Balance Score Card | Part — 1

5 min readMar 15, 2019

Inspired from the book “Execution Excellence — Making strategy work using — Balanced Score card”

Every now and then Management gurus, professors and thought leaders come up with what they think is the next big Management concept or idea. It has sort of slowed down in recent years, but the ideas still flow. As can be expected, ideas tend to come from the more renowned business schools and firms. Around 1992, one such concept emerged from the research of Robert Kaplan, a Harvard Business School professor, and his associate David Norton, a business theorist and consultant.

Rather than focusing on building the next best mousetrap in terms of strategy formulation, Kaplan and Norton focused on building a framework for strategy execution in their book “Execution excellence”. What’s the point of having a huge jargon embedded strategy if you can’t make it work ? The result is what is now know as the Balance Scorecard

Execution Excellence: Making Strategy Work Using the Balanced Scorecard

What is a Balanced Scorecard?

The Balance Scorecard (or balance score card) is a strategic performance measurement model that provides information on the chosen direction for business and processes and in-turn decides the target. The (operational) actions are set up with measurable indicators that provide support for understanding and adjusting the chosen strategy. Some background ideas on why an organisation needs this kind of score card today.

The Flat world theory :

Today the world is flat in Business environment — There boundaries between global and Local hardly exists. Hence, Business strategy has to be aligned in line with global standards. A Small and Medium Scale pharmaceutical manufacturer in India today can compete with local companies, national players, as well as large global players. However, often the large international players under-estimate their small competitors. Competition from these small pockets often goes unnoticeable and makes the large corporations to bleed blue. So according to this Flat world theory, how does an organisation should re-align itself ?

From financial perspective, Businesses need larger aspirations. Financial risk will involve Cross-border currency risk as well as benefits. Revenue drivers will have to include Organic and inorganic Cross-border growth
Sales engine — Sell High value products in mature products and low-value products in emerging markets.
Cost efficiencies need to be globally competitive, products would become competitive across multiple customer segments.
Develop suppliers and employees in off-shore to improve cost efficiencies.
Brands have to translate into many languages and something globally meaningful
IT and Analytics will be the glue that holds organisation together and delivers value.

Don’t fight a battle you can’t win:

Strategy formulation is an interesting exercise. Every stakeholder put their brains with hell of a lot of jargon and grandiose ideas. But, the elephant in the room is execution, it’s not just about the plan..!! So, it’s a must to focus less on Industrial jargon(like Blue-sky strategy and other enchilada), and more on executable Operational Strategy. So, focusing on basics that would help in achieving consistent results should be fine, i.e., “Don’t fight a battle you can’t win” — translates to “Don’t call something a strategy if you can’t execute it”

Strategy formulation :

Strategy Formulation is about understanding 3 key components.

External Assessment : [Time- 12 weeks]

Finding the relevant market and opportunity size through market research, competitive analysis.
For Market research, don’t depend on Google and external consultants alone, Try to validate the data obtained by meeting clients in market.
Identify constraints for execution in the areas of compliance, favourable regulation etc.,

2. Internal Assessment: [Time- 8 weeks]

Identify Strengths, weaknesses and resource capability in the organisation to execute the identified opportunity .
Internal assessment also requires good amount of Data analytics within organization to know the status.
Data representation can be often mis-leading to please management. Search for dis-confirming evidences. Let the less spoken talk more.

3. Way-Forward: [Time — 2 weeks]

This is to decide upon what needs to be done internally to successfully execute the external market opportunity.
Balance Score card summarises all these steps using a map and an objectives table.

These assessments can be done simultaneously and overall time to complete assessment and Balance score card can be done in 30–45 days.

Balance Score Card Preparation (BSC) :

Balance score card(BSC) is a 30–40 page document which consists the details of :

External Assessment : 10–15 pages max
Internal Assessment: 10–15 pages max
Way-Forward — 8-10 pages + 2 pages (for strategy map and BSC table)

There are 4 Key functions that should be covered in Balance Score card document along with objectives and targets are

Financial – Revenue Strategy, Risks , cost strategy and profit strategy
Customer – Market entry / expansion , Customer Retention / Relationship strategy, Brand building strategy
Product and Process — Production, Innovation(new initiatives), Market entry process, Sales channel development process etc.,
Learning and growth– HR, IT processes, Business analytics in alignment to deliver customer and financial expectations(1 & 2 above) .

All targets set in Balance Score Card should be more realistic in nature, less aggressive or aspirational. Consider the execution of BSC as a marathon and not sprint. Remember “Don’t fight a battle you can’t win”

Once the Balance score card template is ready, management can plug and play with its targets as most elements are inter-dependent. Example: Change in finance budget can have an impact on production etc., The resultant document would be a function specific with 20–25 clearly listed objectives. This table would enable the management to review business performance periodically and navigate key management personnel with the set direction.

A Sample Balance Score card Map with Vision and Mission statement as given below.

In the next series of posts, I would describe more on the preparation of Balance score card and implementation.