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BALANCED SCORECARD : A BALANCED SCORECARD : A STRATEGIC MANAGEMENT STRATEGIC MANAGEMENT

TOTO** ABSTRACTABSTRACT The success of any organization is The success of any organization is

reflected upon by its performance reflected upon by its performance which is in turn highlydependent which is in turn highlydependent upon its strategies. upon its strategies.

In this era of cut-throat competition, In this era of cut-throat competition, what an organisation requiresis not what an organisation requiresis not just framing the right strategies, but just framing the right strategies, but also managing the same. also managing the same.

The impact of the right strategies will The impact of the right strategies will

automatically be reflected in the automatically be reflected in the results. Moreover, any organization results. Moreover, any organization has to understand that it needs to has to understand that it needs to give impetus not only towards the give impetus not only towards the financial results but also towards financial results but also towards satisfaction of the customers, satisfaction of the customers, development of state-of-the-art development of state-of-the-art technologies and creation of an technologies and creation of an environment of learning and growth. environment of learning and growth.

The Balanced Scorecard is such an The Balanced Scorecard is such an innovative tool which has considered not innovative tool which has considered not just the financial indices but also the non-just the financial indices but also the non-financial indicators as equally critical in financial indicators as equally critical in determining organizational performance. determining organizational performance.

This tool brings a link between strategy This tool brings a link between strategy and action. and action.

Due to these, the framework is gaining Due to these, the framework is gaining increasing importance among different increasing importance among different business houses.business houses.

Balanced Scorecard - Concept

(i) It considers the financial indices as

well the non-financial ones indetermining the corporate performance level and

(ii) It is not just a performance measurement tool but is also a performancemanagement system.

IT TRY TO ANSWERIT TRY TO ANSWER

1. Financial Perspective - How do we look at shareholders?

2. Customer Perspective - How should we appear to our customers?

3. Internal Business Processes Perspective - What must we excel at?

4. Learning and Growth Perspective - Can we continue to improve and createvalue?

framework tries to bring a balance and linkage between

(a) Financial and the Non-Financial indicators,

(b) Tangible and the Intangible measures,

(c) Internal and the External aspects and

(d) Leading and the Lagging indicators.

The Four Perspectives : Cause and Effect

RelationshipThe Cause and Effect relationships

among the four perspectives Learning and Growth Better Processes Increased Customer Value Improved Financial Performance

A. Financial Perspective

OBJECTIVESOBJECTIVES MEASURESMEASURES

SURVIVESURVIVE CASH FLOWCASH FLOW

PROSPERPROSPER INCREASE IN MARKET INCREASE IN MARKET SHARESHARE

RETURN ON EQUITYRETURN ON EQUITY

B. Customer Perspective

OBJECTIVESOBJECTIVES MEASURESMEASURES

NEW PRODUCTSNEW PRODUCTS ℅ ℅ OF SALES FROM OF SALES FROM NEWER PRODUCTSNEWER PRODUCTS

CUSTOMER CUSTOMER RELATIONSHIPSRELATIONSHIPS

℅ ℅ OF RETAINED OF RETAINED CUSTOMERSCUSTOMERS

C. Internal Business Processes Perspective

OBJECTIVESOBJECTIVES MEASURESMEASURES

MANUFACTURING MANUFACTURING EXCELLENCEEXCELLENCE

CYCLE TIME PER UNITCYCLE TIME PER UNIT

SAFETY INCIDENCE SAFETY INCIDENCE INDEXINDEX

NO. OF ACCIDENTSNO. OF ACCIDENTS

D. Learning and Growth Perspective

OBJECTIVESOBJECTIVES MEASURESMEASURES

TECHNOLOGY TECHNOLOGY LEADERSHIPLEADERSHIP

TIME TO DEVELOP TIME TO DEVELOP NEWER PRODUCTNEWER PRODUCT

Utilising The Balanced Utilising The Balanced Scorecard As A Strategic Scorecard As A Strategic

Management ToolManagement Tool 1. Translating the Vision

2. Communicating and Linking2. Communicating and Linking 3. Business Planning3. Business Planning 4. Feedback and Learning

Advantages of Using The Advantages of Using The Balanced ScorecardBalanced Scorecard

• • It translates vision and strategy It translates vision and strategy into action.into action.

• • It defines the strategic linkages to It defines the strategic linkages to integrate performance across integrate performance across organizations.organizations.

• • It communicates the objectives and It communicates the objectives and measures to a business unit.measures to a business unit.

• • It aligns the strategic initiatives in It aligns the strategic initiatives in order to attain the long-term goals.order to attain the long-term goals.

• It aligns everyone within an organization so that all employees understandhow they support the strategy.

• It provides a basis for compensation for performance.

• The scorecard provides a feedback to the senior management if the strategy isworking

CONCLUSIONCONCLUSION The Balanced Scorecard is therefore a very

important strategicmanagement tool which helps an organization to not only measure theperformance but also decide/manage the strategies which are needed to beadopted/modified so that the long-term goals are achieved.

Thus, in other words,the application of this tool ensures the consistency of vision and action which isthe first step towards the development of a successful organization.

Also, itsproper implementation can ensure the development of competencies within anorganization which will help it to develop a competitive advantage without whichit cannot expect to outperform its rivals.