The Balanced Scorecard Approach

Limitations of Financial Indicators Financial indicators are very important in business evaluation. But they are not enough! History oriented Do not suggest strategies and methods for development Do not timely reflect changes Do not capture the intangible aspects of the firm (values, culture, etc.)

The Balanced Scorecard Professors Kaplan and Norton, Harvard University, first published in 1992 The central idea is that business evaluation and development needs to base on different perspectives

The Balanced Scorecard A management system that is based on indicators of different perspectives Four perspectives: Customer Finance Internal Growth and development A long-term development requires a balance between these perspectives

The Balanced Scorecard Financial Perspective Customer Perspective Internal Perspective Learning Perspective

Applying the Balanced Scorecard From individual to team and organizational levels For each perspective: Goals Measures

Example of a Balanced Scorecard Choosing objectives Identifying appropriate measures Balancing different perspectives in setting objectives (indicators)

Special Notes The four objectives and indicators of the perspectives should relate to and reinforce each other Good combination of generic outcomes (e.g., customer satisfaction) and performance driver (e.g., short time delivery) Ultimately, causal paths from all measures on a Scorecard should be linked to financial objectives Balanced Scorecard only contains strategic measures (not diagnostic measures)

Samsung Case Applying BSC to evaluate how well Samsung is doing, based on the article Identify key objectives, measures, and indicators for Samsung in order to resolve the weaknesses