Question

1.) Identify and discuss the key performance measures of a balanced scorecard.

2.) Discuss in as much detail as possible the specifics of the balanced scorecard that is being used by these three companies; Phillips(PSX), Thomas Reuters(TRI), & Apple(AAPL).

Answer 1

Balanced scorecards have long been used in strategic business management to track key performance indicators, and are designed to provide a framework to manage resources.

There are four basic viewpoints or perspectives to take with the KPI balanced scorecard:

1. Financial perspective – tracking financial performance.
2. Customer perspective – tracking customer satisfaction, attitudes, and market share goals.
3. Internal process perspective – covers internal operational goals needed to meet customer objectives.
4. The learning and growth or innovation perspective- intangible drivers for future success such as human capital, organizational capital, training, informational systems, etc.

Philips Electronics has implemented a scorecard system to align company views, to focus employees on how they fit into the big picture, and to educate employees on what drives the business. Philips management uses the scorecard as a guide at quarterly business reviews worldwide to promote organizational learning and continuous improvement.

Philips created its balanced scorecard with the belief that understanding what drives present performance is the basis to determine future results. Philips uses the scorecard as a basis for employees to understand management’s strategic policies and vision for the future. Philips created four critical success factors (CSFs) to align indicators that measure markets, operations and laboratories with business success. At the business unit level, six key indicators are also included under each CSF. These CSFs and key indicators are:

Competence (knowledge, technology, leadership, and teamwork)
Indicators: Organizational development and IT support

Processes (drivers for performance)
Indicator: Operational excellence

Customers (value propositions)
Indicators: Customer delight and employee satisfaction

Financial (value, growth, and productivity)
Indicator: Profitable revenue growth

Philips uses these CSFs to link short-term actions with long-term strategy so that employees can link their actions to stated company goals.The Philips balanced scorecard has four card levels. The levels, in decreasing order, are the strategy review card, the operations review card, the business unit card, and the individual employee card . To achieve successful results, scorecard goals in lower card levels must align with scorecard goals in upper card levels and be fewer and less complex than the overall organizational goals.