On Monday Robert Kaplan, the co-developer of the Balanced Scorecard management system that is currently being used by many top-tier Thai companies, will be speaking again in Bangkok at the Plaza Athenee.

Speaking from his East Coast US home, Kaplan told The Nation he would talk about two aspects of the famed management system that he developed with Dave Norton.

"I will be talking mainly about the Balanced Scorecard and about the latest development of time-driven, activity-based costing processes," he said.

In the early 1990s, Kaplan and Norton created the Balance Scorecard management system to counter what they perceived as an overemphasis on the "financial perspective".

Although their Balanced Scorecard system retained traditional financial measures, Kaplan and Norton said those measures told the story of past events which were adequate only for industrial-age companies that did not depend on investment in long-term capabilities and customer relationships for success. These financial measures, however, are inadequate for guiding and evaluating the journey that information-age companies must make to create future value through investment in customers, suppliers, employees, processes, technology and investments, they said.

The Balanced Scorecard, Kaplan said, is a strategy execution tool that translates a company's vision into four key dimensional indicators: financial performance, customer satisfaction, internal-process improvement and organisational learning.

"The scorecard is used to define and set strategic targets and provides the process for achieving them," he said.

Kaplan said the Balanced Scorecard gave companies the management system to invest in the long term, in customers, in employees, in new product development and in systems, rather than managing the bottom line to pump up short-term earnings.

"We believe that the reliance on summary financial-performance measures hinders an organisation's ability to create future value," he said.

Kaplan and Norton have made the Balanced Scorecard one of the most-used management tools. It has been sold as a management system that can "channel the energies, abilities and specific knowledge held by people throughout the organisation toward long-term strategic goals".

"The Balance Scorecard is a revolutionary tool that managers can use to mobilise their people to fulfil the company's mission," Kaplan said.

Perhaps more importantly, he said the Balanced Scorecard system allowed managements in today's fast-changing business environments to align their organisations to newly evolving strategies away from the historic, short-term focus on cost reductions and low-price competition.

"We found that many new performance-measurement systems were not aligning measurements to strategies," he said.

At his upcoming presentation in Bangkok, Kaplan told The Nation, he will also talk about the latest developments in what he calls "activity-based costing" (ABC) and its relationship to the successful execution of the Balanced Scorecard system.

Many companies, he said, are very good at determining direct labour costs but not very good at assigning overhead costs.

"We feel that all enterprise costs are there for a reason and they shouldn't be allocated on some percentage basis," he said.

Most companies, Kaplan said, normally allocate an arbitrary percentage to overhead costs. "ABC is a way of assigning these costs more accurately," he said.

The ABC approach, Kaplan said, enables companies to see what demands are made on indirect costs. He uses the example of call centres to explain the principle.

Call-centre costs, he said, should be based on two distinct parameters.

Costs such as salaries, benefits, supervision, occupancy costs, computers and the phone systems are direct costs that must be initially computed.

The ABC approach also calculates the overall capacity of each department and then calculates an indirect time-driven cost approach.

In the call-centre example, the cost per minute for operating the department is calculated. "With ABC you can then accurately calculate the cost of each transaction," he said.

The ABC processes, he said, help management understand the costs associated with every expedited delivery or special feature and service being offered.

"A cost system cannot measure the value, but at least it measures what it is costing you to create products and deliver them and to sell to the customer and service them," he said.

During his Bangkok presentation, Kaplan said, he will talk about the latest major advances in integrating the Balanced Scorecard strategic planning with ABC-based operational planning and budgeting.

"I will be talking about strategic cost management for customer profitability, including my ground-breaking time-driven approach," he said.