PREPARED BY GROUP 4:

ANDREW MOLLOY
AMY MI LLER
MI KE ELI CKER

The Balanced Scorecard: Customer
Perspective, Internal Processes,
Learning and Growth
What is the balanced scorecard?
Developed in the early 1990s by Dr. Robert Kaplan
and David Norton
"The balanced scorecard retains traditional financial measures.
But financial measures tell the story of past events, an
adequate story for industrial age companies for which
investments in long-term capabilities and customer
relationships were not critical for success. These financial
measures are inadequate, however, for guiding and evaluating
the journey that information age companies must make to
create future value through investment in customers,
suppliers, employees, processes, technology, and innovation."


What is the balanced scorecard?
The Balanced scorecard is a management system
that enables organizations to clarify their
vision and strategy and translate them into
action.
Provides an organization with feedback of both the
internal business processes and external outcomes,
which allows for continuous improvement of
strategic performance and results.
Nerve center of an enterprise

What is the balanced scorecard?
The balanced scorecard is centered on four performance
metrics or perspectives:
Customers
Internal processes
Financial
Learning and growth
When implemented properly, each one of these
perspectives contains four subparts consisting of
Objectives
Measures
Targets
Initiatives
What is the balanced scorecard?

Objectives - what the strategy is to achieve in that perspective

Measures - how progress for that particular objective will be
measured

Targets - refer to the target value that the company seeks to
obtain for each measure

Initiatives - what will be done to facilitate the reaching of the
target

What is the balanced scorecard?
The term scorecard signifies quantified
performance measures and balanced signifies the
system is balanced between:
Short-term and long term objectives

Financial and non-financial measures

Lagging and leading indicators

Internal and external performance perspectives

What is the balanced scorecard?
What is the balanced scorecard?
Kaplan and Norton defined a four-step process that has
been used across a wide range of organizations
Defining the measurement architecture
For example will the system be used at the strategic business unit level
rather than the corporate level.
Specify strategy objectives.
These should be carefully decided upon and selected as those deemed
critical in achieving breakthrough competitive performance and
limited in number to 15 to 20, or 3 to 4 in each perspective to avoid
information overload.
Choose strategic measures
These measures should be closely related to the actual performance
drivers and will later be used for evaluating the progress made toward
achieving the objectives
Develop an implementation plan to integrate the scorecard into
management.

Customer Needs
Who is your customer?
What age, gender, group does our product appeal to?
What services or products do they expect from you?
Do we provide personal services, do your products serve as advertised?
How do you listen to and learn from your customers?
Do we provide feedback calls or emails?
How do you retain and acquire new customers?
Do we use new advertisement and how do we advertise?
How do you meet customers needs?
Do we provide help lines and how can we provide help to customers?
How do you measure customer satisfaction and dis-satisfaction?
Do we use surveys to find out how customers feel about us?
Customer Concerns
There are four major categories that managers need to address when
concerning their customers.

Quality
Are there often recalls or problems with defects with our products.

Time
Do we save time by limiting defects and do we provide fast on time delivery.

Performance and service
Do we perform up to customers standards and do we provide fast and adequate
services.

Cost
Do we try to minimize cost when dealing with ordering, scheduling delivery, and
paying for materials in order to lower cost of our products to our consumers.

Customer Perspective
With customer perspective managers and companies have to be careful
and make sure they are setting up their balance scorecard to help
customers.

Examples of things that dont concern customers are profit per
customer, revenue per customer, and improve profit per customer.

These objectives dont necessarily protean to the customer perspective
but rather the companies perspective of the customer.

Managers need to take a step back and look at how customers perceive
your company and what they want to get out of your company.
Examples of Customers Perspective
Two main questions that a company should ask itself to
protean to their customers are:

How should we appear to our customers
Do we show a promising future
Do we show a strong sense of concern

What is our differentiating value proposition to our targeted
customers
How are we different from our competitors
What makes us better than our competitors







Perspectives of Kaplan and Norton
There are four broad categories that Kaplan and Norton base the
customer perspective around.

Best buy
Companies that supply services and products at low prices and fast service.

Product leadership and innovation
Companies that focus on customer that buy the newest and most advanced
cutting edge technology.

Customer complete solutions
Companies that try to sell things like computers where customers customize
them to their liking.

Lock in
Companies that will make a product then to buy accessories for that product you
have to buy the same brand name because other brands out work with that
product.
Successful balanced Scorecards
When using critical thinking of strategy, objectives, and
measures companies can get a feel for who their customers
are and what they can offer them.

Strategy gurus, like Michael Porter stress the fact that it is
more important to accomplish more with less.

Dont try to please everyone when setting up your balanced
scorecard because you cant.
Internal Processes
Internal business process objectives address the
question of which processes are the most
critical for satisfying customers and
shareholders
A firm must concentrate its efforts to excel in these areas

Metrics based on this prospective allow the
managers to know how well their business is running
and whether its products and services conform to
customer requirements
Internal Process Examples
Cost
Throughput
Quality

Objective Specific Measure
Manufacturing excellence Cycle time, yield
Increase design productivity Engineering efficiency
Reduce product launch delays Actual launch date vs. plan
Internal Processes
In addition to the strategic management process two
kinds of business processes may be identified, these
include:

Mission-oriented processes - special functions of government
offices which often involve many unique problems in their
processes

Support processes - more repetitive in nature.
Financial Performance

The financial performance perspective of the
balanced scorecard addresses the question of how
shareholders view the firm and which
financial goals are desired from the
shareholders perspective.

These financial goals are dependent on the
companys stage in the business life cycle.
Financial Performance: Business Life Cycle
There are three main stages to this cycle which
include:
Growth stage -goal of the company is growth
An example of a growth goal would be revenue growth.
Sustain stage - the goal of the firm is profitability
Measures in this stage may include ROE, ROCE, and EVA.
Harvest stage - the goal of the firm is cash flow and reduction
in capital requirements.
Financial Performance
Objective Specific Measure
Growth Revenue Growth
Profitability Return on equity
Cost Leadership Unit Cost
The table below outlines possible financial performance objectives and
their metrics.
Learning & Growth
How much a company
must learn, improve, and
innovate to meet
objectives.
Use of the scorecard:
To set objectives
To determine measures
To predict outcomes
To determine initiatives
To gain the big picture
Key performance indicators include:
Illness rate/days of absence
Employee turnover
Gender/racial ratios
Internal promotion %
A learning & growth example:
Objective: increase internal promotions
Measure: bigger % of in house promotions
Target: +10% in 2 years
Additional classes and training
A balanced scorecard system
provides a basis for executing good
strategy well and managing
change.
-Howard Rohm
Learning & growth must
focus on measurable
outcomes to move the
company forward.
Scorecard allows for
actionable terms derived
from company strategy.
Balanced Scorecard
Makes it easier for
management to carry out
strategy.
4 step process
Define measurement architecture
Specify strategic objectives
Choose strategic measures
Develop implementation plan
Potential Benefits
Translation of strategy into measurable parameters
Communication of strategy
Alignment of individual goals with strategic
objectives
Feedback of implementation results
Potential Disadvantages
Lack of a well defined strategy
Use of only lagging measures
Use of generic metrics
Conclusion
Balanced scorecard is a performance management
system that can be used in any size organization.
Allows management to measure financial and
customer results, operations, and organization
potential.