BSC

BSC shows strategic goals with the ways to achieve these goals from a variety of perspectives. Or, it also means the technique to create strategies. Balanced Score Card.

Overview
Instead of proposing strategic goals from a single perspective like "Increase Profit," for instance "Target sales is X million yen!", BSC defines goals from multiple perspectives and shows how to accomplish each of the goals by additionally considering, for example, the perspective of "employee training," such as "The number of qualification obtained by employees is X." It is desired that creation of BSC is done by following PDCA Cycle.

If the financial perspective of "how we can increase earnings" is the only consideration when setting strategy, businesses will be bogged down in short-term strategy decisions. Thus, corporate management techniques using BSC aim at establishing long-term competitive force by defining quantitative goals from multiple perspectives and conducting well-balanced evaluation and improvement. Typical four perspectives for strategy formulation are shown below.

As shown below, goals defined from each perspective are eventually integrated into goals from Finance perspective, but it takes time to affect the goals from Finance perspective. In this sense, this is the strategy formulation emphasizing the long-term growth.
 * Finance
 * Customer
 * Process
 * Learning
 * Goals from Learning perspective are used to accomplish goals from Process perspective.
 * Goals from Process perspective are used to accomplish goals from Customer perspective.
 * Goals from Customer perspective are used to accomplish goals from Finance perspective.

History

 * 1990: Nolan-Norton Laboratory in KPMG, a consultant company in the United States, carried out a research project to study a new performance measurement framework that would be compatible with the information society.
 * 1992: Robert S. Kaplan, a professor at Harvard Business School, and David Norton, a business consultant, who had participated in the research project, published an article on the BSC concept in the Harvard Business Review and the concept took off from there.
 * 2000: In "The Strategy-Focused Organization," Robert S. Kaplan proposed the Strategy Map (please refer to the example of a Strategy Map) as a tool for formulating consistent strategies among the four perspectives.

Creation of BSC
The procedure to create BSC is shown below.
 * 1) Decide which perspectives are used in addition to Finance perspective. Usually, "Customer," "Process," and "Learning," are used.
 * 2) Analyze As-is and To-be.
 * 3) Define goals from each perspective.
 * 4) By defining CSF and KPI, break down the goals into concrete actions.


 * Finance Perspective
 * Define goals in terms of how we will increase the earning and yield profits of shareholders. Typical KPIs are shown below.
 * Customer Perspective
 * Define goals in terms of how the relationship with customers is well established and maintained.
 * Process Perspective
 * Define goals in terms of how we can effectively execute business by utilizing hard assets and immaterial assets, such as equipments and technologies.
 * Learning Perspective
 * Define goals in terms of how we can create immaterial assets, such as skills of employees.

Depending on which stage of the life cycle the company is in, appropriate goals in each perspective vary.

Example of BSC
Although different BSC is considered in each company, here are some concrete examples.

Strategy Map
Strategy Map illustrates relationship between goals and issues and measures from the four perspectives of BSC, Finance, Customer, Process, and Learning. Usually, it is created with BSC. By using Strategy Map, we can grasp the overall image of the strategy. Strategy Map is indispensable to utilize BSC not only as an "achievement evaluation tool" but also a "management tool."


 * Strategy Map helps business managers extract concrete goals from abstract goals. A strategy formulation tool.
 * Strategy Map helps employees understand the company-wide goals and their own roles in the entire company. A consensus tool and motivation management tool.

Relation between BPM and BSC
One of the perspectives employed in BSC is Goals are defined from business process perspective. BPM is considered as the management to achieve these goals. BPM breaks down goals formulated from Process Perspective in BSC into goals of individual processes.
 * Process Perspective

BPM is more like a real-time management. However, when BSC is used together, it can also cover the future growth like improvement of employees' skills, which can not be included in the process.

Related Articles

 * KGI
 * KPI
 * Dashboard