Professional Documents
Culture Documents
BALANCED
SCORECARD
Robert S. Kaplan
Harvard Business School
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 1
What Is a Balanced Scorecard?
A Measurement
System?
A Management
System?
A Management
Philosophy?
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 2
Translating Vision and Strategy: Four
Perspectives
FINANCIAL
To succeed Objectives Measures Targets Initiatives
financially,
how should we
appear to our
shareholders?
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 3
The Balanced Scorecard Focuses on Factors that
Create Long-Term Value
Traditional financial reports look backward
Reflect only the past: spending incurred and revenues earned
Do not measure creation or destruction of future economic value
The Balanced Scorecard identifies the factors that create long-term economic
value in an organization, for example:
Customer Focus: satisfy, retain and acquire customers in targeted segments
Business Processes: deliver the value proposition to targeted customers
innovative products and services
high-quality, flexible, and responsive operating processes
excellent post-sales support
Customers
Organizational Learning & Growth:
develop skilled, motivated employees;
provide access to strategic information Processes People
align individuals and teams to business unit objectives
.
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 4
The Four Perspectives Apply to Mission Driven
As Well As Profit Driven Organizations
Profit Driven Mission Driven
What must we do to satisfy our Financial Perspective What must we do to satisfy our financial
shareholders? contributors?
What are our fiscal obligations?
What do our customers expect from Customer Perspective Who is our customer?
us? What do our customers expect from
us?
What internal processes must we Internal Perspective What internal processes must we excel
excel at to satisfy our shareholder and at to satisfy our fiscal obligations, our
customer? customers and the requirements of our
mission?
How must our people learn and Learning & Growth How must our people learn and develop
develop skills to respond to these and Perspective skills to respond to these and future
future challenges? challenges?
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 5
The Balanced Scorecard Framework Is Readily Adapted to
Non-Profit and Government Organizations
The Mission
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 6
The City of Charlotte Corporate-level Linkage Model
Customer Perspective
Availability of
Increase Improve Maintain Promote
Reduce Strengthen Safe,
Perception Service Competitive Economic
Crime Neighborhoods Convenient
of Safety Quality Tax Rates Opportunity
Transportation
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 7
Why are Companies Adopting a Balanced Scorecard?
Increase
Customer
Confidenc e
Our
Advice
Broaden
Revenue
Mix
in
Financial
Improve
Returns
Improve
Operating
Efficiency
The Productivity Strategy
Increase
Customer
Satisfaction
Through Superi or
Execution
Financial
Perspective
Customer
Perspective
Internal
Perspective
Increase
Employee
Productivity Learning
Perspective
Growth
Increase revenues, not just cut costs and
enhance productivity
Implement
From the 10 to the 10,000. Every employee
implements the new growth strategy in their
day-to-day operations
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 8
Why Do We Need a Balanced Scorecard?
To Implement Business Strategy!
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 9
Our Research Has Identified Four Barriers to
Strategic Implementation
The Vision Barrier
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 10
Balanced Scorecard Early Adaptors Have Executed
Their Strategies Reliably and Rapidly
1995 #1 in profitability
Mobil 1993
#6 in
profitability 1996 #1 in profitability
(USM&R) 1997 #1 in profitability
Profit Stock
#1 in growth
Losing
1993 1996 and
money
Brown & Root Engineering profitability
(Rockwater)
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 11
The BSC Early Adaptors Have Executed Their
Strategies Reliably and Rapidly
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 12
Question:
How can complex organizations Answer:
achieve results like this in such
short periods of time? Alignment!
The Balanced Scorecard process allows an organization
to align and focus all its resources on its strategy
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 13
How Do They Do It?
The Seven Ingredients of Highly Successful Balanced Scorecard
Programs
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 14
The Ingredients of Highly Successful Balanced
Scorecard Programs
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 15
A Good Balanced Scorecard Tells the Story of
Your Strategy
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 16
The Problem: Most of Todays Feedback Systems Are
Controls Oriented
Variance
Detected
Correction
Applied
Management
Feedback &
Control Loop
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 17
Strategic Learning Some Basic
Concepts
Replacing the budget with the Balanced Scorecard is a step
in the right direction
FINANCIAL
Strategic Objectives Strategic Measures
Performance
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 18
Strategic Feedback Creates Strategic
Learning
The Strategy
Improve
Returns
Financial
Improve Perspective
FOLLOW-UP
Broaden Operating
Revenue Mix Efficiency
Increase Customer
Confidence in Our
Financial Advice
Increase
Customer
Satisfaction Through
Superior Execution
Customer
Perspective
ACTION
Internal
Closing the loop
Perspective
update Increase
Employee
Productivity
Learning
Perspective
THE
the Develop
Strategic
Skills
Access to
Strategic
Information
Align
Personal
Goals MANAGEMENT
strategy strategic learning MEETING
loop Team Problem
Pioneers Balanced Scorecard Solving
FINANCIAL
Performance dialog
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 19
A New Structure for Corporate Governance Executive
Team Takes Responsibility for Managing the Strategic
Cross-Functional Themes
CEO
Strategic Themes
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 20
The Ingredients of Highly Successful Balanced
Scorecard Programs
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 21
Not all Environments are Appropriate for a Balanced
Scorecard
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 22
Key Pitfalls to Avoid
Process Philosophy
Middle management task force Measurement to control; not to
Not driven by senior executive communicate
team Management dictating actions
Only one or a few individuals vs. employee improvisation to
involved achieve desired outcomes
Too long a development For management only, not
process (allowing the best to shared with all employees
be the enemy of the good)
Delay introduction because of
missing measurements
Static not dynamic process
Treating the BSC as an EIS
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 23
THE BALANCED SCORECARD
MANAGEMENT SYSTEM
Significant results can be achieved in relatively short periods of time...
1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 24
Balanced Scorecard References