Balance Scorecard

BALANCE SCORECARDPRESENTED BY, DEBJIT DAS,

SUBHAM KARMAKAR

DEFINITION

• The balance scorecard is a strategic planning and management system that is used extensively in business and industry, government and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications and monitor organization performance against strategic goals.

ABOUT BALANCE SCORECARD

Balance Scorecard is an example of a closed loop controller or cybernetic control applied to the management of the implementation of a strategy.

Balance Scorecard emerged as a performance management system, over a period of time it has come to be known as a strategy management system.

CHARACTERISTICS

The critical characteristics thet define a balanced scorecard are:• Its focus on the strategic agenda of the organization

concerned.• The selection of a small number of data items to monitor.• A mix of financial and non-fuinancial data items.

DIAGRAM OF BALANCE SCORECARD

THE ELEMENTS OF BALANCE SCORECARD

Three elements of balance scorecard, namely, • Measurement System,• Strategic Management,• Communication Tools

MEASUREMENT SYSTEM

Balance Scorecard is also used as Measurement system of a organization.

MEASUREMENT SYSTEM

The balance scorecard enables an organization to translate its mission / strategies into objectives and measured organized into four perspective/dimensions:

1. Financial Perspective, 2. Customers Perspective, 3. Internal business process, 4.Learning and growth.

FINANCIAL PERSPECTIVE

• Financial measures are retained in the balanced scorecard framework as a valuable tool.• It is use for summarising the readily measureable

economic consequences.

FINANCIAL PERSPECTIVE (CONTINUED...)

• They are typically related to profit. • Balance Scorecard measures in the financial perspective included : 1. Income measures the terms of operating income, gross margin. 2. Revenue and cost measures namely revenue growth from new

product. 3. Income and investment measures in terms of return on

investment.

CUSTOMERS PERSPECTIVE

In the customers perspective two questions are critical 1. who are target customers ? 2. What is value proposition in serving them ?

INTERNAL BUSINESS PROCESS

• It identifies the key or critical processes in which the organization should excel.• They would enable the business units to: 1. Deliver the value proposition that will retain

customers in the targeted market segment. 2. Satisfy shareholders expectation of excellent

financial result.

LEARNING & GROWTH PERSPECTIVE

• It identifies the capabilities the organization must excel so as to achieve superior internal processes that, in turn,create value for customers and shareholders.• The measures in this perspective are really the enablers of the

other perspectives.• The 3 principal sources of organizational learning and growth

are: 1. people, 2. systems, 3. procedures.

STRATEGIC MANAGEMENT

• Strategy management is a performance evaluation measure.• Balance scorecard framework acts as a critical tool in

aligning short-term actions with their strategy.• It alleviates many of the issues associated with effective

strategy implementation, namely: 1. Vision barrier, 2. People barrier, 3. Resource barrier, 4. Management barrier.

COMMUNICATION TOOLS

• Sharing scorecard results throughout the organization gives the employees the opportunity to discuss the assumptions underlying the strategy.• Understanding the strategy can unlock many hidden

capacities of the organization as employees know how they can contribute in the process.

MERITS OF BALANCE SCORECARD

• It helps to communicate the strategy of organization to all members.• It motivates managers to take actions that results in

improved financial performance.• It limits the number of measures to the most critical

ones.

PITFALLS OF BALANCE SCORECARD

• Cost benefit considerations should be central element in designing a balance scorecard.• Managers tend to focus on what their performance is

measured by.

POPULARITY

• In 1997, Kurtzman found that 64% of companies followed the strategies of Balance Scorecard. • It is also implemented by govt. agencies, military

units, business units and corporations as a whole.

THANK YOUSubmitted to, Dr. Neeti Mathur

Submitted by, Debjit Das (UG/0101006/2015) Subham Karmakar (UG/0101029/2015)

ADAMAS UNIVERSITY