The Balanced Scorecard - Harvard Business Review
Summary
TLDRThe transcript discusses the importance of long-term strategic planning in business, emphasizing that financial metrics alone can be limiting. It introduces the Balanced Scorecard, a management tool developed by Harvard Business School Professor Robert S. Kaplan and consultant David P. Norton. This tool assesses a company's health through four perspectives: financial, customer, internal, and learning and growth. A semiconductor company's case study illustrates how setting goals and metrics for each perspective can lead to innovation, improved customer satisfaction, and ultimately, better shareholder returns, highlighting the significance of the Balanced Scorecard's order in driving long-term success.
Takeaways
- 🤔 The critical question for managers is understanding how today's decisions will impact the business tomorrow.
- 📈 Traditional financial metrics might emphasize short-term gains, which could be detrimental to long-term success.
- 📊 The Balanced Scorecard, developed by Robert S. Kaplan and David P. Norton, offers a more holistic approach to business management.
- 💹 The Balanced Scorecard includes four perspectives: financial, customer, internal, and learning and growth.
- 💼 The financial perspective assesses whether the company is meeting shareholder expectations.
- 👥 The customer perspective measures customer satisfaction and the company's ability to deliver desired products and services.
- 🏭 The internal perspective evaluates the company's operational efficiency and effectiveness in meeting customer needs.
- 💡 The learning and growth perspective focuses on the company's capacity for innovation and continuous improvement.
- 🔍 An early adopter of the Balanced Scorecard, a semiconductor company, used it to set and measure goals across all four perspectives.
- 📈 For the semiconductor company, focusing on learning and innovation improved competencies, processes, customer satisfaction, and shareholder returns.
- 🔑 The order of the Balanced Scorecard matters, as it reveals the drivers of long-term success when used correctly.
Q & A
What is the key question a manager should ask to ensure the success of their business tomorrow?
-The key question a manager should ask is how the decisions made today will affect their business tomorrow.
Why do financial metrics alone not provide a complete picture for long-term business success?
-Financial metrics can overemphasize short-term gains and do not fully account for the factors necessary for long-term success.
Who developed the Balanced Scorecard and what was its purpose?
-The Balanced Scorecard was developed by Harvard Business School Professor Robert S. Kaplan and consultant David P. Norton to provide a more balanced view of a company's health beyond just financial metrics.
How many perspectives does the Balanced Scorecard use to measure a company's health?
-The Balanced Scorecard uses four perspectives to measure a company's health.
What are the four perspectives used in the Balanced Scorecard?
-The four perspectives are the financial perspective, customer perspective, internal perspective, and learning and growth perspective.
What are the financial goals of a company according to the Balanced Scorecard?
-The financial goals of a company are to survive, succeed, and prosper, as measured by cash flow, quarterly sales growth, market share, and return on investment.
How does a company measure its success in terms of customer perspective?
-A company measures its success in the customer perspective by looking at the percentage of sales from new products, on-time delivery rates, and popularity with key customers.
What are the internal goals of a company as per the Balanced Scorecard?
-Internal goals of a company include excellent manufacturing, producing new designs, and introducing new products, with operational measures developed for each goal.
What does the learning and growth perspective focus on in the context of the Balanced Scorecard?
-The learning and growth perspective focuses on developing new products rather than improving existing ones, which leads to better competencies and processes, boosting customer satisfaction and shareholder returns.
Why is the order of the Balanced Scorecard important for a company?
-The order of the Balanced Scorecard matters because it reveals the real drivers of long-term success, showing how improvements in learning and innovation can lead to better customer satisfaction and ultimately better shareholder returns.
Can you provide an example of a company that has successfully implemented the Balanced Scorecard?
-An example of a company that has successfully implemented the Balanced Scorecard is a semiconductor company that focused on developing innovative tailored products, getting them to market faster, and becoming a supplier of choice.
Outlines
📈 The Balanced Scorecard Approach
This paragraph introduces the concept of the Balanced Scorecard, a strategic planning and management tool developed by Robert S. Kaplan and David P. Norton. It emphasizes the importance of looking beyond financial metrics to include customer, internal, and learning and growth perspectives for long-term business success. The scorecard is designed to help managers make decisions that will positively impact the company's future by considering a more holistic view of performance.
Mindmap
Keywords
💡Managerial Decisions
💡Financial Metrics
💡Balanced View
💡Balanced Scorecard
💡Financial Perspective
💡Customer Perspective
💡Internal Perspective
💡Learning and Growth Perspective
💡Innovation
💡Competencies and Processes
💡Long-term Success
Highlights
The importance of considering long-term effects in managerial decisions.
Financial metrics can overemphasize short-term outcomes.
Introduction of the Balanced Scorecard by Robert S. Kaplan and David P. Norton.
Four perspectives used by the Balanced Scorecard to measure company health.
The financial perspective as the first dimension of the Balanced Scorecard.
Customer perspective as the second dimension, focusing on product and service satisfaction.
Internal perspective as the third dimension, emphasizing operational efficiency.
Learning and growth perspective as the fourth dimension, crucial for continuous improvement.
The necessity of listing both goals and metrics for each perspective.
Case study of a semiconductor company as an early adopter of the Balanced Scorecard.
Financial goals of the semiconductor company included survival, success, and prosperity.
Customer goals focused on innovation, faster market delivery, and becoming a preferred supplier.
Internal goals prioritized manufacturing excellence and new product introductions.
Learning and growth goals centered on developing new products over improving existing ones.
The semiconductor company's discovery that learning and innovation improve competencies and processes.
Link between improved competencies, customer satisfaction, and shareholder returns.
The significance of the Balanced Scorecard's order in driving long-term success.
Transcripts
how will the decisions you make today
affect your business tomorrow that's the
most important question a manager can
ask but to answer it they often rely on
financial metrics which can
overemphasize the short term to win in
the long term you need to take a more
balanced view that's why Harvard
Business School Professor Robert S
Kaplan and consultant David P Norton
developed the Balan scorecard the
scorecard uses four perspectives to
measure your company's Health the
financial perspective are you doing well
by your shareholders is only the
first second is the customer perspective
do they like your products and
services next is the internal
perspective can you efficiently deliver
what your customers
want finally there's the learning and
growth perspective can you continue to
improve and create value for each
perspective you need to list both goals
and
metrics take one Semiconductor Company
that was an early adopter of the balance
scorecard its financial goals were to
survive succeed and
prosper for assessment it used cash flow
quarterly sales growth market share and
return on
investment its customer goals were to
develop Innovative tailored products
to get them to Market faster and to
become a supplier of
choice to measure success managers used
percentage of sales from new products
ontime delivery rates and popularity
with key
customers looking internally the company
prioritized goals like excellent
manufacturing producing new designs and
introducing new products and again
developed operational measures for each
goal
last for its learning and growth goals
it decided to focus on developing new
products rather than improving existing
ones the Semiconductor Company found
that learning and Innovation led to
better competencies and processes which
in turn boosted customer satisfaction
and ultimately generated better
shareholder returns in other words they
learned that the order of the Balan
scorecard
matters when used correctly it reveals
the real Drive of long-term
[Music]
success
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