Balanced Scorecard Fundamentals

Introduction

Speaker: Erica Olsen

Context: Whiteboard session on the fundamentals of the balanced scorecard.

• Reference to earlier sessions on Strategic Objectives and Key Performance Indicators (KPIs).

Overview

Balanced Scorecard Components

1. Balance
2. Scorecard

Balanced Component

Holistic Organizational Perspective

• Developed by Robert Kaplan and Dr. Norton from Harvard.
• Encourages looking at organizations holistically (not in departmental silos).
• Four perspectives to consider:

Financial Perspective

• How are we looking to our shareholders?

Customer Perspective

• What value do we need to provide to our customers to achieve financial goals?

Internal Processes

• What internal processes must we excel at to provide value and achieve financial targets?

People Perspective

• What skills and capabilities are needed to drive internal processes, provide value to customers, and meet financial targets?

Strategy Framework

• Ensures strategic plan is effective, integrated, and holistic.
• Sometimes referred to as a "Strategy Map."

Scorecard Component

Monitoring and Measuring

• Structured like a scorecard to monitor and measure the strategic plan.
• Should include the four perspectives.

Goals Statement

• Example: Improve customer satisfaction and loyalty by 20%.

Measures and Targets

• Measure: Customer satisfaction survey score.
  • Target: Increase by 20%.
• Measure: Delivery time.
  • Target: Less than 4 days (for an online retailer).

Leading and Lagging Indicators

• Leading Indicator: Delivery time (predicts future performance).
• Lagging Indicator: Customer satisfaction survey score (reflects past performance).

Tools in Balanced Scorecard

1. Strategy Maps: High-level visual representation of strategy.
2. Scorecards: Includes goals, measures, and targets.
3. Dashboards: Visual representation of measures and targets.