BALANCED SCORECARD

Presented by-

PayalPratibha VermaRajan Chhangani

MBA 2nd Sem. JIET-SOM

CONTENTS Introduction

Definition

Balanced Scorecard as Performance Measure

Features

Purpose

Perspectives

Importance

INTRODUCTION

Balanced Scorecard is a comprehensive performance measurement framework that translates an organization’s strategy into clear objectives, measures, targets and initiative. It represents a management system that can motivate breakthrough improvement in critical areas of product, process, customer and market development. It integrates the measures used across the organization and helps it to grapple with the intangible or intellectual assets.

DEFINITION

According to Kaplan and Norton, the innovation of the balanced scorecard as, “The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, and adequate story for industrial age companies for which investments in long-term capabilities and customer relationship were not critical for success.

According to David Chaudron, “Using the balanced scorecard to combine viewpoints of Company success” defines Balanced Scorecard as follows:

A way of measuring organizational, business unit or department success.

A way of balancing long-term and short-term actions. A way of balancing different measures of success such as –

Financial, Customer, Internal Operations and HR system and Development.

A way of tying strategy to measures to action.

AS PERFORMANCE MEASUREArmstrong and Baron have laid down many criteria regarding performance measures that are of the opinion that performance measures should:

Be related to the strategic goals. Be relevant to the objectives and accountabilities of the teams

and individual concerned. Focus on measurable outputs, accomplishments and behaviours

that can distinctly be defined. Highlight the data that will be available on the basis of

measurement. Be verifiable by providing information that will confirm the

extent to which expectations have been met. Be as precise. Provide a perfect basis for feedback and action. Be elaborated, covering all the important aspects of

performance, so that a number of measures are available.

FEATURES It is a management tool which focuses on both

financial and non-financial goals of an organisation.

It includes performance measures of four perspectives – financial, customer, internal business processes and learning and growth(innovation).

Balanced scorecard focuses on the link between business processes, decisions and results.

Balanced Scorecard is considered as a device to guide strategy, formulation, implementation and communication.

Balanced Scorecard helps in tracking the performance and providing quick feedback for control and evaluation.

PURPOSE

Clarify and update strategy.

Communicate strategy throughout the company.

Align unit and individual goals with strategy.

Link strategic objectives to long-term and annual budgets.

Identify and align strategic initiatives.

Conduct periodic performance reviews to learn about and improve strategy.

PERSPECTIVES

Four Perspectives of Balanced Scorecard:

The Financial perspective

The customer perspective

The process perspective

The infrastructure (learning and growth) perspective.

IMPORTANCE Consensus on the strategy at executive level

Communicates strategy to the organization

Translates strategy into meaningful goals

Employees identify themselves with goals

Personal targets linked to strategy

Processes focus to achieve strategic goals

Periodic reporting of status of strategic goals

Drives investment/budget decisions

Thank You