Lecture Notes: The Balanced Scorecard Approach

Introduction

• Importance of decision-making for the future impact on business.
• Common reliance on financial metrics which may emphasize short-term goals.
• Need for a balanced view to achieve long-term success.

The Balanced Scorecard

• Developed by Harvard Business School Professor Robert S. Kaplan and consultant David P. Norton.
• Utilizes four perspectives to assess a company's health:
  1. Financial Perspective
  2. Customer Perspective
  3. Internal Perspective
  4. Learning and Growth Perspective

1. Financial Perspective

• Main question: Are you doing well by your shareholders?
• Typically the first perspective considered.

2. Customer Perspective

• Main question: Do customers like your products and services?
• Focus on customer satisfaction and preferences.

3. Internal Perspective

• Main question: Can you efficiently deliver what your customers want?
• Concerns the efficiency of internal processes and operations.

4. Learning and Growth Perspective

• Main question: Can you continue to improve and create value?
• Emphasizes innovation and ongoing development.

Implementation Example: Semiconductor Company

• Financial Goals: Survive, succeed, and prosper.
  • Metrics: Cash flow, quarterly sales growth, market share, return on investment.
• Customer Goals: Develop innovative products, market faster, become supplier of choice.
  • Metrics: Percentage of sales from new products, on-time delivery rates, customer popularity.
• Internal Goals: Prioritize manufacturing excellence, produce new designs, introduce new products.
  • Developed specific operational measures for each goal.
• Learning and Growth Goals: Focus on developing new products rather than improving existing ones.

Outcomes and Insights

• Learning and innovation led to improved competencies and processes.
• Boosted customer satisfaction and enhanced shareholder returns.
• Importance of the sequence of perspectives in the Balanced Scorecard.
• The Balanced Scorecard, when used correctly, identifies the drivers of long-term success.