Need for Balanced

Scorecard
Presented By:Jyoti Kukreja(76)
Priyanka (91)
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Needs for Balanced Scorecard

Learning Objectives
Balanced Scorecard: What is it?
Adopter of Balanced Scorecard
Need for Balanced Scorecard
Benefits of Balanced Scorecard
Case Study
Mobil
Mckinsey

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What
is a Balanced Scorecard
A Balanced
Scorecard monitors the performance of all or part of
an organization, towards (usually) strategic goals. It uses
financial and non-financial performance measures (normally less
than 25, spread across two or more perspectives) to highlight
areas where the organization is failing to do what is required or
was expected.
Robert Kaplan and David Norton in 1992
Management should develop goals or objectives in each of four areas:
Financial: How do we appear to shareholders?
Customer: How do customers view us?
Internal Business Perspective: What must we excel at?
Learning and Growth: Can we continue to improve and create
value? 01/31/15
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Balanced Scorecard

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What measures
improvement?
Financial : Cash flow, revenues, earnings, return on capital, etc
(goal: profit or wealth maximization)
Customer: Market share, sale of new products, customer
satisfaction (repeated purchase), loyalty, customer value
proposition, service quality (goal: customer acquisition= No. of
new customer acquired/ No. of prospective enquiries)
Internal business processes: productivity indices, quality
measures, efficiency, less cycle time, unit cost, (goal:
manufacturing excellence)
Learning & Growth (Innovation): people& systems developing
next generation product. Morale, knowledge, employee turnover,
suggestions, revenue from new product, (goal: technology
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Customer Perspective

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Cause & effect relationship of BSC

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Adopters of BSC
Organization

Industry

Ingersoll Rand;
Philips Electronics;
Siemens AG

Manufacturing

IBM; Infosys

IT

Hilton Hotels

Hospitality

Pfizer

Pharmaceuticals

Walt Disney

Entertainment

University of Washington, Denver,

Florida, Alaska

Higher Education

AT&T Canada Long Distance;

Verizon Communications Inc.

Telecommunications

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Need for Balanced Score Card

Articulate strategy (the outcomes organization desires & drivers
of those outcomes). Describe vision for entire organization
Align individual and organization goals
Define future & Do away with historical decisions:
Traditional control & performance measure systems attempt to
keep individuals & organizational units in compliance with preestablished plan. Reliable basis for incentive based pay .

Sustainable Competitive advantage: Directs attention of

managers and employees on CSFs that are specific leads to
competitive breakthroughs for the organization.
SWOT analysis: It focuses change efforts according to strategy
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Benefits of Balanced Scorecard

Shared understanding
Increase focus on strategy and results
Improve organizational performance by measuring what
matters
Enterprise Performance Management System
Improves communication of organizations vision and strategy
Prioritize Projects / Initiatives

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Mobil North America

Marketing & Refining (NAM&R)
Fiscal year of 2007 fact- profile
Worlds largest company by revenue, at $404.5
billion
Largest corporation by market capitalization at
$517.92 billion
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BRIEF INTRODUCTION

Year of incorporation: 1920

Industry : oil and gas
Headquarters : Fairfax, Virginia
Mission : Mobil Corporation is committed to being
the world's premier petroleum and petrochemical
company. To that end, we must continuously achieve
superior financial and operating results while
adhering to the highest standards of business conduct.
These unwavering expectations provide the
foundation for our commitments to those with whom
we interact
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 Vision : To be the best integrated refiner- marketer in

the United States efficiently delivering unprecedented
values to customers
Mobils Problem: Till 1992, Mobils strategy was to sell a full
range of products and services to all consumers, while still
matching the low prices of nearby discount stations. But this
unfocused strategy had failed, leading to poor financial
performance in the early '90s. This led Mobil to adopt the
Balanced Scorecard.

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 Mobils Strategic Goals:

Increase ROCE >6 percentage points within three
years.
Differentiated value proposition

Mobils new Strategy:

Centrally controlled manufacturer

decentralized,
customer driven
Target consumers who were willing to pay price premium for
gasoline
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Strategy Map

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Results
Mobil increased its operating cash flow by more than $1
billion per year and became the industry's profit leader.
The division (NAM&R) increased its return on capital
employed from 6% to 16%. Sales growth exceeded the
industry average by more than 2% annually and cash expenses
decreased by 20%.
Dealer quality increased each year, the number of consumers
using Speed pass grew by one million annually, safety
accidents plunged between 60% and 80% and lost oil-refinery
yields due to systems downtime dropped by 70%. Employee
awareness and commitment to the strategy more than
quadrupled.
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Take Away
A different customer intimacy strategy: Normally when companies employ
a customer intimacy strategy, it usually focuses on its customer management
processes. But Mobils differentiation occurred at the dealers locations, not
at its own facilities. Hence the company had to focus on achieving operating
excellence throughout its value chain of operations.
Communication of strategy across organization can lead to innovation:
Speedpass is a small device that identifies a customer and charges their
account for purchase of gasoline. The idea for Speedpass came from a
planning manager in the marketing technology group who learned from
Mobil's balanced scorecard about the importance of speed in the purchasing
transaction.
Detection of major gaps in strategy: Using the strategy maps helped Mobil
detect major gaps in the strategies being implemented at the lower levels in
the organization. Using these, senior managers noticed that one business unit
had no objectives or metrics for dealers and another business unit had no
measure for quality.
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The Balanced Scorecard

Complements the
MCKINSEY 7-S Model

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Mc. Kinseys 7S Model

Developed by Robert Waterman and Tom Peters 1982
Strategy: The positioning and actions taken by an enterprise, in
response to or anticipation of changes in the external environment
intended to achieve competitive advantage.
Structure: The way in which tasks and people are divided, and
authorities are distributed; how activities and reporting
relationships are grouped; the mechanisms by which activities in
the organization are coordinated.
Systems: The [in] formal procedures used to manage the
organization including management control systems, performance
management and reward systems, planning, budgeting and
resource allocation systems and management information systems.
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 Staff: The people, their background and their competencies,

how the organization recruits, selects trains and socializes,
manages the careers and promotes employees.
Skills: The distinctive competencies of the organization, what it
does best along dimensions such as people, management
practices, processes, systems, technology and customer
relationships.
Style/Culture: The leadership style of managers-how they
spend their time, what they focus attention on, how they make
decisions, also the organizational culture (norms: dress code,
beliefs)
Shared values: The core or fundamental set of values that are
widely shared in the organization and serve as guiding principle
of what is important mission, vision and value statement that
provide a broad sense of purpose for all employees.
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Conclusion
Thus one can view BSC as the contemporary
manifestation of the 7-S Model , helping to
explain its popularity as a practical and
effective tool for aligning all the organizational
Variable and Processes that lead to successful
strategy implementation

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References
1. Robert
S.
Kaplan
and
David
P
Norton,
The
Balanced
Scorecard:
Translating
Strategy
into
Action
, Harvard Business School Press, 1996.
2. Robert S. Kaplan and David P Norton, Having Trouble with Your Strategy?
Then Map It, Harvard business Review SeptemberOctober 2000.
3. Robert S. Kaplan and David P Nortons, Linking the Balanced Scorecard to
Strategy, California Management Review Vol 39. No. 1 Fall 1996
4. Robert S Kaplan, How the balanced scorecard complements the
McKinsey 7-S model, Strategy & Leadership; 2005; 33, 3; ABI/INFORM
Complete pg. 41
5. J. Heskett, T. Jones, G. Loveman, E. Saaser, and L. Schlesinger, Putting the
service Chain to work, Harvard business Review (March/April 1994),
pp.164-176.

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Thank You!!!!!!

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