Performance Management

by Prof. B.D. Singh IMT

Mind boggling changes, technological revolution,
fierce competition. Perform or Perish ,survival of the
fittest -- survival instinct -And like the story of the
two men on a safari, in order to survive you will have
to die trying. While walking through the jungle, they
came upon a hungry tiger, when one of them started
putting on his running shoes. “How is this going to
help? We can’t outrun the tiger.” asked the other.
The first man replied: ”I don’t have to outrun the
tiger, I only have to outrun you.”

Organizations redefining their strategies--

performance appraisal to performance management
to performance culture in which every member of the
organization knows the goals & consistently make
efforts to achieves high performance
Behaviorism in performance
Performance=skill + will
Or
Individual performance = Ability x Motivation x
Organizational Support + or – Chance Factors?
Iccha (desire, motivation), Gyan, (knowledge)
(Know how), Kriya, (action, to achievement).
Work is sublime—to do nothing is to be nothing—
karma is dharma— dharma of each person to
contribute to the larger society in excess of what
she consumes out of its resources. We can work
to destroy ourselves, or to improve our lot.
-Understand the intrinsic meaning of work can
guide us to better ways of controlling and
directing this powerhouse of human energy.
“Work- as – life”
Economic : Gainful, productive work performed to
meet the economic needs of a person or her
family.
Cultural : Functions, such as the rituals of birth,
marriage and death, death, performed as moral
duty in the course of one’s various life- passages.
Psychosocial : Interpersonal and interfamilial
interactions in one’s role as member of a social
unit.
Physical : All movements from birth to death that
the human body engages in.
Peter Drucker and three stonecutter .
Will to work, to achieve, to contribute, to seek
recognition
Help enhance self- esteem of the worker.
What is performance–Behavior+ Outcome –
achievement, accomplishment at work –being,
(‘Chance’, ‘favors the prepared mind’) – doing
(‘Ideas are funny little things. They won’t work
unless you do.) relating (role network –
vertical, horizontal or otherwise.)
input—throughput –output (exceeds the value
of output?)–feedback
Output or result dimension;
Input dimension;
Time dimensions;
Focus dimension;
Quality dimension; and
Cost dimension.
Performance means both behavior &
result, behavior emanates the
performance
performance management is creating
culture in which organizational & individual
learning are a continuous process –
integration of learning & work
– Normal vs excellent performance - Better than
the best- outstanding/ extraordinary
performance-- Bench Marking,record breaking,
– Excellence is not a skill but an attitude/culture
– The Geeta – Yogah, Karam su kaushalam
The road to excellence is always under
construction.
It is necessary to always surpass oneself
and this is a lifelong occupation.
You got to be the first or the best or
different.
When better is possible, good is not good
enough.
Target for the day: 1% improvement.
Excellence is not a destination- it is an
endless road– excellence seeker do not
follow the laid down path, they break new
paths & leave their trail behind-they
accept the challenge so that they may feel
the exhilaration
Churchil- “excellence seekers never, never
quit, they walk on with optimism as their
hope helps them visualize the invisible,
touch the intangible & materialize the
impossible”
Excellence is not through chance /freak
Luck is what happens when preparation
meets opportunity PMS encourages
individuals to anticipate opportunity &
prepare to grab it.
“Chance favors the prepared mind” –Fortune
favors the brave
Bench marking– up gradation to match with the
best
Fighting fit with six sigma
– Jack Welch’s directive that his GE managers could
wriggle out of Six Sigma training at the cost of losing
their promotion only goes to show how important it is to
enforce this practice from the top.
– The people involved in Six Sigma execution are
Master black belts who are well versed in the rules of the
game,
Black belts (technically oriented individuals involved in the
process of organizational change and development)
Green belts (employees who lead six sigma project teams).
 Six Sigma Fundas
Strong customer-oriented approach that relies on
data to create more efficient processes or refine
existing processes
Under the prescribed specifications, there cannot
be more than 3, 4 defects (defined as anything
that doesn’t add value to the end customer), per
million opportunities.
You can apply it to anything, from making a
movie to manufacturing truck tyres
It needs the unstinted support of organizational
leaders, and emphasizes teamwork and lifelong
evolution of practices and processes.
 Excellence happens through unleashing
human potential which is infinite- culture
of excellence
Peter And Waterman –In search of
Excellence (1982) –
care for customer,
craze for creativity
concern for people
By investing in HR, your company will
grow and succeed.
“the ability to learn faster than your
competitor may be the only sustainable
competitive advantage”
Performance Management?

PfM is another way of envisioning the totality of a

manager’s function. It views the managerial function
holistically
Performance management is the process of creating a work
environment of setting in which people are enabled to the
best of their abilities.
In a traditional system, performance tends to be evaluated
and looked at only in the short run and for immediate
results. Organisations need to understand that for
sustained performance, it has to nurture a creative,
motivated and committed workforce, and for that
employee’s performance has to be planned, analysed,
developed and appraised continuously rather than being
constricted to annual reviews and evaluations.

P M S is concerned with creating a culture in which

individual learning & development are continuous process
It provide means for integration or learning and work so
that every one learns form success & challenges inherent in
day to day activities
The desire to enhance performance
is making ever greater demands on
the knowledge & skill of the work
force & on people, who carry a much
greater responsibility for their own
performance.
It is a holistic, systematic &
continues management function.
It is about performance & not just
apprising. Performance & result
important but people equally
important.
High performing people are critical
Performance Appraisal systems
– Focus is on performance appraisal and generation of
ratings
– Emphasis is on relative evaluation of individuals.
– Annual exercise-normally though periodic evaluations
are made.
– Emphasis is on ratings and evaluation.
– Rewards and recognition of good performance is an
important component.
– Designed and monitored by the HR Department.
– Ownership is mostly with the HR department.
– KPAs & KRAs are used for bringing in objectivity.
– Developmental needs are identified at the end of the
year on the basis of the appraisal of competency gaps.
– There are review mechanisms to ensure objectivity in
ratings
– It is a system with deadlines, meetings, input and
output and a format.
– Format driven with emphasis on the process.
– Linked to promotions, rewards, training and
Performance Management systems
– Focus is on performance management.
– Emphasis is on performance improvements of
individuals, teams and the organization.
– Continuous process with quarterly performance review
discussions.
– Emphasis is on performance planning, analysis, review,
development and improvements.
– Performance rewarding may or may not be an integral
part.
– Designed by HR and Line departments but monitored
by the respective departments themselves.
– Ownership is with line managers, HR facilitates its
implementation KPAs or KRAs are used as planning
mechanisms.
– Developmental needs are identified in the basis of the
competency requirements for the coming year.
– There are review mechanisms essentially to bring
performance improvements
– It is a system with deadlines, meetings, input, output
and a format.
– Process driven with emphasis on the format as an aid.
– Linked to performance improvements and through them
What is New?
– Move away from appraisals.
– Move away from numbers to qualitative
assessment
– Innovate. Process is more important than
formats
– Emphasize learning and development,
empowerment and growth and problem. Solving
more than assessment.
– Use multi ratter assessment as a supplements
– Synergies with other systems
– Encourage employees to own their own
performance management.
– Follow up actions must be taken and taken on
time. It may be training or job rotation or
removing blocks or any other things.
 PMS is change in managerial style of doing work.
It is creating & nurturing performing culture.
The performance culture has to be built into the management & the
enterprise. Great workplaces with high performance cultures tend to
foster growth and feed an individual’s need for learning and
development. Several successful companies have shown that high
performance culture is the sine qua non for attaining sustainable
competitive advantage.

Frame work of Performance Management.

Conduct Future Mapping
Create Transformational Vision, Mission and Core Values
Craft business strategy linked to Vision

Annual corporate objective

Annual corporate strategy-& the other details cascade down --use of
balance score card in Moser Baer
Performance planning
- Task analysis and/or activity analysis;
- Key performance areas (KPAs);
- Key result areas (KRAs);
- Task & target identifications;
- Activity plans/action plans; and
- Goal-setting exercises.
If the following questions can be answered positively after the
exercise, one could say that KPAs have been well
identified:
2. Do the KPAs and targets emphasize/ indicate what the
manager (appraise) is expected to do by himself (rather
than what his department, subordinates etc, are expected
to do)?
3. Together, do they cover a large part of his job and include
all significant contributions expected from his role?
4. Do they indicate the priority areas of work for the appraise
during the year?
4. If all KPAs are well done, can the appraise be
labeled as a good performer?
5. Are the targets set challenging and stretch the
capabilities of the appraise moderately rather
than being routine?
6. Are they comprehensive?
7. Do they specify the standards of performance
expected from the appraise?
8. Do they take into consideration realistically the
conditions under which the appraise is expected
to function during the year?
9. Do they satisfy both the appraise and appraiser?
10. Has adequate time been spent on the process of
identifying KPAs and gaining role clarity?
2.Goals — directions- if you do not know where
you are going, any road will be OK–
Goal setting is a process intended to increase
efficiency & effectiveness by specifying the
desired outcomes towards which individuals,
teams & organisation should work
Goals includes deadline, budget, and other
standards of behaviour and performance
Goals are quantifiable , consistent, precise,
challenging, measurable, achievable, shared,
time related, team work oriented.
SMART
– S – Simple
– M – Measurable
– A – Agreed
– R – Realistic
– T – Time related
3. Performance agreement -- performance
agreements set the direction & form the
basis of measurement, feedback,
assessment in the performance
management system
- Defines work to be done
- The attributes required (skill +knowledge
+ attitude)- competencies required
- Identified measures use to monitor review
and access
- Corporate core values required
4. Performance Measures – “If you can not measure
you cannot improve” – What is not measured is not
worth doing– Simple Measurements (Production,
Quality, Cost, Delivery, Safety etc .– profitability
gets measured on-
-return on investment
-return on sale
-return on total capital
-return on book quality
-net income by total assets
Performance measures provide evidence of whether or
not the intended result has been achieved & extend
to which the job – holder has produced the result.
Performance measure becomes the basis of generating
feedback information.
Bench marking – “ if you know your self &
your enemy well, you can win thousands
of wars”
– “Benchmarking is a tool to help you
improve your business process. Any business
process can be benchmarked”
– “Benchmarking is the process of
identifying, understanding, and adapting
outstanding practices from organisations
anywhere in the world to help your
organisations improve its performance”
– “Benchmarking is a highly respected
practice in the business world. It is an activity
that looks outward operations against those
goals”
-performance appraisal for individual &
team- each organisation have its
own- Moser bear has one
-balance score card for organization
team and individual
Financial performance
Customers satisfaction
Internal business processes
Employees learning and growth
 The Balanced Scorecard Provides a Framework to
0 Translate a Strategy into Operational Terms
Vision & corporate Strategy

Financial
•Objective
1 To succeed financially, how
•Measures
should we appear to our
shareholders? •Targets
•Initiatives
0

To achieve Customer
2
our vision,
•Objectives
how
should we •Measures
appear to
•Targets
our
customer? •Initiatives

3 To satisfy our Internal Business Process

shareholders
and customers, •Objectives
what business •Measures
processes must
we excel at? •Targets
•Initiatives
 0

4 “To achieve Learning & Growth

our vision, •Objectives
how will we
sustain our •Measures
ability to •Targets
change and
improve?” •Initiatives
The weights assigned to different performance measures in
the balanced scorecard as used by 60 large companies
surveyed by Towers Perrin New York, is shown below:-

Innovation/
learning results 5%
Developmental
result 9%

Internal
business
results 12%
Financial results
55%
Customer focus
19%
5. Competency– Competency Mapping,
Competency Profiling, Competency
Matching and Job Matching- at two levels
behavioral & technical.
Competence is skill based attributes-
measures what, what people can do.?
Competency is behavior based attributes,
applies on performance, measures, how,
how they do it – Behavior or set of
behaviors' that describe excellent
performance in particular work context–
Applied knowledge and skill– Behavioral
application of knowledge that produce
 Competency Model

performance
Informance & understanding
needed to fulfill responsibilities
knowledge

Acquired ability or experience

skill needed to fulfill responsibilities

Natural ability that prepares a person

aptitude
to fulfill responsibilities
attitude
attitude
Way of thinking or Behavior
needed to fulfill responsibilities
 Competency caused flow chart
Input Action
Outcome
Personnel
attributes Behavior Job performance
& skills
 Why Strategies Fail

8%

17%
35%

40%

75% fail because of people- lack of competency and reluctance

reluctance to change.

‘People don’t resist change, they resist change without being

changed’
In a study conducted by Mc Kensey in 340
organizations worldwide on “Why Strategy Fails”,
only 17 percent of strategic failures were due to
bad strategy and 8 percent due to other reasons
such as ‘September 11, War natural calamity,
etc. the remaining 75 percent were due to lack of
competency of the people who implemented the
strategy; precisely 40 percent due to lack of
knowledge and skills and the other 35 percent
due to lack of right attitude, i.e. willingness to
change, managing feeling and emotions, etc.
People who excel at their jobs demonstrate
behavior that distinguish them from their peers.
Directing these behaviors are “Competencies”
which we define as underlying personal
characteristics that differentiate outstanding
performance from average performance in a
given job, role, organization or culture.
– List of managerial competencies
2. Planning ability
3. Organizing ability
4. Co-ordination
5. Supervision
6. Leadership & dynamism
7. Initiative
8. Resourcefulness (oral & written)
9. Creativity & Imaginativeness
10. Development of subordinates
11. Contribution to team spirit
12. Analytical abilities
13. Delegation
14. Public relations
15. Sociability
16. Self-confidence
16. Decision-making
17. Cooperativeness
18. Flexibility
19. Problem-solving
20. Risk –taking
21. Ability to motivate subordinates
22. Conflict management
23. Communication skills
24. Perseverance
25. Hard work
26. Integrity
27. Drive
28. Empathy
29. Assertiveness
30. Originality
31. Data management
– Threshold competency – minimum, essential for every manager but
that does not distinguish
– Differentiating competency – superior from average performers
Competency for high achiever
4. Personal drive (achievement motivation)
5. Analytical power
6. Strategic thinking
7. Creative thinking (ability to innovate)
8. Divisiveness
9. Commercial judgment
10. Decision making
11. Team management & leadership
12. Interpersonal relationships
13. Ability to communicate
14. Ability to adopt & cope with changes & pressure
15. Impact on result
– Creativity & innovativeness– Creativity is more than just inspiration.
It is perspiration and hard work too… many of us believe that
creativity is a gift given to only chosen few. Nothing can be further
from the truth. All of us are creative in our own little way. Creativity
is a route to self-fulfillment and satisfaction.
COMPETENCY MAPPING –A TOOL FOR OPTIMIZING THE

HUMAN CAPITAL

The term “Human Capital” describes the economic

value of the organization's knowledge, skill, and
capabilities.
Human Capital is intangible and hence cannot be
managed the way organizations manage jobs,
products, technology etc.
“Can a round peg fit a square hole? So can’t a wrong
employee in a right organization”
The organization will have to find a correct person who
will fulfill its expectations or will have to chisel and
shape up the existing employee to fit its expectations.
“Know the dimensions of the square hole And buy a
square peg Or chisel the round peg to fit.”
“Successful Companies of the 21st Century will be those
who do the best job of capturing storing and leveraging
what their employees know”
Thomas Stewart in his book “Intellectual Capital:
The New Wealth of Organisation” says that
Intellectual Capital is the intellectual material,
knowledge information, intellectual property, and
experiences that can be used to create wealth.
The term ‘intellectual Capital’ represents the
awareness that information is a factor of
production, as economists would describe it, in
the same category with land, labour, capital and
energy. In the early mid 1990s there was an
increasing awareness in the business community
that knowledge was an important organizational
resource that needed to be nurtured, sustained,
and, it possible, accounted
 Monitoring & Mentoring performance----
monitoring employees performance & mentoring their
development is the heart & soul of performance
management.
Performance management aims at sustained effort for –
a. performance improvement
b. enhancement of managers competencies
c. organisational learning
- differentiating leadership with leader
A leader is one who knows the way, who shows the way,
who goes the way
-situational leadership (Directing, Coaching, Supporting,
Delegating) - Introducing movers of human behaviors –
coaching & mentoring – continuous search for drivers of
performance & movers of human behavior – creating
achievers - enriching performance through diversity-
creating building trust- encouraging change - measuring
results
-Mid term review.
How can managers get extra ordinary performance from
ordinary people - by effectively & systematically
managing performance
– three basics principles of high performance-create trust,
encourage change, measure the performance, -----
 Some monitoring/ mentoring
behaviors
Manager meets employees regularly, on
the spot, during work process, facilitate
change .
Praises good performance
Sharing feeling than passing remarks
Demonstrating & demanding integrity in
behavior & intent
Exacibility & availability to the employees
Correcting faults then condemning
Nurturing effective working through
continuous improvement.
6. Pygmalion effect
ANNUAL Stock taking /Performance Review Discussion
and feedback- Performance review- letting employee know
where he stands-process of analysis of achievement and
deficiency- providing opportunity for in-depth exploration for
introspection with the mentor - reinforcement in case of
deficiency, (T & D, counseling, coaching, mentoring etc.),
appropriate reward in case of target fulfillment
Objectives –
1. Helping him to realize his potential as a manager or a leader
etc.
2. Helping him to understand himself –his strengths and his
weakness.
3. Providing him an opportunity to acquire more insight into his
behaviour and analyze the dynamics of such behaviour.
4. Helping him to have better understanding of the
environment.
5. Increasing his personal and inter-personal effectiveness by
giving him feedback about his behaviour and assisting him in
analysing his inter-personal competence.
6. Encouraging him to set goals for further improvement.
7. Encouraging him to set goals for further improvement.
2. Creating an empathic atmosphere to share and discuss
his tensions, conflicts, concerns and problems.
3. Helping him to develop various action plans for further
improvement.
4. Helping him to review in a non-threatening way his
progress in achieving various objectives.
Condition for performance review discussion
General climate of openness and mutuality
General helpful and empathic attitude of management
Sense of uninhibited participation by the subordinates in
the performance review process
Dialogic relationship in goal setting and performance
review
Focus on work-oriented behavior
Focus on work-related problems and difficulties
Avoidance of discussion on rewards and punishment
Methods of review
-tell & sell, tell & listen, problem solving
 Feedback- Feedback is transmitting
information from one part of system to another
part to do corrective action or initiate new
action. Self feedback is highly desirable feature
of PMS but there is always need for managers,
colloquies, inter and external customers to
provide feedbacks based on their observation
(360 feedback). Feedback is considered positive
because it is developmental –
• build feedback in to the job
• on the actual event
• describe do not judge
• refer specific behavior
• be positive
• suggest correction
8. Conditions for effective feedback
Descriptive and not evaluative
Focused on the behaviour of the person and not on the
person himself
Data based and specific and not impressionistic
Reinforces positive new behaviour
Suggestive and not prescriptive
Continuous
Mostly personal, giving data from one’s own experience
Need-based and solicited
Intended to help
Focused on modifiable behaviour
Satisfies needs of both the feedback given and one who
receives feedback
Checked and verified
Well timed
Contributes to mutuality and building up relationship
Unhelpful and helpful response of the appraisal
• Unhelpful
Not encouraging creative acts
Passive listening
Lack of verbal response
Critical
– Criticizing
– Pointing inconsistencies
– Repeated mention of weaknesses
– Belittling
– Reprimanding
Directive
– Prescribing
– Ordering
– Threatening
– Giving no options
– Pointing out only one acceptable way
– Quoting rules and regulations
2. Helpful Appraisal
Empathic
Leveling
Rapport building
Identifying feelings
Supportive
Recognizing
Communicating
Availability
Committing support
Trusting
Exploring
Questions
Reflecting
Sharing
Probing
Closing
Summarizing
Concluding
Contracting for follow-up and help
 Performance Reward, Development
& Recognition
The outcome of performance appraisal
should be linked to:
 Performance linked pay.
 Development opportunities.
 Challenging assignments in various
task forces in the company.
Counseling and Coaching &
mentoring –directing people to do
has always produce inferior results
compare to inspiring people to do
an excel. While counseling helps
people to come out of helplessness,
coaching & mentoring inspires
people to an excel
Counseling is helping people to
help themselves to achieve what
they want to-complete acceptance,
empathy, listening, sensitivity,
impartiality, helping to explore his
own confusion, working out
improvement plan along with him.
Coaching is to assist others to make
changes in their work lives or to
adjust to changes with view to
improving the performance-not
teaching, not instructing, not
training it is on the job to help
people develop their skills and level
of competence, making people aware
of their deficiency and encouraging
them to improve- coaching is a
process were by one people helps
another to unlock their natural ability
to perform learn an achieve- to
increase awareness of the factor
which deterring performance,
to increase their scene of self
responsibility and ownership of
their performance, to self
coaching to identifying & remove
internal barriers of achievement
A mentor is experienced and
trusted advisor – combine four
roles- coach, teacher, sponsor
(adding new challenges), devils
advocate (unusual way of
looking at things)- role model
 Conclusion
As Sherman Roberts of Harvard
university puts it: “The best way to
run an organization is also the best
way to treat people”
In the words of Edward Gibbons, an
English historian, “The winds and
waves are always on the side of the
ablest navigator.”
Balanced Scorecard for Enhancing Performance
“ The problem is that not everything that counts can be
counted, and not everything that can be counted counts.”

As a manager, more often than not, most of our decisions

and the activities are guided by the impact they will have
on the bottom line. Usually, we end up measuring an
organization’s performance in terms of Profit made. No
doubt, profitability, gross revenues, return on capital, etc.
are the critical, “bottom line” kind of results that companies
must deliver to survive. But if we only focus on the financial
health of the organization, it may jeopardize our success in
the long run because financial measures are generally
“lagging indicators” of success and financial performance
depends on a variety of past action & events on which we
may not have immediate control. They are historical. While
they tell us what has happened to the organization, they
may not tell us what is currently happening or be a good
Indicator of future performance.
Another consequence of merely focusing on financial
measures is that we lose sight of the customers who are key
to our well being. In such a scenario, we may end up taking
decisions like reducing the warranty stringent to help the
organization financially, but may hurt the long term
relationships with the customers, who may eventually
reduce the purchases or leave altogether. Such decisions are
sufficient to turn – off the customers in the longer run. The
world over, there are hundreds of companies which are no
more talked about probably because of their obsession only
with bottom line results. As they continued to do what they
had been doing, very soon they realised that their
competitors have displayed them from their place of
imminence.
Instead of such a short-sighted, after the-fact view of an
organisation’s performance, a more comprehensive view is
needed with an equal emphasis on outcome measures (the
financial measures or lagging indicators), measures that
Will tell us how well the company is doing now (current
indicators) and measures of how it might do in the future
(leading indicators). We can’t ignore the bottom line – the
key indicator of what has happened (i.e., a “ lagging
indicator”). The balanced scorecard is just remedy for this
kind of problem.
The origins of the balanced scorecard method can be traced
back to 1990, when the research arm of KPMG sponsored a
study on measuring performance in organisations. The study
was motivated by a belief that existing performance
measurement approaches, primarily relying on financial
parameters which provide information about an
organisation’s past result are not well suited for predicting
future performance or for implementing and controlling the
organisation’s strategic plan. And it is very much relevant in
the Indian context also where many big companies which
were doing quite well financially at one point of time could
not read the writings on the wall and as a result, they are no
more talked about. By analyzing perspectives other than the
financial one, managers can better translate the
organisation’s strategy into actionable objectives and better
measure how well the strategic plan is executing.
Subsequently, in 1992, Robert S Kaplan and David Norton
introduced the balanced scorecard (BSC) for measuring an
organisation’s activities in terms of its vision and strategies
which was published in the Harvard Business Review. It
gives managers a comprehensive view of the performance of
a business and have been widely adopted around the world.
In fact, the Harvard Business Review, in its 75th Anniversary
issue, cites the Balanced Scorecard as being one of the 15
most important management concepts to have been
introduced via articles in the magazine.

What is Balanced Scorecard

The Balanced Scorecard method is a strategic approach and

performance management system that enables the
organisations to translate its vision and strategy into
framework for translating an organization’s vision into a set of
performance indicators distributed among four perspectives :
Financial, Customer, Internal Business Processes, and Learning
and Growth. Indicators are maintained to measure an
organization’s progress toward achieving its vision. Other
indicators are maintained to measure the long term drivers of
success. Through this scorecard, an organization monitors both
its current performance (finances, customer satisfaction, and
business process results) and its efforts to improve processes,
motivate and educate employees, and enhance information
systems – its ability to learn and improve. A Balanced
Scorecard enables us to measure not just how we have been
doing, but also how well we are doing (“current indicators” and
can expect to do in the future (“leading indicators”). This in
turn gives us a clear picture of reality.

The Balanced Scorecard is a way of:

measuring organizational, business unit’s or department’s
success
• balancing long-term and short-term actions
• balancing different measures of success

- Financial
- Customer
- Internal Operations
- Human Resource System & Development ( learning
and growth)

Four Kinds of Measures

The scorecard seeks to measure a business from the

following perspectives :

13.Financial perspective - Measures reflecting financial

performance, for example, number of debtors, cash flow
or return on investment. The financial performance of an
organization is fundamental to its success. Even non-profit
organisations must make the books balance. Financial
figures suffer from two major drawbacks
2. Customer perspective – This perspective captures the
ability of the organization to provide quality goods and
services, effective delivery, and overall customer satisfaction
for both Internal & External customers. For example, time
taken to process a phone call, results of customer surveys,
number of complaints or competitive rankings.

3. Business Process perspective – This perspective provides

data regarding the internal business results against
measures that lead to financial success and satisfied
customers. To meet the organizational objectives and
customers expectations, organizations must identify the key
business processes at which they must excel. Key processes
are monitored to ensure that outcomes are satisfactory.
Internal business processes are the mechanisms through
which performance expectations are achieved. For example,
the time spent prospecting new customers, number of units
that required rework or process cost.
4. Learning and Growth perspective – This perspective
captures the ability of employees, information systems, and
organizational alignment to manage the business and adapt
to change. Processes will only succeed if adequately skilled
and motivated employees, supplied with accurate and
timely information, are driving them. In order to meet
changing requirements and customer expectations,
employees are being asked to take on dramatically new
responsibilities that may require skills, capabilities,
technologies, and organizational designs that were not
available before. It measures the company’s learning curve
for example, number of employee suggestions or total
hours spent on staff training.

Objectives, Measures, Targets and Initiatives

Within each of the balanced scorecard financial customer,

internal process, and learning perspectives, the
organisation must define the following:
• Strategic objectives – the strategy for achieving that
perspective.

• Measures – how progress for that particular objective will

be measured.

• Targets – the target value sought for each measure

• Initiatives – what will be done to facilitate reaching out the

target.

The balanced scorecard provides an inter-connected model

for measuring performance and revolves around four distinct
perspectives – financial, customer, internal processes, and
innovation and learning. Each of these perspectives is stated
in terms of the organisation’s objectives, performance
measures, targets, and initiatives, and all are harnessed to
implement corporate vision and strategy.
The name also reflects the balance between the short-and
long-term objectives, between financial and non-financial
measures, between lagging and leading indicators and
between external and internal performance perspectives.

Under the balance scorecard system, financial measures are

the outcome, but do not give a good indication of what is or
will be going on in the organization. Measures of customer
satisfaction, growth and retention is the current indicator of
company performance, and internal operations (efficiency,
speed, reducing non-value added work, minimizing quality
problems) and human resource systems and development
are leading indicators of company performance.

Robert S Kaplan and David P Norton the architects of the

balanced scorecard approach, recognized early that long-
term improvement in overall performance was unlikely to
happen through technology only and hence placed greater
emphasis on organizational learning and growth. These, in
Turn, consist of the integrated development of employees,
information, and systems capabilities.

Context and Strategy

Just as financial measures have to be put in context, so

does measurement itself. Without a tie to a company
strategy, more importantly, as the measure of company
strategy, the balanced scorecard is useless. A mission,
strategy and objectives must be defined. Measures of that
strategy must be agreed upon to and actions need to be
taken for a measurement system to be fully effective.
Otherwise, it will appear as if the organisation is standing at
a crossroad but unaware of which path to take.

Purpose of the Balanced Scorecard

Kaplan and Norton found that organisations are using the

scorecard to :
• Clarify and update strategy
• Communicate strategy throughout the company
• Align unit and individual goals with strategy
• Link strategic objectives to long term targets and
annual budgets
• Identify and align strategic initiatives
• Conduct periodic performance reviews to learn about
and improve strategy.
 Mission
Why we Exist
Core Values
What we believe in
Vision
What we want to be
Corporate Strategy
Our Game Plan

Balanced Scorecard
Implementation & Focus

Strategic Initiatives
What we need to do

Individual Scorecard
What I need to do

Strategic Outcomes

Satisfied Delighted Effective Motivated

Shareholder Customers Processes Workforce
•The Process of Building a Balanced Scorecard

•Kaplan and Norton suggest following four step process for

building a scorecard:

• Define the measurement architecture

•Specify strategic objectives
•Choose strategic measures
•Develop the implementation plan

•Benefits of Balanced Scorecard

•Some of the benefits include:

• Translation of strategy into measurable parameters
• Communication of the strategy to all stakeholders
• Alignment of individual goals with the organisation’s
strategic objectives
• Feed-back of implementation results to the strategic
planning process
• Preparing the organisation for the Change – It provides for a front-end
justification as well as a focus and integration for the continuous
improvement, re-engineering and transformation process.

Avoiding Potential Roadblocks

• Lack of a well defined strategy

• Using only lagging measures
• Use of generic metrics
• Failure at all levels
• Failure to follow through completion

Balanced Scorecard for Enhancing Performance

In such constantly shifting environments, management must learn to

continuously adapt to new strategies that can emerge from capitalizing
on opportunities or countering threats. A properly constructed balanced
scorecard can provide management with the ideal tool in reacting to the
turbulent environment and helping the organisation to correct the course
to success.
Scorecard provides managers with feedback, thus, enabling them to
monitor and adjust the implementation of their strategy – even to the
extent of changing the strategy itself. In today’s information age,
organisations operate in very turbulent environments. Planned strategy,
though initiated with the best of intentions and with the best
available information at the time of planning may no longer
be appropriate or valid for contemporary conditions.

As companies have applied the balanced scorecard, they

have begun to recognize that the scorecard represents a
fundamental change in the underlying assumptions about
performance measurement.

The scorecard puts strategy and vision, not control, at the

centre. It establishes goals but assumes that people will
adopt whatever behaviours and take whatever actions are
necessary to arrive at those goals. The measures are
designed to pull people toward the overall vision. Senor
managers may know what the end result should be, but
they cannot tell employees exactly how to achieve that
result, because the conditions in which employees operate
are constantly changing.
This new approach to performance measurement is
consistent with the initiatives under way in many organisation
: cross-functional integration, customer supplier partnerships,
global scale, continuous improvement, and team rather than
individual accountability. By combining the financial,
customer, internal process and innovation, and organizational
learning perspectives, the balanced scorecard helps
managers understand, at least implicitly, many
interrelationships. This understanding can help managers
transcend traditional notions about functional barriers and
ultimately lead to improved decision making, problem solving
and enhanced performance. The balanced scorecard keeps
organisations moving forward.