Balanced score card:

Origin:
The origin on balanced scorecard took in 1950s in different forms though
precisely not as BSC by many multinational companies. It started when General
Electric took up a project to assess the project performance measures for its
decentralised business units. The team identified different non-financial metrics
apart from financial metrics namely product leadership, public responsibility,
personnel development and employee attitude. Though GE was not notably
successful in implementing this strategy, it laid foundations for further research
by academicians. Peter Drucker in his classic book, The practice of Management
emphasized on the alignment of strategic goals between employees and the
organisations. But companies were not successful in internalising the goals to
middle level managers and low level employees still. Companies were only
focussing on the financial metrics.
To identify the value created from intangible assets, companies and researchers
formulated many theories and followed different paths. Finally Robert S Kaplan
and Dave Norton introduced the Balanced scorecard to properly assess the
companys performance bringing in four perspectives and develop a strategy for
long term.
What is it?
The BSC views the organisation from four perspectives and develop metrics
accordingly, measure them and design a corporate strategy.
The learning and growth perspective:
It focusses on employee training, culture and attitudes of individuals and
company as a whole. For example in a knowledge worker organisation like any
consulting firm, it is very important for the individual to indulge in continuous
learning activities. They are the only repository for the firm. It includes
knowledge sharing, communication from top level management to middle
management to ensure the company improves and enhances its knowledge over
time.
The business process perspective:
It helps in identifying metrics that measure the internal business processes and
gives a snapshot to managers to know the performance of the internal business
units. Accordingly they can improve themselves by introducing new processes in
meeting the customer requirements. They help in redefining their mission
statements to keep the employees engaging in all the internal activities of the
firm and internalise them.
The customer perspective:
The importance to customer focus and customer service has increased
significantly and has been the critical measure for any company to succeed. If
the customers are not satisfied, eventually they would shift to other products. Its
very important to win customers in competition. We can develop many metrics
by dividing the customers into different groups and types and plan the corporate
strategy accordingly.

The financial perspective:

It helps in identifying high level financial perspectives to create shareholder
value. The need for financial gain makes it most important among all the four,
but one should ideally focus on all the four equally for financial gains. Depending
on the metrics from all the perspectives, they can fix their goals in long term and
short term.
In a nutshell, the BSC helps in articulating the vision of a company, identifying
the key performance categories, establishing business objectives and take action
accordingly to close the gaps and remove the imperfections.
Drawbacks of balanced scorecard:
Cost and time:
The cost and time involved in developing the metrics based on the perspectives
are very high. The theory behind these metrics may not be apprehensible to the
entire organisation.
Incomplete information:
It is very important to have proper information to develop the metrics from
perspectives. Any uncertainty would hamper the development of an optimal
corporate strategy.
Employee resistance:

If the implementation of any strategy based on the formulation suggests the

employees to go for a training, they tend to oppose it and may consider it as a
waste of time.
IA3 framework:
Though the term non market forces has been in existence since 1940s, the
studies and emphasis on non-market issues in recent has taken a focussed
approach because of the rapid development of technologies and internet. One
predominant issue now a days is the environmental issue taken seriously by
many interest groups and activists has questioned the activities of many
companies and criticised them in the public arena. Notable examples are Shells
Brent oil spar, recent plane crashes and product recalls from automobile
manufacturers because of reported accidents and their extensive coverage in the
media. Companies have very limited information during these crisis and their
actions decide the companies future. IA3 framework helps the organisations to
identify their issues properly and help them in formulating an action to come out
of the crisis.
What is IA3 framework?
Unless a crisis hits a company, they generally do not focus on the non-strategic
aspects and hence suffer during crisis. David Bach and David Bruce Allen
designed this framework to get a snapshot of the non-market environment and
help in devising strategies. It is similar to the Porters framework which helps in
market environment.

As shown in the figure, it identifies the issue, actors involved, interests,

information, arena and assets being effected.
What is the issue?
A typical company is effected by many nonmarket issues and taking a position
on a particular issue decides the fate of the company. Sometimes companies turn
these issues to opportunities and create value by their proper actions.
Who are the actors?

The potential parties and different effects to their interests and conflicts among
them has to be identified and formulate a strategy for survival in this battle.
Pharmacy companies have faced many such battles and some companies lost
the battle while some companies made use of the situation and corrected
themselves.

What are their interests?

Identifying the interests of the actors and their motivations help to understand
the criticality of the issue. Depending on this criticality level, a proper action
should be taken.
In which arena do these actors meet?
The general arena is the public arena. For example, different media groups and
activists may fight an issue that creates a potential damage to environment and
is a very tough battle for companies and have to play very safely in view of not
damaging their image.
What information will move the issue in this arena?
Like money for markets, information for non-markets. The kind of information
drives different interest groups towards an issue and draws public attention very
quickly. Companies should not be decisive in these circumstances.
What assets do the actors need to prevail in this arena?
It is very important to assess the loss that is going to create to the tangible and
intangible assets of the company. And actions should be taken according to this
assessment.
Disadvantage of the framework:
Even after this rigorous analysis, the strategy may not guarantee success in the
non-market environment because of its dynamic nature.