9-43 Implementing the Balanced ScorecardEither by visiting a Web site or from a description in a published article, find a description of the implementation of a Balanced Scorecard.
a.Document in detail the elements (objectives, measures, and targets) of the Balanced Scorecard.
b.Identify the purpose of each Balanced Scorecard element.
c.Describe, if the facts are available, or infer, if the facts are not available, how the Balanced Scorecard elements relate to the organization’s strategy.
d.Evaluate the Balanced Scorecard by indicating whether you agree that the choice of Balanced Scorecard performance measures is complete and consistent with the organization’s plan and stakeholder set.
9-45 Designing a Balanced ScorecardWells Fargo’s 2001 annual report (p.16) states that the company’s vision is “to satisfy all our customers’ needs, offer them sound financial advice and help them succeed financially.” Similarly, the 2002 annual report (p.16) states that the vision is “to earn all our customers’ business.” Both annual reports list the following 10 areas of strategic initiatives that the company has been benchmarking itself against for several years.
1.Investments, Trusts, Brokerage and insurance
2.Going for “Gr-eight”! (Increase the average number of products per customer to eight)
3.Doing It Right for the Customer
4.100 Percent Bank and Mortgage/Home Equity Cross-Sell
5.Wells Fargo Card in Every Wallet
6.When, Where, and How Information-Based Marketing
7.Be Our Customer’ Payments Processor
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The Balanced Scorecard consists of a set of integrated performance measures that are derived from the company’s strategy throughout the organization. Under the balanced scorecard approach, top management translate the company’s strategy into performance measures that the employees can understand and do something about. For example, the time a person has to wait before someone takes his order in a McDonalds restaurant might be a performance measure. Such a performance measure is easily understood by the employee and can be improved by the employee’s actions.
When building a balanced scorecard, management must establish the company’s vision, mission, and strategy, and once those are established, the balanced scorecard would start with some statements that convey the company’s vision to the employees. Such statements are called Objectives, and those describe what the company is trying to accomplish.
Measures describe how success in achieving objectives will be determined; in other words measures are the yardstick upon which success in meeting the objectives would be measured. For example if the objective was to decrease the waiting time in a bank queue, the measure would be the percentage reduction in waiting time. Targets are the goals or the rate of improvement required by the objective (a 20% reduction in wait time, for example).
Performance measures used in the balanced scorecard approach tend to fall into four groups: 1) Financial: has our financial performance improved?, 2) Customer: do customers recognize that we are delivering more value?, 3) Internal Business Process: have we improved key business processes so that we can deliver more value to customers?, and 4) Learning and Growth: are we maintaining our ability to change and improve?
Looking at the balanced scorecard of Jaguar – which offers distinctive, richly furnished luxury automobiles to wealthy individuals who prize individualized products such as leather seats, interior and exterior color combinations, and wooden dashboard- we can see that the performance measures used are closely linked to the company’s vision. “Dealership performance was measured throughout the year against a balanced scorecard including sales versus objective, customer satisfaction and product knowledge.”[i]
Jaguar is concerned about quality, which is why one of their performance measures is measuring how well the employees’ skills in installing options. Jaguar’s management stresses the availability of options, and the time taken to install such options; this is an internal business Process measure. This performance measure would ensure the satisfaction of customers which in turn would increase sales.
From the above we can see that Jaguar’s[ii] choice of performance measures in its balanced scorecard is complete and consistent with the organization’s objectives.
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Wells Fargo describes itself as follows at (September 7, 2003):
Wells Fargo (NYSE: WFC) is a diversified financial services company—providing banking, insurance, investments, mortgage and consumer finance from 5,800+ stores, the world's leading internet banking site ( and other distribution channels across North America and elsewhere internationally.
Further, the website states that Wells Fargo’s vision is “to satisfy all our customers' financial needs, help them succeed financially, and become known as one of America's great companies and the number one financial services provider in each of our markets.” Other facts reported include assets of $370 billion, over 20 million customer households served, and 6,290 ATMs.
A Balanced Scorecard for Wells Fargo can be developed similar to the chapter’s Balanced Scorecard for Metro Bank. Although Metro Bank is just beginning its transformation to a one-stop financial supermarket for targeted customers, its financial and customer objectives are similar to Wells Fargo’s. In the 1990’s, Wells Fargo already had a reputation for innovation and cost management (“Wells Fargo Online Financial Services (A),” Harvard Business School Case #9-198-146, p. 2). Examples of measures, targets, and initiatives (actions) described in Wells Fargo’s 2002 Annual Report (pages 18-20, strategic initiatives), focusing on the process perspective and learning and growth perspective, appear in the following table. Additional measures and initiatives are also provided.
Measures / Targets / InitiativesProcess perspective
(1) Investments, trust brokerage and insurance (satisfy customers’ financial needs) / Percentage of Wells Fargo’s profit. / Increase profit of these segments as a group to 25% of Wells Fargo’s profit. / Add more private bankers, license more bankers to sell mutual funds.
(2) Going for “gr-eight”! (cross-sell) / Number of products per customer / Increase average to 8. / Offer packages of products that save customers time and money. For example, the Homebuyers’ Package offers new mortgage customers a package of banking products that can save customers up to $340 per year.
(3) Doing it right for the customer (be advocates for customers) / Proportion of customers lost per year / Cut proportion in half (to 1 in 10). / Foster customer-focused culture and attitudes.
(4) 100 percent bank and mortgage/home equity cross-sell / Percent of mortgage and home-equity customers in Wells Fargo’s banking states who bank with Wells Fargo, and vice versa / 100% cross-selling between banking customers and mortgage/
home-equity customers / Initiative to migrate mortgage and home-equity customers to become Wells Fargo banking customers.
(5) Wells Fargo cards in every wallet / Percent of bank customers who have a credit card or debit card with Wells Fargo / 100% for each type of card / Cross-selling initiative to existing banking customers without Wells Fargo credit card.
(6) When, where, and how (match when, where, and how customers want to be served) / Ranking of online services; number of active online customers in various categories / #1 ranking / Integrate delivery channels to match when, where, and how customers want to be served. Some machines and web services have Spanish or Chinese language options.
(7) Information-based marketing (analyze and meet customer’s needs) / Percentage of customers receiving personalized marketing messages / Offer right product at the right time to save customer time and money. / Deploy customer relationship management and data mining application packages.
(8) Be our customers’ payments processor / Internet payments business revenue and transaction volume
(9) Outstanding customers (attract and retain “high-value” customers) / Retention rate for high-value customers / 100%
Learning and growth perspective
(10) People as a competitive advantage / Percentage of key jobs staffed with people with requisite skills, knowledge, and training / Develop, reward, and recognize “team members”; build an inclusive workplace.
[i]
[ii]