The Balanced Scorecard Lab Case . . .


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  • The Balanced Scorecard supplements traditional financial measures with criteria than measure performance from three additional perspectives – customer, internal business process, and internal learning and growth. It therefore enables companies to track financial results while simultaneously monitoring progress in building capabilities and acquiring the intangible assets they would need for future growth.
  • These Strategic Themes represent the challenges we face as a company. We must address these if we are to be successful in the future and have break through performance. Leverage Thru Synergy to Grow Align the culture to meet specific client needs Cross-selling across our division and business unit lines Sharing resources & information from multiple locations Establish Key Corporate Accounts (clients) Increase Value to Customer Develop new services to meet customer needs Provide superior customer service and value Improve understanding of emerging customer needs (quality) Performance/Process Leadership What do we need to do better, faster, different to help clients “Navigate…” Market Leader/External Focus Understand the changing business environment Understand the impact technology has on our business/processes Stay abreast with changing customer climate
  • In order to realize NTS’s Vision, we need a map which defines the way. This slide shows steps of each BSC Perspective. Talk about Learning goals/objective from slide . These are our challenges: How do we create a culture of employees focused on the customer? How do we create a culture of employees empowered to make decisions and changes to serve the customer? How do we continue to learn and train our employees for future business? How do we gather market/customer intelligence and act on it? Leave them with this thought, As we shift our culture & learn & grow as individuals, we become better at creating new processes to service the customer, which increases revenue for NTS. If ideas and comments come up, push back. Invite them to discuss their ideas with their division managers Talk about Internal Process goals/objective from slide. These are our challenges: How good are our processes at servicing our customers? How effectively do our processes serve our internal personnel, business goals and our goal of sharing information? How do we create & rollout new processes for new customers, new markets or new services? (Telecom examples). Leave them with this thought, As our processes become more effective & efficient, we provide better service to our customers, which increase operating margins. If ideas and comments come up, push back. Invite them to discuss their ideas with their division managers. Talk about Customer goals/objective from slide. Think about this… How effectively do YOU service your clients day to day? How can you CHANGE to better service the client? Leave them with this thought, If ideas and comments come up, push back. Invite them to discuss their ideas with their division managers. Talk about Financial goals/objective from slide. Here’s your challenge… Think about how you can help make money day to day in everything you do! How can YOU change to meet our collective goals. Leave them with this thought, If ideas and comments come up, push back. Invite them to discuss their ideas with their division managers. As you can see from the pyramid, each layer builds upon the other with learning & growth being the foundation, and all the layers leading to the ultimate goal of increasing NTS Market Value.
  • The Balanced Scorecard Lab Case . . .

    1. 1. The Balanced Scorecard
    2. 2. Lab Case . . . <ul><li>Client acquires company with hidden $5M business </li></ul><ul><li>Issue: How can we develop a growth plan </li></ul><ul><li>Discovery: Business and Management Is A Disaster </li></ul><ul><li>How to Organize The Problem </li></ul><ul><li>How to Organize Potential Solutions </li></ul><ul><ul><li>Use the Balanced Scorecard for Organization </li></ul></ul>
    3. 3. Scorecard Perspective On Lab Business Low Margin Projects Losing Repeat Business Fixed Contract Bids Short Capitalization Don’t See Emerging Needs Higher Cost Custom Projects Not Attracting Best Projects Sales System Out Of Control Inadequate QC and CS Losing Key People Financial Customer Systems Knowledge Have Capable People Lacking Skill Development Not Bringing In Key Skills No Knowledge Alliances Need Vision & Strategy
    4. 4. Your Assignment Figure out how to organize this into a cause-effect definition of the problem.
    5. 5. Strategic Learning as Leadership Learn Strategy Creation Focus Align Execute Strategy Implementation
    6. 6. Focus = Strategic Choices & Vision Customer Focus Which customer will we serve? What is their hierarchy of needs? What will we offer them? The Winning Proposition What will we do differently or better than our competition? Greater Customer Value Superior Profits Five Key Priorities
    7. 7. Align the Organization Measures and Rewards Structure and Process People Culture STRATEGY
    8. 8. Most Strategies Fail! . . . Why? <ul><li>45% Failures in Implementation </li></ul><ul><li>26% Failures in Concepts Used To Formulate </li></ul><ul><li>21% Inadequate Info / Poor Assumptions </li></ul><ul><li>8% Failures in Analysis </li></ul>
    9. 9. Issues In Implementation <ul><li>Human Side Of Managing Complex Change </li></ul><ul><ul><li>Altering Perceptions </li></ul></ul><ul><ul><li>Organizational Learning </li></ul></ul><ul><ul><li>Assumes People Want To Perform If Guided </li></ul></ul><ul><li>Change Metrics </li></ul><ul><ul><li>Altering Behavior Based On Reward Systems </li></ul></ul><ul><ul><li>Chaos Management (feedback loops) </li></ul></ul><ul><ul><li>Assumes People Follow Self-Interest </li></ul></ul>Most Companies Go Both Ways Simultaneously
    10. 10. Be Careful What You Ask For … You Might Just Get It! Anonymous
    11. 11. We Have Always Had Metrics <ul><li>Financial Measures </li></ul><ul><ul><li>Revenue / Revenue Growth </li></ul></ul><ul><ul><li>Profit (Return on Net Assets BIT) </li></ul></ul><ul><ul><li>Cash Flow </li></ul></ul><ul><ul><li>EVA (Economic Value Added) </li></ul></ul><ul><li>Market Measures </li></ul><ul><ul><li>Customer Perceived Quality / Satisfaction </li></ul></ul><ul><ul><li>Market Share </li></ul></ul>Lets Explore This Further . . .
    12. 12. Return on Net Investment (Before Interest & Taxes) <ul><li>Net Investment </li></ul><ul><ul><li>Includes Depreciated Assets </li></ul></ul><ul><ul><ul><li>Does Return Cover Replacement of Assets? </li></ul></ul></ul><ul><ul><ul><li>Would You Want To Replace Assets? </li></ul></ul></ul><ul><ul><ul><li>A ‘70’s / 80’s Problem That Led To Business Apathy </li></ul></ul></ul><ul><li>Profit </li></ul><ul><ul><li>Financial Focus on Past </li></ul></ul><ul><ul><li>Not Linked To Strategy and Operations </li></ul></ul><ul><ul><li>Can Be Very Short-Term Focused </li></ul></ul>
    13. 13. Cash Flow <ul><li>Net Income minus Change In Net Investment </li></ul><ul><li>Used Heavily In Portfolio Analysis Models </li></ul><ul><ul><li>BCG Growth-Share Matrix </li></ul></ul><ul><ul><li>Explore Portfolio Investment Balance </li></ul></ul><ul><ul><ul><li>Guide who Generates, Who Holds, Who Can Use Cash </li></ul></ul></ul><ul><li>Discounted CF Used To Judge Investments </li></ul><ul><ul><li>Problem: What Discount Rate? </li></ul></ul><ul><ul><li>Problem: Different Assumptions Give Wildly Different Calculations ( Who can calculate future?) </li></ul></ul>
    14. 14. EVA: Economic Value Added <ul><li>Market Price / Net Book Value </li></ul><ul><ul><li>Management of Balance Sheet </li></ul></ul><ul><li>Market Price determined by: </li></ul><ul><ul><li>Overall Market Valuation </li></ul></ul><ul><ul><li>Growth In Income </li></ul></ul><ul><ul><li>Growth In Investment </li></ul></ul><ul><li>CEO’s Love This Measure In An Up Market </li></ul><ul><li>Is IT Real Or Is It ________? </li></ul>
    15. 15. Market Share <ul><li>Your Sales Value Relative To Competition </li></ul><ul><li>Can’t Deposit MS In The Bank! </li></ul><ul><ul><li>So Why Do We Want It? </li></ul></ul><ul><ul><li>It Leads To Profit . . . So We Believe! </li></ul></ul>ROI MS
    16. 16. Customer Perceived Quality <ul><li>A ‘Soft’ Measure (Perception/Belief) </li></ul><ul><li>Again . . . Can’t Be Deposited </li></ul><ul><li>Importance </li></ul><ul><ul><li>Research Shows It’s Tied To Price </li></ul></ul><ul><ul><li>Research Shows It’s Tied To Purchase Intent </li></ul></ul><ul><ul><li>Research Shows It’s Tied To ‘ Brand Loyalty’ </li></ul></ul><ul><ul><ul><li>Note the term “Brand Equity” </li></ul></ul></ul><ul><ul><li>Research: Quality Ultimately Related To Profit </li></ul></ul>
    17. 17. Measures of Success <ul><li>From Financial To Market </li></ul><ul><li>From Abstract To Actionable </li></ul><ul><li>From Centralized Management To Distributed Management </li></ul><ul><li>From Historical To Predictable </li></ul>
    18. 18. What is a Balanced Scorecard? <ul><li>Strategic Management System </li></ul><ul><li>Focus on Mission / Vision </li></ul><ul><li>Maps What Objectives Are Consistent With Attaining Mission / Vision </li></ul><ul><li>Sets Objectives to Meet Mission / Vision </li></ul><ul><li>Sets Metrics To Measure Success </li></ul><ul><li>Aligns Everyone / Every Process To Mission/ Vision </li></ul>Let’s look at alignment . . .
    19. 19. The Balanced Scorecard: A Framework For Strategic Management Financial How we look to shareholders Customer How we look to our customers Processes What activities must we excel at Knowledge How do we learn & grow Vision & Strategy
    20. 20. The Balanced Scorecard Should Tell The Story Of Your Strategy
    21. 21. Balanced Scorecard Puts Strategy -Not Control At The Center Of Measurement Systems
    22. 22. Criteria for a good scorecard:   1. Recognition that BSC is not just a &quot;metrics&quot; project; it's a change project . Communicate New Strategic Direction Develop Stretch Targets Transform functional specialists into cross-functional, problem-solving teams   2. The Balanced Scorecard strategic management system works best when used to communicate vision and strategy Chain of Cause and Effect Relationships that Represent Strategy Good Mix of Lead and Lag Indicators – Lead indicators indicate what is different about the strategy Programs (Quality, Customer Satisfaction, Innovation Goals) Linked To Financials     3. Successful BSC leaders felt that their most important challenge was communication
    23. 23. For Each Perspective: Financial Objectives Measures Targets Initiatives Responsibility Budget 1. 2. 3. Customer Objectives Measures Targets Initiatives Responsibility Budget 1. 2. 3.
    24. 24. Case Example
    25. 25. Financial Customer Internal Processes Learning/ Growth NTS Strategic Themes Helping Customers Navigate a Short Course to Global Markets Leverage Thru Synergy (Growth) Increase Value To Customer Performance & Process Leader Market Leader: External Focus
    26. 26. NTS Strategy Map Navigate a Short Course to Global Markets Align Culture Develop Pipeline For Technical Ideas & Market Scanning Personal & Professional Growth & Development Best In Class Performance Improve Understanding of Customer Future Needs Outstanding Customer Service Processes Best Practices via Tech Utilization Total Solutions Provider (Synergy) New Services/ Revenue Streams Outstanding Customer Service Increase Revenues Increase Operating Margins Increase Market Value of NTS Leverage Through Synergy Market Centric Customer Service Performance (Process) Leadership Financial Customer Processes Learning
    27. 27. Key Concepts <ul><li>Business Ecosystem </li></ul><ul><li>Strategic Business Unit </li></ul><ul><li>Benefit Segmentation </li></ul><ul><li>Porter’s Five Forces </li></ul><ul><li>Types of Assets </li></ul><ul><li>Capabilities </li></ul><ul><li>Competencies </li></ul><ul><li>Sustainability of Intangible Investments </li></ul><ul><li>Value Chain (components and use) </li></ul><ul><li>Business Model </li></ul><ul><li>SWOT Analysis </li></ul><ul><li>Key Success Factors </li></ul><ul><li>Growth Modes </li></ul><ul><li>Internal Growth Options </li></ul><ul><li>Economies of Scale </li></ul><ul><li>Economies of Scope </li></ul><ul><li>Balanced Scorecard </li></ul>
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