Development of a system of balanced indicators for the enterprise JSC "Sakhalin Airport Okha". Balanced scorecard as a management tool Balanced scorecard using the example of a car dealership

Baumgarten L.V.,
Ph.D. those. sciences,
Associate Professor RGSU

Modern organizations cannot be effectively managed based on financial performance alone. D. Norton and R. Kaplan developed a balanced scorecard that made it possible to integrate financial and non-financial performance indicators. This system of indicators should focus on core business processes, include internal indicators of the organization’s performance, allowing them to reflect changes in market share, the degree of customer satisfaction, and also reflect the organization’s development strategy and its implementation in real time.

The process of managing the organization's performance is aimed at:

identifying external relationships and internal processes that influence results;
management decisions to achieve the organization's goals;
analysis of the impacts that these decisions have on performance indicators.

To create a strategic management system, it is necessary to decompose the organization's strategy into specific strategic goals, which must be clearly formulated, communicate the strategy throughout the organization, be consistent with the goals of personnel, be linked to the annual budget, be consistent with strategic initiatives, and facilitate regular reviews through feedback. and making necessary strategy adjustments.

Drawing up a balanced scorecard is based on decomposing the strategy using a strategic map into the following four promising areas and drawing up strategic maps from them:

financial position of the organization;
consumers of the organization and sales markets;
internal business processes;
development of the organization and its personnel.

A strategic map is a diagram that describes a set of strategic goals and cause-and-effect relationships that indicate how an organization's intangible assets are converted into tangible (financial) results (Figure 1). It performs the following functions:

Represents a description of the strategy implementation process.
Explains the organization's strategy to employees and reflects the interrelationship of strategic goals.
Explains how their individual goals contribute to the overall strategy and its goals.
Shows how non-financial goals (shortening the production cycle, increasing market share, employee and customer satisfaction) help describe the process of creating added value.
Traces how intangible assets (skilled personnel, availability of information systems) are transformed into tangible results (attracting new customers, revenue growth, increased profitability).
Gives management the opportunity to understand the essence of the strategy, and also creates the basis for creating a system for managing the implementation of the strategy.

Strategic maps can be created at the level of divisions and individual performers. For a certain set of strategies, basic, template maps can be drawn up in advance.

The balanced scorecard contains four components that correspond to strategically important aspects of the organization's activities. Each component is associated with a specific key question, the answer to which is an indicator characterizing the direction of strategy implementation (Table 1). These indicators can be used as the basis for creating a balanced scorecard (BSS).

The process of developing a strategy and creating a BSC includes the following stages:

I. Based on the vision of the organization, its management determines financial goals and benchmarks.
II. The organization's consumers are identified and measures are developed to improve consumer perception of goods or services and meet their future needs.
III. Ways to achieve the goals formulated at stages 1 and 2 are identified, measures are developed to improve business processes (development of new products and services, improving the quality of service, increasing the effectiveness and efficiency of business processes) to satisfy consumers and achieve financial results.

IV. The strategy is decomposed into four perspectives: finance, customers, processes and personnel, and goals are set for these perspectives.
V. For each goal, within each perspective, the existing critical factors (key success factors of the industry or competitive advantages of the organization) are identified.
VI. The identified critical factors serve as the basis for selecting indicators with which to measure the state of implementation of each critical factor. For specific conditions of the organization, these indicators will have a specific target value. The totality of such indicators constitutes the BSC.
VII. An action plan is being developed to implement the intended goals using the BSC.

All four components of the BSC should contribute to the implementation of the organization's strategy. It is important to establish a set of main strategic goals for the components of the BSC, which are used in practice when developing a strategy (Table 2).

Critical factors are determined by industry key success factors (controllable factors that improve the organization's competitive position in the industry) and competitive advantages (unique tangible and intangible resources and strategically important areas of activity) of the organization. Key success factors are determined based on industry analysis, and competitive advantages are determined based on management analysis.
Examples of possible critical factors are given in table. 3, and examples of indicators for critical factors in table. 4.

Based on the critical factors, targets are set, which represent specific values of the critical factors that the organization seeks to achieve. Thus, if the percentage of trained employees is selected as a critical factor, then the target indicator could be the percentage of trained employees during the year (for example, 40% per year). With a critical factor characterizing the frequency of assortment renewal, the target indicator could be a complete update of the assortment within two years. To implement target indicators, it is necessary to develop appropriate programs.

If the system of target indicators turns out to be extremely extensive, with the presence of duplicate indicators, then the task is to limit the indicators used. It is believed that a sufficient number of indicators in such areas as finance, clients, training and development should not exceed five, and for internal processes - no more than ten.

We will assume that the developed strategy for the tourism organization is reflected in the strategic map presented in Fig. 2. Based on the strategic map, the BSC was developed with the involvement of consultants and managers of the organization (Table 5). Similar strategic maps are drawn up for divisions (individual employees) of a tourism organization and the BSC is determined for these divisions (employees). The developed BSC should be reflected in the organization’s budgets. As strategic indicators, budgets may reflect the volume of annual profit and sales volume by type of tour. Taking into account seasonality and other specific factors for these types of travel, the annual budget is linked to monthly budgets.

Literature
1. Gershun A., Gorsky M. Balanced control technologies. - M.: Olimp-Business, 2005.
2. Introduction of a balanced scorecard / Transl. with him. - 2nd ed. - M.: Alpina Business Books, 2006. (Series “Management Models of Leading Corporations”).
3. Moiseeva N.K. Strategic management of a tourism company: Textbook. - M.: Finance and Statistics, 2000.

Also on this topic.

The article describes the experience of developing a balanced scorecard using the example of an organization. The company implemented BSC on its own; the initiator and coordinator of the project was the financial director.

The group of companies "Autocenter KGS" specializes in the sale of cars and spare parts. The group includes 3 car dealerships, 15 wholesale and retail stores, 6 service stations and a centralized warehouse. At some point, the growth rate decreased noticeably. It was decided that the most effective strategy would be to reorient the group of companies into a “multi-brand” business. The basis for further transformations was balanced scorecard(BSC, Balanced Scorecard).

BSC allows you to quickly monitor the implementation of the enterprise's strategic plans, as well as correlate them with the current tasks of the departments using objective performance indicators.

Initially, management and business owners determined that the implementation of the balanced scorecard and corresponding changes would be carried out by their own specialists. The guide to action for the group formed to implement the project was David Parmenter’s methodology, which he described in his book “Key Performance Indicators.” The initiator and coordinator of the project was the financial director, who included in the group the heads of departments, and at certain stages, other specialists of the holding.

The main stages of implementing a balanced scorecard using the example of an organization

1. Definition of goals, factors and indicators

Adhering to the methodology described in the book, first of all, management determined the mission and strategy of the company, as well as the key goal (or, as David Parmenter describes it, a “super goal”) - increasing EVA (Economic Value Added), that is, the economic value of the business.

At the next stage of implementing the balanced scorecard system, the project team identified the main success factors, for example, such as unified integrated management of all holding structures, the presence of a sufficient number of divisions (car showrooms, stores, service stations) in all regions chosen for work, as well as a unified employee motivation system . Each such factor corresponds to a strategic (long-term) goal at the holding level, for example, to create a unified comprehensive system of employee motivation within two years (see Table 1).

Table 1. Enterprise-wide critical success factors and long-term (strategic) goals (extract)

Critical Success Factor		BSC component
Improvement of logistics technologies	Over 5 years, reduce the operating cycle indicator (time of full turnover of the entire amount of assets) by 40%	Business processes
Strengthening relationships with strategic suppliers	Within 3 years, achieve the signing of contracts for the supply of goods with the best conditions with all strategic suppliers (compared to other regional companies)	Business processes
Creation of a permanent comprehensive system for staff development	In 2 years, create a comprehensive system for improving the qualifications of employees ()	Employees
Creation of a unified comprehensive system of employee qualifications	In 2 years, create a unified comprehensive system of employee motivation ()	Employees
Timely fulfillment of customer orders (cars, spare parts, service)	Within 5 years, achieve an indicator of timely fulfillment of customer orders according to the originally established deadline (cars, spare parts, service) at the level of 0.95	Clients
Presence of full-fledged modular units in all selected geographic regions	Within 5 years, implement a comprehensive program for the presence of full-fledged modular units in all selected geographic regions	Clients

Then it was necessary to identify specific indicators of the organization's performance, which would then be monitored at various levels of management and link it to the goals.

David Parmenter's methodology involves the use of three types of indicators:

KRI, key performance indicators - characterize the state of affairs of the holding as a whole, reflect past performance results;
KPI, key performance indicators are established for the most important aspects of the company's activities;
P.I., production indicators - are set at the level of enterprises and divisions of the group and determine the current operational actions of managers and employees.

The optimal ratio of the listed indicators is established by the “10-80-10” rule, that is, the company should have approximately 10 KRIs, up to 80 end-to-end PIs and about 10 KPIs. Since management had previously identified corporate-wide strategic goals, a pair of KRIs (key performance indicators) and KPIs (key performance indicator) were selected for each of them. The only exception was the goal regarding the growth of EVA - only KRI was chosen for it, since the implementation of KPIs must be non-financial in nature.

When choosing indicators, we focused primarily on the possibility of obtaining the necessary data either from the IT system automatically or from companies hired to survey clients and employees. The results of correlating KRI and KPI of the company for one of the components of the BSC (“Finance”) are shown in Table 2.

Table 2. General corporate KRIs and KPIs for long-term goals within the “Finance” section

Long-term (strategic) goals
Double employee productivity	Rate of growth/decrease in the number of developed and implemented technological maps of business processes	EBITDA growth/decline rate per employee

Achieve doubling of group EVA	There is no indicator (a financial indicator cannot be a KPI)	EVA Growth/Decrease Rate

The next step towards the balanced scorecard system was the detailing of group-wide goals for the purposes of business units and the determination of production indicators that were directed to subsidiaries and their divisions (parts stores and service stations). Let's consider the algorithm using the example of the previously mentioned part of the BSC “Finance” for a subsidiary car service company.

NOPAT (Net Operating Profit After Taxes, net operating profit after taxes) is one of the drivers of EVA. For a subsidiary, it can be represented as a formula:

NOPAT = TR – TVC – FC

TR - revenue (sale of car services); TVC - variable costs (salaries and payroll deductions for car mechanics, spare parts for car repairs, etc.);

FC - fixed costs (rent of building and equipment, salaries of administrative staff, UTII).

Let's return to the financial “super goal” declared by the shareholders of the Autocenter KGS Group of Companies - to double EVA in five years. The KRI of this goal (key performance indicator is a historical indicator) is defined as the growth rate of economic value added. For example, in the first quarter of 2012, the growth rate of EVA was 1.043, that is, an increase of 4.3%. The target for this period is 4%, which means that the required level has been achieved and even exceeded.

If we analyze the subsidiary car service company, then its goal is to increase net profit. It’s worth making a small remark here: at the first stage of implementation, the indicator of net profit reduced by the cost of equity capital was considered for it. However, after some time they decided to simplify the approach. This is because the directors of subsidiaries often did not understand what was required of them. Net profit is a more understandable indicator for them, so they simply increased the net profit plan by estimated value of equity . This will be the PI for directors of car service companies. Its value was set at 1.037.

In turn, the purpose of a subsidiary is detailed in the purpose of its divisions. In this case, this is the growth of marginal profit (PI - “Marginal profit growth rate”). The indicator is calculated using the formula: TRm = TR – TVC (revenue minus variable costs), and in the company under consideration it is set at 1.092.

Other performance indicators within the framework of the balanced scorecard are shown in Table 3.

Table 3. Examples of KPI and KRI

Long-term (strategic) goals	Key Performance Indicators (KPI)	Calculation of the indicator	Key Performance Indicators (KRI)	Calculation of the indicator
Increase the number of automobile brands offered for sale to 10 and increase the market share indicator: for traditional brands - up to 75%, for new brands - up to 50%	Rate of growth/decrease in the number of new suppliers in the information base	The ratio of the number of suppliers to their number in the base period. An increase in the number of suppliers will lead to an increase in brands sold	Rate of growth/decrease in sales of goods and services (cars, spare parts) for each brand	The ratio of sales of each brand in total terms in the billing period to their sales in the base period
Reduce the operating cycle indicator (time to complete turnover of the entire amount of assets) by 40%	Rate of growth/decrease in the number of developed and implemented technological maps of logistics business processes	The ratio of the number of regulations in the calculation period to the number of regulations in the base period	Rate of growth/decrease of the operating cycle in days	The ratio of the operating cycle in days in the billing period to the same indicator in the base period

Interesting article? Bookmark the page, save, print and forward to colleagues.

2. Centralized management

The next component of the updated strategy is to ensure a sufficient number of divisions (car dealerships, stores, service stations) in the territories where the holding operates. The goal of this direction is to create modular units to serve car owners within five years in all regions of presence. They should be formed according to the principle of a designer, that is, consist of parts that could quickly switch to new brands, whether we are talking about selling cars in car dealerships, spare parts in stores or repairs at service stations.

Now, focusing on the new strategy, management, before purchasing real estate to create a new service point, evaluates the possibility of transforming its components - premises, equipment, distribution of jobs, etc. Preliminary standardization of modular formats allows the holding to further save time and money and avoid ill-conceived investment decisions.

Uniform standards for the selection of new premises are only a detail of the strategy for the transition to managing a holding with the help of a management company. The center is responsible for strategic planning , investment, control of financial results, as well as various policies: marketing (development of the KGS Autocenter brand), production (providing equipment for service stations, technological standards), personnel (management motivation system), information (IT system based on 1C: 8.2 UPP). And decision-making on most tactical tasks falls to the management of subsidiaries.

3. Staff motivation

Naturally, the creation of a balanced scorecard system presupposes the formation of a personnel motivation system focused on the implementation of long-term plans. Let's look at the principles of its construction using the example of the same subsidiary car service company, and start with a motivational scheme for the manager. His monetary remuneration consists of several parts: salary (fixed), as well as a quarterly bonus and an annual bonus (variable).

The manager's quarterly bonus depends, first of all, on the fulfillment of the plan for the net profit of the car service company he heads. If it is completed 100%, the manager can count on the first part of the bonus. It is equal to his average monthly salary last year, adjusted by a coefficient determined by the group’s top managers expertly (in this case, 0.4), and multiplied by 3 (the number of months in the quarter). In case of failure to fulfill the plan, the following correction factors are used:

70-80% - 0,3;
60-70% - 0,25;
50-60% - 0,2;
50% or less - no bonus is paid.

If the division exceeds the plan during the quarter, the director receives an additional 0.2 ruble bonus for each ruble exceeded.

The next step is to adjust the bonus amount by the percentage of plan completion for non-financial indicators. Each of them is expertly assigned weights. The coefficient is calculated as the ratio of the weights of the completed indicators to the total amount of weights (see additional material for the article). Half of the previously calculated premium is multiplied by the resulting value. It is worth noting here that non-financial indicators must be used with caution, because they are determined conditionally and may be negatively perceived by employees. Therefore, it is advisable to use them to adjust only part of the premium (in the KGS Autocenter Group of Companies - half), calculated using the main financial indicator.

Finally, if actual annual net income exceeds the target, the executive's final bonus will be 10% of the excess. The adjustment for the amount of fulfillment of non-financial indicators for the year is similar to the quarterly one, with the only difference being that in this case the non-fulfillment ratio is calculated for all four quarters.

The net profit of the subsidiary for the quarter (planned) was 1,500 thousand rubles, but in fact amounted to 1,700 thousand rubles. The subsidiary’s performance ratio for the period is 0.75. Let's calculate the amount of the manager's quarterly bonus if his monthly salary is 50 thousand rubles.

The main part of the bonus: 50 × 0.4 × 3 = 60 thousand rubles.

Additional part of the bonus for overfulfillment: (1700 - 1500) × 0.2 = 40 thousand rubles.

Adjustment of the bonus taking into account the coefficient of fulfillment of additional indicators:

(60 + 40) : 2 + (60 + 40) : 2 × 0.75 = 87.5 thousand rubles.

Now let's look at the motivation scheme for employees, and take the Reception Point division as an example. The main financial indicator will be marginal profit, since department employees can directly influence it - the more cars are repaired, the higher the margin.

The bonus portion of payments to employees for the quarter is calculated using the following algorithm. First, the division's margin for the year (previous) is determined: the difference between the funds received from the sale of services and direct labor costs (salaries and payroll deductions for auto mechanics) and the cost of spare parts. Accordingly, dividing this value by 4, you can get the quarterly marginal profit of the previous year. A prerequisite is that the premium is paid only if the margin of the calculation period is greater than the quarterly average for the previous year.

Now we need to determine the total bonus fund for employees of the Acceptance Point for the quarter. To do this, we multiply the quarterly amount of employee salaries by the coefficient of exceeding the plan (the ratio of the margin for the billing quarter to the average quarterly value for the previous year), subtract from it the amount of employee salaries and adjust it with another reducing factor, which is determined by experts (in the GC "Autocenter KGS" it equal to 0.8). Thus, wage growth is artificially slowed down so that labor productivity grows at a faster pace.

The marginal profit of the Acceptance Point division for the base quarter amounted to 16 million rubles, and for the settlement quarter - 24 million rubles, the constant part of the salary (salaries) of all employees for the quarter of the base year is 300 thousand rubles. The total bonus fund of the division will be: (300 × 24: 16 – 300) × 0.8 = 120 thousand rubles.

It is worth noting several additional conditions taken into account when calculating premiums. Firstly, they do not include sick pay and vacation pay. Secondly, to ensure that each repair is equally beneficial for the employee, the margin on warranty service (low-margin activity) for bonus calculation purposes is adjusted to the level corresponding to commercial repairs.

Once the bonus amount has been determined, it is distributed among employees in proportion to the amount of work actually completed in the billing quarter (automated calculation is carried out in the IT system). At the same time, the remuneration of an individual employee may be reduced if he does not fulfill the approved non-financial indicators, as well as in case of violation of labor discipline (absenteeism, tardiness, etc.). Thus, the following PIs have been established for employees of the Acceptance Point department:

compliance with established requirements for the preparation of primary documents; full reflection of business processes for car acceptance in the IT system;
compliance with safety requirements.

Motivational schemes for other departments (Mechanics, Technicians, Warranty) were built using similar rules.

Results and algorithm for implementing a balanced scorecard using the example of an organization

The described system was tested at one of the subsidiaries of the KGS Autocenter Group of Companies. The pilot model has proven itself well, and it was implemented in all structures of the holding. Thanks to the use of INS, the group was able to harmonize operational and strategic management. In addition, this concept successfully integrates with the budgeting system and goes well with management methods aimed at increasing business value. As a result, the company's owners and top managers have the opportunity to focus the work of each employee on achieving the goals of the entire group.

ALGORITHM FOR IMPLEMENTING THE PARMENTER METHOD

Step 1. We formulate a mission, vision and strategy.

Step 2. We highlight critical success factors.

Step 3. We build strategic (long-term) plans for the group as a whole by focusing on critical success factors. We define the main strategic goal (“super goal”).

Step 4. We monitor the implementation of the group’s strategic goals using KPIs and KRIs. We highlight the “super goal” indicator.

Step 5. We build motivational schemes for group leaders based on the principle of fulfillment (non-fulfillment) of KPI and KRI. As a rule, the main indicator is financial (in the described case, economic value added EVA).

Step 6. We detail the strategic goals of the group into the goals of its member enterprises.

Step 7 We monitor the achievement of enterprise goals through production indicators (PI).

Step 8 We detail the goals of the enterprise into the goals of its divisions.

Step 9 We monitor the implementation of departmental goals using production indicators.

Step 10 We build motivational schemes for managers of enterprises, departments and employees based on the principle of fulfillment (non-fulfillment) of PI. As a rule, the main PI indicator is financial (for example, marginal profit). Fulfillment of planned non-financial indicators also affects the calculation of bonus payments and bonuses.

Step 11 We create a logical chain. Employee motivation is aimed at achieving the goals of departments, enterprises, and groups, which allows them to adhere to the strategy and given mission.

Send your good work in the knowledge base is simple. Use the form below

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

From the article you will learn:

Balanced Scorecard: General Information

The development of the balanced scorecard began in the early 1990s. Harvard Business School professor Robert Kaplan and the president of the consulting firm Renaissance Solutions, David Norton, worked on it. They created an imperfect model, so it was subsequently refined by other experts.

Download documents on the topic:

What is BSC

The balanced scorecard (BSS) is a concept of decomposition and transfer of strategic goals for planning the activities of an organization. With the help of the BSC, the performance of the company is measured, not of individual employees. Based on the results obtained, the strategy is adjusted.

The Balanced Scorecard system is used as a tool for strategic performance management. It allows you to standardize the reporting form in order to quickly track the execution or non-fulfillment of tasks by employees. BSC is equipped with automation and design methods, and has feedback elements. By tracking a small amount of data, the system is highly efficient.

At the level of business processes, control of the strategic activities of the organization is carried out through key performance indicators, in the English version - Key Performance Indicator. KPIs are measures of achievability set goals, characteristics of the efficiency of processes, the work of each employee. In this context, they are considered the basis of the BSC system.

How Balanced Scorecard works

The BSC methodology transfers strategy to the level of the organization's operational activities. Correct application of the methodology solves many problems. It allows you to:

Establishing the parameters of strategic goals: KPI indicators with numerical values, cause-and-effect relationships between goals and strategic indicators, deadlines for achieving tasks.
Distribution of responsibility among officials for achieving strategic goals.
Identification of effective tools for achieving results.

The development of the BSC (balanced scorecard) begins with the preparation of a strategic map. It reflects the cause-and-effect relationships between the tasks needed to achieve the result. The target result is determined in several perspectives: clients, finances, personnel development, business processes.

For each task, key indicators are determined that measure the effectiveness of the solution. They are necessary and sufficient in order to achieve timely target result. Therefore, the system of target indicators is called balanced.

Application of the balanced performance indicator system requires significant resources. Development of a BSC if there is a specialized unit in the organization takes more than two months. This requires quality control of the results. Labor intensity and complexity of development discourage management from applying the methodology.

Advantages and disadvantages of the balanced scorecard

The introduction of a balanced scorecard is not always rational. Organizations must consider not only the advantages of using a BSC, but also the disadvantages. If managers do not know how to properly implement and use the system, its effectiveness will decrease or go to zero.

Advantages

Flaws

Provides the manager with a complete picture of the business, the performance of the company, individual divisions and employees.

Allows you to prevent critical situations from arising.

Facilitates interaction between participants at all organizational levels and provides an understanding of strategic goals.

Balanced scorecard: an example of construction based on strategic goals

Kaplan and Norton's methodology is used by both small firms, non-profit companies, and entire cities. Compose plan development will only be possible if you correctly analyze the state of the company and the processes in it today. Only after this do managers start from current values, determine goals and ways to achieve them.

The Balanced Performance Scorecard may include the following objectives:

Financial policy: aggressive growth of the company and sales profitability, increasing the value of the organization.
Consumer Policy: popular models or services, creation of a well-known brand, long-term cooperation with clients.
Domestic policy: maintaining the quality of goods or services at a high level, beneficial cooperation with suppliers.
Learning and Growth Policy: highly qualified personnel, advanced technologies, implementation of management systems.

The balanced scorecard example makes it clear that you need to define specific goals and then try to achieve them. When drawing up a BSC, you cannot set unattainable goals. For example, “become the largest company in 2 months.” The goal must be realistic, otherwise there is no point in investing effort, time and money.

BSC in the course of the company's activities

The system of balanced performance indicators includes the main factors of the organization's activity: operational, financial efficiency, management process. The concept involves collecting information of various types: about suppliers, customers, products, services provided, costs and profits, etc.

Based on the analysis, trends are determined, prospects for the company's development, carry out planning, evaluate performance results, compare the organization's performance indicators with its competitors or with industry averages. The system also affects customer service.

The obtained indicators are recorded and regularly analyzed to understand whether the company is achieving its strategic goals. To achieve the desired results, it is assumed that a personal system of indicators and personal goals is developed for employees. The manager analyzes the activities of the staff and identifies shortcomings. Individual work is carried out with employees who show the worst results, aimed at increasing the level of professionalism.

Aspects of the Balanced Scorecard

The balanced performance scorecard is viewed from four perspectives. In accordance with each of them, quantitative and qualitative indicators are developed, data are collected, and they are analyzed.

Learning and Development Perspective

Employee training contributes to the development of corporate culture. Educated people in a company are the main resource. Development and improvement of knowledge, skills and qualifications is important in the context of technological changes, when it is impossible to hire new technically trained employees.
Business Process Perspective

They refer to internal business processes. Indicators help determine the customer focus of the organization. The analysis is performed only by full-time employees who know the company from the inside. It is irrational to entrust work to outside experts.

Customers' Perspective

Alexander Zilberman Leading consultant at FinExpertiza Consulting
Magazine "Consultant", No. 17 for 2012

Managing a company based on a balanced scorecard is very simple. There are a lot of advantages, while there are practically no disadvantages. And implementing the system is not that difficult. But there are some nuances.

The main idea of the balanced scorecard (BSS) is to shift the focus of management's attention when assessing the company's success from purely financial indicators. According to this concept, enterprise management must track not only revenue and profit, but also other criteria related to relationships with customers, improvement of internal business processes, etc.

By assessing a company's results only by financial criteria, top management may lose sight of other components of success. For example, refusing to expand the product line will not require additional funds for technological equipment, modernization, etc. Consequently, in the short term, the company's financial performance will be better.

However, in the future, such a strategy may turn out to be a failure, since a company that does not modernize and modify products risks losing consumer loyalty, and with it, market share. This is exactly how Ford lost the competition to its eternal rival, General Motors Corporation.

The situation is similar with staff training. For example, a consulting firm may not invest in training its employees, and for some time such savings will have a positive impact on financial performance. However, over time, specialists who do not improve their qualifications will not be able to offer clients the best solutions, will not know the latest changes and trends, which will affect the quality of the services provided, reduce customer loyalty and ultimately lead to the loss of some of them.

The difficulty lies in the fact that staff training, relationships with clients and the development of internal processes cannot always be directly linked to the company’s performance. This is due to the fact that the effect of such events is complex and noticeable only in the long term. Therefore, funds for the development of these areas may be allocated irregularly, and solutions to problems may be postponed.

The main idea of the BSC is precisely that the company’s strategy, along with financial indicators, takes into account non-monetary goals. To do this, the organization’s specialists develop up to 20 main goals in four areas (finance, clients, processes, potential) and determine their own indicator for each goal.

Strategic cards

Often, company strategies contain a set of specific goals. A company can identify five or six major goals that it must achieve in the future. However, the goals may be unrelated and even contradict each other.

The balanced scorecard has clear rules for constructing goals. There are four main areas: finance, clients, internal processes, potential. For each of these areas, goals are developed that are linked to each other. A special map is being developed, which marks the main relationships between various goals. In the future, this enables management to clearly understand how the implementation of individual areas allows achieving strategic goals.

Not finance

The BSC was developed precisely for the reason that too much attention in many companies was paid to financial indicators. As a result, many processes, the development of which is important in the long term, were postponed in order to achieve acceptable financial results here and now. For example, a company may not invest in the development of new technologies, maximizing profits from cash cows, but in the long run it will lose out to competitors who have invested in R&D.

The BSC ideology recognizes that financial indicators are a priority for the company, but pushes for the determination of target values for non-financial goals. As a result, the BSC allows for balanced development, since individual areas of activity do not sag. Companies that use the balanced scorecard are better managed, have more prospects and are more transparent from the point of view of potential investors.

Responsible units are assigned for each strategic goal. For example, the logistics department will be responsible for “reducing the delivery time of equipment to the regions.” Based on this goal, this unit will develop several subgoals that will reflect both financial and non-financial indicators. Thus, each department can organize its own BSC.

This process, called cascading, allows you to strategically link the company's goals and the goals of individual departments.

Motivation and correction

The balanced scorecard does not cascade down to the individual employee level. Therefore, the dependence of the remuneration of each employee on the performance of the entire unit is introduced.

If the correct motivation system is built, the specialist makes every effort and skill to ensure that his department achieves the indicators defined for it in the BSC. As a result, a connection between motivation and the implementation of the company’s strategic goals is established, and the importance of the employee also increases, since the impact of his activities on the development of the enterprise as a whole is visualized. This also helps to increase motivation and improve work results.

Thanks to the presence of clear and transparent indicators, management can monitor the functioning of the organization. If any deviations occur or a certain indicator is not achieved, then the reasons are analyzed and the target values are immediately adjusted. This allows you to keep both the operational management system and the enterprise strategy up to date, which must be flexible and take into account ongoing changes.

The balanced scorecard can be compared to a kind of “dashboard” of a business. It is developed in such a way that, with a minimum number of controlled parameters, the manager (or owner) promptly receives information about any significant deviations in the activities of the enterprise or its division.

The BSC gives the manager an additional, convenient control tool. This is appropriate to illustrate with the following example. If the “oil pressure” light comes on on the car’s dashboard, this does not allow us to draw an unambiguous conclusion about the exact cause of the malfunction. But it makes it clear in time that it is necessary to immediately check in detail the condition of the engine and its main components.

Application of the model

The BSC does not replace a strategy or planning system. It is rather a management method that allows you to systematically manage a company, based on specific interrelated indicators and their values.

After analyzing and determining the company’s position in the market, the main goals are developed that it must achieve within three to five years. For each goal, indicators are determined and specific values are developed that serve as a guide for the enterprise.

Targets are first developed for the entire planning period, and then determined for one or another criterion for separate periods, equal, as a rule, to a calendar year.

The next stage of planning is to determine which strategic activities will help the organization achieve balanced performance. Here, the annual values of the criteria are adjusted in accordance with the timing of the implementation of strategic measures.

Next, responsible units are determined for each indicator. There are situations when several departments are responsible for achieving one indicator. For example, regional sales departments receive their own revenue plan, which collectively provides a target value for the organization as a whole.

At the next stages, cascading of indicators occurs, that is, based on the annual indicators for the company as a whole, each division receives its own indicators for which it must be responsible.

Thus, the BSC affects each department, linking the strategic goals of the enterprise and the specific tasks of the departments.

An important element of the system should also be a control system, when the company's management gradually evaluates the results of individual divisions and the enterprise as a whole and makes adjustments to the BSC.

Operational planning

An important aspect when implementing a BSC is related to the fact that some goals are not strategic for the company, but its daily functioning depends on them. For example, if an organization has a fairly low staff turnover, then the goal “to ensure a staff turnover rate of no more than X%” will not be put forward as a strategic goal, since management is satisfied with the existing situation.

Therefore, at the departmental level, it is important to link strategic activities aimed at bridging the strategic gap and performing current activities. As already mentioned, the target indicators that a particular department must achieve are determined on the basis of the target indicators of the enterprise as a whole (top-level indicators).

For each top-level goal, it is determined which units are responsible for its implementation and what target values it must achieve in order for the organization’s strategic goals to be realized.

Thus, cascading of indicators occurs and departments receive their own BSC.

Then the head of the department draws up its annual budget, highlighting in a separate section events that are of strategic importance for the company. When developing the budget for the next year, the head of the department takes into account both current activities, which are determined in the “basic budget” section, and the implementation of strategic activities that require separate provision of resources, described in the “project budget.” This emphasizes the particular importance of strategic activities for the development of the organization. Moreover, only the implementation of both areas of activity will allow the department to achieve its target indicators.

Then, based on the departmental budgets, a single company budget for the year is drawn up. At this stage, adjustments to strategic activities and target values are possible if the resources required to achieve the goals exceed the capabilities of the organization.

Thus, by implementing the BSC, management receives a tool that links strategy and daily activities.

Indicators and their measurability

Let's talk about the key errors encountered when implementing the system. The BSC includes four main areas along which the company’s goals are developed: finance, customers, processes, potential.

For some purposes, determining the indicator and the mechanism for measuring it is quite simple. For example, an organization receives information about financial indicators from its own financial statements.

However, for a number of purposes, the assessment of the basic and target values of indicators is not obvious. In this case, it is necessary to carry out special measures that will determine the base level and target value of the criterion.

Let's take a trading and manufacturing company as an example. Let's analyze which indicators are easy to determine and in which cases additional work is required (see table).

Table 1. Evaluation of indicators

Perspective	Target	Index	Unit	Actual value	Target value (three-year horizon)	Information for assessing the indicator
Finance	Reduce inventories in the regions	Share of warehouse stocks by region	%	25%	10%	Management reporting
Finance	Increase business profitability	Profit	%	12,5%	25%	Financial statements
Finance	Increase company revenue	Revenue volume	million rubles	650 million rubles	1 billion rubles	Financial statements
Finance	Reduce variable costs per unit of production	Variable costs per unit	Rubles by type of product	Additional calculations by product type are required		Financial statements
Clients	Enter new regional markets	Share of sales in new markets	%	5%	25%	Marketing research, accounting reporting
Clients	Increase the company's share	Company market share	%	7,5%	10%	Marketing research
Clients	Improve the customer feedback system	Waiting time for a client to connect with a call center operator	Min.	5.5 min.	2.5 min.	Call center data processing
Clients	Improve the customer feedback system	Estimated value	Points			Customer Satisfaction Study
Clients	Increase awareness among the target audience	Estimated value	%	45%	65%	Analysis of recognition among the target audience
Processes	Reduce delivery time for equipment to the regions	Average delivery time for equipment by region	Number of days	15	5	Logistics service data
Processes	Reduce product development time	Average time to develop new products	Number of weeks	Additional preliminary calculations required		R&D department data
Processes	Expedite warranty repairs of equipment	Average warranty repair time	Number of days	20	10	Warranty repair department data
Processes	Increase quality control in production	Number of warranty calls	%	2%	0,5%	Management reporting
Potential	Improve staff qualifications in R&D	Estimated value	Points	Additional preliminary calculations required		Certification
Potential	Increase employee motivation	Turnover among key employees	%	It is necessary to identify key employees
Potential	Increase employee motivation	Satisfaction level assessment	Points	50 points	80 points	Employee survey
Potential	Increase the level of employee initiative	Number of employee initiatives	PC.	Preliminary calculation of the indicator is required		Creating custom statistics
Potential	Increase the level of employee initiative	Implementation of a feedback system	Implementation schedule implementation			Quarterly data
Potential	Increase presence in target media	Number of articles and comments	PC.	5 articles, 40 comments year	10 articles, 100 comments	Monitoring target media

As can be seen from the table, for a number of purposes it is easy to determine the indicator and the method of measuring it. This primarily concerns finance and, to a somewhat lesser extent, the “clients” area. In the areas of “processes” and “potential”, this is much more difficult to do, since there are often no clear criteria for assessing these goals.

For example, the goal is “to improve the customer feedback system.” Two indicators were proposed - “the time a client waits for a connection with a contact center operator” and “calculated value”. The time is determined based on a customer survey in order to find out how satisfied they are with the opportunity to express complaints and wishes to the company.

To evaluate the first indicator, we had to install special software, which made it possible to track the client’s waiting time before connecting with the operator. To assess the second, a sample survey was conducted to find out how satisfied customers were with the quality of interaction with operators, the speed of solving their problems, etc.

Since measuring indicators requires additional costs, many companies choose indicators that are easier to measure instead of more informative ones. Such errors significantly impair the effectiveness of the BSC.

Lack of strategic analysis

One of the most common mistakes in our practice when implementing a BSC is the lack of in-depth strategic analysis before developing the system. That is, companies are trying to skip the stage of strategic analysis and immediately move on to determining the indicators they must achieve. This is fraught with very serious consequences.

For example, in one of the Russian banks, the goal in the “customers” direction was “to take a share of the consumer lending market.” This was done in 2003-2004, when consumer lending was developing very rapidly and many banks considered it their duty to play in this field. As a result, significant funds were allocated to solve this problem, additional branches were opened to provide potential private clients with convenient and fast loans. However, this direction soon had to be curtailed.

The bank's main clients were large government agencies. Experience in the retail market was not enough. In addition, the bank could not offer private clients the same attractive conditions as competitors specializing in this area. And even despite the efforts made and the funds spent, it was not possible to occupy the required share of the consumer lending market. Therefore, we had to curtail these programs, focusing on the main areas of activity.

Thus, the definition of any indicators is not the primary basis. Before developing a BSC, a strategic analysis, identification of strengths and weaknesses, analysis of competitors, suppliers, consumers and other elements of the external environment are required.

The company's unpreparedness for implementation

One of the key challenges to implementing a balanced scorecard is resistance to change. After the development of the BSC, the project is often put aside, and the company continues to live as before. This behavior is partly explained by the fact that the introduction of clear indicators can weed out effective managers from ineffective ones, which is not desirable for everyone.

In addition, in order for the BSC to not just gather dust on a shelf, but to serve as a management tool, it is necessary to control the progress of strategy implementation, evaluate intermediate results and make adjustments to the company’s activities. These activities take time, especially at the stage when the system is just being implemented and the procedures have not yet been worked out. For these reasons, there are often situations when the BSC implementation process ends at the stage of document approval.

One of the basic elements of overcoming such resistance may be the introduction of a BSC in any one division of the company. Successful experience will also show managers of other departments that the time they spend on development, implementation and control will be well spent. This will significantly increase their loyalty, and at the same time the likelihood of successful implementation of the BSC.