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Balanced Scorecard
A general overview
Gartner Group suggests that over 50% of large
US firms have adopted the BSC
 Bain & Co finds that about 44% of organisations
in North America use the BSC
 Germany, Switzerland, and Austria - 26% of
firms use BSCs
 The widest use of the BSC approach can be
found in the US, the UK, Northern Europe and
Japan
http://www.apinstitute.com/Balanced%20Scorecard.html
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How many companies use the
Balanced Scorecard?
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The balanced scorecard is for everyone in
the organization. This means that the
balanced scorecard should be cascaded to
all departments/business units and teams
– both operating and support units. This is
the only way to ensure successful strategy
execution...
Sandy Richardson, Strategy Focused
Business Solutions Inc.
Why?
developed in 1992 - Robert Kaplan and David Norton
 Translating corporate vision and strategy into a set of
strategic objectives that drive behavior and
performance
 built upon the premise that measurement motivates
and that measurement must start with a clearly
described strategy
 pioneering work of General Electric on performance
measurement reporting in the 1950’s and the work of
French process engineers (who created the Tableau
de Bord – literally, a "dashboard" of performance
measures) in the early part of the 20th century
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history
http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx
establishing the linking between Balanced
Scorecard and the Strategic Management
system
 BSC not linked to the Strategic
management turns from the fundamental
system into just the collection of the
isolated indicators which do not have any
influence on the strategic development of
the company
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The Balanced Scorecard and the
Strategic Management system
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Better Strategic Planning –powerful framework for building
and communicating strategy
Improved Strategy Communication & Execution –strategy
with all its interrelated objectives is mapped on one piece of
paper allows companies to easily communicate strategy
internally and externally
Better Management Information
–forces organisations to design key performance indicators for their
various strategic objectives
Research shows that companies with a BSC approach tend to
report higher quality management information
Improved Performance Reporting –create meaningful
management reports and dashboards to communicate
performance both internally and externally
Better Strategic Alignment –align their organisation with
the strategic objectives
Better Organisational Alignment –help to align
organisational processes such as budgeting, risk management
and analytics with the strategic priorities
What are the Key Benefits of
using Balanced Scorecards?
Developed by the Balanced Scorecard Institute
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Step
Step
Step
Step
Step
Step
Step
Step
Step
One: Assessment
Two: Strategy
Three: Objectives
Four: Strategy Map
Five: Performance Measures
Six: Initiatives
Seven: Automation
Eight: Cascade
Nine: Evaluation
Building & Implementing a Balanced Scorecard:
Nine Steps to SuccessTM
http://www.balancedscorecard.org/BSCResources/TheNineStepstoSuccess/tabid/58/Default.aspx
Developed by the Balanced Scorecard Institute

Step One: Assessment- BSC Development Plan
◦ assessment of the organization’s Mission and Vision,
challenges (pains), enablers, and values
◦ Preparation of a change management plan for the
organization
◦ conducting a focused communications workshop to identify
key messages, media outlets, timing, and messengers
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Step Two: Strategy - Customer Value
◦ Strategic Results, Strategic Themes, and Perspectives, are
developed -focus attention on customer needs and the
organization’s value proposition
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Step Three: Objectives- Strategy Action
Components
◦ Strategic Objectives are first initiated and categorized on
the Strategic Theme level, categorized by Perspective,
linked in cause-effect linkages (Strategy Maps)
Building & Implementing a Balanced Scorecard:
Nine Steps to SuccessTM
http://www.balancedscorecard.org/BSCResources/TheNineStepstoSuccess/tabid/58/Default.aspx
Developed by the Balanced Scorecard Institute
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Step Four: Strategy Map-Cause-and-Effect
Links
◦ the cause and effect linkages between the enterprisewide Strategic Objectives are formalized in an enterprisewide Strategy Map
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Step Five: Performance Measures
◦ Develop Performance Measures are for each of the
enterprise-wide Strategic Objectives
◦ Lead and lag measures are identified
◦ Determine targets and thresholds, and
◦ Develop baseline and benchmarking data
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Step Six: Initiatives
◦ Strategic Initiatives are developed that support the
Strategic Objectives
Building & Implementing a Balanced Scorecard:
Nine Steps to SuccessTM
http://www.balancedscorecard.org/BSCResources/TheNineStepstoSuccess/tabid/58/Default.aspx
Developed by the Balanced Scorecard Institute
 Step Seven: Automation
◦ Software
◦ Performance Reporting
◦ Knowledge Sharing
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Step Eight: Cascade-key to organization alignment
◦ Cascading a balanced scorecard means to translate the corporate-wide
scorecard (referred to as Tier 1) down to first business units, support units
or departments (Tier 2) and then teams or individuals (Tier 3)
◦ Cascading translates high-level strategy into lower-level objectives,
measures, and operational details
◦ Determine performance measures at each level – more operational and
tactical
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Step Nine: Evaluation
◦ Strategy Results
◦ Revised Strategies
Building & Implementing a Balanced Scorecard:
Nine Steps to SuccessTM
http://www.balancedscorecard.org/BSCResources/TheNineStepstoSuccess/tabid/58/Default.aspx
The Balanced Scorecard is just one of
three levels in the business management
process:
 Top level: Company-wide Strategy maps
 Middle Level: Balanced Scorecard
 Bottom Level: Initiatives
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Business Management Process
Exh.
10-11
Performance Measures
Financial
Has our financial
performance improved?
What are our
financial goals?
Customer
Do customers recognize that
we are delivering more value?
What customers do
we want to serve and
how are we going to
win and retain them?
Vision
and
Strategy
Internal Business Processes
Have we improved key business
processes so that we can deliver
more value to customers?
Learning and Growth
Are we maintaining our ability
to change and improve?
What internal business processes are
critical to providing
value to customers?
The Balanced Scorecard: From
Strategy to Performance
Measures
http://www.managerialaccounting.org/Balanced%20Scorecard.htm
Translates a company’s mission and
strategy into a comprehensive set of
performance measures
 Financial and nonfinancial aspects
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The Balanced Scorecard
Who are your stakeholders?
What do your stakeholders need?
What are their strategic goals?
 Create a Strategy Map-identify your
priorities
 Consider the four perspectivesBusiness Processes, Customer
Relationship, Education and Growth, and
Finance
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How to define strategic goals
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strategy map view
◦ articulates the strategy in a series of linked
objectives representing the most important
priorities for the organization

scorecard view
◦ Gives specific measures and targets
◦ represent the yardstick and expected level of
success
◦ the strategic initiatives or action programs that
are the ways to achieve targets outside of
current capabilities.
Elements
http://www.lenskold.com/content/articles/rigatuso_aug07.html
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The Learning & Growth Perspective
◦ includes employee training and corporate cultural
attitudes related to both individual and corporate
self-improvement
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The Business Process Perspective
◦ refers to internal business processes
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The Customer Perspective
◦ the importance of customer focus and customer
satisfaction in any business
◦ Lead indicators
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The Financial Perspective
Perspectives
Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard
Business Review (January-February 1996): 76.
Early BSC
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Organization & Learning: people, teams,
training and recruiting
Internal Process: business process,
automation, technology & plant
infrastructure
Customer: marketing, value proposition,
and product/service in the eyes of the
customer
Financial: revenue, growth, earnings,
corporate governance, shareholder value
Perspectives of BSC
Modern BSC
http://www.ap-institute.com/resources_whitepapers.asp
http://www.torontospin.com/torontospin/events/doc/presentations/20041124MarkKozak-Holland.pdf
http://www.torontospin.com/torontospin/events/doc/presentations/20041124MarkKozak-Holland.pdf
http://www.torontospin.com/torontospin/events/doc/presentations/20041124MarkKozak-Holland.pdf
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historical internal (company) data (from
operational systems)
historical external data (from third parties)
forecast external data (from third parties)
forecast company internal data (financial
and non-financial)
target values (eg EPS targets, Sales
Quotas, etc)
Data availability – existing vs. to be
collected
Data
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Decreed by executive management
Negotiated between the operational and
line management
Selected from an industry benchmark
Selected from competitors known (or
assumed) values
Selected as % change over last years
historical value
Target values
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Key Performance Indicators
◦ reflect the critical success factors of an organization
◦ must be quantifiable
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stay with the same definition from year to
year
set targets for each Key Performance
Indicator
identify everything that is easy to measure
and count
collect and report the data on everything that
is easy to measure and count
Key Performance Indicators
help organizations understand how well
they are performing in relation to their
strategic goals and objectives
 Show whether the organization is on track
or not
 serve to reduce the complex nature of
organisational performance to a small
number of key indicators
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Key Performance Indicators
(KPIs)
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Good Key Performance Indicators vs. Bad
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Bad:
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Good:
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Title of KPI: Increase Sales
Defined: Change in Sales volume from month to month
Measured: Total of Sales By Region for all region
Target: Increase each month
What needs to be corrected?
◦ Title of KPI: Employee Turnover
◦ Defined:
no of employees resigned + no of employees terminated due to performance
number of employees at the beginning of the year
◦ Measured: information available at human resources
◦ Target: Reduce Employee Turnover by 5% per year
Example KPI
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Who should design your indicators?
◦ Strategist and a line manager
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Do you have good indicators?
◦ indicators should not repeat each other, but taken together, they should describe
90% of your company or business unit
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Are your indicators easy to measure?
◦ should be easy to understand and measure
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How many indicators?
◦ three or four indicators in each category. If you have more, you are overloading
your scorecard
Key performance indicators and
BSC
Marr, B. (2010) How to design
Key Performance Indicators,
Management Case Study,
The Advanced Performance
Institute (www.apinstitute.com).
http://www.apinstitute.com/download
s/100608%20How%20t
o%20design%20Key%
20Performance%20Indi
cators.pdf
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Type of data
◦ Raw
◦ Progress
◦ Change
Source of data
 Frequency of data
 Target performance
 graphs
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KPI
http://www.enterprise-dashboard.com/2007/04/05/difference-between-balanced-scorecard-and-enterprise-dashboard/
Culture change
 Human resources
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◦ tasks, responsibilities
◦ Performance appraisal, bonuses
Measurement and data collection
 Information management
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Effect on the organization
http://www.scorecardtrainings.com
 http://www.balancedscorecard.org
 http://www.bscdesigner.com
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Some sources
1. Recruitment KPI
2. Training KPI
3. Health and safety KPI
4. Performance KPI
5. Employee loyalty KPI
6. Working time KPI
7. HR efficiency KPI
8. Compensation KPI
9. Labor relation KPI
10. Regulation compliance KPI
11. Employee satisfaction KPI
• Attitude about compensation and benefits.
• Attitude about coworkers.
• Attitude about supervisors / managers.
• Attitude about promotions, training.
• Attitude about work tasks.
12. HR budget KPI
13. Job leaving KPI
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1.
2.
3.
4.
Job leaving ratio per year.
Job leaving ratio per department.
Average age of employees that retire.
Percentage of early retirements
14. Workforce information KPI
http://www.humanresources.hrvinet.com/recruitment-key-performance-indicators-kpi/
Human Resource KPI
1. Customer care KPI
Customer care KPIs include KPIs such as frequency impact to customers, the rate of service charges /
profits etc.
2. Customer appraisal KPI
They are KPIs related to appraisal customer such as number of new customers, average sale per VIP
customer etc.
3. Complaints of customer KPI
They include KPIs such as Complaints are resolved in the first time, the rate of complaints by sector
etc.
4. Market share KPI
They are KPIs related to market share of company such as market share of the company compared
with the entire market, relative market share etc.
5. Customer loyalty KPI
These KPIs measure customer loyalty of company. Some KPIs are total customer lost, the rate of lost
customers lost after purchasing first time etc.
6. Shops and supermarkets KPI
Some KPI of this sector such as the rate of profit / per shop, sales turnover / location. These KPIs
measure effectiveness of sale channel of shop or supermarket.
7. Sales contact by telephone KPI
These ratios relate to effectiveness of contacting by telephone of salesman.
8. Sales rep KPI
These ratios relate to effectiveness of sales representative staff such as the rate of response / total
sent, time to answer a request by customers.
http://www.humanresources.hrvinet.com/sales-kpi/
Sales KPI
1. Public relations KPI
PR KPI include KPIs related to appraisal indicators of Public relations
such as effective PR items, press releases, conducting survey, the
level of awareness of the enterprise through the public relations did
etc.
2. Promotion KPI
Promotion KPI include KPIs related to appraisal indicators of promotion
activities in marketing such as the rate of sales in promotion period
and before the promotion, percentage of sales in promotion and after
promotion etc.
3. Advertisement KPI
Advertisement KPI include KPIs related to appraisal indicators of
advertisement activities in marketing such as the cost of advertising
on the 1000 target audiences, the level of awareness of the product
etc.
4. E-marketing KPI
E-marketing KPI include KPIs related to appraisal indicators of Emarketing in marketing such as the rate of new visitors, number of
page views / visitors etc
http://www.humanresources.hrvinet.com/marketing-kpi/
Marketing KPI
1. Manufacturing cycle time
Measured from the Firm Planned Order until the final production is reported. It usually takes
into account the original planned production quantity verses the actual production quantity.
2. Defects per million opportunities (DPMO)
DPMO is a Six Sigma calculation used to indicate the amount of defects in a process per one
million opportunities.
Calculation: Total Number of Defects / Total Number of Opportunities for a Defect. Then
multiply the answer by 1 Million.
3. Average production costs of items
Average production costs of items produced within measurement period.
4. Mean-time between failure (MTBF)
The average time between equipment failures over a given period i.e. the average time a
device will function before failing. It is the reliability rating indicating the expected failure
rate of equipment.
5. Loss ratio of material per order
This is lost ratio of material per order. The rate is usually 3 – 5% custom types orders.
6. Rate of material defect by causes of material itself
By total material defect due to the nature of that material, measured by the number and
value of money.
7. Rate of damaged material by error of workers
By total material damage because of worker error, measured by the number and/or value of
money.
8. Scrap value %
Scrap value as a percentage of production value
General production KPIs
http://www.humanresources.hrvinet.com/production-kpi/
1. Delivery on time
• Formula: the number of delivery on time / total delivery.
• Apply this formula to each provider and entire company every month.
2. Delivery is not enough quantity, quality
• Formula: with the total number of delivery with enough quality/ quantity / the number of
total delivery .
3. Quantity bought over required
• This rate determine the number of products using in actual in comparison with quantity
planned.
• This rate determines the effectiveness of the purchasing order.
• The rate may be identified in quantity or money.
5. Purchasing cost
• By value of purchasing / sales value
• Compare this with the percentage rate as planned.
6. Cost of purchasing units
• This rate is total purchase cost / total sales.
7. Transaction cost unit of purchasing
• Formula = (Total cost of purchasing – a total cost of goods) / sales turnover.
• You can compare this rate with different goods in order to view transaction costs a high
or low
8. Suppliers rating.
• Number of suppliers accounting for 80% of the value of goods
• The number of suppliers of goods per year
• Number of suppliers be removed per year..
• Number of new suppliers per year..
Purchasing / Procurement KPI
http://www.humanresources.hrvinet.com/purchasing-procurement-kpi/
General Financial KPIs
1. Weighted Average Days Paid
Weighted Average Days Paid in Receivables Management
2. Weighted Average Days Past Due
Average days past due for open AP invoices weighted by open amount
3. Weighted Days Delinquent Sales Outstanding
Weighted Days Delinquent Sales Outstanding in Receivables Status dashboard
4. Weighted Terms Outstanding
Weighted Terms Outstanding in Receivables Status dashboard
5. Receipts Amount
Receipts Amount in Receivables Management
6. Revenue (P&L)
Revenue KPI in Profit and Loss Analysis Dashboard
7. T&E per Head
Travel and entertainment expenses / Headcount
8. Total Receipts
Total Receipts (Rolling 30 Days) in Receivables Status dashboard
9. Unapplied Receipts
Unapplied Receipts Amount
10. Weighted Average Days Due
Sum of days until due weighted by invoice amount for open AP invoices
Financial KPI
http://www.humanresources.hrvinet.com/financial-kpi/
1. Operating income: Operating Income equals Gross Profit minus SG&A Expenses. It is the
income from current operations.
2. Gross profit: Gross Profit equals Revenue minus Cost of Goods Sold. It identifies the
amount available to cover other operating expenses.
3. Gross profit margin: Gross Profit Margin equals Gross Profit divided by Revenue,
expressed as a percentage.
4. Cost of goods sold (COGS): Cost of Goods Sold includes all expenses directly associated
with the production of goods or services the company sells (such as material, labor,
overhead, and depreciation). It does not include SG&A.
5. Operating margin: Operating Margin equals Operating Income divided by Revenue,
expressed as a percentage.
6. Goodwill: Goodwill is an accounting term used to reflect the portion of the book value of a
business entity not directly attributable to its assets and liabilities.
7. Total Assets: Total Assets are everything of value that is owned by a company.
8. Accounts Payable: Money owed (payable) to suppliers for goods or services purchased on
credit that must be paid within a year.
9. Long-Term Debt: Long-Term Debt represents the amount of borrowings due more than one
year from the date of the balance sheet.
10. Total Liabilities: Total liabilities represent the sum of all monetary obligations of a
business and all claims creditors have on its assets.
11. Cumulative Annual Growth Rate (CAGR):
12. Cash Flow Return on Investments (CFROI): This is similar to ROI, but the only
difference is CASH is used inplace of Profit.
13. SG&A expenses: Selling, General, and Administrative Expenses include all salaries,
indirect production, marketing, and general corporate expenses.
14. Net profit margin: Net Profit Margin equals the Total Net Income divided by Revenue,
expressed as a percentage.
15. Shares Outstanding: Shares Outstanding is the outstanding number of shares of the class
of common stock that is most actively traded.
General Accounting KPIs
16. Total Equity: Total Equity equals Preferred Stock Equity + Common Stock Equity.
17. Total Current Assets: Total Current Assets equals Cash and Equivalents + Receivables
+ Inventories + Other Current Assets.
18. Other Current Assets: Other Current Assets includes prepayments, deferred charges,
and amounts (other than trade accounts) due from parents and subsidiaries.
19. Inventories: Inventories is merchandise bought for resale or supplies and raw materials
purchased for use in revenue producing operations.
20. Net Receivables: Net Receivables are amounts owed to the company, net of any
provisions for bad debts.
21. Cash: Cash consists of cash and may include cash-like items such as short-term
investments that can be quickly converted to cash.
22. Net Change in Cash: Net Change in Cash is the difference between the Cash and Cash
Equivalents at the beginning of the reporting period minus the amount at the end of the
reporting period.
23. Common Stock Equity: Common Stock Equity is the amount of shareholders’ equity
attributable to common stock.
24. Preferred Stock Equity: Preferred Stock Equity is the amount of shareholders’ equity
attributable to the preferred stock issued by the parent company.
25. Other Noncurrent Liabilities: The liabilities that are not assigned to Long-Term Debt or
deferred Income Taxes.
26. Short-Term Debt: Short-Term Debt represents the amount of borrowings (principal and
interest) that must be paid in the near future.
27. Other Noncurrent Assets: Assets that are not assigned to Net Fixed Assets or
intangibles.
28. Total Current Liabilities: Total Current Liabilities equals Accounts Payable + Short-Term
Debt + Other Current Liabilities.
29. Other Current Liabilities: Other Current Liabilities includes all other liabilities not
assigned to Short-Term Debt or Accounts Payable.
30. Net Fixed Assets: Net Fixed Assets are the assets of a company that are of a relatively
permanent nature and are not intended for resale, such as property, plants, and
equipment.
General Accounting KPIs
http://www.humanresources.hrvinet.com/sample-kpi/