Kaplan & Norton's Balanced Scorecard

• What is the Balanced Scorecard?

  Considers the objectives a business may have, not just profit.
• 4 Perspectives of Balanced Scorecard

  • Financial
  • Customer
  • Internal Processes
  • Organisational Capacity
• Financial Perspective Focus is on

  Financial Performance
• Customer Perspective focus is on

  Customer satisfaction
• Internal Processes Perspective focuses on

  Business efficiency
• Organisational Capacity Perspective focuses on

  Knowledge & innovation
• Who made the scorecard?

  Kaplan and Norton
• Why was Balanced Scorecard Developed?

  To measure and report Business Performance.
• What is an aim of the Balanced Scorecard?

  Align business activities to the vision and strategy of the business
• What is an aim of the Balanced Scorecard?

  Improve internal and external communications
• What is an aim of the Balanced Scorecard?

  Monitor business performance against strategic goals.
• Key Features of the Balanced Scorecard

  Top-down approach
• Key Features of the Balanced Scorecard

  Identifies key performance indicators from 4 different perspectives.
• What is a result of looking at many perspectives?

  Broader report on how the business is doing in financial and non-financial measures.
• What did Kaplan and Norton suggest for their scorecards?


  That organizations should focus their efforts on a limited number of specific, critical performance measures which reflect stakeholders key success factors.
• Focus on Financial Performance is what perspective?

  Financial
• Financial perspective KPI Examples:

  • Return on investment
  • Return on Capital Employed
  • Gearing
  • Revenue
  • Shareholder Returns
  • Profits and Profitability
• Focus on Customer Satisfaction is what perspective?

  Customer
• Focus on Business efficiency is what perspective?

  Internal Processes
• Focus on Knowledge and Innovation is what perspective?

  Organizational Capacity
• Internal Processes KPI Examples:

  • Productivity
  • Efficiency
  • Labour Costs
  • Unit Costs
  • Capacity Utilisation
• Customer KPI Examples:

  • Level of Returns
  • Service Rating
  • Repeat Customers
  • Market share (more = positive)
  • Lead times
• Organizational Capacity KPI Examples

  • Research and Development
  • New Product Development
  • Training
  • Employee Participation
• Key Advantage of the Balanced Scorecard


  Broader view of how business is performing relevant to its mission and vision than just looking at the income statement
• Advantage of Balanced Scorecard


  In theory, involves everyone in the business
• Advantage of Balanced Scorecard


  Highly Flexible - key is to find KPI that are relevant to the business
• Drawback of Balanced Scorecard


  Danger of too many KPIs
• Why is having too many KPIs dangerous?

  • Can be overwhelming to employees and managers. This can lead to confusion about priorities and dilute efforts.
• Why is having too many KPIs dangerous?

  Can lead to a lack of focus - easy to lose sight of strategic objectives
• Why is having too many KPIs dangerous?

  Measurement Burden - Managing and tracking numerous KPIs can lead to inefficiencies in data collection, analysis, and reporting.
• Drawback of Balanced Scorecard



  Need balance between 4 perspectives which is not easy.
• Drawback of Balanced Scorecard


  Senior Management may still be too concerned with financial performance
• Why would Senior Management be concerned with financial performance?

  Many of their incentives (eg. bonuses and commissions) are based around the financial perspective.
• Drawback of Balanced Scorecard


  Needs to be updated regularly to be useful