Balance Score Card

Balance score cad
Balanced Score Card (BSC) is a performance management and strategy development methodology that
helps executives translate on organization’s mission statement and overall business strategy into
specific, qualifiable goals and monitors the organization’s performance in terms of these goals. It is a
set of financial and non-financial measures relating to company’s critical success factors. As a
management tool it helps companies to assess overall performance, improve operational processes and
enable management to develop better plans for improvements. The BSC does not focus solely on
achieving financial objectives. It is an approach, which provides information to management to assist in
strategic policy formulation and achievement. It allows managers to look at business from four different
perspectives by seeking to provide answers to the following four basic questions:
(1) How do customers see us ? (Customer perspective)
(2) What must we excel at ? (Internal business perspective)
(3) Can we continue to improve and create value ? (Learning and growth perspective)
(4) How do we look to shareholders ? (Financial perspectiv
The aim of scorecard is to provide a comprehensive framework for translating company’s strategic
objectives into a coherent set of performance measures.
Four Perspectives of BSC
1. Financial 2. Customer 3. Internal business process 4.Learning from growth
Financial - The financial perspective serves as the focus for the objectives and measures for the
objectives and measures in the other scorecard perspectives. This perspective is concerned for profit of
the enterprises
2.Customer - This perspective captures the ability of the organization to provide quality goods and
services, the effectiveness of their delivery, and overall customer service and satisfaction. Needs and
desires of customers have to be attended properly because customer pay for the organization’s cost and
provided for its profits.
3. Internal Business Process -his perspective focuses on the internal business results that lead to financial
success and satisfied customer. To meet organizational objectives and customers’ expectations,
organizations must identify the key business processes at which they must excel. Key processes are
monitored to ensure that outcomes will be satisfactory
4. Learning from Growth - This perspective looks at the ability of employees, the quality of information
systems, and the effects of organizational alignment in supporting accomplishment of organizational
goals. Processes will only succeed if adequately skilled and motivated employees, supplied with accurate
and timely information,are driving them.
Steps in Developing BSC -
Identify the key outcomes to the success of the organization

Identify the process that leads to these outcomes
Develop key performance indicators for these processes.
Develop reliable data capture and measurement systems
Develop a mechanism for reporting these to the relevant managers and staff.Enact improvement
programs to ensure that performance improves
Types of Information Required for BSC - BSC emphasizes that financial and non-financial measures must
be part of the information system for employees at all levels of the organization. BSC can be used to
improve strategic performance in several ways
Information required for Performance Measurement under BSC -

The main types of information required by the managers to implement the balanced scorecard approach
to performance measurement are:
Customer Perspective - How do customer see us ? - Price, quality, delivery, customer support etc.
Internal Perspective- Where we must excel at ? - Efficiency of manufacturing process, sales penetration,
new production introduction, skilled manpower etc.
Learning and Growth Perspective - Can we continue to improve and create value ? - Technology
leadership, cost leadership, market leadership, research and development, cost reduction, etc.
Financial Perspective - How do we look to the shareholders? - Sales, cost of sales, return on capital
employed,profitability, prosperity etc
Benefits and Limitations of BSC
It avoids management reliance on short-term financial measures

It can assist stakeholders in evaluating the firm, if measures are communicated externally
It helps in focusing the whole organization on the few key things needed to create breakthrough
performance
It helps to integrate various corporate programs like re-engineering, customer service initiatives.
it helps in clarifying and updating budgets.
It helps in identifying and aligning strategic initiatives.
It helps in conduct of periodic performance reviews to learn about and improve strategy.
Limitations
There is no clear relation between BSC and shareholder value.
- It does not lead to a single aggregate summary of control.
- The measures may give conflicting signals and confuse management.
It involves substantial shifts in corporate culture

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Balance score cad

(1) How do customers see us ? (Customer perspective)

(2) What must we excel at ? (Internal business perspective)

(4) How do we look to shareholders ? (Financial perspectiv

Four Perspectives of BSC

1. Financial 2. Customer 3. Internal business process 4.Learning from growth

Steps in Developing BSC -

Identify the key outcomes to the success of the organization

Information required for Performance Measurement under BSC -

Benefits and Limitations of BSC

It avoids management reliance on short-term financial measures

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