Introduction to Balanced Scorecard An internal strategic management tool

1
Introduction to Balanced ScorecardAn internal
strategic management tool

• Professor Doug Cerf
• Donald Bren Graduate School of Environmental
  Science and Management
• Environmental Accounting Financial Management
  (ESM 284)
• Spring 2007

2
Introduction to Balanced Scorecard

• Developed by
• Robert Kaplan (Harvard) and David Norton
• early 90s..
• The balanced scorecard is a strategic management
  system (not only a measurement system)
• Internal assessment, improvement and reporting
  system
• Key is the link to the strategic plan
• System to turn strategy into action

3

• The balanced scorecard retains traditional
  financial measures. But financial measures tell
  the story of past events, an adequate story for
  industrial age companies for which investments in
  long-term capabilities and customer relationships
  were not critical for success. These financial
  measures are inadequate, however, for guiding and
  evaluating the journey that information age
  companies must make to create future value
  through investment in customers, suppliers,
  employees, processes, technology, and innovation.

Kaplan Norton
4

• Enables organizations to clarify their vision and
  strategy and translate them into action
• It provides feedback about both
• the internal business processes and
• external outcomes
• Continuous improvement of strategic performance
  and results.

5

• The balanced scorecard suggests that we view the
  organization from four perspectives
• The learning growth perspective
• The business process perspective
• The customer perspective
• The financial perspective
• and to develop metrics, collect data and analyze
  relative to each of these perspectives

6
(No Transcript)
7
Project Level Balanced Scorecard
8
Learning and Growth Perspective

• Development of the human resources
• This perspective supports the concept that people
  are a company's main resource and most valuable
  asset
• metrics defined for this perspective must measure
  various aspects of employee improvement, growth,
  and satisfaction.
• personnel training and improvement
• cultivation of corporate culture
• organizational development, including the
  nurturing of corporate experts, gurus, and
  mentors
• setting up of fast and efficient knowledge
  transfer infrastructure
• opening up of communication lines among personnel

9
Business Processes Perspective

• Internal business processes.
• These metrics, which measure various aspects
  (efficiency, speed, quality, etc.) of how well
  the company's products, services and internal
  support systems are produced or delivered

10
The customer perspective

• Focus on customer satisfaction. 
• Rigorous data analysis to understand the customer
• Difficult to reflect the true sentiment of the
  customer. 

11
Financial Perspective

• Indicates if the transformation of strategy leads
  to economic success
• Define the financial performance that the
  strategy is to achieve
• Revenue growth
• Cost reduction
• Cost reduction from energy efficiency
• Measures the effectiveness of the other
  perspectives

12
Characteristics of good metrics

• reflect the true present status of the company
  from many different perspectives
• provide constructive feedbacks to various company
  processes, leading to continuous improvement
• show trends in company performance over time,
  facilitating adjustments to changes
• quantify many things, making analyses more
  accurate and solutions more effective.

13
Close the loop

• once the metrics have been defined and
  implemented
• scorecard data becomes available,
• follow-through becomes imperative
• movements in the metrics must be analyzed to
  identify their causes.
• Causes that produce positive (negative) changes
  must be sustained or enhanced (eliminated)

14
Next step

• Expand to include sustainable balanced scorecard
• The Sustainability Balanced Scorecard Linking
  Sustainability Management to Business Strategy
  Steffan Schaltegger, Lunenburg, University
  Germany.