Balanced score card a tool of performance management- presentation
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Balanced score card a tool of performance management- presentation Presentation Transcript

  • 1. BALANCED SCORE CARD-A TOOL OF PERFORMANCE MANAGEMENT 15 DEC 2012 December 26, 2013
  • 2. 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 study December 26, 2013
  • 3. 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 perspective December 26, 2013
  • 4. Contd--• Requirement 5- linking the perspectives- the strategic 4 Box Model • Session 4 • Benefits of implementing the balanced scorecard • Traps in implementation • CLOSING REMARKS December 26, 2013
  • 5. PART- I KEYS TO EFFECTIVE PERFORMANCE December 26, 2013
  • 6. 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 December 26, 2013
  • 7. 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 them December 26, 2013
  • 8. 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 December 26, 2013 • Continuous improvement
  • 9. PART II VISION AND VALUES December 26, 2013
  • 10. WHAT -----• IS A VISION? • ARE VALUES? December 26, 2013
  • 11. WHY-----• IS A VISION IMPORTANT? • ARE VALUES IMPORTANT? December 26, 2013
  • 12. 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 December 26, 2013
  • 13. VALUES RELATED TO---• Standards for action • Internal and external relationships • Ethical standards • Self- development • Ideals • Financial matters December 26, 2013
  • 14. 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 December 26, 2013
  • 15. PART III BALANCED SCORE CARD-A CURTAIN RAISER December 26, 2013
  • 16. WHAT YOU MEASURE IS WHAT YOU GET YOU CAN’T IMPROVE WHAT YOU CANNOT MEASURE December 26, 2013
  • 17. What Is a Balanced Scorecard? A Measurement System? A Management System? A Management Philosophy? December 26, 2013
  • 18. 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 December 26, 2013
  • 19. 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 December 26, 2013
  • 20. Advantages Balanced Scorecard because: financial and ... indicators external and ... measures outcomes and ... drivers quantitative and ... December 26, 2013 factors nonfinancial internal performance qualitative
  • 21. Why Balanced Scorecard • Situation – Bias towards Financial Measures – Initiatives not all linkable to financials, hence •Either not undertaken •Or too many initiatives – Top Management need to focus December 26, 2013
  • 22. 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 December 26, 2013
  • 23. December 26, 2013
  • 24. A PICTORIAL REPRESENTATION--The Mission "If we succeed, how will we look to our financial donors?” ”To achieve our vision, how must we look to our customers?” “To satisfy our customers, financial donors and mission, what business processes must we excel at?" “To achieve our vision, how must our people learn, communicate, and work together?” The Mission, rather than the financial / shareholder objectives, drives the organization’s strategy December 26, 2013
  • 25. 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 December 26, 2013
  • 26. METRICS PROVIDE---• STRATEGIC FEEDBACK • DIAGNOSTIC FEEDBACK • TRENDS IN PERFORMANCE OVER TIME • CONTINUOUS FEEDBACK ABOUT THE MEASURES ADOPTED- WHICH METRICS NEED TO BE TRACKED. December 26, 2013
  • 27. Why are Companies Adopting a Balanced Scorecard? • Change The Revenue Growth Strategy The Productivity Strategy “Im prove stability by broadening the sources of revenue from current custom ers” “Improve operating efficiency by shifting custom ers to m ore costeffective channels of distribution” Improve Returns Increase Customer Confidence in Our Financial Advice 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 December 26, 2013 Financial Perspective Improve Operating Efficiency Broaden Revenue Mix Increase Customer Satisfaction Through Superior Execution Customer Perspective Internal Perspective Understand Customer Segments Dev elop New Products Cross-Sell the Product Line Shift to Appropriate Channel Increase Employee Productiv ity Develop Strategic Skills Access to Strategic Information Minimize Problems Provide Rapid Response Learning Perspective Align Personal Goals
  • 28. The Ingredients of Highly Successful Balanced Scorecard Programs 1. Leadership From the Top – – – Create the Climate for Change Create a Common Focus for Change Activities Rationalize and Align the Organization 4. Make Strategy a Continuous Process – Formulate – – Communicate 2. Make Strategy Everyone’s Job – – – – Comprehensive Communication to Create Awareness Align Goals and Incentives Integrate Budgeting with Strategic Planning Align Resources and Initiatives December 26, 2013 STRATEGY Execute Strategic Feedback That Encourages Learning Executive Teams Manage Strategic Themes Testing Hypotheses, Adapting, and Learning Navigate 3. Unlock and Focus Hidden Assets – – Reengineer Work Processes Create Knowledge Sharing Networks
  • 29. CHAIN 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 December 26, 2013 have the will to survive
  • 30. . December 26, 2013
  • 31. The City of Charlotte Corporate-level Linkage Model Customer Perspective Reduce Crime Increase Perception of Safety Improve Service Quality Strengthen Neighborhoods Availability of Safe, Convenient Transportation Maintain Competitive Tax Rates Promote Economic Opportunity Financial Accountability Perspective Expand Non-City Funding Maximize Benefit/Cost Maintain AAA Rating Grow Tax Base Internal Process Perspective Increase Positive Contacts Promote Community Based Problem Solving Learning and Growth Perspective Secure Funding/ Service Partners Enhance Knowledge Management Capabilities Improve Productivity Close Skills Gap Streamline Customer Interactions Increase Infrastructure Capacity Achieve Positive Employee Climate Promote Business Mix
  • 32. TOP-LEVEL METRICS OF SUCCESS •Time to develop next  Time-to-market  Warranty cost •No of times design  Market share  Customer satisfaction modified  Key financials: •Quality standards gen product •Asset Utilization •Service quality.  Sales margin  Operating profit  Return on net assets  Cash flow  Employee satisfaction December 26, 2013
  • 33. COMPANIES THAT HAVE IMPLEMENTED THE BALANCED SCORE CARD • GODREJ • TATA MOTORS • TCS • CASTROL INDIA LTD • PHILIPS ELECTRONICS • INFOSYS • TAJ GROUP OF HOTELS December 26, 2013
  • 34. PART IV THE FINANCIAL PERSPECTIVE December 26, 2013
  • 35. 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 December 26, 2013
  • 36. GROWTH STAGE • PRODUCTS HAVING GROWTH POTENTIAL • COMMITMENT OF RESOURCES • EXPAND PRODUCTION CAPACITY • OPERATING CAPABILITIES • INVESTMENT IN SYSTEMS/INFRASTRUCTIURE • MORE CASH OUTFLOW December 26, 2013
  • 37. SUSTENANCE STAGE • ATTRACT INVESTMENTS • ENHANCING IMPROVEMENTS • ENHANCING PROFITABILITY • ROI • ROCE • EVA December 26, 2013
  • 38. HARVEST STAGE • ENOUGH TO MAINTAIN EQUIPMENT • NO EXPANSION • INVESTMENT S WITH A VIEW TO SHORT TERM RETURNS • PAY BACKS • MAXIMIZE CASH FLOW December 26, 2013
  • 39. 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 December 26, 2013
  • 40. Core Measures Market Share Customer Acquisition Perceived quality December 26, 2013 Customer Value Perceived image Customer Satisfaction Customer Retention
  • 41. Internal Business Processes Identify the market Create the Product/ Service Offering Innovation Process •Operating Processes December 26, 2013 Build the Deliver the Products/ Products/ Services Services Service the Customer
  • 42. 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 December 26, 2013
  • 43. Learning & Growth Measurement Framework Core Measurements Results Employee Retention Employee Productivity Employee Satisfaction Enablers Staff Competencies December 26, 2013 Technology Infrastructure Climate
  • 44. 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 December 26, 2013
  • 45. Barriers to Strategic Implementation The Vision Barrier Only 5% of the work force understands the strategy The People Barrier Only 25% of managers have incentives linked to strategy 9 of 10 companies fail to execute strategy The Management Barrier 85% of executive teams spend less than one hour per month discussing strategy 60% of organizations don’t link budgets to strategy The Resource Barrier You Can’t Manage Strategy With a System Designed for Tactics
  • 46. Developing the Scorecard Vision n lig A CSF's Strategic Goals t en m Key Business Objectives (Business Plans) Lin kag e Fin. $$ Balanced Business Scorecard (BBS) December 26, 2013 Cust. Balanced Business Scorecard Learning Process Key Business Processes Key Performance Indicators (KPI's)
  • 47. Key Pitfalls to Avoid Process • • • • • • • 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 Philosophy • • • Measurement to control; not to communicate Management dictating actions vs. employee improvisation to achieve desired outcomes For management only, not shared with all employees
  • 48. Thank You Questions? December 26, 2013