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The Balanced Scorecard Approach

The Balanced Scorecard Approach. Limitations of Financial Indicators. Financial indicators are very important in business evaluation. But they are not enough! History oriented Do not suggest strategies and methods for development Do not timely reflect changes

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The Balanced Scorecard Approach

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  1. The Balanced Scorecard Approach

  2. Limitations of Financial Indicators Financial indicators are very important in business evaluation. But they are not enough! • History oriented • Do not suggest strategies and methods for development • Do not timely reflect changes • Do not capture the intangible aspects of the firm (values, culture, etc.)

  3. The Balanced Scorecard • Professors Kaplan and Norton, Harvard University, first published in 1992 • The central idea is that business evaluation and development needs to base on different perspectives

  4. The Balanced Scorecard • A management system that is based on indicators of different perspectives • Four perspectives: • Customer • Finance • Internal • Growth and development • A long-term development requires a balance between these perspectives

  5. The Balanced Scorecard Financial Perspective Customer Perspective Internal Perspective Learning Perspective

  6. Applying the Balanced Scorecard • From individual to team and organizational levels • For each perspective: • Goals • Measures

  7. Example of a Balanced Scorecard • Choosing objectives • Identifying appropriate measures • Balancing different perspectives in setting objectives (indicators)

  8. Special Notes • The four objectives and indicators of the perspectives should relate to and reinforce each other • Good combination of generic outcomes (e.g., customer satisfaction) and performance driver (e.g., short time delivery) • Ultimately, causal paths from all measures on a Scorecard should be linked to financial objectives • Balanced Scorecard only contains strategic measures (not diagnostic measures)

  9. Samsung Case • Applying BSC to identify key objectives, measures, and indicators for Samsung

  10. Practice: Develop BSC for APIM • In a team of 4-5 people, please develop a BSC 2011-2013 for APIM based on the information provided. THANK YOU!

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