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Balanced Score Card and Theory Of Constraints

“One approach to [measuring business performance] is called ‘balanced scorecard’.

This proposed solution falls into the trap of trying to measure many, many things. It violates the objective… that when we measure many things, there will be some things that will look good and others that look bad.

Depending upon the management style of the people involved, management can always find something to find fault with employees.

With TOC (Theory of Constraints), we’re interested in ongoing improvement. We aren’t interested in measuring what is going well as much as we are interested in measuring what can be improved.”

From Dr Lisa Max Profit.


Balanced Service Scorecard

Notes from Balanced Service Scorecard by Tyagi and Gupta, June 2008

On the original Balanced Scorecard

  • As a strategic management system geared towards the organisations executives – is not useful at the operations level
  • Employees at the operations level can not relate to the BSC thus causing a gap in communication between executives and employees
  • BSC does not relate to the organizations structures, thus it appears to be an imposed set of measurements.
  • BSC does not provide guidance for input at the process level. It only takes measurements of output.
  • BSC does not address the intangibles of an organisation and thus remains incomplete. It does not addrss the issues of leadership, employee innovaiton, and improvement

Performance measurement is the process of developing indicators using metrics for driving progress toward business goals.

Performance measures have evolved through the industrial age, quality age, information age, and now into the knowledge age.

Today’s objective is for sustained profitable growth. The driver is customer value.

Ability to Predict

According to Jeff Hawkins book On Intelligence, intelligence implies the ability to predict. Holistic and comprehensive business scorecards should include leading indicators (not just financial lag indicators).

The Service Scorecard should balance cost and revenue, improvement and innovation, management and employees, execution and growth.

To establish measurements in different areas, answer:

  • What does one do?
  • Why does one do it?
  • Who is it done for?
  • How will you know it has been done?
  • Will they?
[/private_free] [widget id=”text-402250971″]Text: Free Membership Banner[/widget] Performance Management Development

Generic process of developing a performance management system could be described in 5 steps:

  1. Define the objectives of the system. Need for and utility of a measurement system. The type of system required, and how it will interact with the existing system.
  2. Identify core requirements of the syste and relate them to the core business process and/or core competencies and/or key success factors. Identifying causality.
  3. Develop the Service Scorecard. Metrics should be linked to the business drivers, presenting past, present and future (leading) indicators, with each metrics having a target goal.
  4. Establish a baseline, threshold, and success factors.
  5. Focus on implementation. Starting stage, development stage customisation/adaption/evolution), and useage stage.
[/private_free] A measurement system can have 3 columns identifying Framework Elements, Objectives Of Each Element, and Performance Measures Of Each Objective.

Each objective many also have Long-Term and Short-Term Actions identified.

Maintaining transparency through clarity to details at the bottom, and renewing with seasonal variations.

A business is composed of processes, therefore each part of the Service Scorecard must represent key business processes.

10 attributes of a good scorecard:

[private_free]1. strategic support 2. business relevance. 3. simple flow-down. 4. clarity. 5. executable. 6. opportunistics. 7. predictive. 8. dynamic. 9. benchmark. 10 balanced. [/private_free]

The fundamental strategy is sustained profitable growth.

Without transforming business objectives into process objectives, strategic reslts cannot be realized.

The scorecard must be aligned to various organizational roles – leadership, management, employees.



Growth and profit are considered contradictory propositions in many businesses.


In most organizations, leadership is measured through overall financial performance driven by the shared value and market trends. Such a perspective results in an inconcsisten direction conflicting with the corporate vision and values, fluctuatin outcomes, and cycles of performance instead of sustained success.

The two measures for leadership are Employee Recognition for significant added value and ROE.


Most organizations improv continually but not fast enough.

Rate of improvemet is a measure of acceleration. Each departmetn must establish a goal to achieve higher performance deliverd faster and more cost-effectively.


CRM, SRM (supplier relationship managment), and PRM (partner relationship management).


Four types of innovation: fundamental, platform, derivative, and variation.

Types of service innovation include business model, market, operations, process, experience, and on-demand innovation.


Excellence in service delivery. Service accuracy and cycle time are effective measures.


Three categories of customer requirements are Assumed, Market Driven, and Love to Have.