1. Overview of the Balanced Scorecard
Howard Rohm Founder & Director, U.S. Foundation for Performance Measurement President, Howard Rohm Consultants, LLC

2. © U.S. Foundation for Performance Measurement
“It’s about management and strategy first, and measurement and technology second.”
It is important for us to remember that the balanced scorecard is a management system that is supported by measures of performance. The measures help us manage, test our strategies, and evaluate results and accomplishments.
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3. The Evolution Of Measurement
Balanced Scorecard
Six Sigma
Shareholder
Value
Competencies/
Capabilities
15th Century
19th Century
Late
20th Century
Business Process
Reengineering
Customer
Satisfaction
Operational
Improvement
Competitive
Advantage
Comparative
Benchmarking
Management
Accounting
Double-entry
Bookkeeping
Financial
Strategic
Operational
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4. Benefits of Implementing a BSC
Accelerates behavioral and cultural changes
Shortens implementation cycle for strategy
Facilitates communication among managers, employees, and stakeholders
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5. © U.S. Foundation for Performance Measurement
BSC History
Nolan Norton Institute study
David Norton, study leader
Robert Kaplan, academic consultant from Harvard
Harvard Business Review articles
Jan-Feb 1992: balanced performance measures
Sep-Oct 1993: tie to strategic goals and objectives
Jan-Feb 1996: strategic management system
BSC soon expected to be used by 40% of Fortune companies; increasingly being adopted by Federal agencies, by state and local organizations, and internationally.
The balanced scorecard evolved from pioneering work in the early 1990s. The Nolan Norton Institute sponsored a study involving a dozen companies, on measuring performance in the organization of the future. The study was motivated by the belief that existing approaches to measuring performance, relying mostly on financial accounting measures, were becoming obsolete. The study included companies in manufacturing, service, heavy industry, and technology.
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6. © U.S. Foundation for Performance Measurement
Meeting the Challenge with the Balanced Scorecard
The balanced scorecard is a performance management system that
enables an organization to establish, accomplish, and measure the success of its strategies
is used to evaluate an organization’s impact from several perspectives, such as customers, employees, internal business processes, and financial results
allows effective communication of strategy and performance information throughout the organization.
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7. Mission Perspectives Measures STRATEGY Balanced Scorecard Terms Themes
Vision
Customers
Mission
Goals
Perspectives
Themes
STRATEGY
Objectives
Performance Drivers
Critical Success Factors
KPI
Measures
Thresholds
Targets
Initiatives
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8. © U.S. Foundation for Performance Measurement
Advantages of the BSC
Emphasizes achieving results and implementing strategy
Focuses on high-impact performance measures
Is easy to use and economical to maintain
Focuses on customers
Empowers process owners to make improvements
Allows comparisons to best-in-class performance (benchmarking)
Bridges the gap among strategy, development, formulation, and implementation
Can drive cultural change in an organization
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9. Why Use a BSC? Addressing “Burning Platforms”
Losing competitive position
New technological advances
Changing labor markets
Employee shifts/Downsizing
Government management reforms
Examples of situations that drive the need for organizational change and refocus include: competition, technology, labor markets, and management reform. Kaplan & Norton call these “burning platforms.”
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10. Why Use a BSC? Achieving Government Reform Objectives
Program priorities that match Congressional priorities
Demonstrated value of programs to the public
Meaningful performance measures (especially outcome measures) to gauge program success
Goals, strategies, and performance measures linked to annual budget requests
Resources and contract costs for each strategy
Interagency coordination, to eliminate waste
Logical connections among strategy, performance plans, and performance reports
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11. How Is a BSC Different from Other Performance Frameworks?
People use it.
It changes organizational behavior.
It covers whole organizations.
It puts a discipline and structure in place.
It ties strategies to budget.
It captures the value of the business.
It allows effective communications throughout the organization.
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12. Vision Mission Strategy
sssssssWhat Does a Completed Scorecard System Look Like?
Objective
Measure
Target
Initiative
Financial
Measure
Target
Initiative
Internal Business Process
Objective
Customer
Measure
Target
Initiative
Objective
Vision Mission Strategy
Measure
Target
Initiative
Objective
Learning & Growth
Adapted from Kaplan and Norton
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13. Vision Mission Strategy
What Questions Does a Scorecard System Answer?
Objective
Measure
Target
Initiative
Financial
To succeed financially, how should we appear to our owners?
Measure
Target
Initiative
Internal Business Process
Objective
Customer
Measure
Target
Initiative
Objective
Vision Mission Strategy
To satisfy our customers, at what business processes must we excel?
To achieve our vision, how should we appear to our customers?
Measure
Target
Initiative
Objective
Learning & Growth
To achieve our vision, how will we sustain our ability to learn and improve?
Adapted from Kaplan and Norton
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14. Meeting the Challenge with the Balanced Scorecard
Strategic Themes
Assessment
Evaluate & Improve
Perspectives & Objectives
Cascade
Strategic Map
Computerize & Communicate
Initiatives
Performance Measures

15. BSC Methodology—Nine Steps to Building & Implementing a BSC
Phase One: Building a Balanced Scorecard Performance System
Conducting an Organizational Assessment
Defining Strategic Themes
Choosing Perspectives and Developing Objectives
Developing a Strategic Map of the Organization
Defining Performance Measures
Developing Initiatives
Phase Two: Implementing the Balanced Scorecard
Computerizing and Communicating Performance Information
Cascading the Scorecard throughout the Organization
Using Scorecard Information to Evaluate and Improve Performance
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16. Performance Scorecard Toolkit™
Customer
Satisfaction Model
Who are our customers and how do we satisfy them?
Tree
Diagram
What do we need to do to produce successful outcomes?
“Why”
Model
What intermediate and end outcomes
does our work produce?
Cause-
Effect
What factors are associated with successful results?
Flow
Charting
What are the critical steps in the processes needed
to produce outputs and outcomes?
Performance
Information
Communication
How should I collect and communicate
performance information throughout the organization?
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17. Example: Strategic Mapping
Improve Operating Efficiency
Improve Returns
Broaden Revenue Mix
Financial
Customer
Internal Processes
Employees
Increase
Customer Satisfaction Through Superior Execution
Increase Customer Confidence in Our Advice
Cross-Sell the Product Line
Provide Rapid Response
Develop New Products
Understand Customer Segments
Minimize Problems
Shift to Appropriate Channel
Provide Access to Strategic Information
Develop Strategic Skills
Increase
Employee Productivity
Align Personal Goals
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18. © U.S. Foundation for Performance Measurement
Typical Performance Measures
Shareholder value
Investment
Asset utilization
Resource allocation
Profitability
Objective
Measure
Target
Initiative
Financial
Strategy
Measure
Target
Initiative
Internal Business Process
Objective
Customer
Measure
Target
Initiative
Objective
Value proposition
Retention
Service quality
Satisfaction
Production efficiency
Cost
Bottlenecks
Measure
Target
Initiative
Objective
Learning & Growth
Skills coverage
Innovation
Employee development
Capacity building
Knowledge transfer
Adapted from Kaplan and Norton
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19. Example: Linking Objectives, Measures, Targets, and Initiatives
What strategy must be achieved and what is critical to its success
How success will be measured and tracked
Performance
expectation
Key action programs required to achieve objectives
Objective
Measure
Target
Initiatives
Revenue mix
Customer
retention
% Revenue from
new products
Skill coverage
Sales Promotions
New Channel Marketing
Frequent Buyers’
Club
R & D Program
Customer Mailing
Custom Training
Knowledge Library
Broaden
revenue mix
Increase
customer
satisfaction
Develop new
products
Develop
strategic skills
10% Product A
40% Product B
50% Product C
95% % % %
90%
Financial
Customer
Internal
Learning & Growth
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20. Framework for Implementing a BSC
Formulating and
updating vision, mission, and
strategic themes
Collecting data, communicating information, and
linking/aligning
Providing feedback,
recognition,
and learning
Balanced
Scorecard
Implementing the scorecard integrates long-range strategic planning, operational budgeting, and employee and infrastructure activities. Four steps are required to accomplish this: Set stretch targets, identify and rationalize strategic initiatives, identify critical cross-business initiatives, and link to annual resource allocation and budgets.
Planning, target
setting, allocating resources, and
budgeting
Source: Kaplan and Norton
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21. Cascading Scorecards Support Strategy
Corporate
Business Units
Support Units
Team/
Individual
Vision
Mission
Strategy
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22. Align Strategy and Work Processes
Corporate
Strategic
Themes 1. 2. 3. .
Strategic Business Units
SBU1
SBU2
SBU XX X
Support Units
SU1
SU X
Teams/
Individuals
TI1
TI X
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23. Linking the BSC with Budget and Operations
Strategic Direction
Balanced Scorecard
Perspective
Measure
Target
Initiative
Objective
Planning
Budget Formulation & Costing
Output
Input
Process
Programs & Operations
Management
Adapted from: Balanced Scorecard Collaborative
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24. Challenges of Building and Implementing a BSC
Visions and strategies that are poorly defined and understood and not actionable
Strategies and goals that are not linked to performance drivers, measures, initiatives, and individual goals and incentives
Strategies that are not linked to resource allocation and budget
Measures that are set independently of a complete BSC system
Performance targets that are too high or too low
Feedback that is tactical rather than strategic
Lack of meaningful employee involvement
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25. © U.S. Foundation for Performance Measurement
Attributes of Good Scorecard Performance Systems
Management commitment—senior executive buy-in to change management philosophy and to adopt performance-based management principles.
Actionable strategies—realistic, "stretch" goals that are easily understood and workable.
Linked objectives—clear, cause-effect relationships among strategies, objectives, measures, initiatives, and resources.
Balanced measures—leading and lagging measures that help validate strategies and chart new directions.
Employee involvement—good communications that enable everyone to contribute to dynamic changes to meet customer requirements.
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26. Typical BSC Cycle: One Iteration
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27. © U.S. Foundation for Performance Measurement
Putting It All Together— A Nine-Piece Puzzle
Computerize
& Communicate
Assessment
Strategic
Mapping
Cascade
Strategic Themes
Measures
Perspectives
&
Objectives
Evaluate
&
Adjust
Initiatives
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28. © U.S. Foundation for Performance Measurement
Acknowledgements
Performance Drivers, Niles-Goram Olve, Jan Roy and Magnus Wetter, Wiley
The Strategy-Focused Organization, Robert Kaplan & David Norton, Harvard Business School Press
The Balanced Scorecard, Robert Kaplan & David Norton, Harvard Business School Press
Balanced Scorecard Functional Standards, The Balanced Scorecard Collaborative
City of Charlotte and Wells-Fargo Online Financial Services, Case Studies, Harvard Business School
Keeping Score, Mark Graham Brown, Quality Resources
How To Measure Performance: A Handbook of Techniques and Tools, Performance-Based Management Special Interest Group, U.S. Department of Energy
Various articles, Harvard Business Review
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