10. Balanced Scorecard MBA © Rajiv D. Banker
Do not reproduce without permission
MBA

11. Balanced Scorecard: Linking Strategy to Performance
Financial Executives Research Foundation
Only 29% of all chief financial officers are satisfied with their performance measures.
55% of balanced scorecard users are satisfied with their performance measures.
© Rajiv D. Banker

12. Chicken Efficiency
What behavior is induced when store performance is measured as the ratio of chicken sold to chicken used?
© Rajiv D. Banker

13. What Makes an Outcome a Good Performance Measure
SENSITIVITY: If the outcome changes a lot depending on the employee’s actions, then that outcome is a sensitive performance measure
PRECISION: If factors beyond the control of the employee do not much impact the outcome, then that outcome is a precise performance measure
CONGRUENCE: If the outcome accurately reflects relative priorities of the organization’s multiple objectives, then that outcome is a congruent performance measure.
© Rajiv D. Banker

14. Sensitivity Precision
Congruence
Sensitivity Precision
Performance Measure for a City Police Department
© Rajiv D. Banker

15. The Balanced Scorecard…..
Provides a method for the organization to systematically develop a comprehensive system of planning and control. Kaplan and Norton, Harvard Business Review, 1992
© Rajiv D. Banker

16. The Balanced Scorecard
Financial Perspective
How do we look to our owners and investors?
Customer Perspective
Internal Processes Perspective ?
How do we look to our customers?
How efficient and effective are the critical internal processes?
Organizational Learning Perspective
Are we able to sustain innovation and improvement?
© Rajiv D. Banker

17. Balance in the Scorecard
Balance between the four different perspectives of the scorecard
Balance between financial and non-financial measures
Balance between short-term and long-term objectives
Balance between stakeholders (Investors, Customers, Employees, Society)
© Rajiv D. Banker

18. Drivers of Satisfaction with Performance Measures
Our performance measures help understand levers for successful implementation of strategy
In our organization, linkages between
internal processes, customer satisfaction
and financial performance are made explicit
Our mission and strategy are translated into measurable objectives at the operating level
Satisfied Dissatisfied
82%
46%
74%
17%
82%
40%
© Rajiv D. Banker

19. The Balanced Scorecard…
Is a performance measurement system that translates an organization’s strategy into clear objectives, measures, targets, and initiatives. Kaplan and Norton, Harvard Business Review, 1996
© Rajiv D. Banker

20. Strategic Linkages Financial Perspective
How do we look to our owners and investors?
Customer Perspective
Internal Processes Perspective
Strategic Vision
How do we look to our customers?
How efficient and effective are the critical internal processes?
Organizational Learning Perspective
Are we able to sustain innovation and improvement?
© Rajiv D. Banker

21. The Vertical Scorecard
Financial
Perspective
Customer
Perspective
Internal Processes
Perspective
Organizational Learning
Perspective
© Rajiv D. Banker

22. Linking the Balanced Scorecard to Strategy
Return on
Investment
Financial
Customer Loyalty
Customer
On-time Delivery
Internal Processes
Process Quality
Process Cycle Time
Organizational Learning
Employee Skills
© Rajiv D. Banker

23. Cause and Effect Relationships
Return on Investment
Revenue growth
Customer Retention
Share of Wallet
Customer Satisfaction Survey
Customer Complaints and Returns
On-time delivery
Cycle Time
Yield, Variability
Employee Satisfaction
Employee Skills
Employee Teams
Employee Training
© Rajiv D. Banker

24. Performance Measurement System
“OK, I think I’ve got all the data I need.”
“Oops, looks like something bad has happened.”
Data
Information
Knowledge
Wisdom
Collect
Organize
Analyze
Manage
© Rajiv D. Banker

25. Kaizen (Continuous Improvement)

26. Kaizen (Continuous Improvement)
Japanese concept – not made redundant by the decline of the Japanese economy which may be due to other institutional factors!
Focus on gradual and continuous improvement
A whole business philosophy
Importance of EVERYONE buying into the concept and the vision

27. Kaizen Great attention paid to customer requirements and needs
Punctuality in all aspects – delivery, supply, manufacture, etc.

28. Kaizen
Efficient stock control methods help reduce costs and improve cash-flow
Leadership seen as vital. Ability to communicate a clear vision, take people along with the vision and to think about where the company needs to be in 5, 10, 15 and 20 years time

29. Kaizen
Flexible working practices and empowerment – help increase efficiency, reduce costs and improve motivation

30. Kaizen
Fundamental principles – often characterised as ‘lean production’ – reducing waste, zero defects, high quality control measures at all stages