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Overview The Balanced Scorecard was introduced in 1992 by Kaplan & Norton and was one of several similar type balanced scorecards concepts put forward at the time. The Kaplan & Norton model is certainly the most famous and is now synonymous with the Balanced Scorecard. The Balanced Scorecard provides an Enterprise view of an organizations overall performance by integrating Financial measures with other key performance indicators around Customer satisfaction, Internal business processes and Organizational growth, learning and innovation. The BSC translates strategy into action- rapidly, measurably, at all levels of the enterprise by aligning strategy with the 4 areas above in a framework for managing change. Thousands of organizations worldwide have implemented Balanced Scorecards to boost performance and achieve results. The Gartner Group estimates that at least 40% of the Fortune 1000 will have implemented a Balanced scorecard by the end of the year. While Fortune magazine reports that 9 out of 10 companies fail to execute their strategies, Balanced Scorecard users are not only executing their strategies, but are doing it fast (2 years). At present Balanced Scorecards are being used by larger organizations, however Performance Track Ltd will use the BSC methodology as core to their Value Business product in the SME market place. The BSC is an aid in creating a “balance” among various factors, which share a view of the organization’s strategy for its future development. The BSC links short term operational control to long-term vision & strategy by focusing on a few critical Key Performance Indicators in target areas and forcing to control & monitor day -to-day operations as they affect development tomorrow. For each perspective, we formulate strategic aims, measures, specific goals, and action plans. (See figure 1 & 3.0).  Figure 1 Details Businesses competing in the information age can no longer be measured in the short run by the traditional financial accounting model. This model developed for the industrial age measures events of the past not the investments in the capabilities that provide value for the future. The Balanced Scorecard is a framework for integrating measures derived from strategy. While retaining financial measures of past performance, the Balanced Scorecard introduces the drivers of future financial performance. (Figure 2) The drivers (customer, internal business process, learning & growth perspectives) are derived from the organization’s strategy translated into objectives and measures.  Figure 2 (Some companies find it more preferable to split the Learning & Growth perspective into 2 perspectives: Human resources and Development) The Balanced Scorecard is more than a measurement system it can be used as an organizing framework for their management processes. The real power of the Balanced Scorecard is when it is transformed from a measurement system to a management system. It fills the void that exists in most management systems – the lack of a systematic process to implement and obtain feedback about strategy. Measurement Matters: “ If you can’t measure it, you can’t manage it”. If companies are to survive/prosper in the information age they must use measurements and management systems derived from their strategies and capabilities. Unfortunately many organizations espouse strategies about customer relationships, core competencies, and organizational capabilities while motivating and measuring performance only with financial measures. Financial Perspective The BSC retains the financial perspective since financial measures are valuable in summarizing the readily measurable economic consequences of actions already taken. They indicate whether a company’s strategy, implementation and execution are contributing to the bottom line. The financial measures tend to be profit related (by operating income), return on capital employed (ROCE or EVA) and Sales growth or generation of cash flow. Customer Perspective Identifies the customer and market segment in which the business will compete and measures performance in these targeted segments. The perspective typically includes several core/generic measures like customer satisfaction, customer retention & acquisition and market share. The perspective should also include specific measures of value proposition in the specific market/customer i.e. lead-time, on time delivery if applicable. Internal Business Process Perspective The Internal perspective identifies the critical internal processes in which the organization must excel. These processes enable the business to:
The internal measures focus on the processes that have the greatest impact on customer satisfaction and financial objectives. The inclusion of innovation measures in this perspective also gives the organization drivers of long-term financial success as well as short-term operational measures. Learning & Growth Perspective Learning and Growth perspective identifies the infrastructure that the organization must build to create long-term growth and improvement. Businesses are unlikely to be able to meet their long-term targets for customers and internal processes using today’s technologies and capabilities. Also intense global competition requires companies continually to deliver value to customers and shareholders. Learning and Growth comes from people, systems and organizational procedures. The financial, customer, and internal perspectives will reveal gaps in the capabilities of people, systems and procedures. To close these gaps businesses will have to invest in reskilling employees, enhancing IT systems and aligning organizational procedures. Measures include: Employee satisfaction, employee retention, system availability & “front line” customer information, Alignment of employee incentives with overall organization success factors etc. The best Balanced Scorecards consist of a series of objectives and measures with linkages incorporating both cause-and-effect relationships and a mixture of outcome measures and performance drivers. Cause-and-Effect Relationships A strategy is a set of hypotheses about cause and effect. The chain of cause-and- effect should pervade all four perspectives of the Balanced Scorecard therefore a properly constructed Balanced Scorecard should tell the story of the company’s strategy. Performance Drivers A good Balanced Scorecard should also have a mix of outcome measures (lagging indicators) and performance drivers (leading indicators). Outcome measures without performance drivers do not communicate how the outcomes are to be achieved or give an early indication about whether the strategy is being implemented successfully. Conversely performance drivers without outcome measures (may achieve short term operational improvements) fail to reveal whether operational improvements have translated into expanded business with enhanced financial performance. Balanced Scorecard Use The Balanced Scorecard can be used to:
 Figure 3
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