Balanced Scorecards For The Busy Business Person

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  • Balanced Scorecards For The Busy Business Person

    1. 1. Balanced Scorecards for the Busy Business Person Warren J. Rutherford Rutherford Advisors, Inc.
    2. 2. What is a Balanced Scorecard? <ul><li>A strategic planning & management system. </li></ul><ul><li>Used to align business activities to - </li></ul><ul><ul><li>business vision and strategy, </li></ul></ul><ul><ul><li>improve internal and external communication, </li></ul></ul><ul><ul><li>monitor performance against goals. </li></ul></ul>
    3. 3. Why is it used? <ul><li>1978 NYU Stern School of Business Study (5,000 companies) </li></ul><ul><li>95% correlation between balance sheet and business value </li></ul>95%
    4. 4. Why is it used? <ul><li>2005 NYU Stern School of Business Study </li></ul><ul><li>28% correlation between balance sheet and business value </li></ul><ul><li>Intangibles – the 72% </li></ul><ul><ul><li>Intellectual Property </li></ul></ul><ul><ul><li>Strategy </li></ul></ul><ul><ul><li>Brand </li></ul></ul><ul><ul><li>Systems </li></ul></ul><ul><ul><li>Processes </li></ul></ul><ul><ul><li>Access to Capital </li></ul></ul><ul><ul><li>Off balance sheet items </li></ul></ul><ul><ul><li>Customer reputation </li></ul></ul><ul><ul><li>Executive Team </li></ul></ul>72% 28%
    5. 5. Why is it used? <ul><li>Financial measures not enough </li></ul><ul><li>Need to measure value from knowledge -centric activities and perspectives </li></ul><ul><li>*Balanced Scorecard Institute </li></ul>
    6. 6. What does it measure? <ul><li>Perspectives in each company concerning – </li></ul><ul><li>Learning & Growth, </li></ul><ul><li>Business Process, </li></ul><ul><li>Customer, & </li></ul><ul><li>Financial. </li></ul>
    7. 7. Why is that important to you? <ul><li>Only 5% of a workforce understands their company’s strategy. </li></ul><ul><li>Only 15% of senior management spends more than 1 hour a month defining strategy and aligning operations to it. </li></ul><ul><li>Only 25% have their operations aligned to the strategy. </li></ul><ul><li>Only 40% align company from budget to strategy. </li></ul><ul><li>David Norton, Balanced Scorecard Report, Vol. 3, No. 5 (Sep/Oct 2001) </li></ul>
    8. 8. <ul><li>W hat is it that makes us valuable and profitable? </li></ul><ul><li>How can we identify, quantify, and measure the intangible assets so that we can increase value and our performance ? </li></ul>The Questions companies have to ask themselves today are:
    9. 9. Learning & Growth Perspective <ul><li>Employee training. </li></ul><ul><li>Company cultural attitudes toward individual & corporate self-improvement. </li></ul><ul><li>Workforce alignment - </li></ul><ul><ul><li>Person/future fit (selecting for the long-term contributions of a person to the business’ long-term strategy). </li></ul></ul><ul><ul><li>Formal processes and procedures and professional standards created the best, long-term workforce alignment </li></ul></ul><ul><ul><li>Family-like community created the best, long-term workforce alignment. </li></ul></ul>
    10. 10. Business Process Perspective <ul><li>Internal processes w/ metrics looking at - </li></ul><ul><ul><li>How well is the business running? </li></ul></ul><ul><ul><li>Do products conform to customer requirements (mission)? </li></ul></ul><ul><ul><li>What are your major processes? </li></ul></ul><ul><ul><li>Are they optimized – tasks, time, money? </li></ul></ul><ul><ul><li>Who has participated in their review? </li></ul></ul>
    11. 11. Customer Perspective <ul><li>Customer focus. </li></ul><ul><li>Customer satisfaction. </li></ul><ul><li>Analyze by kinds of customers. </li></ul><ul><li>Analyze the kinds of processes that we use to provide our products & services to those different customer groups. </li></ul>
    12. 12. Financial Perspective <ul><li>Look at change from prior year & objective for following year. </li></ul><ul><li>Analyze significant indicators - </li></ul><ul><ul><li>Revenues, </li></ul></ul><ul><ul><li>Profit, </li></ul></ul><ul><ul><li>COGS, </li></ul></ul><ul><ul><li>Gross Margin, </li></ul></ul><ul><ul><li>Operating Expense, </li></ul></ul><ul><ul><li>Inventory, & </li></ul></ul><ul><ul><li>Return on Assets, etc. </li></ul></ul>
    13. 13. What do you put in the Scorecard? <ul><li>Objectives, </li></ul><ul><li>Measures, </li></ul><ul><li>Targets, & </li></ul><ul><li>Initiatives. </li></ul>
    14. 14. What are some ways to start? <ul><li>There are many ways to start, and there are programs available to assist. </li></ul><ul><li>Develop your vision for a multi-year period . </li></ul><ul><li>Ensure your mission is in alignment with customer needs. </li></ul><ul><li>Develop strategies that complement your vision and mission. </li></ul>
    15. 15. What are some ways to start? <ul><li>Develop objectives that seek annual achievement of these strategies. </li></ul><ul><li>Develop action plans that set and track targets for accomplishment of your initiatives. </li></ul><ul><li>These can be developed by project, by section, division, department, by company. </li></ul><ul><li>Report and discuss monthly to reinforce accountability. </li></ul>
    16. 16. Example <ul><li>The following illustrate an approach by The One Page ® Business Plan to illustrate - </li></ul><ul><ul><li>Development of a Strategy, </li></ul></ul><ul><ul><li>Objectives by the 4 perspectives, and </li></ul></ul><ul><ul><li>Action plans for 1 quarter. </li></ul></ul>
    17. 23. Summary <ul><li>Establish benchmarks that are manageable. </li></ul><ul><li>Manage the data. </li></ul><ul><li>Use the data to improve collaboration, communication, & accountability toward vision, mission, and strategy. </li></ul>

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