investment Rate
o Illness rate
o Internal Promotions %
o Employee Turnover
o Gender/Racial Ratios
Further lists of general and industry specific KPIs can be found in the case studies and methodological articles and books presented in the references section.
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