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Balanced Scorecard (1)

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5 views

Balanced Scorecard (1)

Uploaded by

yedu raj
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Balanced Scorecard

Suhas M Avabruth
Introduction
• During the early 19th and 20th century, the primary assets were the
one generating the value.
• The financial indicators of the performance were sufficient
• ROI, different measures of profit
• Financial performance is backward looking and gives a controller
mindset.
• Now the primary assets are not enough for creating the value
rather intangibles are needed for creating the value.
Introduction
• The spending creates intangible assets, however the financial
system expenses these in a financial year.
• The value generated by the spending is never recognized by the
financial statements.
• Management accounting exists for supporting the management to
execute the strategy and handle the operations.
• Various measures EVA, Total quality management, Balanced
scorecard were developed to tackle the above.
• Balanced Scorecard is most used one
Balanced Scorecard
• Balanced Scorecard measures the performance on 4 different but
linked perspectives.
• Financial
• Customer
• Process
• Learning and Growth
• The financial perspective is the lagging indicator whereas, the rest
are the leading indicators
• Improvement in the leading indicators should ultimately result in
the improvement of the lagging indicator
Financial Perspective
• The ultimate objective for any for profit organization is to improve
the value for its shareholders.
• The financial perspective measures what company wants to
achieve
• Higher shareholder value
Customer Perspective
• It is an external lead indicator, measures what the company wants
from the customers
• Higher customer retention
• Customer loyalty
• On time delivery etc.
Process
• Describes how the strategy will be executed
• Identifies the most important processes necessary for the
success
• Reduction in cycletime
• Improve the process quality
Learning and Growth
• Employees of the organization are the ones who make the
decisions at the end of the process.
• Learning and growth describes how will the employees obtain the
skills necessary for the improvement
• It measures the employee capability to improve the process.
Balanced Scorecard – Strategy Map
• The financial perspective is the ultimate objective of any profit
seeking organization
• Being a lagging indicator, it measures the success of the strategy
implementation.
• The financial performance improves through two broad measures
• Productivity improvement
• Lowering the cost/cost reduction
• Asset utilization
• Revenue growth
• Existing customers
• New customer
Strategy Map
• Customer perspective
• How the company attracts, retains and deepens the relationship with the
existing customers
• Success in the in the customer perspective should lead to better financial
performance
• All organizations try to improve on the customer perspective (Whether
follows a balanced scorecard or not)
• Only when the measures of customer perspective is applied to the
customer segment it becomes a strategy
• Customer strategy can be mainly looked from three perspectives
• Low total cost
• Product leadership
• Total customer solution
Strategy map – Process Perspective
• The financial and the customer perspective reflects the outcome of the
process
• It identifies the critical
• operations management
• Asset utilization
• quality
• Customer management
• Customer acquisition
• Customer retention
• Innovation
• Developing new products
• R&D excellence
• Regulatory and Social
Strategy Map – Learning and Growth
• Identifies the strategies for the
• HR
• IT
• Organizational culture
Balanced Scorecard
• Barriers for Balanced Scorecard
• Commitment by the senior management
• Not delegating the responsibility
• Treating the scorecard as a onetime event
• Looking at the scorecard as a system problem
• Trying to forcefit the existing metrics into the scorecard

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