Organizational

Analysis Models:

BALANCED
SCORECARD
MODEL
Presented by: Kristine Javier & Angely Timbogan
Financial
Indicators
earnings-per-share
return-on-investment
net profit
Industrial
Era
TRADITIONAL

Financial Operational
Measures Measures
Developed and introduced in 1992

Robert S. Kaplan and David P. Norton

Harvard Business Review: "The

Balanced Scorecard - Measures That
Drive Performance"

One of the most effective management

tools

FIRST PHILIPPINE
INDUSTRIAL
CORPORATION (FPIC)
 Kaplan and Norton describe the innovation of the balanced scorecard as follows:

“The balanced scorecard retains traditional financial

measures. But financial measures tell the story of
past events, an adequate story for industrial age
companies for which investments in long-term
capabilities and customer relationships were not
critical for success. These financial measures are
inadequate, however, for guiding and evaluating the
journey that information age companies must make to
create future value through investment in customers,
suppliers, employees, processes, technology, and
innovation.”

Robert S. Kaplan David P. Norton

What is a Balanced Scorecard?
Definition
Purpose
Advantages
Disadvantages
Critiques
Application
 Definition
Balanced Scorecard (BSC) is
a strategic planning and
management tool used by
organizations to:

Align the day-to-day Prioritize projects, Measure, monitor

Comunicate what they
work that everyone products, and progress, and provide
are trying to
is doing with the services feedback on the
accomplish
organization's performance of the
vision and strategy organization against
strategic targets
 Most frequent related terms:

Objective - the high-level goal you have in mind;

Measures -the means that allow you to determine

whether you're meeting your goals;
Initiatives - the actions in which a financial
resources and efforts are invested to
accomplish an objective and improve

Balanced performance;
Action items - the subtasks that help you complete
Scorecard your initiatives;
Strategy map -a one-page visual depiction of an
Short Glossary organization's scorecard.
Strategy Map Example
The name “balanced scorecard” comes from the
idea of looking at both strategic and traditional Financial
financial measures to get a more “balanced”
view of performance.

Internal Process
BSC is a visual tool used to measure the Customer
effectiveness of an activity against the strategic
plans of an organization.

Learning & Growth

Often used during strategic planning to make
Financial
sure the organization's efforts are aligned with
the overall strategy, mission, and vision.

Internal Process
In the BSC of the organization, the strategy, Customer
mission, and vision are at the center. These are
surrounded by measures along four
perspectives namely, Financial, Customer,
Internal Processes, and Learning & Growth.
Learning & Growth
Four Perspectives
Financial
"How do we look to stakeholders?"
Financial performance
Effective resource use
Customer
"How do customers see us?"
Customer value
Satisfaction and/or retention
Internal Processes
"What must we excel at?"
Efficiency
Quality
Learning and Growth
"Can we continue to improve and create value?
Human Capital
Infrastructure and technology
Culture
 Purpose
C - TRACK
C
Communicate
TTrack
R
Reinforce
To reinforce good behavior in an
To communicate the strategy To track and improve organization and attain objectives
across the organization strategic performance that result from its primary
functions
The Balanced Scorecard clearly It monitors and measures By analyzing performance
lays out a strategy map that progress towards strategic across different perspectives, it
communicates priorities and objectives, providing feedback helps identify and correct
objectives to employees, to help managers and factors hindering business
customers, suppliers, and other executives make better performance and reinforces
stakeholders. decisions. positive behavior.
 Purpose
C - TRACK
AAlign
C
Comprehensive View
K
Kickstart Planning
To align an organization’s day- To provide a comprehensive To kickstart planning and
to-day activities, divisions and view over an organization’s prioritizing strategic initiatives
departments around a common big-picture goals
strategy
It links the company’s vision, It gives a comprehensive view of The Balanced Scorecard
mission, and values to strategic both financial and non-financial provides clear metrics for better
measures, initiatives, and goals, reminding executives of prioritization of projects,
targets, helping all stakeholders the importance of quality and strategy implementation, and
understand how their projects service alongside sales and development of strategic
contribute to overall success. expenses. objectives and initiatives.
 Advantages
S-M-A-R-T

S M A
Structure the strategy Make communication easy Align departments and
divisions
The BSC provides a clear The BSC uses visual tool like By linking individual and
and logical framework for strategy maps to clearly overall objectives to the
organizing and managing communicate strategic overall strategy, the BSC
the organization's strategic plans across the ensures that all parts of the
goal. organization. organization are working
towards common goals.
 Advantages
S-M-A-R-T

R T
Reveal individual goals Track strategy in reporting

The BSC helps employees The BSC keeps strategy

see how their personal central in reporting by
goals and performance ensuring regular review
contribute to the meetings and updates,
organization's strategy. making strategy an active
part of management and
tracking goal achievement.
 Disadvantages
H-A-R-D
H A R D
Highly overwhelming Adaptation challenges Requires strong leadership Difficult to maintain consistency

The extensive material, Adapting the BSC to fit an Weak leadership support Maintaining consistency
complexity, and resource- organization's specific and lack of commitment with the BSC is
intensive nature of the strategy and goals can be can hinder the successful challenging, especially with
BSC can be highly challenging because it implementation of the basic tools like Excel or
requires a customized BSC, as it requires Powerpoint, leading to
overwhelming, especially
significant organizational accuracy issues, subjective
for those new to the approach that cannot be
change and buy-in from metric selection,
concept. simply replicated from
all levels, especially maintenance demands,
other organizations.
senior management, to and dependency on data
be effective. quality, which can affect
effectiveness.
Balanced Scorecard Criticisms
COMPLEXITY AND
OVEREMPHASIS ON
IMPLEMENTATION
MEASUREMENT
DIFFICULTY

RIGIDITY LACK OF FLEXIBILITY

POTENTIAL FOCUS ON
MISALIGNMENT QUANTITATIVE METRICS
Balanced Scorecard Criticisms
OVEREMPHASIS ON MEASUREMENT

ISSUE

The BSC prioritizes metrics over meaningful action, leading to an

overemphasis on numbers rather than actual performance improvement.

According to Kaplan and Norton (2004), the Balanced Scorecard can lead
to an overemphasis on measurement, where organizations focus too much
on the metrics themselves rather than the underlying strategic objectives.
While measurement is important, it's essential to balance it with action
and improvement.
Balanced Scorecard Criticisms
OVEREMPHASIS ON MEASUREMENT

EXAMPLE

If the DENR sets a target of reforesting 10,000 hectares annually, the focus
might shift to simply planting trees to meet this target. However, this
approach might neglect the necessary activities for ensuring the survival
and growth of these trees, such as soil preparation, species selection, and
community involvement.
Balanced Scorecard Criticisms
COMPLEXITY AND IMPLEMENTATION DIFFICULTY

ISSUE

The BSC requires too much effort and resources, making it inaccessible to
smaller or resource-constrained organizations.

According to Wildermon (2014), implementing a Balanced Scorecard can

be complex and time-consuming, requiring significant effort and
resources. While it's true that implementation can be challenging, many
organizations have successfully implemented the BSC with proper
planning and resources.
Balanced Scorecard Criticisms
COMPLEXITY AND IMPLEMENTATION DIFFICULTY

EXAMPLE

A Regional DENR Office might struggle to allocate personnel to develop

and maintain a comprehensive BSC. The time and effort required for data
collection and analysis could detract from critical activities such as
monitoring illegal logging or conducting environmental impact
assessments.
Balanced Scorecard Criticisms
RIGIDITY

ISSUE

The BSC can become stale and inflexible if not regularly updated, leading
to a disconnect between strategy and execution.

According to Neely (2002), while the BSC may initially be rigid, it's
designed to be adaptable and iterative. Organizations should regularly
review and update their scorecards to reflect changing circumstances.
Balanced Scorecard Criticisms
RIGIDITY

EXAMPLE

If the DENR’s BSC focuses on forest conservation metrics, it might not

quickly adapt to a sudden need for disaster response metrics after a
major typhoon that causes widespread environmental damage.
Balanced Scorecard Criticisms
LACK OF FLEXIBILITY

ISSUE

The BSC is too prescriptive and doesn't allow for customization, leading to
a lack of fit with diverse organizational needs.

According to Seddon (1997), the Balanced Scorecard framework can be

modified to accommodate unique organizational needs. It's not a one-
size-fits-all approach; instead, organizations should tailor the framework
to their specific context.
Balanced Scorecard Criticisms
LACK OF FLEXIBILITY

EXAMPLE

A BSC developed for DENR Central Office might not be suitable for the
Regional Offices dealing with specific issues like coastal erosion or
volcanic activity. The lack of flexibility could result in irrelevant or less
effective performance metrics.
Balanced Scorecard Criticisms
POTENTIAL FOR MISALIGNMENT

ISSUE

The BSC, if not properly aligned, can lead to misalignment between

strategy and execution, creating confusion among employees.

According to Luffman et al. (2006), proper alignment with organizational

culture and strategic objectives is crucial for successful implementation of
the BSC. If not properly aligned, the scorecard can lead to confusion
among employees.
Balanced Scorecard Criticisms
POTENTIAL FOR MISALIGNMENT

EXAMPLE

If the DENR’s BSC includes metrics for community engagement in

conservation efforts but the employees are not adequately trained or
motivated to engage with communities, there may be a disconnect
between the metrics and actual activities, leading to ineffective
community programs.
Balanced Scorecard Criticisms
FOCUS ON QUANTITATIVE METRICS

ISSUE

The BSC prioritizes numbers over non-financial aspects of performance,

such as employee morale or customer satisfaction, which can have
significant impacts on organizational success.

According to Kaplan and Norton (1996), while quantitative metrics are

essential, they shouldn't be the only focus. Qualitative aspects of
performance are equally important.
Balanced Scorecard Criticisms
FOCUS ON QUANTITATIVE METRICS

EXAMPLE

A quantitative target for reducing illegal logging might be met by

increasing patrols and enforcement actions. However, without qualitative
measures such as community education and involvement, these efforts
might not be sustainable in the long term.
Balanced Scorecard: When to Use
COMPREHENSIVE
STRATEGIC ALIGNMENT PERFORMANCE
MONITORING

LONG-TERM STRATEGIC COMMUNICATION AND

PLANNING ENGAGEMENT

PERFORMANCE
HOLISTIC IMPROVEMENT
ACCOUNTABILITY
Balanced Scorecard: When to Use
STRATEGIC ALIGNMENT

The Balanced Scorecard (BSC) is highly effective when an organization

needs to ensure that its strategic objectives are clearly communicated
and aligned across all levels and departments. It provides a structured
framework that translates high-level strategy into specific, measurable
actions and goals.
Balanced Scorecard: When to Use
COMPREHENSIVE PERFORMANCE MONITORING

The Balanced Scorecard (BSC) is ideal for organizations that want to

monitor performance from multiple perspectives, not just financial
outcomes. It helps in providing a holistic view of performance by
incorporating various dimensions such as financial, customer, internal
business processes, and learning and growth.
Balanced Scorecard: When to Use
LONG-TERM STRATEGIC PLANNING

The Balanced Scorecard (BSC) is suitable for organizations focused on

long-term growth and sustainability. It helps in balancing short-term
financial results with long-term strategic objectives. By integrating
financial and non-financial performance measures, the BSC encourages
organizations to invest in initiatives that may not have immediate financial
returns but are critical for future success.
Balanced Scorecard: When to Use
COMMUNICATION AND ENGAGEMENT

The Balanced Scorecard (BSC) can serve as a powerful tool for

communicating the organization’s strategy to employees and engaging
them in achieving strategic goals. By clearly articulating strategic
objectives and linking them to specific performance measures and
targets, the BSC helps employees understand how their roles contribute
to the organization’s success.
Balanced Scorecard: When to Use
HOLISTIC IMPROVEMENT

Organizations seeking to improve overall performance across various

dimensions can benefit from the Balanced Scorecard's (BSC) balanced
approach. The BSC goes beyond traditional financial metrics by
incorporating other critical perspectives such as customer satisfaction,
internal processes, and learning and growth. This comprehensive view
allows organizations to identify and address weaknesses in any area that
may impact overall performance.
Balanced Scorecard: When to Use
PERFORMANCE ACCOUNTABILITY

The Balanced Scorecard (BSC) can help establish clear performance

expectations and accountability by defining specific metrics and
assigning responsibility. By breaking down strategic objectives into
measurable performance indicators, the BSC provides a clear framework
for what needs to be achieved and who is responsible for achieving it.