balanced score card a tool of performance management- presentation
TRANSCRIPT
BALANCED SCORE CARD-A TOOL OF PERFORMANCE
MANAGEMENT15 DEC 2012
April 12, 2023
Programme of work
• Session 1• Current performance challenges• Understanding , vision and values of
the organization• Introduction to the balanced
scorecard• Session 2• Recap of the case studyApril 12, 2023
Contd---
• Requirement 1- the financisl perspective
• Requirement 2-the learnning and development perspective
• Session 3• Requirement 3the internal business
process perspective• Requirement 4-The customer
perspectiveApril 12, 2023
Contd---
• Requirement 5- linking the perspectives- the strategic 4 Box Model
• Session 4• Benefits of implementing the
balanced scorecard• Traps in implementation• CLOSING REMARKS
April 12, 2023
KEYS TO EFFECTIVE PERFORMANCE
PART- I
April 12, 2023
WHERE IS THE KEY TO PERFORMANCE?
An old man was walking home late one night when he saw a friend on his knees under a light searching for something” What are you doing ?” he asked his friend
“ I dropped the key to my house”‘ I’ll help you look”After a few minutes of frustrated
searching the old man asked his friend” where exactly were you when you dropped this key?:
The friend pointed towards the darkness” over there”“Then why are you searching for it here?”“Because this is where the light is”
Sun parable
April 12, 2023
PERFORMANCE CHALLENGES
• Patchwork styles- superficial results
• Default future
• Stereotyping- making faceless groups
• Not letting go old assumptions
• Self deception
• What do i care about an issue being resolved??
• Inability to use future focused language
• How people perform depends on how the situation
occurs to themApril 12, 2023
KEYS TO EFFECTIVE PERFORMANCE
• Personal relationships• Operational excellence• Shared vision• Managing for results• Shaping performance oriented behaviour-identifying
hidden agendas• `Planning precisely with clear goals• Aligning employee goals• Having a clear set of performance standards/ measures• Focus on cooperative communication• Transparency• Mutual respect• Continuous improvement
April 12, 2023
VISION AND VALUESPART II
April 12, 2023
WHAT ------
• IS A VISION?• ARE VALUES?
April 12, 2023
WHY------
• IS A VISION IMPORTANT?• ARE VALUES IMPORTANT?
April 12, 2023
FORMULATING A VISION
• Bring together all stakeholders in a vision planning exercise
• Gather responses to vision questions from stakeholders
• Develop a draft set of vision statements for review by stakeholders
• Adjust the draft based on recommendations
• Develop the final vision statement
April 12, 2023
VALUES RELATED TO----
• Standards for action• Internal and external relationships• Ethical standards• Self- development• Ideals• Financial matters
April 12, 2023
Strategic themes
• Need for a thematic approach as a compass bearing.
• Future state vs current reality• Translation into measures and
actions • Importance of time frame
April 12, 2023
BALANCED SCORE CARD-A CURTAIN RAISER
PART III
April 12, 2023
WHAT YOU MEASURE IS WHAT YOU GET
YOU CAN’T IMPROVE WHAT YOU CANNOT MEASURE
April 12, 2023
What Is a Balanced Scorecard?
A Measurement A Measurement System?System?
A Management A Management System?System?
A Management A Management Philosophy?Philosophy?
April 12, 2023
Elements of a good Management System
• Derived from the Vision and Strategy of the organization• Planning
– Long term strategic plan– Short term business plan and budgets
• Measurement– Focused set of measures– Measures represent organization's plan and vision
• Review– Plans are regularly reviewed and suitably revised
• Performance – Rewards are linked to driving key measures
April 12, 2023
Genesis of Balanced Scorecard
• The ‘Balanced Scorecard’ solution - Kaplan & Norton– A set of measures based on
• Finance• Customer• Internal processes• Learning and growth
– Linked to vision and strategy– ‘Balances’ short and long term needs– Builds ‘leading’ and ‘lagging’ indicators
April 12, 2023
financial and ... nonfinancial indicators
external and ... internal measures
outcomes and ... performance drivers
quantitative and ... qualitative factors
Balanced Scorecard because:
Advantages
April 12, 2023
• Situation– Bias towards Financial Measures– Initiatives not all linkable to financials,
hence•Either not undertaken•Or too many initiatives
– Top Management need to focus
Why Balanced Scorecard
April 12, 2023
WHY BALANCED SCORECARD
• Increasing importance of intangible assets for competitive advantage
• Need to make strategy and its implementation the central focus of any organization
• Alignment of strategy to organizational departmental and personal goals
• Use of measurement and management systems derived from strategies and capabilities
• Role of executive leadership in mobilizing and implementing change
April 12, 2023
April 12, 2023
A PICTORIAL REPRESENTATION---
The Mission, rather than the financial / shareholder objectives, drives the organization’s strategy
"If we succeed, how will we look to our financial donors?”
“To achieve our vision, how must our people learn,
communicate, and work together?”
“To achieve our vision, how must our people learn,
communicate, and work together?”
The Mission
“To satisfy our customers, financial donors and mission,
what business processes must we excel at?"
“To satisfy our customers, financial donors and mission,
what business processes must we excel at?"
”To achieve our vision, how must we look to
our customers?”
April 12, 2023
FUNCTIONS OF THE BALANCED SCORECARD
• Helps implement vision and strategy• Develops metrics based on the priorities of the
overall strategic plan• Designs processes relevent to these metrics• Reduces metrics into numeric form for storage
and analysis• Examines outcomes of various strategies
outcomes and measures• Tracks results to guide the company and provide
feedback
April 12, 2023
METRICS PROVIDE----
• STRATEGIC FEEDBACK• DIAGNOSTIC FEEDBACK• TRENDS IN PERFORMANCE OVER
TIME• CONTINUOUS FEEDBACK ABOUT THE
MEASURES ADOPTED- WHICH METRICS NEED TO BE TRACKED.
April 12, 2023
Why are Companies Adopting a Balanced
Scorecard?• Change
Formulate and communicate a new strategy for a more competitive environment
•Growth
Increase revenues, not just cut costs and enhance productivity
• Implement
From the 10 to the 10,000. Every employee implements the new growth strategy in their day-to-day operations
The Revenue Growth Strategy
“Improve stability by broadening the sources of revenue from current customers”
The Productivity Strategy
“Improve operating efficiency by shifting customers to more cost-effective channels of distribution”
Improve Returns
Improve Operating Efficiency
Broaden Revenue Mix
Increase Customer Confidence in Our Financial Advice
IncreaseCustomer Satisfaction Through Superior Execution
IncreaseEmployee Productivity
Access to Strategic Information
Develop Strategic Skills
Align Personal Goals
FinancialPerspective
CustomerPerspective
InternalPerspective
Learning Perspective
Cross-Sell the Product Line
Shift to Appropriate Channel
Provide Rapid Response
Develop New Products Minimize
Problems
Understand Customer Segments
April 12, 2023
1. Leadership From the Top– Create the Climate for Change– Create a Common Focus for
Change Activities– Rationalize and Align the
Organization
3. Unlock and Focus Hidden Assets– Reengineer Work Processes– Create Knowledge Sharing Networks
2. Make Strategy Everyone’s Job– Comprehensive Communication to
Create Awareness– Align Goals and Incentives– Integrate Budgeting with Strategic
Planning– Align Resources and Initiatives
4. Make Strategy a Continuous Process
– Strategic Feedback That Encourages Learning
– Executive Teams Manage Strategic Themes
– Testing Hypotheses, Adapting, and Learning
The Ingredients of Highly Successful Balanced Scorecard Programs
STRATEGY
FormulateFormulate
NavigateNavigateCommunicateCommunicate
ExecuteExecute
April 12, 2023
CHAIN OF CAUSATIONCHAIN OF CAUSATION Our Survival is dependent upon growing the
business Our business growth is largely determined by
customer satisfaction Customer satisfaction is governed by quality,
price and delivery Our process capability is greatly limited by
variation Process variation leads to an increase in
defects, costs and cycle time To eliminate variation, we must apply the
right knowledge In order to apply the right knowledge, we
must first acquire it To acquire new knowledge means that we
must have the will to surviveApril 12, 2023
.
April 12, 2023
Customer Perspective
Financial Accountability Perspective
Internal Process Perspective
Learning and Growth Perspective
Reduce Crime
Reduce Crime
Increase Perception
of Safety
Increase Perception
of Safety
Availability of Safe,
ConvenientTransportation
Availability of Safe,
ConvenientTransportation
Maintain CompetitiveTax Rates
Maintain CompetitiveTax Rates
Improve Service Quality
Improve Service Quality
Promote Economic
Opportunity
Promote Economic
Opportunity
Strengthen Neighborhoods
Strengthen Neighborhoods
Enhance Knowledge
Management Capabilities
Enhance Knowledge
Management Capabilities
Close Skills Gap
Close Skills Gap
Achieve Positive
Employee Climate
Achieve Positive
Employee Climate
StreamlineCustomer
Interactions
StreamlineCustomer
Interactions
Improve Productivity
Improve Productivity
IncreasePositiveContacts
IncreasePositiveContacts
Secure Funding/ServicePartners
Secure Funding/ServicePartners
ExpandNon-CityFunding
ExpandNon-CityFunding
MaximizeBenefit/Cost
MaximizeBenefit/Cost
Grow Tax Base
Grow Tax Base
Maintain AAA
Rating
Maintain AAA
Rating
Promote Community
Based Problem Solving
Promote Community
Based Problem Solving
The City of Charlotte Corporate-level Linkage Model
Increase Infrastructure
Capacity
Increase Infrastructure
Capacity
Promote Business
Mix
Promote Business
Mix
TOP-LEVEL METRICS OF SUCCESSTOP-LEVEL METRICS OF SUCCESS
•Time to develop
next gen product
•No of times design
modified
•Quality standards
•Asset Utilization
•Service quality.
Time-to-market Warranty cost Market share Customer satisfaction Key financials:
Sales margin Operating profit Return on net assets Cash flow
Employee satisfactionApril 12, 2023
COMPANIES THAT HAVE IMPLEMENTED THE BALANCED SCORE CARD
• GODREJ• TATA MOTORS• TCS• CASTROL INDIA LTD• PHILIPS ELECTRONICS• INFOSYS• TAJ GROUP OF HOTELS
April 12, 2023
THE FINANCIAL PERSPECTIVE
PART IV
April 12, 2023
Finance
• To succeed financially, how should we appear to our shareholders
• Financial measures
– Show economic consequences of actions already taken
– Show if strategy, implementation have given results
• Typically can be:
– Operating Income– ROCE
April 12, 2023
GROWTH STAGE
• PRODUCTS HAVING GROWTH POTENTIAL
• COMMITMENT OF RESOURCES• EXPAND PRODUCTION CAPACITY• OPERATING CAPABILITIES• INVESTMENT IN
SYSTEMS/INFRASTRUCTIURE• MORE CASH OUTFLOWApril 12, 2023
SUSTENANCE STAGE
• ATTRACT INVESTMENTS• ENHANCING IMPROVEMENTS• ENHANCING PROFITABILITY• ROI• ROCE• EVA
April 12, 2023
HARVEST STAGE
• ENOUGH TO MAINTAIN EQUIPMENT• NO EXPANSION• INVESTMENT S WITH A VIEW TO
SHORT TERM RETURNS• PAY BACKS• MAXIMIZE CASH FLOW
April 12, 2023
Customer• To achieve our vision, how should we appear to our
customers• Measures typically can be related to:
– Customer satisfaction– Customer retention/business expansion with existing– New customer acquisition– Value delivery - to customer– Market and account share in targeted segments
• Segment specific drivers could be:– Shorter lead times– Innovative products and services– Better quality
April 12, 2023
Core Measures
CustomerSatisfaction
CustomerAcquisition
CustomerRetention
CustomerValue
MarketShare
Perceived imagePerceived
quality
April 12, 2023
Internal Business Processes
Identifythe
market
Create the Product/ Service Offering
Servicethe
Customer
Build the Products/
Services
Deliver the Products/
Services
Innovation Process
•Operating Processes
April 12, 2023
Learning and Growth• To achieve our vision, how will we sustain our ability to
change and improve• The infrastructure that the organisation must build to create
long-term growth and improvement• Come from:
– People– Systems– Organisational procedures
• Measures include– Employee Satisfaction– Retention– Training– Skills
April 12, 2023
Learning & Growth Measurement Framework
Results
EmployeeProductivity
EmployeeRetention
ClimateTechnologyInfrastructure
EmployeeSatisfaction
StaffCompetencies
Enablers
Core Measurements
April 12, 2023
Measures• Employee Satisfaction
– Satisfaction rating– Suggestions per employee– Improvement projects implemented/employee
• Employee Productivity– Revenue per employee– Value added per employee– Output produced to employee compensation
• Employee skill/competency building– Skill matrix score
April 12, 2023
Barriers to Strategic Implementation
You Can’t Manage Strategy With a System Designed for Tactics
Only 5% of the work force understands the strategy
60% of organizations don’t link budgets to strategy
Only 25% of managers have incentives linked to strategy
85% of executive teams spend less than one hour per month
discussing strategy
9 of 10 companies fail
to execute strategy
The People Barrier
The Vision Barrier
The Management Barrier
The Resource Barrier
LinkageAlignment
Key Business Objectives(Business Plans)
Vision
Strategic Goals
Key Business Processes
Learning
Process
CSF's
BalancedBusinessScorecard(BBS)
KeyPerformanceIndicators(KPI's)
Fin. $$
BalancedBusinessScorecard
Cust.
Developing the Scorecard
April 12, 2023
Key Pitfalls to Avoid
• Middle management task force
• Not driven by senior executive team
• Only one or a few individuals involved
• Too long a development process (allowing the “best” to be the enemy of the “good”)
• Delay introduction because of missing measurements
• Static not dynamic process
• Treating the BSC as an EIS
• Measurement to control; not to communicate
• Management dictating actions vs. employee improvisation to achieve desired outcomes
• For management only, not shared with all employees
Process Philosophy
Thank You
Questions?
April 12, 2023