SCORECARD
STEP-BY-STEP
By : Paul R. Niven
Measures For Financial Perspective
“We start with the destination. What are we
trying to achieve ? . . . If you look at the logic of
the Scorecard, the arrows all end up with
financials .”
Presented To: Prof. Dr. Ahmed Fahmy Galal
Presented By : Motaz Moustafa
Issues Relating To Financial
Measures
• They are not consistent with today’s business environment .
• Financial measures provide a great “rearview mirror” .
• Long-term value-creating activities may be compromised by shortterm financial metrics .
• Financial measures provide little in guidance employees in their
day-to-day actions.
A well-constructed Balanced Scorecard is not complete without
financial measures of performance.
By using the Balanced Scorecard an organization has the opportunity
to mitigate, if not eliminate entirely, many of the issues related to
financial measures.
What type of Financial
Measures should we Choose?
Not every organization will choose financial measures relating to
growth, profitability, or value. Some, may choose indicators of
risk management to complement other financial measures.
As with all Balanced Scorecard measures, the key is alignment to
one’s strategy.
MEASURES FOR THE CUSTOMER
PERSPECTIVE
Customer Satisfaction
Market Share
Customer Profitability
If you look closely at these measures, they all reflect a bias
toward actions already taken, and hence are what would be
described as lagging indicators of performance.
While each of these indicators is valuable , their results will
reveal little until we know what actually drives their
performance. In other words, what are their leading indicators?
Using Your Value Proposition to Determine
Leading Indicators
To develop a customer value proposition, many organizations choose one of three
“disciplines” articulated by Treacy and Wiersema in The Discipline of Market
Leaders.
Other Sources of Customer Measures
Financial objectives
and measures.
• Once you have developed financial
objectives and measures, ask yourself how
they translate into customer requirements.
The customer’s
voice.
• The Internet is an incredibly powerful
medium
for
spreading
customer
perceptions about your products and
services , Take advantage of this
opportunity by listening to what your
customers have to say about you, and then
proactively defining yourself.
Moments of truth.
• Any point at which a customer comes in
contact with a business defines a moment of
truth by mapping those moments we can
isolate your differentiating features.
Cont.: Other Sources of Customer Measures
Look to your
channels.
• Retailer They may offer shopping over the
Internet, in retail stores, or by catalog, Each
of these channels has specific processes and
will entail different performance measures.
Work from the
customer experience.
• Economy is undergoing a shift to
experiences in which every business is a
stage and memorable events must be
created for customers.
Customer
relationship
management (CRM)
initiatives.
• Companies should measure CRM with a
balanced Scorecard. Your customer perspective
should contain measures that track the
effectiveness of your considerable investment in
customer relationship management programs.
What Is A “Lag” Measure And What Represents
“Leading” Performance?
Every measure is in effect “lagging “because it is
historical in nature. We could argue the semantics of this
topic forever, but in the end it comes down to choosing
measures and asking yourself, “What drives this
measure?” Whenever you choose one measure and can
hypothesize a relationship with a related metric you
believe drives the performance of the first measure, you
have determined a lag and lead relationship.
MEASURES FOR THE INTERNAL PROCESS
PERSPECTIVE
To achieve our customer objectives, and ultimately our
financial objectives, we must now develop performance
measures to track the key internal processes and activities
that support our customer value proposition.
Firms will focus on the internal processes supporting their
value proposition, but cannot simply ignore other
supporting processes. the appropriate balance should be
maintained.
Let’s examine each of the value propositions and
determine which internal processes must be closely
monitored to ensure success.
Thank You