toyota balanced scorecard case study

Toyota Company Management: Applying Balanced Scorecard Report

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Introduction

The need for a balanced scorecard, methodology, background of the bsc, bsc matrix for toyota, the toyota production system.

The Toyota Motor Company started by building trucks in Japan. It was founded by a visionary man named Sakichi Toyoda in 1933 when he first introduced his invention known as the Toyoda Model. It was sponsored by the Japanese Imperial Army in support of its military conquest throughout Asia. Toyoda introduced many car models, surpassing its rivals in efficiency and sales.

Toyota has introduced a type of management that is knowledge based. Toyota’s management style is simply traditional; the traditional has evolved into a modern way of encapsulating the teachings of the past and the new system of management. Because of this management innovation, Toyota has led the global car manufacturing industry while keeping its production system unique; unique in the sense that its managers and employees know how to implement a system and continuously improve it. Other organisations may have known this system but making it a successful one depends on the people managing and implementing the system. The Toyota production system (TPS) is composed of kaizen and Jishuken processes. These are original management disciplines, copied but never equaled by the Western style of management.

As a small company in Japan, Toyota started to manufacture and sell about 18,000 vehicles a year, but it raised production when the company decided to become international. Toyota is now a global firm and the leading car manufacturer of the new millennium. The Toyota Production System is applied on all of its plants internationally including those of the United States.

In 1945, Toyota was granted license by the US military to enter into automobile manufacturing. Toyota built the Toyopet, a cheap car having a speed of 55 mph and a 27 horsepower engine. In 1965, Toyota had manufactured 600,000 Toyopet automobiles. Toyota took the opportunity offered by the American industrial training programs, developed in the United States during the war, which focused on process improvement, and employee training and development. The training programs evolved into the concept of kaizen and the Toyota production system used by the company until today.

In 2001, Toyota management formulated a Code of Conduct, known as the “Toyota Way 2001” which provided 14 principles, serving as guidelines for all employees. The 14 principles emphasised:

• management based on the traditional philosophy, even sacrificing short-term financial goals;
• continuous improvement so that problems could be identified;
• lean management to avoid overproduction;
• simplicity of workload;
• a culture where employees can solve problems by their own;
• providing standards as the basis for continuous improvement and allowing employees as part of decision making process;
• visual control to expose the problem;
• tested and reliable technology to serve customers and the people;
• developing leaders from among the workforce who have the capability to understand the job, discern and live the philosophy, and share it with others;
• valuing partners and suppliers by supporting them;
• personal analysis and understanding of the issues so that problems can be solved;
• collective decisions of the team, thoroughly examining all issues and knowing the options, and then conduct decisions at an instance; and,
• a knowledge based organisation through continuous learning and continuous improvement (Heller & Darling 2012, P. 158).

Toyota’s knowledge infrastructure and intangible assets are ideal to become parts of a Balanced Scorecard. However, there are departments that need focus and emphasis; thus the need for a Balanced Scorecard.

A problem emerged involving quality. This seldom occurs because Toyota has been known for its quality cars and parts. At a time when Toyota was on top as the world’s number one automobile manufacturer, a problem on quality occurred. Toyota has to recall millions of Lexus cars because of alleged quality flaws. Toyota hybrid cars, which ran on petrol and gas, were ordered recalled by the United States government because of the many accidents that occurred involving a sudden acceleration of the gas pedals. Customers complained of “no breaks” and other malfunctions. The quality flaws needed to be corrected even if Toyota has been known for its quality products and traditional but effective management.

Toyota has a unique management style; it is known for its application of the Toyota production system along with the concepts of kaizen and Jishuken. But it needs innovation and the usual strategy of continuous improvement. Toyota needs a BSC matrix during emergency recalls so that managers and their teams automatically know how to handle the situation. Many commented that what happened during the recent recall of millions of cars was a failure of top management when cars with questioned car pedals were continuously sold even when the recall was still going on. It was said to be a question of management because there was no coordination between top management and the dealership.

The strategic evaluation of balanced scorecard enables organisations to attain an integrated and straightened balanced attention on the established perspectives of the organisation which collectively emphasise the success of the organisation’s vision. All decisions made by managers must have the right strategies; they use this as basis for long-term goals and in making strategic planning. Managers provide changes to organisational plans, especially if they are new to the organisation. New managers are chosen very carefully by top managements because of this reality.

This essay was conceived to answer the question ‘why’? It is not the question of why there was a recall. The Toyota production system is known for its quality strategy in production and management. The question is why it involved millions; the subject of recall could have reached 9 million Lexus cars. As mentioned repeatedly here, recall is not uncommon in the car industry. There are always complaints as there are also defects and flaws in the system that need to be continuously innovated and applied with quality functions.

We examined the literature on BSC and the organisation Toyota. Toyota literature can be consulted on many aspects of quality management, while the BSC is also about quality management. The company Toyota has a unique and long history of quality management. So-called ‘quality lapses’ on Toyota hybrid cars are only one of a kind and can be considered a remote occurrence.

After gathering information on the company Toyota, we sourced out concepts and theories on the BSC, how it came into existence and used by organisations, and how this has become a perfect instrument for strategic management. The problem of the Toyota recalls emerged as a perfect example in the application of the BSC. Although BSC is already in the Toyota system, some innovations and improvement need to be introduced into the system to avoid further recalls, and if recalls are needed, how to deal with it. BSC is a must in management.

Complex factors in formulating the BSC have to be considered with respect to the structure of the organisation. The organisation is a place or a situation facing daily challenges of innovation, social responsibility and constant changes. (Chavan 2009)

The Balanced Scorecard is about strategy. Organisations should not rely solely on financial indicators as this focuses on ‘short-term behavior that sacrificed long-term value creation for short-term performance’ (Chavan 2009, p. 394). Financial measures are only one of a few perspectives that an organisation should focus on. If financial measures can lead to wrong goals for the organisation, the best way is to measure the strategy. The Balanced Scorecard is a tool in dealing with the organisation’s strategy (Kaplan & Norton 2001, as cited in Chavan, p. 395).

The BSC first appeared in 1992 in the Harvard Business Review article of Robert Kaplan and David Norton. Traditional ways of measuring performance emphasised financial indicators but the Balanced Scorecard focuses on several perspectives. The essential information needed in a Balanced Scorecard emphasises financial and nonfinancial measures which are considered composites of a system that provide information to every aspect of the organisation (Brewer & Speh, 2000 as cited in Chavan, 2009). The BSC is a strategic management tool to manage long-term strategies (Poll as cited in Chavan, p. 395).

The BSC is effective in: clarifying and translating vision into strategy; communicating and linking strategic objectives and measures; planning, setting targets and aligning strategic initiatives; and enhancing strategic feedback and learning. Traditionally, organisations focused on short-term financial assessments, but the BSC includes perspectives, like performance associated with customer service, internal processes, and learning and growth needs of employees (Latshaw & Choi, 2002 as cited in Chavan, 2009, p. 396).

The BSC has the purpose of focusing on long-term objectives and providing a strategic plan for the organisation. The organisation can also measure its performance in providing key capabilities required in its long-term survival. Companies that want to achieve longer-term superior returns and are pursuing new strategies because of the new threat in the competition, and where lack of organisational performance threatens its long-term sustainability, need the beneficial advantages of the BSC (Hagood & Friedman, 2002 as cited in Chavan, 2009, p. 396).

The CEO and top-echelon are tasked to provide the specific performance for the middle- and lower-level management and employees and what they should do to attain success at their level and for the organisation. These processes and measures are transferred to individuals in the entire organisation and are encapsulated in the Balanced Scorecards. A significant part of the Balanced Scorecard is the feedback and learning process wherein an organisation can measure where it is going in its strategic capability as reflected by its current performance, and other changes that the organisation might encounter in the near future.

This process will provide a mechanism for the organisation to know where it is going and what changes are to be made, if necessary. Should the processes need changes, it will depend on ‘the definition of the destination, the pace of the journey, or the redesign of the initiatives designed to build the capability’ (Chavan 2009, p. 396). The BSC should be tailored for each part of the organisation to allow each to contribute in a holistic way to the corporate objectives.

Financial perspective for Toyota

To show financial success, shareholders should see how capital returns, how shares increase, and how assets are being used.

Customer perspective

• Improve customer interaction;
• Quality is of prime importance;
• Serving the community is the ultimate priority.

Internal business processes

We have to continuously improve our products and deliver with benchmarked quality.

According to Toyota’s website, we can achieve quality if we integrate the various perspectives of development, design, marketing, and manufacturing and the various aspects of sales. Each of these factors is important in customer satisfaction.

Learning and growth perspective

• Capabilities of employees should be on top;
• Information system should be in place;
• Employees are motivated and empowered.

Lexus is a product of long years of research and development by a team of Toyota engineers. The people behind Toyota and the system are well-trained technicians and engineers, ‘educated’ inside not outside the workplace, and their capabilities are unquestioned. Toyota believes in training their own workforce and not in the university or from other outside sources. The company values their employees and as much as possible, they retain their employees even in times of crises such as recessions or economic downturns. This company culture and strategy should remain as part of the BSC matrix. Toyota culture built through years of continuous innovation has been refined every time it needs refinement. It needs no correction because it is part of the system.

Although Toyota is known for its quality cars, the company receives complaints from customers every now and then. The complaints are considered suggestions or comments from valued customers. Employees are also considered customers by co-employees. The logic behind is for employees to provide solutions to problems posed by fellow employees. Toyota uses research and development (R&D) in designs and creating car parts. When Toyota introduced the Prius, a product of Toyota subsidiary Lexus, everyone in the company thought they had built a perfect hybrid car that could run on petrol and electricity. Something went wrong when complaints on the gas pedals and breaks kept coming in from the customers. Accidents were also attributed to the malfunctioning breaks. Toyota had to recall the millions of Lexus cars, costing billions of dollars for the company. (Evans & Lindsay 2012)

Toyota’s crisis (also known as the pre-crisis state) began in September 2007 when Toyota recalled 55,000 automobile floor mats because they were risky and had trapped the gas pedal (Auto Channel as cited in Heller & Darling 2012). The floor mat issue and the breaks became a public concern when an accident occurred in August 2009 involving a Lexus, which suddenly accelerated out of control. Before impact, one of the occupants managed to call 911, saying that the car did not have brakes (Heller & Darling, p. 159).

It was as if Toyota admitted its fault when it recalled the floor mats and this was done to 4.2 million Lexus cars. The investigation of the National Highway Traffic Safety Administration (NHTSA) supported the floor mat concept but their report said that this was true to only 16 percent of the automobiles investigated (MSNBC, 2010 as cited in Heller & Darling 2012). In other words, there was no evidence to fully support the accelerator allegation. Toyota denied the report and said that it was sticking to its recall repairs. They however reasoned that they would continue to monitor the acceleration problem including other factors. (Heller & Darling, p. 161)

The Toyota Production System is also known as lean management. There are many concepts or talks about the TPS and so commentators also give different views. The question lurking in the minds of investigators is: did TPS fail as the millions of Lexus cars had to be recalled?

Jishuken is an application of kaizen. A definition of Jishuken states that it is an activity in production applied with speed, just like ‘kaizen blitz model’ (McNichols et al., 1998; Bicheno, 2000 as cited in Marksberry, Badurdeen, Gregory, & Kreafle 2010, p. 671). Jishuken aims to provide learning, at the same time to improve production. It also aims to improve managers’ ability to solve management problems in cooperation with a team. Jishuken is applied to all cars manufactured in every Toyota plant. It was used on all Lexus cars recalled for their malfunction. Jishuken cannot be faulted for the malfunctioning parts because each part is examined and each team, along with the entire production department, is responsible for any fault.

Safety recalls are not uncommon in the car industry despite the application of discreet quality controls, like that of Toyota. In their website, Toyota CEO Aki Toyoda apologized about the incident. But Mojonnier (2012), in his blog, asked why Aki Toyoda ordered to continue selling Lexus when there was an order of recall. Added to this management failure is the production side of the problem, which many commentators pointed to be the main cause of the problem.

The complexity of the problem provides several versions, as explained by a number of comments. One is that a car, like the Lexus, is so full of wires and sensors embodied in a computerized box, that the complexity allows it to commit faults. A small electronic error will impact on the car’s performance.

Many said it is a question of management. In the course of the Lexus problem, Toyota improved its management system by focusing on Jishuken and the Toyota production system. It did not have to change the system because the system itself promotes continual improvement. With the Lexus debacle as its background, Toyota managers examined Jishuken in their TPS activities.

Jishuken aims to solve production problems necessitating management focus. It also aims to improve, correct and enlighten managers on the many features of TPS by enhancing managers’ involvement of problem-solving by ‘using hands-on activity and coaching’ (Marksberry et al. 2010, p. 672). This is not similar to other problem-solving activity as this one is conducted by management teams to pinpoint the problems and implement solutions through continuous trouble-shooting techniques (Toyota Motor Manufacturing Kentucky, 2009 as cited in Marksberry et al., p. 672).

Managers perform their roles as mentors for team members solving the problem. Jishuken therefore involves technical and managerial activity, and it has to be stressed that it is different from other problem-solving activity as the ones doing it are managers from the different departments involved in the different aspects of the problem. Jishuken develops the managers’ interpersonal skills, building their attitude toward coaching the right method in production and supporting kaizen (Alloo, 2009 as cited in Marksberry et al., p. 672). Jishuken adds more weight to the many concepts of TPS, for examination in waste elimination.

When the Lexus problem occurred, Toyota managers examined every aspect of the problem. Managers were one in saying that it was the problem of the floor mats although the accelerator pedals could not be disregarded. Why the million of recalls was involved is another case in point. The production side of the problem was pinpointed and so there was a solution, i.e. to recall and to fix. Another problem was the top management’s decision to continuously ship cars to the United States with the same defective parts (Mojonnier 2012), that is why the recall involved millions.

The BSC is ingrained in the Toyota system. Toyota cars and products are applied with the highest quality innovations. When problems occur in its plants and workplaces, managers and employees already know what to do; this is part of a unique management that is built through years of innovation and continuous improvement. This is the aim of the BSC, to be able to solve problems which appear time and again. Toyota has applied quality and strategic management to its millions of cars and other Toyota products. What is remarkable in this company is that it has its own unique management only Toyota managers and employees know how to perform. This is also part of the intangible asset the company has. Intangible assets are unique in any company or organisation.

In this paper, the BSC was not introduced, it was improved. BSC is already a part of the system, a unique management system only Toyota has it. Problems always occur and questions from competitors keep coming in. What Toyota has been doing is to apply continuous improvement. The Lexus problem was dealt with this kind of solution, and Toyota has been able to surpass the situation with an open mind and a commitment to apply more quality solutions even in the presence of an almost perfect strategic management.

Chavan, M 2009, ‘The balanced scorecard: a new challenge’, Journal of Management Development , vol. 28, no. 5, pp. 393-406, 2013, via ABI/INFORM Complete, ProQuest database, Evans, J & Lindsay, W 2012, Managing for quality and performance excellence , Cengage Learning, United States of America. Web.

Heller, V & Darling, J 2012, ‘Anatomy of crisis management: lessons from the infamous Toyota case’, European Business Review , vol. 24, no. 2, pp. 151-168, 2013, via ABI/INFORM Complete database. Web.

Marksberry, P, Badurdeen, F, Gregory, B, & Kreafle, K 2010, ‘Management directed kaizen: Toyota’s Jishuken process for management development’, Journal of Manufacturing Technology Management , vol. 21, no. 6, pp. 670-686, 2013, via ABI/INFORM Complete, ProQuest database. Web.

Mojonnier, T 2012, Business theory: best practices of great managers , 2013. Web.

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• Balanced Scorecard Inception and Its Developments
• Balanced Scorecard: Structure, Benefits, and Implementation
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• Organizational Development Planning and Evaluation
• The Effects of ISO Certification on Organization Workmanship Performance
• Successful Change Management Principles and Practice
• Chicago (A-D)
• Chicago (N-B)

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Balanced Scorecard | Explained with Examples

The Balanced Scorecard is a strategic planning and management system used by organizations to align business activities with the vision and strategy of the organization, improve internal and external communications, and monitor organizational performance against strategic goals. It was originated by Dr. Robert S. Kaplan and Dr. David P. Norton in the early 1990s.

The Balanced Scorecard aims to provide a more comprehensive view of organizational performance beyond traditional financial measures by incorporating these additional perspectives. It serves as a framework for translating an organization’s strategic objectives into a coherent set of performance measures, providing a more balanced view of how well the organization is achieving its long-term goals.

The Balanced Scorecard suggests that an organization is viewed from four perspectives and to develop metrics, collect data, and analyze it relative to each of these perspectives:

Financial Perspective

The Financial Perspective is one of the four pillars of the Balanced Scorecard, a strategic management tool that translates an organization’s mission and vision into a comprehensive set of performance metrics. The Financial Perspective focuses on the financial objectives of an organization and measures the economic consequences of actions taken in the other three perspectives (Customer, Internal Business Processes, and Learning and Growth).

The primary purpose of the Financial Perspective is to ensure that the company’s strategy, implementation, and execution contribute to bottom-line improvement. Traditional financial metrics like revenue growth, cost reduction, cash flow, and return on investment (ROI) are common in this perspective, but they are often complemented by more forward-looking indicators that can predict future financial performance.

Key Components of the Financial Perspective:

• Revenue Growth and Mix : This involves looking at the overall growth of revenue and analyzing the mix of revenue sources to ensure a diversified and sustainable income stream.
• Cost Management : This includes measures for controlling and reducing costs, improving operational efficiencies, and optimizing the use of resources.
• Asset Utilization : This involves metrics that assess how effectively the organization uses its assets to generate revenue. Examples include return on assets (ROA) and return on equity (ROE).
• Investment Strategy : This focuses on how capital investments support the organization’s long-term strategy. Metrics might include the payback period, internal rate of return (IRR), or the economic value added (EVA).

Importance:

The Financial Perspective is critical because it clearly shows whether the company’s strategy and operations contribute to bottom-line improvement. It ensures that strategic initiatives are financially viable and align with shareholder expectations. However, relying solely on financial measures can be misleading, as they often reflect past actions and decisions. This limitation is why the Balanced Scorecard includes non-financial perspectives to provide a more comprehensive view of the organization’s performance.

Integration with Other Perspectives:

The Financial Perspective is closely linked with the other perspectives of the Balanced Scorecard. For example:

• Customer Perspective : Satisfied and loyal customers often lead to better financial outcomes through repeat business and referrals, which can increase revenue and reduce marketing and sales costs.
• Internal Business Processes Perspective : Efficient and effective processes can lower operational costs, improve quality, reduce cycle times, and enhance productivity, all of which can positively impact the financial bottom line.
• Learning and Growth Perspective : Investments in employee development, organizational culture, and information systems can lead to innovations and improvements that drive long-term financial performance.

By integrating the Financial Perspective with the other perspectives, organizations can ensure a balanced approach to strategy execution that supports sustainable financial success.

Customer Perspective

The Customer Perspective is one of the four dimensions of the Balanced Scorecard. It is a strategic management tool that helps organizations translate their vision and strategy into action across four key areas: Financial, Customer, Internal Business Processes, and Learning and Growth. The Customer Perspective focuses on identifying and measuring the value delivered to customers, which is crucial for achieving financial success and sustainable growth.

Key Objectives of the Customer Perspective:

• Customer Satisfaction : Understanding and measuring how well the organization meets the expectations and needs of its customers. This can involve customer satisfaction scores, service quality assessments, and customer feedback.
• Customer Retention and Loyalty : Tracking the organization’s ability to retain customers over time, often reflected in customer loyalty rates, repeat purchase rates, and customer lifetime value. High retention rates indicate customer satisfaction, leading to increased revenue and reduced marketing costs.
• Market Share and Acquisition : Measuring the organization’s success in attracting new customers and expanding its presence in targeted market segments. This can involve tracking changes in market share, the effectiveness of marketing campaigns, and the rate of new customer acquisition.
• Customer Value Proposition : Ensuring the organization’s value proposition aligns with customer needs and preferences. This involves understanding what customers value most: price, quality, service, innovation, or something else, and ensuring that the organization delivers on these dimensions.

The Customer Perspective is critical because it focuses on the customer, who ultimately judges the company’s products and services. In many industries, especially those with high competition, attracting, satisfying, and retaining customers is a crucial determinant of financial performance. Furthermore, by focusing on customer needs and expectations, organizations can identify new opportunities for growth and innovation.

• Financial Perspective : Satisfied and loyal customers often lead to better financial outcomes, such as increased revenue from repeat purchases, higher transaction values, and lower costs associated with customer acquisition and retention.
• Internal Business Processes Perspective : To deliver the value that customers expect, organizations need to excel at internal processes such as product development, manufacturing, delivery, and after-sales service. Improvements in these areas can enhance customer satisfaction and loyalty.
• Learning and Growth Perspective : Developing the skills and capabilities of employees, fostering a customer-centric culture, and investing in technology and systems that improve customer interactions are all critical for delivering value to customers. This perspective supports the organization’s ability to innovate and adapt to changing customer needs.

Metrics and Measures:

To manage the customer perspective effectively, organizations typically use a variety of metrics, such as Net Promoter Score (NPS), customer satisfaction indices, customer complaint rates, customer retention rates, and market share growth. These metrics help organizations track their performance from the customer’s viewpoint and identify areas for improvement.

By prioritizing the Customer Perspective within the Balanced Scorecard framework, organizations can ensure that their strategic objectives are aligned with customer needs and expectations, driving both customer and financial success.

Internal Business Processes 

The Internal Business Processes perspective is one of the four components of the Balanced Scorecard, a strategic management tool designed to provide a comprehensive framework for translating an organization’s vision and strategy into a coherent set of performance measures. This perspective focuses on the critical internal operations and processes an organization must excel at to meet its customer and financial objectives effectively.

Key Objectives of the Internal Business Processes Perspective:

• Operational Efficiency : This involves measuring and improving the efficiency of internal processes, which can include reducing cycle times, minimizing waste, and optimizing resource utilization. The goal is to deliver products and services faster, cost-effectively, and with higher quality.
• Process Quality : Ensures that internal processes can produce outputs that meet quality standards, leading to higher customer satisfaction and lower costs related to rework or defects.
• Innovation and Product Development : Focuses on the organization’s ability to develop new products and services, improve existing offerings, and bring these to market quickly. This can involve measures related to the number of new product launches, the success rate of new products, and the percentage of revenue from new products.
• Supply Chain Management : Optimizes the flow of materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer to consumer. Effective supply chain management can reduce costs, improve flexibility, and enhance customer satisfaction.

The Internal Business Processes perspective is crucial because it directs attention to the processes that impact customer satisfaction and the organization’s ability to achieve its financial objectives. By focusing on internal processes, organizations can identify inefficiencies and bottlenecks, improve quality, and drive innovation, all contributing to competitive advantage and long-term success.

• Customer Perspective : Excellence in internal processes directly impacts the quality, cost, and delivery of products and services, affecting customer satisfaction and loyalty. By improving internal processes, organizations can better meet customer needs and expectations.
• Financial Perspective : Efficient and effective internal processes can lead to lower operational costs, higher productivity, and improved profitability. Organizations can enhance their financial performance by reducing waste and improving process efficiency.
• Learning and Growth Perspective : The ability to improve internal processes often depends on the skills, knowledge, and capabilities of employees, as well as the organization’s culture and information systems. Investments in training, technology, and organizational culture can support continuous improvement and innovation in internal processes.

To manage and improve internal business processes, organizations might use a variety of metrics, such as:

• Cycle Time : The time required to complete a process from start to finish.
• Cost per Unit : The cost associated with producing a single unit of product or service.
• Defect Rates : The frequency of errors or defects in the outputs of a process.
• Process Throughput : The work or products produced within a given period.
• Capacity Utilization : The extent to which an organization’s total production capacity is used.

These metrics help organizations monitor their internal processes’ efficiency and effectiveness, identify improvement areas, and track progress over time.

By focusing on the Internal Business Processes perspective within the Balanced Scorecard framework, organizations can ensure that their internal operations are aligned with strategic objectives, contributing to overall performance and success.

Learning and Growth

The Learning and Growth perspective, also known as the “Organizational Capacity” perspective, is one of the four pillars of the Balanced Scorecard framework. This dimension focuses on the intangible assets of an organization, primarily its people, systems, and organizational procedures. The core idea is that long-term success is achieved through continuous improvement and the capability to innovate and change in alignment with market demands and opportunities.

Key Objectives of the Learning and Growth Perspective:

• Employee Skills and Knowledge : Emphasizes the importance of ongoing employee training and development to ensure the workforce has the necessary skills and knowledge to meet current and future demands. This includes technical skills relevant to specific job functions and soft skills facilitating effective communication, teamwork, and leadership.
• Employee Satisfaction and Retention : Recognizes that employee engagement and morale are critical to productivity and innovation. High employee satisfaction and retention rates indicate a positive organizational culture supporting personal and professional growth.
• Information Systems and Technology : Focuses on the role of technology in enabling efficient and effective business processes. This includes the hardware and software used by the organization and the systems and processes that ensure information is accurately captured, stored, and made accessible to decision-makers.
• Organizational Culture and Alignment : Pertains to creating a culture that supports the organization’s strategic objectives, encourages open communication, and fosters a sense of shared purpose among employees. Alignment ensures that everyone works towards the same goals and understands how their role contributes to the broader strategy.

The Learning and Growth perspective is essential for creating the foundation for achieving excellence in the other three Balanced Scorecard perspectives (Financial, Customer, and Internal Business Processes). It recognizes that an organization’s ability to innovate, improve, and meet customer needs over the long term depends on its people, systems, and procedures.

• Internal Business Processes : A skilled and knowledgeable workforce, supported by efficient information systems, can enhance process efficiencies, drive innovation, and improve quality, directly impacting operational performance.
• Customer Perspective : Engaged and well-trained employees are more likely to deliver superior customer service and contribute to developing products and services that meet evolving customer needs, thus enhancing customer satisfaction and loyalty.
• Financial Perspective : Investments in learning and growth initiatives can lead to long-term financial benefits, such as increased productivity, reduced operational costs, and enhanced revenue growth through innovation and improved customer satisfaction.

To manage the Learning and Growth perspective, organizations might use metrics such as:

• Employee Training Hours : The average number of training hours per employee, indicating the organization’s commitment to employee development.
• Employee Satisfaction and Engagement Scores : Regular surveys gauge how motivated, engaged, and satisfied employees are with their work and work environment.
• Turnover Rates : Particularly voluntary turnover rates, which can indicate the overall health of the organization’s culture and the effectiveness of its retention strategies.
• Technology ROI : The return on investment for technology initiatives, measuring how effectively technology investments support business objectives and process improvements.

By focusing on the Learning and Growth perspective within the Balanced Scorecard, organizations can invest in the capabilities and systems that will enable them to adapt, grow, and achieve long-term success.

Examples of balanced scorecard

To illustrate the Balanced Scorecard approach, here are examples for each of the four perspectives:

• Revenue Growth : Measures the year-over-year increase in income generated from the organization’s activities.
• Cost Reduction : Targets specific areas where operational costs can be minimized without affecting product or service quality.
• Return on Investment (ROI) : Calculates the efficiency of various investments in terms of their generated returns.
• Cash Flow Analysis : Evaluate the inflows and outflows of cash, ensuring the organization maintains a healthy liquidity position.
• Customer Satisfaction Index : Surveys and feedback tools measure customers’ satisfaction with the products, services, and overall experience.
• Market Share : Assesses the company’s proportion of total sales in its industry, indicating competitive strength.
• Customer Retention Rate : Measures the percentage of customers the company retains over a certain period, reflecting customer loyalty and satisfaction.
• Net Promoter Score (NPS) : Gauges customer loyalty by asking how likely customers are to recommend the company to others.

Internal Business Processes Perspective

• Quality Control Metrics : Monitors defect rates, rework levels, and adherence to quality standards.
• Cycle Time : Measures the time required to complete a business process from start to finish, aiming to increase efficiency.
• Process Cost : Analyzes the cost associated with each critical process, identifying opportunities for cost-saving improvements.
• Innovation Pipeline Strength : Evaluates the number and potential of new ideas or projects in development, indicating the organization’s future growth prospects.

Learning and Growth Perspective

• Employee Turnover Rate : Monitors the rate at which employees leave the organization, indicating the overall work environment and employee satisfaction.
• Training Hours per Employee : Measures the investment in employee development, correlating with improved performance and innovation.
• Skill Assessments : Regular assessments to ensure employees have the necessary skills and competencies for their roles and future company needs.
• Employee Engagement Scores : Surveys to gauge employee engagement and identify areas for improvement in the organizational culture.

These examples show how a Balanced Scorecard might be implemented in an organization. The specific metrics can vary significantly depending on the industry, the organization’s strategic goals, and challenges.

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Definition:

Strategic objectives:.

Executive Summary

Corporate strategy, critical success factors, competitive advantage within the same industry, balanced scorecard, below is the flow chart of how it was done:, recommendation.

• Annual Report (2009). Toyota Motor Corporation Gallagher, S. (2005). The Toyota Way. IEEE Transactions On Engineering Management, 52(1), 140. Hines, P. (1998), “Benchmarking Toyota’s supply chain: Japan vs UK”, Long Range Planning, Vol. 31 No. 6, pp. 911-18.
• Kaplan, R.S. and Norton, D.P. (2001b), The Strategy-focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, Harvard Business School Press, Boston, MA. Kurogane, K. (Ed.) (1993), Cross-functional Management: Principles and Practical Applications, Asian Productivity Organization, Tokyo. Monden, Y. (1998), Toyota Production System: An Integrated Approach to Just-in-Time, 3rd ed., Engineering and Management Press, Norcross, GA. Nobeoka, Kentaro, Jeffrey H. Dyer and Anoop Madhok, (2002).
• “The Influence of Customer Scope on Supplier Learning and Performance in the Japanese Automobile Industry.” Journal of International Business Studies, Vol. 33, No. 4, 717-736.
• Toyota (1999), Ensuring the Achievement of the Second Action Plan (FY2000) and Taking Actions for the 21st Century, company document, Toyota Environment Management, Toyota City. Vedd, R. (2011).BBUS 4251: Class Notes. Thompson Rivers University Witcher, B.J., Chau, V.S. (2007)
• "Balanced scorecard and hoshin kanri: dynamic capabilities for managing strategic fit", Management Decision, Vol. 45 Iss: 3, pp.518 - 538

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15 Balanced Scorecard

Strategic management: balanced scorecard.

“What you measure is what you get”

(Kaplan and Norton, 1992: 71)

Introduction

The balanced scorecard (BSC) is a strategic management and planning tool used by many organizations. It focuses on aligning daily work with the organization’s strategy while putting in place specific measures that allow management to progress towards strategic targets.

The BSC concept was first suggested by Kaplan and Norton in 1992 to evaluate financial and non-financial performance measurements. They were able to conceive the idea after examining the top corporations in the world and how they were run. The scorecard provides managers with a comprehensive framework to assess both tangible and intangible assets in the corporation (Kaplan and Norton, 2001a). While focusing on four perspectives (financial goals, customer satisfaction, internal processes, and learning and growth), companies are able to effectively evaluate their overall performance.

The BSC helps individual organizations evaluate their performance based on their own strategy and internal environment. It can set the stage for developing performance measures on the basis of two specific characteristics: transparency and strategy orientation.

What makes the BSC effective is its capability to convert the organization’s strategy to practical measures (Kaplan and Norton, 2001a). The BSC also suggests that intangible assets play a significant role in creating an organization’s value (Nolan Norton Institute, 1991). Intangible assets are objects the company owns that are not physically available. This includes intellectual property (i.e. patents and trademark), human capital (i.e. employees’ talent) and customer loyalty (Kaplan and Norton, 2009). On the other hand, tangible assets are of the physical form and include machinery, buildings, and lands.

According to Norton and Kaplan, in order to improve the management of their intangible assets, corporations are required to incorporate the non-financial measures to their management systems. It should be noted that intangible assets rarely make value by themselves, instead they should be integrated into other intangible and tangible assets to generate value.  For example, with the implementation of a new growth-oriented sales strategy in the organization, different aspects should be aligned. This includes knowledge about customers, databases, organization structure, and incentive compensation program.

Management systems contain many interrelated parts which need concurrent coordination among different line and staff units in the corporation. Independent functions such as budgeting, human resources, and process management should be coordinated to make the strategic alignment. Indeed, they should act as an integrated system rather than a set of independent sub-systems. To align different units and personnel to the strategy, the BSC suggests three efficient tools: strategy map, dashboard, and scorecards.

Strategy Map:

The concept of the strategy map, (Kaplan & Norton 2000, 2001, 2004), illustrates causal relationships between project objectives. For instance, training personnel can boost service quality which in turn leads to higher customer satisfaction, increased customer loyalty and eventually higher revenues and margins.

All the objectives are connected to each other through cause and effect relationships. These interactions begin from employees, pass through processes and customers, and end with financial outcomes.

The dashboard is a set of measures that provide managers with information regarding various operations and processes within the organization. It demonstrates current progress on an operational level and therefore allows managers to get an idea of the current state of the company.

Scorecards :

While the dashboard is used as a way of measuring performance, the scorecard is used to manage performance. Scorecards use key performance indicators (KPIs; critical indicators of progress toward an intended result) as a tool to measure progress in order to plan and execute the company’s strategy. Kaplan and Norton compare scorecards to an “airplane cockpit providing the pilot with detailed information about several aspects of the flight” (Kaplan and Norton, 1992) which ultimately allow future planning.

The four perspectives

As mentioned earlier, in order to be well-rounded and successful, the BSC suggests that the company views itself from four perspectives and consequently develop objectives, measures (KPIs), targets and initiatives that are in relation to these points of view. Generally speaking, companies can follow the proposed hierarchy of perspectives (from top to bottom: Financial → Customer → internal processes → learning and growth), yet it’s important to note that it is encouraged to tailor the BSC to the company’s strategy and needs, consequently arranging the perspectives as required.

• Financial perspective:

When an organization begins creating a BSC, how they will want to improve financially will come as an initial concern. For example, the financial perspective for start-ups is about survival as they need the cash flow to help them stay afloat. However for more established companies, their financial perspective should look to keep their shareholders happy and keep them invested in their company.

This is where a business will develop their goal as it will give an organization more specificity with their project. For example, tech companies may look for revenue growth on a new product. Accounting, consulting and law firms may focus on increasing profit margins. A company is then able to track their goals with key performance indicators (KPI’s). KPI’s are measurements that are linked to the goal that is the best way to follow the success of a project. These can include cash flow, total asset holding, market price per share, total expenses and revenue per employee. More can be seen from this website here https://bscdesigner.com/sample-kpis.htm .

The financial objective is also a consequence of the other three objectives so they will have to be connected and balanced. Even though a lot of companies are aimed at being financially successful, the top companies in the world have shown that a balance of all four perspectives is their key to success (De Wet, Johannes & Jager, Phillip, 2007).

• Customer perspective:

The Customer perspective addresses how a company creates value for its customers (Atkinson et al. 2012). For this perspective, the objectives are to fulfill their consumers’ value propositions and to create win-win partnerships in order to strengthen dealer and distributor relationships. If the organization is able to meet these objectives, it should see a positive effect on its financials because happy consumers continue to buy from organizations that treat them well. If the organization is unable to meet these objectives, their financials will suffer.

However, the outcome of the Customer perspective, “Delight the consumer” is not explicitly linked to the Financial perspective. It is a general belief that if consumers are delighted, they should buy more products. The first step in developing this perspective is to define its customer/market segments (Figge, Hahn, Schaltegger and Wagner 2002). Once a company has identified its market segment, it was suggested that the company selects two sets of measures: generic measures (market share, customer retention, customer acquisition, customer satisfaction, and customer profitability) and performance drivers (product/service attributes, customer relationship, and company image and reputation) (Kaplan and Norton 1996a). Second, the company must determine what customers value and define how they differentiate (performance drivers) themselves from other companies to retain, attract, and satisfy (generic measures) their target customers (Kaplan and Norton 2001). In sum, the Customer perspective uses a value proposition to describe the product, price, and image that a company offers.

• Internal processes perspective:

This perspective focuses on the objectives necessary to satisfy both customer and financial needs. That being, the company must develop “internal processes” which are the core/critical business processes where the company creates value (Kaplan and Norton, 2001). To do so, a corporation can either improve existing business systems or develop new business systems.

This perspective is best understood when presented with examples. For instance, when a company’s mission is to be a leader in product development, established objectives revolve around the creation and development of products. Therefore, in relation to the customer perspective, the internal perspective could in return develop products that satisfy those needs. Looking at Apple, it has developed its camera in order to satisfy the customer’s need to capture moments with their phone. On the other hand, when a company focuses on operational excellence, the internal perspective will aim to satisfy objectives such as decreasing running costs, increasing product quality or optimizing the supply chain.

Similar to the rest, this perspective is interdependent with all other perspectives. Although it serves a specific subgroup of the balanced scorecard, it ultimately serves the overarching mission of the company. Another important thing to note when developing the internal perspective is to not use binary indicators when assigning KPI’s to the objectives. Binary indicators are those that have two possible values/states (i.e. complete/incomplete). The issue with such indicators is that they don’t grant us control over the progress of the company. The team’s knowledge is limited to whether the objective is completed or not, and therefore nothing is known about how far along we are from completion. Moreover, having a binary indicator could reduce the team’s ambition since there is no set target that will push the team’s performance (instead of hitting a quantified target, the team only aims to complete the task). In order to avoid binary indicators, objectives must be correctly formulated/worded.

• Learning and growth perspective:

“Learning and Growth” is the extent to which a company should learn and develop its vision. According to Kaplan and Norton, ‘learning’ is more important than ‘training’ which contains mentoring and coaching in the corporation.  This perspective also evaluates the flow of information among employees. That is how easy the communication between workers is that let them resolve the problems efficiently.

Furthermore, this perspective determines the extent to which a company must learn in order to fulfill the customer’s expectations, improve internal processes, and obtain financial objectives.

Through the measurement of “Learning and Growth” perspective managers can develop the following capabilities:

• Employee capabilities: Managers can provide employees with the necessary skills aligned with the strategy. Moreover, they give personnel the opportunity to obtain a better understanding of different functions of the company such as marketing, sales, etc.
• Information system capabilities: They can figure out what information systems such as CRM, ERP, BMP that organization may require to implement the strategy effectively.
• Strategy awareness and motivation: Managers can motivate and align employees by holding specific programs about the understanding and implementation of the strategy.

learning and growth constitute the essential foundation for the success of any knowledge-worker organization. In a knowledge-worker organization that the employees are the core resource and due to the rapid technological change, it is vital for the organization to provide workers with continuous learning. BSCs help managers focus on learning programs where they can have the biggest contribution in the execution of strategy.

BSC’s advantages:

Kaplan and Norton (1996a), suggest several benefits to applying the BSC in companies:

• Clarify and reach consensus about strategy.
• Communicate strategy across the company.
• Align sectors and employees’ goals to the strategy.
• Make a connection between strategic objectives and long-term goals and annual budgets.
• Determine strategic initiatives.
• Conduct periodic evaluation and systematic reviews based on strategy.
• Receive feedback for improving strategy.

BSC’s disadvantages:

Disadvantages of having a focus: Excessive focus on one strategy could ruin the business. Although It is important to have a specific focus on a trademark area of expertise for the company, there is a need to take care of other aspects of the company and keep a “balanced” focus.

How to implement a Balanced Scorecard.

• Establish company strategy/vision/mission.

This is what will determine the direction of the company and build the framework for the perspectives that will be put in place. Although they are superficial and can be tailored to best suit the company, there are 3 generic strategies that a company can adopt (Kaplan and Norton, 2001):

• Developing new products.
• Innovating existing products.
• Improving speed to market.
• Implementing customer relationship management systems (i.e. the company’s activity in social media).
• Establishing customer support service (i.e. call center responsible for customer concerns)
• Improving customer interaction (the process by which the company integrates customer feedback in R&D phase)
• Decreasing operating costs and cycle time.
• Ensuring high standards of quality and delivery time.
• Optimizing supply chain.
• Developing new revenue streams via new products and services (product leadership strategy).
• Ameliorating profitability by improving customer value proposition (customer value strategy).
• Optimizing resources via cost reduction, scaling production or sharing resources between departments (operational excellence strategy).
• Improving product quality (product leadership strategy).
• Optimizing customer experience (customer intimacy strategy).
• Improving pricing and timing (operational excellence strategy).
• Simplifying product initiation (product leadership strategy).
• Improving customer service and relationship management (customer intimacy strategy).
• Optimizing process flow by re-sequencing tasks (operational excellence strategy).
• Assess employee skills.
• Train employees.
• Implement strategy awareness program.
• Improve leadership and motivation.
• Develop organizational culture.
• Improve information system capabilities.

Below are examples of BSCs within the different generic strategies. For now, focus only on the main objectives within each perspective (the corresponding measures will be explained in the following sections of this manual). In the examples below, the companies have a main focus but it is key to observe that they show a proper execution of a balance between the different perspectives but also between different strategies. This is because it is crucial for a company to satisfy diverse needs in order to succeed in the industry. Moreover, these examples represent the concept of key measures which will be discussed in the following sections of this OER.

Customer intimacy strategy example:

Product leadership strategy example:

Operational excellence strategy example:

3. After we have specified the objectives required, we must complement them with appropriate indicators.Also known as Key Performance Indicators, KPIs are a metric that allow a company to set a standard of measurement. Consequently, this gives the ability to compare with past results or different companies, as well as plan ahead. These indicators will allow the company to measure progress based on specific criteria that best suit the strategic objectives. This is best explained by defining and giving examples of the types of indicators used.There are two types of indicators used:

Leading: Indicators that will positively influence/drive towards the desired outcome. This is considered to be a predictive measurement. I.e. The percentage of people wearing hard hats on a building site is a leading safety indicator.

Lagging: this indicator is an output measurement and can only be used as a record to what has already happened. I.e. the number of accidents on a building site is a lagging safety indicator.

Note: Lagging indicators can be considered reactive measurements while leading indicators can be considered proactive measurements.

• Average speed of answer.
• Cost per inbound contact.
• R&D budget.
• Revenue from new projects.
• Time of product production.
• Cost per unit.

For a more detailed guide to KPIs: https://bscdesigner.com/kpis-guide.htm

Below is an infographic explaining the implementation of performance indicators (for more detailed information about this section, visit the origin of this infographic: https://bscdesigner.com/leading-vs-lagging.htm ).

4. Finally, we need to cascade internal objectives.Also known as “alignment”, cascading is applicable to all perspectives. This step involves translating the corporate-wide objectives (Tier 1) down to smaller subunits of the company such as departments (Tier 2) and teams/individuals (Tier 3). This allows the entire organization to maintain a clear understanding of the overarching strategy and vision. Moreover, this allows the corporate level to precisely pinpoint areas of strength and weakness and therefore allow improve the company’s productivity. As the management system is cascaded, objectives become more operational and strategic.

The process of cascading objectives basically revolves around finding the specific tasks required to complete the objective (objectives within objectives). This is exemplified in the example below: the company wishes to “provide customers with better product or service” (Tier 1), which requires building and presenting brand by the marketing team (Tier 2). Accordingly, the website team (Tier 3) within the marketing team will need to “provide engaging content” in order to “build and present brand”.

Note how among the different tiers of the company, there is a constant alignment of strategy and objectives within different perspectives.

A case study with BSC in Toyota.

Toyota is one of the leading car companies in the world, originating from Japan but eventually manufacturing cars all over the world. In America, their mission statement is to be the most successful and respected car brand in America. To gain this success in 2003, Toyota management implemented a BSC. They began by creating a strategy to complement their mission statement like expand sales to youth buyers, expand shares of the SUV market and have the tops sales in passenger cars. Throughout this process, the executives maintained contact with their employees for feedback and updated them about their progress. This was done in order to align the company and ensure that the whole system understood the process and objectives of each goal. Through the employees’ feedback, Toyota was able to assess where they needed to improve on and create objectives to work on these weaknesses(Delta Publishing 2014).

After creating their overall strategies and listening to the feedback from their employees Toyota’s management started devising a way to incorporate these goals into a BSC. This meant having a balance between the four goals with some of the objectives overlapping with each other.  For increasing financial goals they had tasks like control the growth of general expenses, manage workforce costs and also sustain a high level of profitability given a challenging market. While looking at the internal business process they had focused on expanding sales and service capability and focus on completing major technology process. Toyota also wanted to maintain its high level of customer loyalty, sustain a high level of dealership satisfaction and also improve customer and sales satisfaction. Lastly to improve their learning and growth they wanted a successful model launch, achieve #1 in passenger sales and maintain luxury SUV leadership(Delta Publishing 2014)..

Financial BSC

Learning and growth  BSC

Internal Process BSC

Customer Segment BSC

With Toyotas implementation of the BSC we can see their strategy succeed in many areas of their vision. The BSC shown above provides an excellent example of creating an understandable project for the employees and management to understand.   With each objective to improve the company, they also included KPI’s to evaluate the progress of each of their goal. We can also see the crossing over of each of the four BSC perspectives, for example in learning and growth the successful launch of a new car will impact the financial goals of the company. The dashboard is also seen on the side of each BSC which shows the managerial team where the company is at with the targets. The BSC was able to benefit the employees, customers, and management in a different way. Employees saw more contribution from their work, managers saw increased profit and sales while improving customers loyalty. From Toyota, other companies can learn success and follow the BSC with a strategy of their own. It shows that financial success is not always the only measure of success and that other non-financial options can lead a company to be just as successful. The only thing Toyota could have improved on was a strategy map that would include the causal relationships between each goal(Delta Publishing 2014).

Conclusion:

The BSC is a strategic management tool helping to measure, monitor, and communicate strategic goals throughout the organization through an understandable way and get everybody on the same page working towards the same goals (Lawson et al. 2008). The BSC is a set of coherent performance measures providing executives with a comprehensive framework for an organization’s vision and strategy (Kaplan and Norton 1996a). Organizations are using the BSC to provide a quick look at whether or not they are achieving their goals and strategy. The BSC is considered as a mean of communication, informing, and learning system and should not be used as a controlling system (Kaplan and Norton 1996b). Top management of an organization can use the BSC to translate its strategy into performance measures that employees can easily understand. The BSC is organized into four perspectives: Learning and Growth perspective, Internal Process perspective, Customer perspective, and Financial perspective (Atkinson, Kaplan, Matsumura, and Young 2012).

References:

Atkinson, A.A., Kaplan, R.S., Matsumura, E.M., Young, S.M., (2012). Management Accounting, 6thEd. New Jersey, NJ: Pearson Education.

Atkinson, A., J. Waterhouse, and R. Wells (1997) A Stakeholder Approach to Strategic

Performance Measurement, Sloan Management Review (Spring).

Delta Publishing (2014)The Balanced scorecard: strategic based controls,

http://www.apexcpe.com/publications/371015.pdf

De Wet, Johannes & Jager, Phillip. (2007). An Appropriate Financial Perspective for a Balanced Scorecard.

Figge, F., Hahn, T., Schaltegger, S., & Wagner, M., (2002). The Sustainability Balanced Scorecard – Theory and Application of a Tool for Value-Based Sustainability Management. In Greening of Industry Network Conference, Gothenburg (p. 2).

Kaplan, R. S., & Norton, D. P. (2001). Transforming the Balanced Scorecard from Performance Measurement to Strategic Management: Part I. Accounting Horizons, 15(1), 87-104.

Janota, R. M. G. (2008). The Balanced Scorecard in a pharmaceutical company.

Lawson, R., Hatch, T., & Desroches, D. (2008). Scorecard Best Practices: Design, Implementation, and Evaluation. Hoboken, NJ: John Wiley & Son.

Kaplan, R.S., & Norton, D.P., (1996a). Linking the Balanced Scorecard to Strategy.

California Management Review, 39(1).

Kaplan, R.S., & Norton, D.P., (1996b). The Balanced Scorecard: Translating Strategy

into Action. Harvard Business Press.

Kaplan, R. S. and D.P. Norton (1992) The Balanced Scorecard: Measures that Drive Performance,

Harvard Business Review, (January-February): 71-79.

Kaplan, R. S. and D.P. Norton (2003) Strategy Maps, Boston: HBS Press.

Kaplan, R. S. and D.P. Norton (2004b). Measuring the Strategic Readiness of Intangible Assets,

Harvard Business Review (February): 52-63

Kaplan, R. S. and D.P. Norton (2006a). Alignment: Using the Balanced Scorecard to Create

Corporate Synergies, Boston: HBS Press.

Kaplan, R. S. (2009). “Conceptual foundations of the balanced scorecard.” Handbooks of management accounting research 3: 1253-1269.

6 examples of balanced scorecards: https://www.clearpointstrategy.com/full-exhaustive-balanced-scorecard-example/

Demonstration of how to build BSC on website.

https://bscdesigner.com/try-bscdesigner

https://bscdesigner.com/internal-processes.htm

Cases and Tools in Biotechnology Management Copyright © by Trent Tucker. All Rights Reserved.

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Balanced scorecard as a strategy implementation tool at Toyota east Africa limited

• Caroline Wachuka Karimi
• Published 2011
• Business, Economics

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• Toyota Motor Manufacturing, U.S.A., Inc., Video
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Introduction to Balanced Scorecard Analysis

At EMBA PRO , we believe that Balanced Scorecard approach is highly efficient strategic tool to formulate a cohesive strategy. Balanced Scorecard approach focuses on comprehensive metrics rather than only local optimization in various spheres such as – financials, operations, internal processes, and customers’ needs.

EMBA Pro Balanced Scorecard Analysis Solution for " Toyota Motor Manufacturing, U.S.A., Inc., Video" case study

This is an updated video of the Toyota Motor Manufacturing Kentucky (TMMK) assembly facility in Georgetown, KY. It is meant to be paired with the 693-019 Toyota Motor Manufacturing U.S.A. case, but with higher quality video. The vidoe shows a line tour of Assembly Two at Georgetown, with a focus on just-in-time delivery and installation of seats. It also shows parts of engine and body assembly (door line), kitting with Toyota's Set Pallet System" (SPS) and flow racks, the andon cord and notification system with labeling of key steps.

Case Authors : Willy Shih

Topic : technology & operations, related areas : manufacturing, product development, supply chain, emba pro balanced scorecard analysis approach to toyota motor manufacturing, u.s.a., inc., video case study.

The Balanced Scorecard approach was first proposed by Robert S. Kaplan and David P. Norton in their January – February 1992, Harvard Business Review article titled – “The Balanced Scorecard—Measures that Drive Performance”. Kaplan and Norton approach to organization performance is – “What you measure is what you get”. Balanced Scorecard also provides a base to build a metrics framework that is aligned and consistent. EMBA PRO immersive learning methodology from – case study discussions to simulations tools help MBA and EMBA professionals to - gain new insight, deepen their knowledge of the Technology & Operations field. Balanced Scorecard Analysis, case solution, Balanced Scorecard Solution.

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What is Balanced Scorecard Framework?

The Balanced scorecard is an integrated approach to assesses performance of business strategy and how changes can be made in the areas such as – financial objectives and goals, customer preferences and choice architecture, operations management and supply chain bottleneck resolutions, and organizations learning ability and capacity building Balanced Scorecard is a resource focused strategic analysis tool. Leaders at Georgetown Toyota can use Balanced Scorecard strategic tool to build sustainable competitive advantage by better understanding the relationship among - financial resources, internal processes, customer preferences, and operations management in Georgetown Toyota’s overall strategy.

Why is it called a Balanced Scorecard? How Balanced Scorecard is Useful?

Companies generally fail at implementing a strategy or managing operations because they lack an overarching management system to integrate and align these vital processes. Balanced Scorecard analysis of Georgetown Toyota is a comprehensive effort to integrate and align strategy and operations. Toyota Motor Manufacturing, U.S.A., Inc., Video case study provides a strategic dilemma for the protagonist. Balanced Scorecard strategic analysis can help Georgetown Toyota managers in understanding the relationship between activites and take the systems approach rather than the local optimization approach.

***It is a broad analysis and not all factors are relevant to the company specific. For greater details connect with us.

Applying Balanced Scorecard Approach to Toyota Motor Manufacturing, U.S.A., Inc., Video Case Study

According to by Robert S. Kaplan and David P. Norton , 85 percent of executive teams spent less than one hour per month discussing strategy, with 50 percent reporting that they spent virtually no time on strategy discussions. Balanced Scorecards help "Georgetown Toyota" to translate, communicate, and measure its strategies. Some of the questions answered by Balance Scorecard Analysis of Toyota Motor Manufacturing, U.S.A., Inc., Video are -

- How do customers perceive Georgetown Toyota? What is required to improve the brand equity or market performance in terms of – marketing, sales, distribution, and pricing strategy.

- Are we innovative and ready for the future? In today’s market place a company’s ability to sustain competitive advantage is highly dependent upon Georgetown Toyota's ability to innovate and stay ahead of the curve vis a vis to its competitors.

- What is important for Georgetown Toyota shareholders? How the decisions that Georgetown Toyota is making can impact the financial reports and balance sheet?

- Which internal processes can add value? What are the core competencies of Georgetown Toyota and how it can add value going future? Do the firm require to make either small tweaks or big changes in the internal processes to build of maintain sustainable competitive advantage.

What are the main features of balanced scorecard? / What are the four perspectives of the balanced scorecard?

The Balance Scorecard of each company varies based on the nature, size of the firm and industry it operates in. Broadly there are four main components / features of Balance Scorecard. These four perspectives / components of Balance Scorecard are –

• • Financial Perspective
• • Customer Perspective
• • Internal Business Perspective
• • Innovation and Learning Perspective

What are the advantages of Balance Scorecard Approach?

The biggest advantage of Balance Scorecard approach for Toyota Motor Manufacturing, U.S.A., Inc., Video is that it provides senior executives and leaders with a framework that they can use to develop a holistic strategy rather than just optimizing just one part of the business. The balanced scorecard allows managers to look at the business from four different perspectives. Secondly people lower down in the organization are more likely to be measured by the non-financial metrics so Balance Scorecard approach provides a good framework to not only include their efforts in overall strategy but also to communicate to them how their efforts is contributing to the overall strategy and success of Georgetown Toyota.

Customer Perspective in Balanced Scorecard Approach

Some of the Customer Perspective metrics that can be used in Balanced Scorecard approach are - • Market share in target segments • Existing customer business development • Customer profitability and customer life time value • Timely delivery of goods and services • Return policy • Claims and complaints handling • Handling service calls.

Internal Process Perspective in Balanced Scorecard Approach

Some of the Internal Processes metrics that can be used in Balanced Scorecard approach are - • New sales as a percentage of total sales • Meeting product introduction goals • Product development cycle • Break-even time realized.

Balanced Scorecard approach to Human Resources

Some of the Human Resources metrics that can be used in Balanced Scorecard approach are - • Employee satisfaction and retention, or the opposite (turnover rate) • Revenue and/or value added per employee • Strategic redundancy in job skills (job-coverage ratio) • Employee retraining cycle time • New ideas (per employee, implemented) • Information availability relative to need.

What are the disadvantages of Balanced Scorecard Approach?

Theoretically there are no great disadvantages of Balance Scorecard approach but in practices managers face a number of hurdles such as – • Poorly defined metrics – metrics are either too broad or too narrow. • Data collection challenges – apart from digitally native companies, traditional organizations still faces lots of problem in collecting and organizing data. • Lack of review structure – often Balance Scorecards are made by consultant and lacks a clear organization wide review structure. A number of times they often clash with the chain of command in the organization.

5C Marketing Analysis of Toyota Motor Manufacturing, U.S.A., Inc., Video

4p marketing analysis of toyota motor manufacturing, u.s.a., inc., video, porter five forces analysis and solution of toyota motor manufacturing, u.s.a., inc., video, porter value chain analysis and solution of toyota motor manufacturing, u.s.a., inc., video, case memo & recommendation memo of toyota motor manufacturing, u.s.a., inc., video, blue ocean analysis and solution of toyota motor manufacturing, u.s.a., inc., video, marketing strategy and analysis toyota motor manufacturing, u.s.a., inc., video, vrio /vrin analysis & solution of toyota motor manufacturing, u.s.a., inc., video, pestel / step / pest analysis of toyota motor manufacturing, u.s.a., inc., video, case study solution of toyota motor manufacturing, u.s.a., inc., video, swot analysis and solution of toyota motor manufacturing, u.s.a., inc., video, references & further readings.

M. E. Porter , Competitive Strategy(New York: Free Press, 1980) Willy Shih (2018) , "Toyota Motor Manufacturing, U.S.A., Inc., Video Harvard Business Review Case Study. Published by HBR Publications. O. E. Williamson , Markets and Hierarchies(New York: Free Press, 1975) Barney, J. B. (1995) "Looking Inside for Competitive Advantage". Academy of Management Executive, Vol. 9, Issue 4, pp. 49-61

Kotler & Armstrong (2017) "Principles of Marketing Management Management", Published by Pearson Publications.

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Balanced scorecard

• Strategic analysis

Having Trouble with Your Strategy? Then Map It (HBR OnPoint Enhanced Edition)

• Robert S. Kaplan
• David P. Norton
• October 01, 2000

Measuring the Strategic Readiness of Intangible Assets

• February 01, 2004

Putting the Balanced Scorecard to Work

• From the September–October 1993 Issue

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• November 01, 2003

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• From the September–October 2000 Issue

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Building a Game-Changing Talent Strategy

• Douglas A. Ready
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The Explainer: The Balanced Scorecard

• October 14, 2014

The Best-Performing CEOs in the World

• Morten T. Hansen
• Herminia Ibarra
• From the January–February 2013 Issue

Measuring the Strategic Readiness of Intangible Assets (HBR OnPoint Enhanced Edition)

Using scorecards for governance in the corporate and public sector.

• September 29, 2008

The Office of Strategy Management

• From the October 2005 Issue

Using the Balanced Scorecard as a Strategic Management System

• From the July–August 2007 Issue

8 Reasons Companies Don't Capture More Value

• Stefan Michel
• April 08, 2015

How to Implement a New Strategy Without Disrupting Your Organization

• From the March 2006 Issue

Saving Money, Saving Lives

• Jon Meliones
• From the November–December 2000 Issue

How To Measure Your Company's Risk in a Downturn

• December 19, 2008

London Public Library

• Vaughan Radcliffe
• November 05, 2008

China Resources Corp. (B): China Resources Microelectronics

• Dennis Campbell
• November 07, 2006

Transworld Auto Parts (A)

• V.G. Narayanan
• September 30, 2009

Domestic Auto Parts

• June 03, 2005

Wells Fargo Online Financial Services (A)

• Nicole Tempest
• June 12, 1998

Wilford College

• Neel Bhatia
• October 20, 2011

Boston Lyric Opera

• June 15, 2001

United Way of Southeastern New England (UWSENE)

• Ellen L. Kaplan
• November 14, 1996
• February 07, 2003

Strategy That Works: How Winning Companies Close the Strategy-to-Execution Gap

• Paul Leinwand
• Cesare Mainardi
• February 02, 2016

Transworld Auto Parts (B)

Volkswagen do brasil: driving strategy with the balanced scorecard.

• Ricardo Reisen de Pinho
• October 25, 2010

Western Chemical Corp.: Divisional Performance Measurement (A)

• William J. Bruns Jr.
• Roger Atherton
• October 02, 1995

Wells Fargo Online Financial Services (B)

• August 31, 1998

City of Charlotte (B)

• March 29, 1999

Media General and the Balanced Scorecard (A)

• Mark E. Haskins
• Darrell Eakes
• June 05, 2008

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• Harvard Business Review
• Michael E. Porter
• W. Chan Kim
• Renee Mauborgne
• February 07, 2011

Breaking Bad Habits: Defy Industry Norms and Reinvigorate Your Business

• Freek Vermeulen
• November 14, 2017

Chemical Bank: Implementing the Balanced Scorecard

• Norman Klein
• February 17, 1995

Johansen's: The New Scorecard System-Southwest Regional Manager (Handout 4)

• Luann J. Lynch
• Jennifer Forman
• Graham Gillam
• May 27, 2014

Harvard Business Review, March 2015

• March 01, 2015

The Genuine Responsibilities of the CEO: A Framework for Managing Today

• Rafael Andreu Civit
• Joan Enric Ricart Costa
• December 16, 2014

The Balanced Scorecard Links Performance Measures

• July 01, 2005

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