Similarly, Joseph De Feo, chief executive of Service Businesses, one of the three operating divisions of Barclays Bank, had to transform what had been a captive, internal supplier of services into a global competitor. A balanced scorecard is a performance metric used in to identify and improve various internal functions of a business and their resulting external outcomes. Starting with that customer-facing goal, the Balanced Scorecard approach defined goals in other areas: internal processes, employee impact and finances, he says. The Balanced Scorecard concept has been around for many years as a way to help turn strategy into measurable action. Apple uses the scorecard as a device to plan long-term performance, not as a device to drive operating changes. Follow the five step checklist outlined below to implement a balanced scorecard approach within your organisation: 1. Interviews: Second Round The facilitator reviews, consolidates, and documents the output from the executive workshop and interviews each senior executive about the tentative balanced scorecard.
Did you encounter any problems as you launched the six pilot projects? The facilitator also seeks opinions about issues involved in implementing the scorecard. These are typically broken into four perspectives: customer, financial, processes and innovation. Even if the scorecard itself were better suited to external reporting, at present the financial community itself shows little interest in making the change from financial to strategic reporting. Apple Computer uses the balanced scorecard as a planning tool rather than a control tool. The Company sells a range of related software, services, accessories, networking solutions and third-party digital content and applications. First, learning and growth are analyzed through the investigation of training and knowledge resources. Four characteristics stand out: 1.
The development of a comprehensive and timely index of project performance effectiveness was viewed as a key core competency for the company. It should be the core of the management system, not the measurement system. These managers fail not only to introduce new measures to monitor new goals and processes but also to question whether or not their old measures are relevant to the new initiatives. The balanced scorecard metrics are revisited annually as part of the strategic planning, goal setting, and resource allocation processes. Essential Background Answer these four questions to get a fast but comprehensive view of your business. Kaplan, a Harvard Business School professor of accounting, and Norton, president of Renaissance Solutions, make a key contribution by describing and illustrating the balanced scorecard, a multidimensional approach to measuring corporate performance that incorporates both financial and non-financial factors. In order to implement the Business Scorecard into your business, you must customize the scorecards to fit your mission, strategy and culture.
Since 1984, the company has realized annual returns-on-investment of greater than 15%. Business units devise customized scorecards to fit their mission, strategy, technology, and culture. Implementation A newly formed team develops an implementation plan for the scorecard, including linking the measures to databases and information systems, communicating the balanced scorecard throughout the organization, and encouraging and facilitating the development of second-level metrics for decentralized units. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Because of the emphasis on output measures and the previous focus on operations and financial measures, the customer and innovation perspectives proved the most difficult. Project profitability provided focus on the project as the basic unit for planning and control, and sales backlog helped reduce uncertainty of performance. So here we have three businesses, three different processes, all of which could have elaborate systems for measuring quality, cost, and time but would feel the impact of improvements in radically different ways.
For the financial perspective, Apple wanted to emphasize shareholder value; for the customer perspective, it was customer satisfaction; for the process perspective, core competencies was the focus; and, finally, for the innovation perfective the committee wanted to improve employee morale. We had run the company tightly for the past 20 years and had been successful. Evaluate initiatives in light of performance metrics using internal and external benchmarks 5. Employees came from different cultures, spoke different languages, and had different operating experiences and backgrounds. Interviews: Second Round-facilitator compiles information and interviews executives about the tentative balanced scorecard. Historically, we have had two corporate departments involved in overseeing business unit performance.
The management team wanted a metric that would clearly communicate to all members of the organization the importance of building relationships with and satisfying customers. The results of the survey are displayed in terms of both the actual level of employee responses and the overall trend of responses. And in one of our agricultural machinery businesses, orders come within a narrow time window each year. Many of the improvement programs under way were emphasizing time, quality, and cost measurements. A rhetorical analysis of the balanced scorecard.
Moreover, unlike conventional metrics, the information from the four perspectives provides balance between external measures like operating income and internal measures like new product development. Coupled with a major recapitalization in 1986, these returns resulted in an increasing shareholder value that significantly exceeded industrial averages. Harvard Business Review September-October : 167-176. Simon's levers or control in relation to the balanced scorecard. Problem: I need help developing a balanced scorecard to measure the critical factors in successful implementation of a strategy for Apple Inc with explanations. But it was becoming less clear where future growth would come from and where the company should look for breakthroughs into new areas.
Several companies that have used the balanced scorecard are given as examples in this article. Apple Computer: Adjusting Long-Term Performance Apple Computer developed a balanced scorecard to focus senior management on a strategy that would expand discussions beyond gross margin, return on equity, and market share. We have done very little to define our strategy for corporate staff utilization. Using the balanced scorecard as a strategic management system. And, by requiring managers to select a limited number of critical indicators within each of the four perspectives, the scorecard helps focus this strategic vision. The Greater China segment includes China, Hong Kong and Taiwan. These are competence knowledge, technology, leadership and teamwork , processes, customers, and financial measures.
Does what you measure matter for your business? It complements traditional financial indicators with measures of performance for customers, internal processes, and innovation and improvement activities. But the process was not easy. In this case, the cycle-time improvements could be tied to specific targets for increased sales and market share. Therefore, the balanced scorecard is often referred to as a management tool, not a measurement tool. Many companies track more measures than they can possibly use. In the long run, this American tech company will be issuing out quantitative measurements to find out the answers they need and see if enabling employees in this fashion leads to nurturing their skillsets. Once a technology- and product-focused company, Apple has introduced measures that shift the emphasis toward customers.
These four areas, also called legs, involve learning and growth, business processes, customers, and finance. And the contracts allow for reimbursement of inventory holding costs. By giving all of these things an equal weighting, this can enable the organisation to function at an optimum level of performance. . A staff attitude survey and a metric for the number of employee suggestions measured whether or not such a climate was being created.