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Balanced Scorecard
Kaplan & Norton: HBR
July-August 2005: repeat of 1992 seminal article
Feb 2004: Strategy Map
Oct 2005: Examples
March 2006: Implementation examples
Finland 2010
Perspectives
• GOALS & PERFORMANCE MEASURES
– Financial perspective
• How do we look to shareholders?
– Customer perspective
• How do customers see us?
– Internal Business perspective (BPR)
• What must we excel at?
– Innovation & Learning perspective
• Can we continue to improve & create value?
Finland 2010
Example:
anonymous semiconductor company
• FINANCIAL perspective
GOALS MEASURES
Survive Cash flow
Succeed Quarterly sales
Growth
Operating income by division
Prosper Increase in market share
Increase in Return on Equity
Finland 2010
CUSTOMER perspective
GOALS MEASURES
New products % sales from new products
% sales from proprietary products
Responsive On-time delivery
supply (customer definition)
Preferred Share of key accounts’ purchases
suppliers Ranking by key accounts
Customer # of cooperative engineering
partnerships efforts
Finland 2010
INTERNAL BUSINESS perspective
GOALS MEASURES
Technology Benchmark vs. competition
capability
Manufacturing Cycle time
excellence Unit cost
Yield
Design Silicon efficiency
productivity Engineering efficiency
New product Schedule: Actual vs. Planned
innovation Finland 2010
INNOVATION & LEARNING
perspective
GOALS MEASURES
Technology Time to develop next generation
leadership
Manufacturing Process time to maturity
learning
Product focus % products equalling 80% of
sales
Time to market New product introduction vs.
competition
Finland 2010
2004 article: Strategic Readiness
• Strategy map: framework to link intangible
assets to shareholder value creation
– Through the 4 perspectives
• 3 Intangible Asset categories essential to
implement strategy (Learning & Growth)
– Human Capital
• Skills, training, knowledge
– Information Capital
• Databases, information systems, networks, infrastructure
– Organizational Capital
• Culture, leadership, alignment with goals, knowledge sharing
Finland 2010
Strategy Map: Intangible assets link
to Internal Process
• Intangible assets make up Learning & Growth perspective
• Map to Internal Process perspective
– Operations Management
• Produce & deliver products & services
– Customer Management
• Enhance customer value
– Innovation
• Create new products & services
– Regulatory & Social
• Improve communities & the environment
• Customer perspective
– Price, quality, availability, selection, functionality, service, partnership, brand
• Financial perspective
– Productivity strategy
• Improve cost structure
• Increase asset utilization
– Revenue growth strategy
• Enhance customer value
• Expand revenue opportunities
Finland 2010
Consumer Bank (anonymous)
example: Human Capital
Finland 2010
Information Capital Readiness
Finland 2010
Organization Capital Readiness
Finland 2010
SCM & BSC
Beasley, Chen, Nunez & Wright, Strategic Finance 87:9 [2006]
CATEGORY Purpose Aim
Learning & Growth for To achieve our vision How will we sustain our
Employees ability to change &
improve?
Internal Business To satisfy our Where must we excel in
Processes stakeholders & our business processes?
customers
Customer Satisfaction To achieve our vision How should we appear
to our customers?
Financial Performance To succeed financially How should we appear
to our stakeholders?
Finland 2010
Learning & Growth for
Employees
GOALS MEASURES
Increase employee process ownership Employee survey scores
Improve information flows Changes in information reports
Frequencies across supply chain
partners
Increase employee identification of Compare actual disruptions with
potential supply chain disruptions reports of potential disruption drivers
RISK-RELATED GOALS
Increase employee awareness Number of employees attending risk
management training
Increase supplier accountability Supplier contract provisions on risk
Increase employee awareness of Number of departments participating
supply chain risks & other enterprise in supply chain risk identification &
risks assessment workshops
Finland 2010
Internal Business Processes
GOALS MEASURES
Reduce waste across supply chain Pounds of scrap
Shorten time from start to finish Time from raw material purchase to
product/service delivery to customer
Achieve unit cost reductions Unit costs per product/service
delivered
% of target costs achieved
RISK-RELATED GOALS
Reduce probability & impact of threats Number of employees attending risk
management training
Identify specific tolerances for key Number of process variances
processes exceeding specified acceptable risk
tolerances
Reduce number of exchanges of Extent of risks realized in other
supply chain risks to other enterprise functions from supply chain process
processes risk drivers
Finland 2010
Customer Satisfaction
GOALS MEASURES
Improve product/service quality Number of customer contact points
Improve timeliness of product/service Time from customer order to delivery
delivery
Improve customer perception of value Customer scores of value
RISK-RELATED GOALS
Reduce customer defections Number of customers retained
Monitor threats to product/service Extent of negative coverage of quality
reputation in press
Increase customer feedback Number of completed customer
surveys about delivery comparisons to
other providers
Finland 2010
Financial Performance
GOALS MEASURES
Higher profit margins Profit margin by supply chain partner
Improved cash flows Net cash generated over supply chain
Revenue growth Increase in customers & sales per
customer
% annual return on supply chain
assets
RISK-RELATED GOALS
Reduce threats from price competition Number of customer defections due to
price
Reduce cost overruns Surcharges paid
Holding costs incurred
Overtime charges applied
Reduce costs outside the supply chain Warranty claims incurred
from supply chain processes Legal costs paid
Sales returns processed
Finland 2010
Gaudenzi & Borghesi
The International Journal of Logistics Management 17:1 [2006]
• AHP in balanced scorecard style
– Develop formula to evaluate risk within
departments
• Focus on top level criteria
– On-time delivery
– Completeness
– Correctness
– Damage/defect free products
Finland 2010
Gaudenzi & Borghesi Weights
Criteria Mean weights Extreme1 weights Extreme2 Weights
On-time 100 0.317 100 0.402 50 0.215
delivery
Completeness 90 0.286 66 0.265 100 0.429
Correctness 75 0.238 50 0.201 50 0.215
Damage-defect 50 0.159 33 0.133 33 0.142
free
315 249 233
Finland 2010
Weights: Contingent upon
On-time first vs. Completeness
Criteria
first
On-time first Completeness first
On-time delivery 0.36 0.22
Completeness 0.29 0.43
Correctness 0.21 0.21
Damage-defect free 0.14 0.14
Finland 2010
On-time delivery evaluation –
Manager subjective scores
Procurement Warehouse Order Mfg Trans.
Cycle
On-time 0.36 0 0.5 1 0.5 0
delivery
Completeness 0.29 0 0.5 1 1 1
Correctness 0.21 1 1 1 1 0.5
Defect free 0.14 0.5 1 1 1 0
Value scores 0.28 0.675 1 0.82 0.395
Finland 2010
Completeness evaluation –
Managerial subjective scores
Procurement Warehouse Order Mfg Trans
Cycle
On-time 0.22 0 0.5 1 0.5 0
delivery
Completeness 0.43 0 0.5 1 1 1
Correctness 0.21 1 1 1 1 0.5
Defect free 0.14 0.5 1 1 1 0
Value scores 0.28 0.675 1 0.89 0.535
Finland 2010
Other Business Scorecards in
Broader Perspectives
• Internal auditing in accounting
– Campbell, Adams, Campbell & Rose
• Financial Executive 22:1 [2006]
• Mental health governance
– Sugarman & Kakabadse
• The International Journal of Clinical Leadership 16
[2008]
Finland 2010
Marketing natural gas vehicles
Janssen, Lienin, Gassmann & Wokaun, Transportation Research Part
A 40 [2006]
INDICATORS
1. Ratio of natural gas vehicles per
compress natural gas fueling stations
2. Type coverages (how many different
natural gas vehicle types were available)
3. Natural gas vehicle investment pay-back
time
4. Sales per type
5. Subsidies par automobile
Finland 2010
