WEEK 22

1.What is your understanding on the Balanced Score Card approach? How useful is it for the Companies?

Balanced Score Approach is a management system that enables organizations to translate vision to action. (Isoraite M.,2008). Robert Kaplan and David Norton developed it in 1992. It is a management system that measures the organizations performance by providing feedbacks on the internal business process and external outcomes.

The measurement focus of the BSC is used to accomplish the following management processes:

clarifying and translating vision and strategy,

communicating and linking strategic objectives and measures,

planning, setting targets and aligning strategic initiatives and

enhancing strategic feedback and learning.

The four perspective of the balanced score card are:

• Financial: tracking the financial requirements and performance by  focusing on the shareholder value or for the public sector, by measuring the mission effectiveness.
• Customer: measuring the customer’s satisfaction and ability to provide quality goods and services
• Internal business process: focusing on the critical internal operations, which derives customer satisfaction
• Innovation and learning perspective: ability of employees, technological tools and effects of change to continuously improve and create value for services to support organizational goals

The uses of BSC for companies are:

• It translates company’s strategy into action
• It helps to manage the intangible assets like employee capabilities and customer loyalty
• It creates management system so can be used as a strategic tool
• It can be used to do gap analysis by determining the difference between organization’s strategy and performance.

2.Identify and list the 20 important KPIs of Balanced Score Card

 The 20 important KPIs of BSC are:

1. Return on capital (ROCE)
2. Sales growth
3. Cost reduction
4. Customer loyalty
5. Customer satisfaction
6. Manufacturing cost
7. Acquisition of new customers
8. Product quality
9. New product and development record
10. Market share
11. Superior technology
12. Efficiency of assets
13. Employee retention
14. Labor productivity growth
15. Average product-output ratio
16. Expenses on research and innovation
17. Number of registered patents
18. Investments in exploration of new markets
19. Total assets holdings
20. Efficiency of sales volume

Reference:
Margarita IŠORAITE. (2008). THE BALANCED SCORECARD METHOD: FROM THEORY TO PRACTICE. [Online] Available at: http://www3.mruni.eu/~int.economics/3nr/Isoraite.pdf. [accessed on 15 December 2013]

Performance Management. [Online] Available: https://www.opm.gov/policy-data-oversight/performance-management/reference-materials/historical/using-a-balanced-scorecard-approach-to-measure-performance/ [Accessed on 15 December 2013]

List of sample KPIs in 5 perspectives of BSC.[Online] Available at : http://www.bscdesigner.com/list-of-sample-kpis-in-5-perspectives-of-bsc.htm. [accessed 15 December 2013.]