Human Systems Management 26 (2007) 217227

IOS Press

217

Design and planning of the balanced

scorecard: A case study
Ming-Hon Hwang a,b and Hsin Rau b,
a Department
b Department

of Information Management, Diwan College of Management, Taiwan

of Industrial Engineering, Chung Yuan Christian University, Taiwan

Abstract. In the industrial economy, evaluating company performance based on financial results was good enough. However,
in the current globalized and highly competitive environment, maintaining long term competitiveness requires companies to
engage in overall strategic planning and performance evaluation. The balanced scorecard is a tool or method for balancing an
organizations performance and can react to situations where a companys direction becomes disoriented. This approach assists
in strategy planning, process management, and performance evaluation from four perspectives, including financial, customer,
internal process, and learning and growth. Good strategy planning provides companies with a correct management direction,
correct process management ensures the efficient execution of plans, and correct performance evaluation illustrates the execution
results. This study mainly focuses on how a large rubber company in Taiwan utilizes the balanced scorecard in its organization. As
the technical perspective is important in the rubber keypad industry, besides the four above perspectives, this company has added
the technical perspective. By introducing this company and its progress in implementing the balanced scorecard, this study hopes
to provide other companies, especially rubber companies, with a planning direction and reference for the future implementation
of the balanced scorecard.
Keywords: Balanced scorecard, competitive advantage, performance evaluation

Ming-Hon Hwang is a PhD candidate

at the Department of Industrial Engineering, Chung-Yuan Christian University, and a senior lecturer at the Department of Information Management, Diwan College of Management, Taiwan.
His research interests include supply
chain management and strategy management.

Hsin Rau is a Professor of Industrial

Engineering Department at Chung-Yuan
Christian University, Taiwan. He received the PhD degree from UCLA. His
research interests include e-business and
supply chain management. He has published many papers in journals and conferences.

* Corresponding author. E-mail: hsinrau@cycu.edu.tw

1. Introduction
In the past, companies used economies of scale
to produce abundantly standardized products, to acquire customers at the lowest possible price, and to
succeed in the industry. It was important to obtain
a simple method of assessing company financial performance. However, given improvements in technology and global market transparency, global companies
seem to be competing locally. Customers thus have the
ability to find products or services with the greatest
customer value and purchase them as soon as possible. Customer value is the measurement of customers
feelings towards a company, and comprises the product, service and other intangeables provided by the
company. Thus, to survive and compete against global
competitors, companies have to make a total strategy
plan and an operating process. The balanced scorecard
is a tool or method for balancing organizational performance and can help managers by providing them
with early warning and thus facilitating rapid response
to a bad company decision. During the past ten years,
a belief has grown among academics and industry that
companies are excessively reliant on financial indi-

0167-2533/07/$17.00 2007 IOS Press and the authors. All rights reserved

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M.-H. Hwang and H. Rau / Design and planning of the balanced scorecard

cators for performance evaluation, despite this form

of evaluation not helping their competitiveness. Chow
et al. [1] pointed out that 80% of large American enterprises wish to change traditional performance evaluation and measurement systems to improve their capacity for strategy execution. Johnson and Kaplan [2]
noted that in many big companies, managers use short
term financial measurements as a basis for decisionmaking, especially earnings per share and profit, to
review the effects of each project on those measurements.
However, investments which are helpful to long term
economic development, such as research development,
process improvement, and training, have been ignored
by managers who are focused on short term financial performance at the expense of long-term competitiveness. For example, Xerox was quite successful in leasing copy machines, and their financial reports indicated excellent performance. However, the
company ignored customer complaints regarding their
products and dissatisfaction with pricing, issues which
were not reflected in the performance measurement,
and the company eventually faced a financial crisis
as a result of these issues. Hoffecker and Goldenberg [3] believed that short-sighted companies that focus on a single false performance dimension are at
risk of suffering from weak company strategy. Kaplan
and Norton [4] believed traditional financial performance measures were effective in the industrial age,
but had been discarded by companies seeking new
technologies. Managers seek a balance between financial and other performance. Christopher [5] emphasized that traditional performance evaluation cannot
help teams understand their operations and capacities,
or improve their performance. These result measures
are mostly internal financial indicators, including revenue, gross margin, cost and debts, and few of them include a cross-department index. Maisel [6] mentioned
that traditional financial performance evaluations cannot be associated with various strategies, creating barriers to strategy execution, competitiveness improvement, and profitability. Hoffecker and Goldenberg [3]
thought that former performance evaluation methods
based on traditional accounting systems cannot provide information about customers and competitors, and
losing this important information means losing awareness of market opportunities. Zeleny [7] believes that
decision making occurs only when additional dimensions, such as an estimated reliability, a judges credibility, or the cost of erroneous judgments are brought
in. Clearly, no one-dimensional or single-criterion de-

cision problem can ever exist. Other than choosing the

tool of measurement, there remains very little to be
decided. Atkinson et al. [8] believed that performance
evaluation trends involve improving current financial
indicators and non-financial indicators (e.g., customer
satisfaction, employee satisfaction, and product failure
rate). Zee and Jong [9] observed that traditional evaluations, like regular sales and sales revenues indicate
past results rather than future prospects. In terms of the
analysis of stock holder value, future forecasts should
be based on the current status. However, the problem is
that the financial evaluation is the final result, and can
be obtained only after executing different activities. In
contrast, the balanced scorecard covers areas like customers, internal processes, team innovation, and development progress, and helps in methodically analyzing
team activities and tracing the execution results, finally
leading the company to financial success.
Thus, this study focuses on company P, and describes in detail how it integrates the balanced scorecard into its strategy planning. The remainder of this
paper is organized as follows: Section 2 describes the
content of the balance scorecard. Section 3 then introduces the case (i.e., Company P). Section 4 explains
the implementation of the balance scorecard for Company P. Conclusions are finally drawn in Section 5.

2. Content of the balanced scorecard

2.1. Origin
The balanced scorecard concept dates back to 1988,
when KPMG designed a performance evaluation system for APPLE. Later, in 1990, the Nolan Norton Institute sponsored a research project entitled evaluation of future organization performance, led by Professor Robert Kaplan of Harvard University as a representative of academia and the CEO of Nolan Norton David Norton as a representative of industry to
evaluate the performance of 12 companies. The project
was completed in December of 1990 and published in
the Harvard Business Review in 1992. Norton and Kaplan mentioned the concept of the balanced scorecard,
which applies an overall management system covering four perspectives to help managers acquire complete information very quickly, and learn the status of
their business. The balanced scorecard is a total management system for translating strategy into action, and
its core value is achieving the company vision and
strategy. The key objective is to transform company

M.-H. Hwang and H. Rau / Design and planning of the balanced scorecard

strategy into actions to improve competitiveness. The

four perspectives include the traditional financial indicators and add three non-financial operating indicators,
namely the customer perspective, the internal process
perspective, and the learning and growth perspective.
These four perspectives transform an organizations
vision and strategy into a new performance evaluation system with objectives and measures. It consolidates individual, departmental, cross-departmental, resources and projects of the company to achieve common objectives, and it associates company strategy, vision, and direction with a strategic performance management system. In practice, many companies using
the balanced scorecard consider it to be an important
management process, being used for individual and
team objectives, the salary system, resource allocation, budget estimation and planning, as well as strategy feedback and learning. Consequently, the balanced
scorecard has been promptly developed as a strategic
management system.
2.2. Definition
Niven [10] thinks that the balanced scorecard is
a strategic measurement tool carefully selected by
companies, that leaders use to express investment
achievements to employees and stakeholders, and to
motivate the achievement of objectives. He also believes that the balanced scorecard incorporates measurement systems, strategy management tools, and
communication tools. Chow et al. [1] pointed out
that the balanced scorecard associates traditional and
strategic performance evaluation, and helps a company
to achieve objectives such as long term strategy, innovation, and customer values. Kaplan and Norton [4]
mentioned in the Harvard Business Review that the
balanced scorecard is a strategic management tool for
the association of company strategy and key performance indexes, seeking a balance between long term
and short term objectives, financial and non-financial
measurements, external and internal performance perspectives, lagging and leading indicators, as well as
subjective and objective perspectives.
2.3. Advantages
Chow et al. [1] believe that the advantage of the balanced scorecard lies in helping companies to integrate
strategy, organization framework, and vision into management systems, to translate the long term strategy
and innovation of customer value into operational ac-

219

tivities, and to balance the competitiveness and short

term fortunes of stockholders via the combination of
traditional and modern indicators. Martin [11] thinks
that traditional performance indicators tend to measure
financial and accounting aspects, impacting long term
productivity and profits, whereas companies should focus on synthetic indicators like customer reactions,
profits, quality, and flexible production selection. The
balanced scorecard provides measurements of those indicators. Berman [12] stated that the balanced scorecard enables companies to focus on necessary management and measurement indicators. Moreover, it also
enables efficient communication of team objectives,
and companies can understand how to achieve strategic
success by using the balanced scorecard. Berman [12]
also believes that companies should include 25 to
60 key performance indicators in the balanced scorecard. Additionally, Hanson [13] thinks that the main
advantage of the balanced scorecard lies in helping
all organization members to cooperate on developing the future of the firm. MacStravic [14] mentioned
that the balanced scorecard possesses six advantages:
(1) An Increase of firm insights in the understanding
of customers, (2) Readjustment of internal operations,
(3) Stockholder satisfaction, (4) Customer acquisition,
(5) Improving customer relationships, (6) Increasing
customer loyalty. Frigo and Kip [15] pointed out that
Motorola has improved in three key areas after using the balanced scorecard, including vision systemization, quality improvement, and execution. Therefore, the balanced scorecard is an important tool for
providing focus in strategic management.

3. Case study of Company P

Company P was established in 1972, and has accumulated over 30 years of experience. It has built
up an excellent technical team, which explains its
leading position in producing conductive rubber keypads, and having a global customer-base. Products
previously produced by Company P include mobile
phone parts, computers, calculators, desk phones, remote controls, car remote controls, translators, and fax
machines (Fig. 1).
Company P not only looks to reduce costs and share
their profits with clients, but it also stresses product
quality, which itself depends on a perfect quality control system. Therefore, machines must periodically be
reformed, fleshware should be constantly improved regardless of market competition, and efforts must be

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Fig. 1. Products of Company P.

Fig. 2. The organization of Company P.

made to continue stressing internal management, improve work efficiency, reduce costs and provide customers with feedback. As a good corporate citizen,
Company P has important community responsibilities.
Moreover, its core values include innovation, rapidity,
pragmatism, diligence and thrift, described as follows:
Innovation: Aggressive, brave, understanding internal and external changes, able to adapt to
changes, continuously looking for improvement
and creating new opportunities.
Rapidity: Agile, well-executed, efficiently gaining a leading position.
Pragmatism: Working effectively and honestly.
Not being edgy or hypocritical, and seeking to obtain stable progress.
Diligence and thrifty: Being diligent and thrifty,
concentrating on the business, and making things
simple and clear.
To realize the above values, Company P has designed
their organization as shown in Fig. 2.

The main goal of Company P is to make a profit. To

achieve this goal Company P extends secondary objectives from this principle. Company P has adopted the
slogan 20103100 to describe the direction in which
they need to go in to achieve their target. Company P
hopes to bring their company to a new level during the
21st century and to rise to big challenges. The slogan
has the following meaning:
2010 stands for the Year 2010 (now is the Year
2006)
3100 stands for company expectations: (1) To
rank among the top three in terms of global market share, (2) To obtain 100 technical patents,
(3) To make one billion NTD in sales revenues.
Company P will work with its current organization and resources, relying on business core values, to achieve the above vision. The vision is
shown in Fig. 3.

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221

Fig. 3. Company P vision 20103100.

4. Implementation of the balanced scorecard

4.1. Strategy planning and process
Rather than using traditional financial performance
indicators based on internal accounting systems, which
cannot provide important information about customers
and competitors, resulting in lost awareness of market opportunities, Company P helps managers to get
complete information to understand the status of their
businesses, with the balanced scorecard providing the
basis of firm strategic planning. Additionally, with the
11 steps of the balanced scorecard developed by Olve
et al. [16] and the background information of four perspectives developed by Niven (Fig. 4 [10]), Company P
creates the process of strategy planning (Fig. 5). Figure 5 shows that Company P first builds the company
vision, which is identified by the management team
and agreed on by the entire organization. After defining
the vision, they must establish accurate objectives for
its achievement. However, before setting objectives,
various factors should first be analyzed. Company P
uses the inner factors analysis, competitors analysis,
and five forces analysis to analyze business operations.
Furthermore, due to the professionalism of the rubber industry, Company P has added the technical perspective to supplement the four perspectives of the balanced scorecard as a direction for objective setting. After objectives are set, the action plans for achieving
them needs to be defined. If there are no problems during the planning of action plans, the plan execution
and performance evaluation step is next; however, if
there are problems in the objective setting when defining the action plan, then you have to get back to the

objective setting step to reset the objectives. Once at

the plan execution and performance evaluation step, if
there is a problem executing the action plans or doing
the performance evaluation, then you have to get back
to the action plan definition step to check the original
action plan. On the contrary, if there are no problems
at the plan execution and performance evaluation step,
the objectives and action plan set by Company P are alright, and Company P can successfully meet its target.
4.2. Inner factors analysis
Company P has to perform the inner factors analysis
to understand its advantages and weaknesses in order
to set correct objectives. Company P generates its advantages and weaknesses with the inner factors analysis as follows:
Advantages:
Respond to requests for low quantity and diversified products.
Strong resources and highly cooperative.
Weaknesses:

Insufficient technical human resources.

The appearance of the office building is not good.
Insufficient research and development.
Big factories have low intentions of placing orders.
Insufficient technical staff causing reluctance to
invest.
Others have already applied Quality Assurance
Systems (e.g., Company A, Company B), and
their technical information is stored and made
available to the public.

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Fig. 4. Background information of four perspectives [9].

Focusing on the weakness of the Company P, this

study proposes a solution as follows:
Recruit highly educated new employees and train
them to increase their competence.
Redecorate the appearance and build a large standardized factory.
Train talented staff as R&D specialists, and recruit external researchers.
Improve factory scope, technical staff, customer
service and satisfaction to increase the possibility
of receiving orders from big factories.
Employee training. Sufficient technical staff can
solve the resource problem in company investment.
Company P also has a Quality Assurance System
which is filed and made available to the public.
4.3. Competitors analysis
The competitors of Company P are Company A,
Company B, and Company C. Their advantages and

weaknesses compared with Company P are as follows:

(1) Company A
Their main products are PC film, P + R, Rubber, Soft IC, and films in plastic keypads. The
advantages of Company A are:
Sufficient resources for technical and market
development.
Publically listed company, with sufficient financial support.
Sufficient capital, with plans for equipment
performance improvement and employee
training, indicating generally bright prospects.
The comparisons between Company P and
Company A are listed in Table 1.
(2) Company B
The products of Company B consist of metal
rubber coated keypads, double printing keypads,
EL lamps, plastic metal domes, plastic films,
and mobile phone covers. The advantages of
Company B are:

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223

Fig. 5. Process of strategy planning for Company P.

Table 1
Comparison between Company P and Company A
No

Item

Company P

Company A

1
2
3

Number of employees
Stock listed
Financial support, having plans for equipment performance improvement and
employee training, bright prospects

Insufficient
No
Insufficient

Good
Good
Good

Sufficient employees, especially in engineering and R&D.

Publically listed company, with full capital
support.
Stable structure, with irreplaceable advantages in terms of resources.
Excellent appearance of the office building,
equipment, and technical staff, with consistent orders from big factories.
Efficient factory management and decision
process.
The comparisons between Company P and
Company B are listed in Table 2.
(3) Company C
Company C has transformed itself into an electronics company, and their main products are
rubber, P + R, bonding, lasers and PC films.
The comparison between Company P and Company C are listed in Table 3.

4.4. Five forces analysis

Considering current resources, organization, team
scope, competitive analysis, the admission of Taiwan
to the WTO, competition and threats from the rapid
growth of China enterprises, and the current international economic situation, this subsection conducts
a five forces analysis for Company P. This five forces
analysis should help to clarify the future direction for
Company P and help it identify a correct strategy,
reduce risks, and achieve maximum profits, creating
a win-win situation. Hopefully, Company P can enter
a new phase in the 21st century and continue to grow.
The five forces analysis devised by Porter [17] determines industry profitability or attractiveness based
on five competitive forces: threats from potential entries, threats from substitutors, price negotiation power
of the buyer, price negotiation power of the supplier,
and industry competitors. This analytical perspective

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M.-H. Hwang and H. Rau / Design and planning of the balanced scorecard
Table 2
Comparison between Company P and Company B

No

Item

Company P

Company B

1
2
3
4
5

Number of employees, especially in engineering and R&D

Stock listed company, capital supports new projects within budget
Stable structure, irreplaceable advantages in resource
Excellent appearance, equipments and technic, consistent orders from big factories
Efficient factory management

Insufficient
Not listed
Fair structure and resources
Insufficient
Fair

Good
Good
Good
Good
Good

Fig. 6. Strategic map for Company P.

helps clarify the industry characteristics, which influence competitiveness and profitability in the industry.
From a strategic point of view, enterprises face competition from competitive forces.This study uses the five
forces of Porter for Company P. The synthetic analysis
is shown in Table 4.
4.5. Strategic map
Following the inner factors analysis, competitors
analysis, and five forces analysis for Company P, future objectives and action plans can be defined, and

Table 3
Comparison between Company P and Company C
No

Item

Company P

Company C

1
2
3

Technical staff
Equipment
Capital

Insufficient
Insufficient
Fair

Enough
Enough
Enough

the balanced scorecard can be used to evaluate performance. The balanced scorecard includes financial,
customer, internal process, technical, and learning and
growth perspectives. Figure 6 shows the strategic map
for Company P for the year 2010.

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225

Table 4
Synthetic analysis
Price negotiation power

Substitute products

Substitute level

Whom

Level

Product

Substitute Product

Level

Entry difficulty
Category

Level

Examples

Material supplier
Partner
Customer

Middle
Strong
Weak

Touch screen
Membrane switch
PC film

Mobile phone
PDA
General

High
High
Low

Rough
Fine
Extra work

Low
High
High

Remote control, toy, telephone

Auto parts
Mobile phone, PDA

Table 5
2006 annual objectives for Company P
Perspective No

Strategy

Measurement

KPI performance indicator

Status (/year)

Target (/year)

Financial

Increase sales

sales (new product)

Annual growth

25%

50%

sales

ROI

10%

20%

Continuous order rate

Customer
Customer
satisfaction
complaint

Production cycle

Delivery rate

90%

95%

productivity

Production cycle reduction rate

Increase personal productivity

20%
40%

Number of employees

Elimination rate

2.4 million
NTD
2%

Improve R&D

Patent

Quantity

5%

20%

Production
techniques
Technical
management

New product development

Quality
Productivity
Task follow-up
Problem finding and solving

Success rate
Yield rate
Personal productivity
Success rate
Problems found Solving rate

50%
90%
3750p

5/month 90%

100%
95%
2% (3825p)
95%
10/month 90%

Quit rate

5%

2%

Customer loyalty
Achievement rate
Success rate

70%
40%

99%
90%
80%

Customer

Internal

Increase customer Customer loyalty

satisfaction
Customer satisfaction

Reasonable cost

process
4

Technical

5
6
7

Learning

and growth

Reinforcement of
organization

Building company Employee satisfaction

99%
99%

<6/month

5%

culture
9
10

Multi-functional
e-enterprise

Customer recognition
Competence development
Process improvement

4.6. Annual objective for the year 2006 for

Company P
With the strategic map for Company P, we have
a rough understanding of the direction in which we are
working, and can start setting objectives for 2006. To
stimulate discussion between decision makers and all
related staff, the 2006 annual objectives are listed in
Table 5.
4.7. Action plans
After completing the 2006 annual objective setting,
Company P can work on the action plans with their
strategy performance indicators, as shown in Table 6.

5. Conclusion
Company P has carried a debt of one hundred million NTD since June 1989, but achieved earnings of
tens of millions of NTD for 2005. Company P has
experienced numerous difficulties and transitions, but
currently the scope of the company is growing, the
number of employees is increasing, and products are
becoming increasingly complicated. The former one
governor policy does not suit the current rapidly
changing market. Therefore, Company P must start
a new process starting with objective setting, strategic plans, action plans, project execution, and evaluation, to avoid any losses caused by personal negligence
or error. The process can also improve decision mak-

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M.-H. Hwang and H. Rau / Design and planning of the balanced scorecard
Table 6
Action plans of Company P

Perspectives Strategy

Indicator

Action plan

Schedule/Month

Owner

1 2 3 4 5 6 7 8 9 10 11 12
Finance

Customer

Increase
sales

Improve
customer
satisfaction

Double

Quantity increase
of new products 50%
Quantity increase
of mature products 100%

Continuous order Improve

over 95%
service quality
(customer loyalty) Reduce failure rate
Accurate delivery

Plan
execution

Sales

Sales/R&D

QC/Product
line

Production
Management/
Product line

Internal

Reasonable
cost

Cost down
15%

Low cost material

Reduce failure rate
Shorten
production cycle

Technical

R&D
Competence

20 pcs/
year

Staff optimization

Learning
Multifunctional Basic employees
and growth
30 hrs
Engineers
50 hrs
Middle staff
20 hrs

Sales/RD

QC/Production

Engineering/
production

Purchase patent
techniques

Building annual
training
evaluation system

Managers
36 hrs

ing. By introducing the steps and data of the balanced

scorecard of Company P, this study expects to provide
other enterprises, especially the rubber industry, with
an important reference for use in their future implementation of the balanced scorecard.
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