Page 268 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes

Notes What is Balanced Scorecard?
The Balanced Scorecard method is a strategic approach and performance management
system that enables the organisations to translate its vision and strategy into
implementation. The Balanced Scorecard is a conceptual framework for translating an
organization's vision into a set of performance indicators distributed among four
perspectives: Financial, Customer, Internal Business Processes, and Learning and Growth.
Indicators are maintained to measure an organization's progress toward achieving its
vision. Other indicators are maintained to measure the long term drivers of success.
Through this scorecard, an organization monitors both its current performance (finances,
customer satisfaction, and business process results) and its efforts to improve processes,
motivate and educate employees, and enhance information systems - its ability to learn
and improve. A Balanced Scorecard enables us to measure not just how we have been
doing, but also how well we are doing ("current indicators" and can expect to do in the
future ("leading indicators"). This in turn gives us a clear picture of reality.
The Balanced Scorecard is a way of:
1. Measuring organizational, business unit's or department's success

2. Balancing long-term and short-term actions
3. Balancing different measures of success
(a) Financial
(b) Customer

(c) Internal Operations
(d) Human Resource System & Development (learning and growth)
Four Kinds of Measures
The scorecard seeks to measure a business from the following perspectives:

1. Financial perspective: Measures reflecting financial performance, for example,
number of debtors, cash flow or return on investment. The financial performance of
an organization is fundamental to its success. Even non-profit organisations must
make the books balance. Financial figures suffer from two major drawbacks
2. Customer perspective: This perspective captures the ability of the organization to
provide quality goods and services, effective delivery, and overall customer
satisfaction for both Internal & External customers. For example, time taken to
process a phone call, results of customer surveys, number of complaints or
competitive rankings.

3. Business Process perspective: This perspective provides data regarding the internal
business results against measures that lead to financial success and satisfied
customers. To meet the organizational objectives and customers expectations,
organizations must identify the key business processes at which they must excel.
Key processes are monitored to ensure that outcomes are satisfactory. Internal
business processes are the mechanisms through which performance expectations
are achieved. For example, the time spent prospecting new customers, number of
units that required rework or process cost.
Contd...

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