balance score card presentation_final
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Intangible assets has become far more important than physical assets
needed for future growth
Balanced scorecard complements financial measures to measure
performance
Customers
Internal Business process
Learning and growth
Emphasis of most companies is on short-term financial measures leaves a
gap between the development of a strategy and its implementation
Balanced scorecard links a companys long-term strategy with its short-term
actions with four new management processes
The Processes :
Translating the vision
Communicating and linking Business planning
Feedback and learning
Introducing The Balanced Scorecard
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A set of measures that give comprehensive
view of the business. It includes :
Financial Measures that tell the results
of action already taken, lagging parameters
and
complements with operational measures
that are the drivers of future financial
performance, leading parameters.
Balanced Scorecard
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Balanced Scorecard: Four new management processes
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Translating vision and strategy: four perspectives
Lofty vision and
strategy statements
dont translate easily
into action at the
local level
Statements
must be expressed as
an integrated
set of objectives and
measures which are
long-term drivers of
success
To provide superior service to targeted customers
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Communicating and Linking
Managers communicate their strategy up and down the organization and
link it to departmental and individual objectives
All levels of the organization understand the long-term strategy and that
both departmental and individual objectives are aligned
Generally engage in three activities:
Communicating and educating
Brochures, newsletters, town meetings, electronic bulletin boards
provide basis for feedback and accountability
Setting goals
High level strategy must be translated into objectives and measures for operating units
and individuals
The personal scorecard helps people to translate communicate corporate into
meaningful tasks and targets
Linking rewards to performance measures
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Business Planning
Most Organizations have separate strategic planning group and
resource allocation Senior management in strategic planning group draws plan for next
3/5/10 years down the line
Finance group does their budgeting in isolation and set financial
targets for different business unit
Unfortunately, targets set by finance staff does not get in sync withlong-term strategic objectives set by strategic planning group
This becomes the base document for monthly/ quarterly/ annually
review of organizational performance
Balance scorecard helps in integrating strategic planning to financial
objectives of the business organization
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Feedback and Learning
The Balance score card achieves in fourimportant attributes
Articulates the companys shared vision
Communicates a holistic model that linksindividual efforts and accomplishments to
business unit objectives.Supplies the essential strategic feedback
system.Facilitates the strategy review that is essential
to strategic learning.
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Strategy is described using
four perspectives
Cause and effect is a key
element
Measures are developed to
monitor performance
Profitability Growth
ShareholderValue
Organisation Vision
Price Service Quality
Market Innovation ContinuousLearning
Intellectual Assets
If we succeed,how will welook to ourshareholders?
To achieve ourvision, how mustwe look to ourcustomers?
To satisfy ourcustomers, whatmanagementprocesses must weexcel at?
To achieve ourvision, how mustour organisationlearn and
improve?
Cycle TimeProductivityCost
Financial Perspective
Customer Perspective
Internal Perspective
Organization Learning
Balanced Scorecard provides a framework to translate strategy into operational terms.
Linking measures on Perspectives
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Financial Yesterday
Customer Today
Business Process
Growth & Learning Tomorrow
The challenge is to identify the operational parameters focussing
on effectiveness and efficiency
We shall identify balanced set of THRUST AREAS
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Clarify and update strategyCommunicate strategy throughout the companyAlign unit and individual goals with the strategyLink strategic objectives to long-term targets and
annual budgetsIdentify and align strategic initiativesConduct periodic performance reviews to learn
about and improve strategy.
Uses of Balance Scorecards
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Year 2003-04 : ChallengesBalanced Scorecard - StepsVision
Mission
Strategy Map
Balanced Scorecard
X Matrix Deployment
Vision:
To be amongst the top 3 flacconage manufacturers inthe world
Mission:
a) To attain a market share of 10% in C&P worldwide
market
b) To be rated as strategic supplier by top 3 C&P
customers
c) To enhance EVA in Pharmaceuticals
d) All Furnaces to be EVA positive by 2010
e) Deming Level 4 by 2011
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Objectives
World ClassMfgProcesses
Statementof whatstrategy
mustachieve and
whatscritical to
its success
Target
25 Days Revenue
fromSelect _
The levelof
performance or rate
ofimprovem
entneeded
Projectfor leadtime
KAMs
Key actionprogramsrequired
to achieveobjectives
InitiativeMeasurement
Faster NPD Select
bottles Mfg
Howsuccess inachieving
thestrategywill be
measuredand
tracked
Strategic Theme:Operating Efficiency
Delta EVATarget
Financial
Learning
Increased AssetProductivity
Hireexperienced
Managers
Customer
Intern
alDevelop World Class
Mfg Processes
Strategy Map: Diagram of thecause-and-effect relationships
between strategic objectives
Differentiated Capacity forSelect & Mass in India & US
Balanced Scorecard terminologyVision
Mission
Strategy Map
Balanced Scorecard
X Matrix deployment
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Balanced Scorecard exampleVision
Mission
Strategy Map
Balanced Scorecard
X Matrix deployment
* Initiatives Captured only partly
Category Element Measures Target
Financial
Achieve targeted Cost Reduction(eg Productivity and efficiency; For Low
Mass and NP)
%
Optimise Work In Process Inventory(Heldware)
Less than 1 CrCustomer
Quality Assurance Process for NonSelect
No of CustomerComplaints
60% ofExisting
Quality Assurance Process for Select No of CustomerComplaints
-
Internal
Processes
Reduce NPD Cycle Time NPD Lead Time 45 Days byEnd ofYear
Differentiated ManufacturingCapability For Select
No of SamplesApproved from
Customer
???
Enhanse Manufacturing Capability Revenue generatedfrom NPD's
25% ofTotalBusiness
Energy Management Energy Cost pertonnes
???
Manufacturing Excellence Project Level Score
Improve Order to Delivery Process % OTIF
Learning Establish Pillar Structure No of Pillars
Acquire International Certifications Cerification Dates
Implementation of SHE % SHE NonConformance
Enhance Quality of people Training Man Days
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Based on the Vision and Mission of the company, SBU level strategy
maps are formed
From Strategy maps SBU level score cards are formed
From SBU level score cards, department level scorecards are formed
The Balanced Scorecard gives us the framework to describe our strategy
(perspectives)
The Strategy Map is how we describe the detail of our strategy
Themes help us focus on specific aspects
Summarising
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Translate a strategy into operational terms
Ensure that the components of the strategy -- objectives,
measures, and initiatives -- are aligned and linked
Communicate the strategy throughout the organisation
Form the basis of an effective and integrated strategic
management process
Some Goals of the Balanced Scorecard
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For each KFA3 Find out, what type of result when measured, will give us confidence, that the
unit is creating the desired focus. Prioritise top 2-3 KRAs for each KFA.( May use relationship diagram / criteria
matrix / judgement.)
For each KRAq Determine which all departments will have key roles
q
Discuss and arrive at Measures & Targets for each of the KRA
Identify KFAs
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Brainstorm for creating right focus in the unit to achieve the desiredthrust
KFAs selected : Target Receivables cycle for Select Market Reduce Receivables cycle for Non Select Market (Non LC) Increase Asset productivity
Optimise Work In Process Inventory Optimise Finished Goods Inventory Improve EBITA Revenue from Select Customers (Europe/ Non US) Revenue from Existing Non-Select Customers Revenue from New Non-Select Customers
Toach
ieve
EVA
Target
Key Focus Areas (KFAs)Vision
Mission
Strategy Map
Balanced Scorecard
X Matrix deployment
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Thrust Area
Achieve EVA Target
Receivab
lescycle
forNo
nSelectMa
rket
Optimise
FG
Inven
tory
X Matrix - Thrust AreasVision
Mission
Strategy Map
Balanced Scorecard
X Matrix deployment
Rev
enuefrom
Sele
ctCu
sto
mers(Europe/Non
US)
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Receivablescycle
forNon
SelectMarke
t
Achieve EVA Target
Revenuefrom
Se
lectCustomers
OptimiseFini s
hed
GoodsInventory
Thrust
Area
K
FA
KRA
Receivables targets
Reduce delays
Revenue customer wise
Customerwise NPDs
Linewise inventory
Sales from inventory target
Finalised X Matrix
Measure
s
Tgt..
95%
60 2
crs
OTIF
Receivable
sno
ofday
s
Inventoryv
alu
eRedn
2crs
14
Linewisein
ventory
value
NoofNPD
sfo
r
keycustom
ers
Totalrevenue
from
selectplay
ers
10crs
WHO
Prodnpl an
ning
MFG.
Logistics
Marketin g
Finance
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