Balanced Scorecard: a Measure of the Key Elements of the Company

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BALANCED SCORECARD

The Balanced Scorecard is a measure of
the key elements of a company’s
strategy, ranging from continuous
improvement and partnerships, to team
work and innovation.
Organisations design their unique
balanced scorecard based upon their
unique constraints. A company’s
performance depends on how it
measures its performance.

Managers cannot afford to rely on either
financial or operational measures
exclusively.
No single measure provides a clear
performance target focusing on the
critical areas of a business. Thus there is
a need for balanced representation of
both financial and operational measures.

Kaplan and Norton have devised a balanced
scorecard- a set of measures that give top
managers a quick but comprehensive view of
the business. The balanced scorecard consists
of –
a)financial measures that measure the actions
already taken.
b)The scorecard also contains operational
measures such as customer satisfaction,
internal processes and the organisation’s
innovation and improvement activities.

The balanced scorecard can be
compared with dials and indicators in an
airline cockpit.
Pilots need detailed information of
many aspects of flight ( wind speed, level
of turbulence, height above the ground,
temperatures, etc. )for navigating and
flying an airplane.

These information is necessary to get an
idea of the current and predicted
environment..
Relying on an single measure can be
fatal.
Just like a pilot, a manager should be
able to view performance in several
areas at the same time.

Using a balanced scorecard, managers
can look at the business in terms of four
dimensions. The balanced scorecard
answers four basic questions-

1. HOW DO CUSTOMERS SEE US?
GOALS

MEASURES

New products Percentage of sales from new
products/proprietary products
Responsive
On-time delivery ( defined by
supply
customer)
Preferred
Share of key account’s
supplier
purchases
Customer
Number of co-operative
partnership
engineering efforts

2.WHAT MUST WE EXCEL AT?

GOALS

MEASURES

Technology capability

Manufacturing geometry vs.
competition
Manufacturing excellence Cycle time/ unit cost/yield
Design productivity

Efficiencies

New product introduction

Actual introduction schedule
vs. plan

3.CAN WE IMPROVE AND CREATE
VALUE
GOALS

MEASURES

Technology
leadership
Manufacturing
learning
Product focus

Time to develop next generation

Time to market

Process time to maturity
Percent of products that equals 80%
sales
New product introduction vs.
competition

4.HOW DO WE LOOK TO
SHAREHOLDERS?
GOALS

MEASURES

Survive

Cash flow

Succeed

Quarterly sales
growth and operating
income by division
Increased market
share and ROI

Prosper

Many firms use balanced scorecard as a
strategy tool
1. It brings many elements of a company’s
strategy in a single report.
2. It helps to minimise sub optimization.
The balanced scorecard is appropriate for
organisations of today to be on track and
move confidently into the future. The
scorecard keeps strategy and vision at the
center

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