12/5/2018 Balanced Scorecard Case Study

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Chartered Global Management Accountant

Balanced Scorecard Case Study

June 11, 2013

What is it?
Scorecard

The Balanced Scorecard concept, popularised by Robert S Kaplan and David P Norton, is a performance management tool that
encompasses the nancial measures of an organisation and key non- nancial measures relating to customers or clients, internal
processes, and organisational learning and growth needs. It places these into a concise ‘scorecard’ that can be used to monitor
performance.

Early implementations of the Balanced Scorecard tended to focus on including a balance of measures in the four domains or
perspectives rather than on execution of strategy, but over time it has become a widely used strategic management tool. The
Balanced Scorecard process attempts to identify important links between nancial performance and the underlying customer,
internal processes and organisational metrics. This creates a mechanism for translating the strategic vision into concrete actions
necessary to achieve success.

This characteristic of the Balanced Scorecard places strategy at the core of management. When implemented properly, it can be
used to align measures, actions and rewards to create a proper focus on the execution of strategic initiatives and achievement of
strategic objectives, rather than a sole focus on the annual budget.

The widespread adoption of the Balanced Scorecard is due in part to its exibility. Many companies have implemented their own
variations to suit their strategic purposes. The Tesco ‘Steering Wheel’, for example, includes ve perspectives, capturing their
commitment to the community in addition to their nancial, customer, operations and people aspects.

The Balanced Scorecard has also been successfully adapted for use by not-for-pro t and public sector organisations. While the
top line nancial objectives of for-pro t organisations are replaced by mission-related objectives, the process of identifying
relevant stakeholder, internal process and resource measures serves much the same purpose.

The Balanced Scorecard

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12/5/2018 Balanced Scorecard Case Study

Adapted from Robert S Kaplan and David P Norton,

Using the Balanced Scorecard as a strategic management system, Harvard Business Review (January-February 1996)

What bene ts does the Balanced Scorecard provide?

The Balance Scorecard provides a means to clarify, articulate and communicate strategy. It is a shorthand way of putting all key
measures into a ‘dashboard’ that can be used to monitor results. By including non- nancial measures, it can be used to show how
the non- nancial aspects of performance, such as customer satisfaction, drive nancial performance.

The Balanced Scorecard is a useful tool for motivating employees and focusing their attention on factors that are deemed to be
critical to long-term performance rather than simply short-term nancial results.

Questions to consider when implementing a Balanced Scorecard

Do we have su cient buy-in from top management?
Are we willing to engage in a more participatory strategy and performance management process?
Are we committed to the organisational change e ort necessary for successful implementation?
To what extent will our current management information systems be able to support implementation? What are the costs
and bene ts of making these changes?
What are we already doing that we can incorporate into our scorecard? What do we need to modify or stop doing?
Are we prepared to focus our reporting around the scorecard

Actions to take / Dos Actions to Avoid / Don'ts

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12/5/2018 Balanced Scorecard Case Study

Involve a broad senior Do not use the scorecard as

management team another tool of command and
Engage everyone in the control, or annual target
scorecard process setting process
Use the scorecard to set Don’t withdraw support for
ambitious goals the scorecard at the rst sign
Use the scorecard to make of missed nancial targets
strategy a continual process Too many measures can spoil
Start with objectives, follow the scorecard – don’t go ‘KPI
with measures, then initiatives crazy’
– for example, increase sales Failing to identify and validate
by x%, introduce y new causal links undermines the
products in next 12 months, credibility of measures
launch new product Failing to cascade the
development and marketing scorecard and create links to
initiative compensation undermines
Create measures that link to success
strategic success and long- Avoid attempting to create
term performance business unit or functional
Use the scorecard to nd the scorecards that can be
best KPIs aggregated upwards
Keep it to four to ve KPIs for
each perspective
Create a mix of leading,
lagging, input and output
measures – customer
satisfaction is a leading
indicator of sales; the number
and quality of customer calls
handled are output measures
of the customer service
process
Cascade the scorecard to
business unit and functional
teams
Each business unit’s scorecard
should be informed by
corporate goals but not
dictated by them
Use the scorecard to drive
action plans
Link to compensation
Use the scorecard to empower
teams and make strategy
everyone’s job

   
In practice: The Balanced Scorecard

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12/5/2018 Balanced Scorecard Case Study

Implementation of the Balanced Scorecard and an alternative costing system at the Royal Botanic Garden Edinburgh
(CIMA case study, 2010)

Download full case study

(http://www.cimaglobal.com/Documents/Thought_leadership_docs/edu_ressum_garden_designs_improve_line_sight_July2010.pdf)

The Royal Botanic Garden Edinburgh (RBGE) rst adopted the Balanced Scorecard (BSC) in 2004. The Senior Management Group
(SMG), which was responsible for strategy development, used the BSC to answer the ‘who, what, why, where, when’ questions
prompted by the four perspectives as they related to the services that the RBGE provides to external stakeholders.

The original BSC created by the RBGE was employed as the basis of strategy and performance reviews. However, the prospect of a
strategic review by an international peer group, along with an imperative to demonstrate alignment to the Scottish Government’s
National Outcomes, prompted a deeper look at the organisation’s strategic objectives and underlying perspectives.
   
The ensuing revisions included improved alignment between the RBGE’s ‘impact’ perspective and its ‘activity’ perspective. This
review also led to the development of an objective costing system linked to an existing performance management system that
improved monitoring of performance against strategic objectives.

Lessons learned

The Balanced Scorecard can be adapted to suit an individual organisation.

The e ort and commitment required from senior management to transform strategic management processes should not be
underestimated.
Resistance to change may result as individuals become more accountable for their actions.
Management accountants are well-placed in the organisation to become very involved in the development of the Balanced
Scorecard and implementation process, thereby becoming an important strategic partner in the business.

Related and similar practices

Strategy mapping (/resources/tools/essential-tools/strategy-mapping.html)
Developing non- nancial key performance indicators (/resources/tools/develop-non- nancial-kpis.html)

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