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Performance Management System

Notes organization on what must be done to create breakthrough performance. BSC was introduced in
1992 by Dr. Robert Kaplan and David Nortan and has been successfully adopted by numerous
companies worldwide.
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 Measure

The scorecard seeks to measure a business from the following perspectives:
1. Financial perspective: Measures refl ecting 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 and External customers.

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 satisfi ed 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.

Example: The time spent prospecting new customers, number of units that
required rework or process cost.

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