THE LOGIC PYRAMID OF BALANCED SCORECARD

STRATEGIC PLANNING

Toma PLEȘANU
Professor, Engineer, PhD, “Carol I” National Defence University
tomaplesanu@yahoo.co.uk

Gheorghe MARCU
Captain (Navy), Engineer, PhD candidate, “Carol I” National Defence University
gelu_marcu@yahoo.com

Cătălin BURSUC
Professor, Engineer, PhD, “Carol I” National Defence University
catalin258@yahoo.com

Abstract: The Balanced Scorecard (BSC) concept is defined and used in managerial practice as a measurement
system, as well as a strategic planning and management system, being implemented in business or industrial
organizations, in the government system, or in nonprofit organization.
From the perspective of measurement system Balanced Scorecard concept using Key Performance Indicators
(Key Performance Indicators) to measure performance within an organization that aligns subsequently daily
activities and actions undertaken to fulfill the strategic objectives of the organization.
In terms of planning and strategic management within the Balanced Scorecard (BSC) was developed a
hierarchical system and a strategy map, where the mission, values and vision of the organization are the starting
points for achieving in an optimal way, the strategic objectives. This article presents the role of the Balanced
Scorecard concept on organizational efficiency.
Due to the concepts and functions developed within the Balanced Scorecard (BSC), rigorous determination of
performance and counter performance within an organization, Balanced Scorecard (BSC) is also recommended
for use in institutions within the defense, public order and national security system.
Keywords: Balanced Scorecard, organization, national defense.

Introduction
The balanced scorecard concept as it is today defined and used is based on the work of
several researchers. We can appreciate at a theoretical level, that the balanced scorecard
system originates methodologically and conceptually in the concepts initiated by Peter Druker
- considered founder of modern management who introduce notions such as objective
management, decentralization of management and control, multidisciplinary training of
workers, satisfaction priority client in relation to profit, to name a few. Following the same
basic elements of the balanced scorecard system, we can highlight concepts taken from the
work of Abraham Maslow - known for creating the pyramid of needs. Looking for sources the
modern concept includes the French school that gave the first form of boarding as a support
system for the decision, as well as many other studies of other foreign researchers.

Analysis of basic concepts of Balanced Scorecard

As a management system, a balanced scorecard was introduced in 1992 following
Robert S. Kaplan and David P. Norton's publication in the Harvard Business Review of The
Balanced Scorecard - Measures That Drive Performance, a performance measurement study
in May to many companies that are largely dependent on the existence of intangible elements.
We appreciate that in the process of assessing the performance of a company, such as:

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employees' skills / abilities, employee motivation, innovation etc, were introduced, although
until then there were data used in this process such as: customer satisfaction, market share,
etc. but based on financially terms1. At the same time, a classification of the recorded and
evaluated values is introduced, in four large perspectives in close correlation with the
organization's strategy, thus ensuring consistency in the application of the concept 2:
 Financial;
 Customer;
 Internal business;
 Inovation and learning.
This provides a set of tools and methods that examine the adopted strategy and then
evaluate the proposed objectives to correct the company's progress.
Financial Perspective
This perspective translates in particular through the recording of profit and is
expressed in traditional financial terms. Even if other specific and detailed objectives in the
other three perspectives, such as customer satisfaction, product quality, delivery time,
employee skills development, are positive, if the financial target is not achieved, the strategic
goal is not reached. We can see the interdependence of resource allocation to achieving goals
such as employee training, investing in new technologies, or creating a strategic
communication campaign - cost-generating and profit-making to support all of these issues.
From the point of view of government institutions, this perspective can not be assessed
in terms of cost / revenue ratio. The value returned to the social system is based on concepts
such as education, health, safety and security of the citizen and can not be quantified
generically in financial terms as a profit. It can be evaluated through transparent decision-
making policies, successful implementation of reforms, implementation of an efficient
management, transparency of internal activities and processes, etc.
Customer Perspective
This perspective can go from some very simple questions3:
 What are the target customers to which the company's offer is directed?
 What are the expectations of the customers towards the company's products?
 What is the value of the offer in relation to customers?
All these questions involve many challenges, approaches and answers, taking into
account the company's specificity and strategy. Focusing on obtaining a low cost of
production or on the uniqueness of products on the market and focusing on maintaining a
leader in the field by addressing one of the two stated directions may be the key to this
perspective4.
Also, this perspective, in the case of governmental institutions we are witnessing a
conceptual constraint, their offer is addressed to the population, classifications can be
introduced depending on the age, region of the country, educational training, social status, etc.
It can be assessed by the degree of trust that the population gives to state institutions.

Internal business perspective

1
Cătălin, BURSUC; Gheorghe, MARCU; Toma PLEŞANU, “Analysis of Balanced Scorecard efficiency for
implementation in to the field of national defense”, Proceedings of the 10 th International Conference on
Knowledge Management: Projects, Systems and Technologies, Bucharest, November 23-24, 2017. Bucharest,
Editura “Carol I” National Defence University, 2015. pp. 163-169, ISSN 2069-1920.
2
Robert S. Kaplan & David P. Norton, The Balanced Scorecard – measures that drive performance, Harvard
Business Review, 1992.
3
Paul R. Niven, Balanced scorecard evolution, Editura The Wiley Corporate F&A, 2014, pp. 4.
4
Porter, Michael E., Competitive Advantage, The Free Press, Chapter 1, New York, 1985, pp. 11-15.

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 This perspective sets the objectives for a company to remain on the market by
continuously adding value to its customers and shareholders. The challenge that we identify in
this process is to identify those internal processes and their periodic evaluation (from the
multitude that can be set to achieve the objectives), processes that bring the company unique
to the market and establish a close relationship with customers. They can be invoked as
strengths: research, innovation, developed chain of business, customer knowledge and loyalty,
etc.
Returning to the government institutions and analyzing them through this perspective,
we can emphasize the need to reduce and make more efficient the costs generated by the state
sector, to maintain an efficient management and transparency in the spending of public
money.
Perspective Inovation and learning
This perspective can be considered the basis and the engine of all other perspectives.
In order to achieve all the objectives proposed, a staffing policy is needed to maintain and
develop employees' skills at the level of existing technological requirements at a given time,
and more importantly, to constantly prepare employees to understand and use the latest news
in the specific field.
It includes three directions of action: human capital, organizational structure and
information technology. All the activities carried out to achieve the objectives are based on
the human resource, its level of training, the ability of the company to shape its organizational
structure according to internal and external needs, and last but not least on the use of state-of-
the-art information technology streamlining production and technical support in making,
disseminating, evaluating and implementing decisions.
The same rules are retained in governmant institutions, to maintain a level of response
to the level at which the society operates. Continuous staffing, the use of dynamic
organizational structures and a minimum of staff and the implementation of state-of-the-art
technology in the current workforce to meet the demands of society are needed.

Description of the tools and how they are generated

Having defined the strategic objective of the company, all other aspects specific to the
four perspectives derive from it and we can proceed to identifying objectives for each
dimension, setting the performance indicators to be assessed, establishing a reporting chain
and deadlines. The role of the balanced scorecard concept in this situation is a tool for
monitoring and evaluating strategic performance.
In order to create a unified implementation concept around the strategy, it is necessary
to define and implement the following elements5:
 Objectives and strategic map;
 Performance indicators;
 Targets;
 Strategic initiatives.
The definition of the objective reflects the need for action, and it is expressed in a
statement of what needs to be done to align it with the strategy. In order to meet the
requirement of efficiency, it is necessary for the objective to be formulated in an instrumental
way, and in its definition it is important to start with the verb6. The role of the target can be
defined as a bridge between strategy and performance indicators.
As an example of the wrong understanding of the balanced scorecard concept, in the
early years, companies have translated their own strategy by populating the four perspectives

5
Paul R. Niven, Balanced scorecard evolution, Editura The Wiley Corporate F&A, 2014, p. 8.
6
A.N., Această topică specifică în limba engleză dă forţă exprimării.

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with performance indicators resulting in a large amount of data and after all they can not
discern which of the indicators ensure the success of the strategy. Subsequently, there was a
need to create goals that are specific to every perspective that aligns the company's effort with
the strategy. The question to look for answers is: What should be done better7?
By graphically representing the objectives identified in the four perspectives,
highlighting their interrelation in order to align the entire business of a company to the
strategy has revealed the strategic map. It is a powerful means of internal communication,
oriented towards the employee but also externally to all those interested, through which the
strategy is transposed into concrete actions.
Performance indicators and targets
Performance indicators are those indicators that reach a goal and which are evaluated,
the unit of measurement being usually expressed in numerical form and which, by interpreting
them at fixed intervals, provides the image of the evolution of the objective. Performance
indicators are closely related to employee activity.
Establishing thresholds - targets - is the possible to keep the evolution of a target,
which can be on an ascending, descending or non-regressive slope.
By evaluating and analyzing these indicators, corrections can be made to current and
prospective work to achieve the proposed objectives and the strategy line.
Strategic initiatives
Achieving set targets requires the development and implementation of strategic
initiatives. The difference between these and the objectives lies in the fact that the strategic
initiative has a fixed duration for implementation and the achievement of a target, while the
objectives are timeless. Strategic initiatives can be: career development program,
implementation of new technologies or software, employee motivation program, customer
loyalty program, strategic communication, etc.
By using all of these elements, the balanced scorecard concept also becomes an
internal or external communication tool that provides a stronger link between all stakeholders:
shareholders, customers, employees and the command team.

Specific conditions of application

The implementation of the balanced scorecard system is only possible through the
definition of mission, vision and strategy. From this position, the balanced scorecard concept
becomes a strategy management tool.
Mission
Defining the mission is the core of the reason for the existence of an organization. It is
also the reason why employees join the organization's efforts in its current activities and
transcend the need for well-being of only the shareholders or the executive board. It defines
how the organization is positioned in society to serve the interests of its clients.
As a definition, we can appreciate that the mission of an organization is an example of
embodying man's aspirations in a field, of collective effort to achieve a goal, of contributing
to the needs of society, of adding value to the work undertaken8.
The attributes of the mission definition are:
 Simplicity and clarity;
 Inspirational;
 Long-term implementation;
 Easy to understand and communicate.

7
Paul R. Niven, Balanced scorecard evolution, Editura The Wiley Corporate F&A, 2014, pp. 9.
8
Paul R. Niven, Balanced scorecard evolution, Editura The Wiley Corporate F&A, 2014, pp. 96.

336
 An effective way of defining a mission is to respond repetitively (five times) to the
question: Why is this important? This iterative process clarifies the existential purpose of an
organization, ultimately providing an abstract response to the mission of the organization.
Also, in order to support the definition of the mission, other questions can be used, such as:
Who are we ?, What are the primary needs for which we operate ?, How do we recognize,
answer or anticipate these needs or problems ?, What is philosophy or our organizational
culture that guides us ?, What makes us unique?9
Mission is the thought expressed from the highest level of leadership, while offering
multiple possibilities for action without limiting the organization's action.
Below is a simplified model for defining the mission10:

Table no. 1 Statement template for mission development

We exist to (primary purpose, need served or problem solved)

___________________________________________________________________________
___________________________________________________________________________
For (primary clients or customer)
___________________________________________________________________________
___________________________________________________________________________
In order to (core services offered)
___________________________________________________________________________
___________________________________________________________________________
So that (long-term outcomes detrmining succes)
___________________________________________________________________________
___________________________________________________________________________

Once the mission is defined, this will act as a beacon for the whole spectrum of the
organization's activities, guiding actions for its entire staff.
Vision
The history of mankind has been marked by events that have changed our way of
thinking, acting or living. This is mainly due to the research and the way in which some
people have the courage to look to the future and through passion and hard work have
imagined and fulfilled their dreams.
Defining vision provides the point we want to reach, in short, medium or long
intervals. Its definition is not an abstract one, it presents the final state that is to be achieved
and forms the basis of the subsequent formulation of strategy and objectives.
The attributes of defining the vision are11:
 Quantifiable and time bound;
 Concise;
 Applicable at all levels
 Consistent with mission;
 Measured / verifiable;
 Feasible;
 Inspirational.

9
Paul R. Niven, Balanced scorecard evolution, Editura The Wiley Corporate F&A, 2014, p. 99.
10
Formularul este adaptat şi simplificat după Paul R. Niven, Balanced scorecard evolution, Editura The Wiley
Corporate F&A, 2014.
11
Paul R. Niven, Balanced scorecard evolution, Editura The Wiley Corporate F&A, 2014, p. 107.

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 The definition of the vision must also take into account the current possibilities of the
organization, the level of ambition to which it is intended to be achieved and, depending on
the existing predictions on the evolution of technology, the skills of the staff and the need for
establishment, the funds needed for its implementation and last but not least customer
satisfaction.
The destination specified in the vision, including quantitative details and agreed
timings, clarifies and aligns the efforts of the management team to achieve strategic success.
Strategy
Choosing a strategy provides the course of action to be followed by the organization to
achieve the defined state of vision without departing from the mission of the organization.
The objective of defining the strategy and conceiving a plan for its implementation is to
integrate the organization's activities, prioritize them and allocate existing resources to meet
the objectives they have assumed.
In designing the strategy, account must also be taken of the uncertainty pattern that
defines the current environment, the actual or probable evolution of the other participants in
the specific field of the organization, the possibilities of the organization to achieve the
established objectives.
Currently, there is a wealth of tools and methods that help define and analyze
organizational strategies. I believe that defining the key elements for formulating a
competitive strategy, given by Henry Porter12, is comprehensive and captures the essence of
developing a strategy:
 Strengths and weaknesses of the organization;
 The value of the management team;
 Opportunities and risks;
 Customer expectations.
Defining and introducing the strategy provides organizational actors the framework for
making their own decisions in close correlation with the specified / allocated resources and
aligns their own effort to the joint effort of the organization to accomplish the mission.
From the point of view of the balanced scorecard, the importance of defining the
mission, vision and strategy lies in the fact that once defined and disseminated, they will be
translated at all levels of the organization and will be decoded into performance targets and
indicators that by their ongoing assessment and corrections through the set targets will ensure
the success of their achievement.
By following the steps outlined in the Balanced Scorecard concept, we can represent
in a graphical form the pyramid of implementing a strategy, as thought by the founders of the
concept13:

12
Michael Porter, What is Strategy?, Revista Harvard Business Review, 1996.
13
Daniela Ştefănescu, Maria Silvestru, Balanced Scorecard – instrument de planificare strategică, Revista
Romanian Statistical Review nr. 2, 2012.

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 Mission
Why do exist?
Core values
What we belive in?
Vision
What we want to be?
Strategy
How we want to get there?
Balanced Scorecard
Our measurement dashboard.
Strategic initiatives
What we need to do?
Personal objectives
What I need to do?
Strategic results
Well-motivated
Effective internal
Satisfied customers and training
business
workforce

Figure no. 1 the logic pyramid of balanced scorecard strategic planning

Conclusions
This system proved to be effective in the case of restructuring of the macro-
components of the government, which belong to both the administration and the national
defense and security area. We appreciate the effectiveness of the balanced scorecard system
and the fact that although it appeared and developed in the Western area, experience has
shown that it can also be implemented in the Asia region, unlike similar systems that fail to
generate efficiency outside the cultural and geographic framework which have been created.
The balanced scorecard concept presents itself as a concept with multiple valences:
 Strategic management and control system;
 Performance management system;
 Strategic communication system.
The above mentioned valences are all the advantages that the system recommends for
use in the restructuring and reorganization of macro-components at national or supra-state
level (alliances). Along with these arguments, we emphasize the above-mentioned advantage
of the universality of application in contemporary society.

BIBLIOGRAPHY
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339
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