The Balanced Scorecard

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The Balanced Scorecard

• An Overview

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The Agenda for today

• Successful strategic planning- what does it take
  ?
• The Balanced Scorecard (BSC)
• The concept
• Strategy map
• Scorecard measures
• Scorecard Initiatives
• The advantages of a Scorecard
• The BSC and Business Excellence

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Successful strategic planning

• What does it take ?

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Successful strategic planning

• Customer driven quality is a strategic viewpoint.
• Entry into new markets, Customer attraction,
  Customer retention, Gain in market share are key
  factors in competitiveness, profitability and
  business success. (ExternalOutcome view)
• Operational performance improvements,
  productivity growth, cost competitiveness,
  responsiveness and flexibility are indicators of
  your business fitness.(Internal Capability
  view)
• Strategic planning aligns work processes with
  your organizations strategic directions.
• Let us revisit the key elements of Strategic
  Planning
• Environment Scan Opportunities and Threats
• Organization Scan Strengths and Weaknesses
• Stakeholders Expectations Your Mission, Vision
  and Values
• Financial, Societal and other Potential risks
  evaluation and mitigation strategies
• Synthesis from strategic alternatives to arrive
  at Objectives.

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The Basic Issue
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How Effective Are The Vision Statements?
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Impact of Strategy Deployment
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Impact From Learning
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Classical Management Control System
Budget
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The Balanced Scorecard (BSC)
Strategy Implementation Using Measurement To Commu
nicate, Focus, Review And Align
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About the BSC

• Introduced by Drs. Robert Kaplan and David Norton
  in 1991.
• Selected by HBR as one of the most important
  management ideas in the last 75 years.
• Kaplan and Norton have published 4 books on the
  BSC namely Balanced Scorecard, Strategy
  Focused Organization, Strategy Maps and
  Alignment.
• Bain Co. 1999 survey shows that
• more than 50 of the Global 1000 companies have
  adopted the BSC.
• Strong satisfaction among BSC users

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Balanced Scorecard - The Need

• Translating the Vision and Strategy
• For people to act on the words in vision and
  strategy statements, those statements must be
  expressed as an integrated set of objectives and
  measures agreed upon by all senior executives,
  that describe the long-term drivers of success

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Balanced Scorecard - The Need

• Business Planning
• Managers find it difficult to integrate various
  diverse initiatives to achieve strategic goals.
  They need a basis for allocating resources and
  setting priorities so that they can undertake and
  coordinate only those initiatives that move them
  towards their long-term strategic objectives

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Balanced Scorecard - The Need

• Communicating and Linking
• Traditionally, departments are evaluated on
  financial performance and individual incentives
  are tied to short-term financial goals. There
  is, however a need for all levels of the
  organization to understand the long-term strategy
  and that both departmental and individual
  objectives are aligned with it

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Balanced Scorecard - The Need

• Feedback and Learning
• Existing feedback and review processes focus on
  whether the company, its departments or
  individual employees have met their budgeted
  financial goals. A company needs to however have
  processes in place to review strategy in light of
  recent performance

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Balanced Scorecard - The Concept
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The Four Perspectives
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The Financial Perspective
Grow
Revenue Growth And Mix
Sustain
Cost Reduction Productivity Improvement
Asset Utilization
Harvest
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Strategic Themes - Financial Perspectives
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The Customer Perspective
Market Share
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Measuring Customer Value
Customer Value
Product / Service Attributes
Image and Reputation
Relationship
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Rockwater Customer Perspective
Product Attributes
Image
Relationship
Professional Management
Relationship
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Business Process Perspective
Customer Need Satisfied
Customer Need Identified
New Product Sales New Product Intro. Vs
Competitors Process Capability Time to Market
Quality Cost Schedule
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Learning And Growth Perspective
Technology Infrastructure (Information System
Capability)
Staff Competencies (Employee capability)
Climate for action (Motivation, empowerment and
alignment)
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Measurement Framework
Operating Results
Employee Productivity
Employee Retention
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Cause Effect Relationship
Financial
ROCE
Customer
Business Processes
Learning Growth
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The Balanced Scorecard Measures
Strategic Objective
Outcome Measures Common Measures Across The
Industry
Performance Drivers Strategy Dependent Unique
Measures
Lagging Measures To Gauge Outcomes Of Strategy
Leading Measures To Understand processes And
Activities
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Selecting BSC Measures

• Caution
• Do not select what can be measured select what
  should be measured
• Counter balance the measures to prevent strategy
  distortion
• Restrict the number of measures to the level of
  control / action

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Rockwaters Balanced Strategic Objectives

• Financial
• Return On Capital
• Cash Flow
• Project Profitability
• Reliability Of Performance

• Customer
• Value For Money
• Competitive Price
• Hassle Free Relationship
• High Performance Professionals
• Innovation

• Business Processes
• Shape Customer Requirements
• Tender Effectiveness
• Quality Service
• Safety / Loss Control
• Superior Project Management

• Learning Growth
• Continuous Improvement
• Product Service Innovation
• Empowered Work Force

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Rockwaters Balanced Scorecard

• Financial
• Return On Capital Employed
• Cash Flow
• Project Profitability
• Profit Forecast Reliability
• Sales Backlog

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Business Plan / Budget Support Strategy
Corporate Projects, Activities, etc.
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Constructing The Scorecard
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BSC Addresses Barriers To Strategy Implementation
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Align All Levels Of The Organization
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Operational Review to Strategic Review
Present Quarterly Review Meeting
Quarterly Strategy Review Meeting
Review Strategic Issues (10)
Review Strategic Issues (60)
Discuss Implications (40)
Review Performance (50)
Discuss Implications (30)
Review Performance (10)
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Benefits Of Using The Balanced Scorecard

• Makes strategy Operational - Translates strategy
  into a set of performance measures and targets.
• Enables effective communication of strategy
  across the organization.
• Focuses the entire organization on what must be
  done to create breakthrough performance
• Aligns various initiatives/programs across the
  organization to the strategic objectives.
• Makes it possible to connect employees
  individual work to the overall objectives of the
  company.
• Converts the organization from a collection of
  isolated, independent functions/ departments into
  an single seamless, aligned and efficient entity.

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The Way Forward
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Refining The Contents

• Defining The Performance Measures
• Preparing The Action Plan
• For Generating Information Carrying Out
  Analysis
• For Determining Past Performance
• For Selecting Appropriate Comparisons
• Suggesting The Review Mechanism
• Use The Format Provided

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A great scorecard is not enough

• Get the strategy right.
• Senior management commitment a must.
• Realize - BSC is a major change process.
• Involve more more people.
• Communicate educate to create awareness.
• Ensure Personal alignment KRAs, Compensation.
• Link strategy budgeting.
• Use it
• Use it !
• Use it !!

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Warning!!The balanced scorecard is not a
substitute for good managementIt is only a
toolIt requires good management!!
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Business Excellence AndThe Balanced Scorecard
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Business Excellence The Core Requirement

• Strategy-driven performance addressing
• the needs of all stakeholders

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Driving Business Excellence
Mission / Vision Environment /
Opportunity
Internal Communication Intranets, Communication
Tools
Strategy Development SDP, SPP
Company Strategies
Strategy Deployment Balanced Scorecard, Hoshin
Kanri, MBO
Objectives / Goals / Targets
Excellence Assessment Like CII-EXIM award process
Key Initiatives Business
Excellence Plans
Process Excellence Employee Involvement QIP, 6 s,
Lean, Kaizen
Department Goals / Targets
Functional Excellence Plans
Process Assessment 5S, ISO, CMM, Audits
Performance / Implementation
Performance Review / Progress Review
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Managing Strategy Driven Performance
Customer Perspective
Internal Perspective
Financial Perspective
2.0 Strategic Planning
7.5 Organizational Effectiveness Results 7.4
Supplier Partnering Results
7.1 Customer Focussed Results
7.3 Human Resource Results
4.0 Information Analysis
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Thank You!!