Balanced Scorecard for the Automotive Industry

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Balanced scorecard for the automotive industry


1. Introduction
2. Balanced Score Card development
3. Balanced Score Card in the automotive industry
4.1. Learning and growth perspective
4.2. Financial perspective
4.3. Customer perspective
4.4. Internal business process perspective
4. Summary and conclusions
5. References

1. Introduction
“If you cannot measure it, you cannot manage it.” (Drucker, 1939) But which data to measure and what targets to formulate, is the question many accountants ask themselves. Back in the early 90s, David Norton and Robert Kaplan developed the balanced scorecard approach to compensate for shortcomings they perceived in using only financial metrics to judge corporate performance. They recognized that in this new economy it was also necessary to value intangible assets (Kaplan, Norton, 1996). Therefore, they advised companies to measure non-financial factors as quality and customer satisfaction which by then were still somehow esoteric. According to Kaplan and Norton, “The Balanced Scorecard is a framework, that incorporates all quantitative and abstract measures of true importance to the enterprise and provides managers with the instrumentation they need to navigate to future competitive success” (Kaplan, Norton 2004). Kaplan and Norton often compared their approach for managing a company to that of pilots viewing their instrument panels in an airplane cockpit: both have a need to monitor various aspects of their working environment (Kaplan, Norton, 1996). They were convinced that long-term success was not achieved by short and midterm achievement of financial goals only- meaning that a primary focus on solely financial Key Performance Indicators (KPI’s) was not a promising strategy. Like the name “Balanced” already indicates, several dimensions are taken into account and put into relationship. In the BSC these dimensions refer for example to: * external oriented data (for investors and customers) and internal control factors (for critical operational processes, innovation, growth) * hard and soft facts

* strategic performance indicators (lagging indicators) and performance drivers (leading indicators) * past and future oriented indicators
* generic (industry related) and (company) specific KPI’s The term “Scorecard” has its origin in sports like golf, where it is used to monitor the degree of target achievement. The general Balanced Score Card looks at the company’s business performance from four different perspectives: * Financial perspective

* Customer perspective
* Internal business processes perspective
* Learning and growth perspective.
Flowingly, the challenge of designing a four-dimensional score card with balancing KPI’s will be described in a four step process.

2. BSC development: 4 Step Design
First step: Translate the vision into operational goals
The Balanced Scorecard helps managers to focus on strategic issues and the implementation of strategy. It is important to remember that the Balanced Scorecard itself has no role in the formation of strategy and in fact is derived from it. These dependencies are illustrated in the breakdown of corporate mission to strategic management systems and measures in figure number one.

Figure nb.1: Link of mission, strategy and BSC (Wordpress, 2009)

Second step: Define KPI’s, targets and measures
Choosing the right KPI’s is reliant upon having a good understanding of what is important to the organization. ‘What is important’ is as individual for a company as the business itself. In selecting KPI’s managers should focus on four to seven connected indicators per...
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