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track of the execution of activities by staff within their control and monitor
the consequences arising from these actions. It is perhaps the best known
countries and Scandinavia in the early 1990s. Since 2000, use of BSC, its
derivatives (e.g. performance prism), and other similar tools (e.g. Results
Based Management) have become common in the Middle East, Asia and
considerably since the initial ideas proposed in the late 1980s and early
balanced scorecard.
organizations to clarify their vision and strategy and translate them into
an enterprise.
1992 by R.S. Kaplan and D.P. Norton. Kaplan and Norton suggested that
factors.
Definition:
objective.
the follow:
Then
[4]
• Customer satisfaction level.
Meaning:
translate them into action the balanced scorecard incorporates not only
Objectives:
what their goals and come up with strategic that are aligned with these.
Features:
operational targets.
measures together.
Benefits:
breakthrough performance.
[7]
• Helps breaks down corporate level measures so that local managers
and employees can see what they need to do well if they want to
and department.
Characteristics:
• The first versions of BSC asserted that relevance should derive from
[8]
on choosing measures and targets associated with the main
• As the initial audiences for this were the readers of the Harvard
Business Review, the proposal was translated into a form that made
US business.
and Growth".
[9]
Yet amid all these measures of customer success, some
they ask "how high". They offer additional product features and services to
their customers, but fail to receive prices that cover the costs for these
additional features and services. How can companies avoid this situation
sales had more than tripled to nearly $3 billion, yet selling, general, and
increased even faster than sales. Despite the tripling in sales, margins had
just incurred its first loss in decades. Rather than SG&A costs being fixed
[10]
substantial pre-sales support from marketing, technical, and sales
field service; and liberal payment terms. While all of these come for free.
administrative costs into the cost as fixed-period costs and don't drive
It is reported that over 50% of fortune 1000 firms now use the
helped to implement the BSC and found that it has acted as a catalyst to
assist staff to see their jobs and parts of the outside world from a totally
[11]
Advantages:
financial factors.
driven by the ideas and innovations that come from their people.
Disadvantages:
performance measure.
goal.
[12]
• It is somewhat difficult and time consuming to implement a
and profit before tax are outcome indicators. They only alert us when
things have gone wrong and the effect is being felt by the business
the future.
[13]
2. The drivers of business success: Financial measure alone do not
assess and measure the parts of the organization that create the
of this below) can help to fill the gap and help a wide range of
the end someone put their hand up and said "Excuse me, but what
[14]
technical term used by very few people in the company. The fact is
must define what are the component parts of the organization(again using
[15]
aligned to our strategy we have a performance measurement and
have the three key parts of the organization that inter-lock to deliver
shareholder value.
financial objectives.
[16]
environmental needs), Customer Offerings and Relationships and
one driving another. Financial results are driven first by people. People
with the right skills, motivation and information create effective and
services that create value for the customer. Customer value in turn
[17]
BALANCED SCORECARDS AND
ORGANIZATIONAL DEVELOPMENT
show that strategic measurement can work wonders, there are also many
cases where scorecards simply did not work. The most balanced
perspective is that these tools work well, when they are well implemented.
knowing about scorecard tools can be helpful, since some of the tools can
be used independently.
vision of success, and get people working on the right things and focusing
system. This article is the first in a series describing how to build and
approach.
system. These are strategy -based systems that align the work people do
measures (outcomes, outputs, process and inputs) are only one of several
[19]
decision making at all levels in the organization. In strategy executed well.
accomplish. In other words, we' 11 start with the end in mind, not with the
essence of our journey: "People and their managers are working so hard
to be sure things are done right, that they hardly have time to decide if
[20]
Engaged Leadership, Interactive Communications and Change
organization it's about changing hearts and minds. Leaders who are
and planning and managing change are important first steps in the
process.
values that are built on strong personal values. Most organization has
components that allow employees to "get it" easily. A compelling and clear
and external pains and enablers that will drive strategy creation and the
[21]
perspective, and includes an understanding of customer needs, product
strategies and expected results. Key strategies are the main focus areas
are the building blocks of strategy (strategy "DNA"), and objectives linked
and provide a basis for prioritizing the budget and identifying the most
[22]
strategy, using the strategy map, performance measures and targets, and
strategy actionable for people, and help build buy-in for the behavior
explored in more detail. Here, the focus is on the relationship between the
Balanced Scorecard, Kaplan and Norton set forth a hypothesis about the
chain of cause and effect that leads to strategic success. This cause-and-
ideas are vital to the future of the organization, because they come
from the experts the people who are involved with the business
back to Deming, who saw the vital need for managers and shop-
[24]
that stifles or ignores new ideas from its employees is probably
long-term success.
increased market share, which directly affect the bottom line whether
Corresponding to the steps in the causal chain are four general areas of
[25]
Learning and growth is fostered by knowledge management
processes.
Customer loyalty cannot any longer be taken for granted within the
[26]
loyalty. These efforts come under the general heading of customer
(EVM) and other practices by which managers can learn more from
success.
growth is the key to strategic success, the foundation for the future.
[27]
management activities are deployed and expanding in order to
BALANCED SCORECARD
abstraction that narrows the search space for a measure ( e.g. find a
catalogues and suggestions from books are only helpful `after the event' -
[28]
in the same way that a Dictionary can help you confirm the spelling (and
usage) of a word, but only once you have decided to use it.
Performance Measures:
that objective.
and the time period for the measurement. Measures should be written as
Types of Measures:
Core Measures:
[29]
These are measures the Department expects all elements to
employ where applicable. The formulae and methods for core measures
Optional Measures:
Local Measures:
specificity that each site may identify and include as part of their BSC.
performance.
includes financial measures that tell the results of actions taken and
[31]
Because BSC shows the cause and effect relationship (Garrison and
performance.
executives to track not only financial measures that indicate the results of
the past decisions, but also non-financial measures, which are leading
[32]
measures that better report such assets as loyal customers, proprietary
that has a very large customer base. Such a firm could be an attractive
takeover target simply because the acquiring firm wants access to those
with the plan to discontinue the competing product line and convert the
customer base to its own products and services. The balance sheets of
such takeover targets do not reflect the value of the customers who
those areas. The objectives within the four perspectives are carefully
[33]
selected and are firm specific. To avoid information overload, the total
meant by "performance".
scorecard, Kaplan and Norton defined a four-step process that has been
order avoid optimizing the results of one business unit at the expense of
others.
[34]
2. Specify strategic objectives:
The top three or four objectives for each perspective are agreed
drivers are selected for evaluating the progress made toward achieving
the objectives.
MANAGEMENT SYSTEM:
[35]
strategy at all levels of the organization by facilitating the following
functions:
consensus.
organization.
but achievable targets are set for each perspective and initiatives
learning").
[36]
Balanced Scorecard has been applied successfully to private sector
of employees.
process.
Perspectives:
• Financial;
• Customer;
• Internal Business;
Financial Perspective:
create value to shareholders. In BSC, the spelled out financial goals are
performance in these areas are very much essential to have an idea about
[38]
• Project expense: actual to budget, actual to forecast
initiatives.
on capital invested.
reduction.
Customer Prospect:
customer services into specific measure which reflect the factors that
[39]
really matter to the customers. Customers concern tends to fall into four
product or service.
[40]
need to focus on those critical internal operations that enable them to
time.
[41]
• Problem management: time to restore services on customer-
incidents.
review/findings.
The targets for success do not remain static but they keep
continual improvement to their existing products and process and have the
company's ability to improve and learn ties indirectly to its value. Value for
penetrate new markets and increase revenues and margins. From the
it is clear that this system is broad based and covers areas beyond the
[43]
BALANCED SCORECARD AS A STRATEGIC
MANAGEMENT TOOL
scorecard was first introduced in the early through the work of Robert
Since then, the concept has become well known and its
[44]
By combining financial measures and non-financial
managers with richer and more relevant information about activities they
and utility, Kaplan and Norton proposed that the number of measures on a
into four groups. Beyond this, the original definition of Balanced Scorecard
was sparse. But from the outset it was clear that the selection of
perspectives.
unchanged since these early papers, having at its core a limited number of
[45]
clearly differentiate them from earlier examples. This paper describes
stakeholder in a business.
between the four perspectives was illustrated but not used for specific
purpose. Kaplan and Norton's original paper's focus was on the selection
this process.
[46]
Kaplan and Norton's original work makes no specific observations
of organizations.
Scorecards are still being developed, and that they probably still form the
exist in the academic literature. Those few that do focus primarily on the
[47]
(the process of choosing specific measures to report), and clustering
sentences attached to the four perspectives, and were used to capture the
or a strategic plan.
between the perspectives had been Balanced Scorecard saw the idea of
[48]
Measure based linkages provided a richer model of causality than before,
Balanced Scorecard'.
(rather than the measures) with causality linking across the perspectives
Scorecards there are still areas that prove difficult to deal with during the
[49]
development process for both management teams and consultants
priority elements within their collective vision and strategic goals difficult.
While there is usually some type of common reference point in the form of
something that the management team didn't fully agree on. Working to
selecting priority objectives itself is not one that has been found to support
Strategic Objectives and the Strategic Linkage Model, for similar reasons
strategic plans.
[50]
3rd Generation Balanced Scorecard:
to give better functionality and more strategic relevance. The origin of the
developments stem from the issues relating to target setting and the
this statement `how much' of key things would have been achieved by this
the hope was it would subsequently by easier (for example) to check for
balanced scorecard and the next level of detail for each of the four
[51]
The first part of the process is creating a model for the
scorecard. First, review and clarify strategies; this often requires some
be dealt with.
For example, one automaker's strategies for selling cars were spilt by
group: the CEO believed in forming alliances with exotic makers, the sales
executive leaned on rebates, and the product group, with limited budgets,
expensive hodgepodge.
company.
within the company to actually pursue the strategy. At the automaker, they
[52]
strategic goals, and worked together to pursue them. Lead time was cut in
half, costs were slashed, and the products gained immediate critical
survey of the leadership team. Once that is that is done, you can move to
scorecard. This is where the process and the paper come together. One
• It is a process check to ensure that the issues chosen are clear and
well understood.
• It takes away some of the time demands from the senior leaders.
the senior leaders, who then either use them, or ask for changes or
[53]
clarifications. The measurement teams can also be used to help with
implementation.
process and are prepared for it; and how well the scorecard is being
CONCLUSION
FUTURE PROSPECTS
can be viewed in the context of the sweeping changes that have come
[54]
It is expected that these change will continue.
competitive marked where things have been changing quite rapidly. With
• A CUSTOMER-ORIENTED OUTLOOK:
hours, provision of the wide network of ATMs, phone banking and net
[55]
Customer can now withdraw money at any time and from branch across
the country.
well as finance for investing initial public offering is stocks and share to the
investors.
• RETAIL FINANCING:
great extent and sanctioning time has been speeded up. Customers can
apply for credit online and even the processing of loan application is done
years.
competes.
and fully understand the people skills you require going forward.
Scorecard many changes have been made to the physical design, utility
and the design processes used to create the tool within organizations.
architecture of the original idea. The need to have a design process that
made measure selection more relevant and part of the collective view of
the management team drove the major changes that can be seen in two
indication that the more modern ideas about Balanced Scorecard design
processes and structure are indeed `better' than the original concept
described by Kaplan and Norton, in so far as they are more likely to have
[59]
Strategy communication tool however, its precise utility needs future
Exploration.
unfamiliar with the new concepts. EVA and Intellectual Capital are
working with them, they won't design them into their Balanced
management team.
[60]
Balanced Scorecard within organizations is the ability to
banks; on the other to balance scorecard design and feedback and review
[61]
competitiveness. New model of banking services is based on the
the traditional service level of knowledge and cultural grade, and will
adapt to the development of the new banking services model and respond
BIBLOGRAPHY
WWW.GOOGLE.COM
WWW.MSN.COM
WWW.ASK.COM
[62]
[63]