Crowdsourced Business                                                                           Presentation Design Servic...
PPT Lab (www.pptlab.com) is the only crowdsourced                                             presentation design service....
Contents     Overview                                                                 4     Four Processes              ...
Contents     Overview     Four Processes         – Translating the Vision         – Communicating and Linking         – ...
The Balanced Scorecard takes a “balanced” approach to strategic management—combining both financial and non-financial pers...
Companies should use the BSC approach as its new strategic management system Overview – New Strategic Management System   ...
Four management processes tie short-term activities to long-term objectives Overview – Four Processes                  The...
This diagram illustrates the iterative process among the four processesFour Processes – Framework Diagram                 ...
BSC allows for the strategic vision to be translated and communicated to the organization—and assists in the business plan...
BSC measures the organization’s performance against 4 perspectivesOverview – Four Perspectives             The BSC approac...
Contents     Overview     Four Processes         – Translating the Vision         – Communicating and Linking         – ...
1                   2 Communication                                                                                       ...
1                    2 Communication                                                                                      ...
1                   2 Communication                                                                                       ...
1                   2 Communication                                                                                       ...
1                   2 Communication                                                                                       ...
1                   2 Communication                                                                                       ...
Contents     Overview     Four Processes         – Translating the Vision         – Communicating and Linking         – ...
This 26-month timeframe portrays how a company can adopt BSC as its strategic management system … Example – BSC Strategic ...
… By year 2, we see BSC has now become a routine part of the strategic management process Example – BSC Strategic Manageme...
Example – BSC Strategic Management Process (3 of 3)                                                                       ...
An example of a Personal Scorecard—note how it contains both financialand non-financial objectivesExample – Personal Score...
This diagram illustrates how measures from the Four Perspectives are interlinked and drive each other Example – Linking Me...
BSC Implementation 2-Year Timeline TemplateTemplate – BSC Implementation Timeline (1 of 2)                                ...
BSC Implementation 2-Year Timeline TemplateTemplate – BSC Implementation Timeline (2 of 2)                                ...
Personal Scorecard Template  CORPORATE OBJECTIVES                                                                        ...
PPT Lab (www.pptlab.com) is the only crowdsourced                                             presentation design service....
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Balanced Scorecard

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This document explains the Balanced Scorecard business framework and how to use it as a strategic management system. It includes instructional slides explaining the methodology, in addition to examples and slide templates. Topics include the Four Processes, Four Perspectives, Personal Scorecard, and Strategic Learning.

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http://pptlab.com/ppt/HBR-Using-the-Balanced-Scorecard-as-a-Strategic-Management-System-19

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  1. 1. Crowdsourced Business Presentation Design ServiceBalanced ScorecardUsing the Balance Scorecard as aStrategic Management SystemThis document explains the Balanced Scorecard business framework and how touse it as a strategic management system. It includes instructional slides explainingthe methodology, in addition to examples and slide templates. Topics include theFour Processes, Four Perspectives, Personal Scorecard, and Strategic Learning. November 27, 2012ORIGINAL PROJECT DETAILShttp://pptlab.com/ppt/HBR-Using-the-Balanced-Scorecard-as-a-Strategic-Management-System-19
  2. 2. PPT Lab (www.pptlab.com) is the only crowdsourced presentation design service. Get consulting-quality presentations at a fraction of the cost!www.PPTLab.comsupport@pptlab.com Each month, we will create well over 50 slides of for our members. As a member, you will drive what business slides we create by submitting your own presentation projects to our team. All presentations will be created by a team of management consultants and follow the Consulting Presentation Framework.PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 2
  3. 3. Contents  Overview 4  Four Processes 11 – Translating the Vision 12 – Communicating and Linking 14 – Business Planning 15 – Feedback and Learning 16  Examples and Templates 18PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 3
  4. 4. Contents  Overview  Four Processes – Translating the Vision – Communicating and Linking – Business Planning – Feedback and Learning  Examples and TemplatesPPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 4
  5. 5. The Balanced Scorecard takes a “balanced” approach to strategic management—combining both financial and non-financial perspectives Executive Summary The Balanced Scorecard (BSC) is a strategy performance management tool—a semi-standard structured report, supported by proven design methods and automation tools, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions. It was developed by Robert Kaplan and David Norton. The BSC approach takes a “balanced” approach by supplementing traditional financial measures with 3 key non-financial areas: • A company’s relationship with its customers; • Its key internal business processes; and • Its learning and growth. Financial Customer Financial Customer Measures Relationships Measures Relationships VS Internal Learning and Internal Learning and Processes Growth Processes Growth TRADITIONAL SCORECARD BALANCED SCORECARD This approach enables companies to track financial results, while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they need for future growth.Source: 2GC Balanced Scorecard Usage Survey, Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 5
  6. 6. Companies should use the BSC approach as its new strategic management system Overview – New Strategic Management System 1. Clarify and update the overall corporate The BSC provides a strategy framework for managing Companies should use the 2. Communicate strategy throughout the the implementation of Balanced Scorecard as a company strategy, while also foundation to an 3. Align departmental and individual goals allowing the strategy integrated and iterative with the strategy itself to evolve in strategic management 4. Link strategic objectives to long-term response to changes in targets and annual budgets the company’s system to perform the following functions: 5. Identify and align strategies initiatives competitive, market, and 6. Conduct periodic performance reviews to technological learn about and improve strategy environments.Source: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 6
  7. 7. Four management processes tie short-term activities to long-term objectives Overview – Four Processes The Balanced Scorecard relies on 4 key management processes to tie short-term activities with long-term objectives: 1 2 Translating the Communicating and Vision Linking 3 4 Feedback and Business Planning LearningSource: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 7
  8. 8. This diagram illustrates the iterative process among the four processesFour Processes – Framework Diagram 1 Translating the Vision • Clarifying the vision • Gaining consensus 2 Communicating and Linking 4 Feedback and Learning • Communicating and educating • Articulating the shared vision Balanced • Setting goals • Supplying strategic feedback Scorecard • Linking rewards to performance • Facilitating strategy review and measures learning 3 Business Planning • Setting targets • Aligning strategic initiatives • Allocating resources • Establishing milestonesPPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 8
  9. 9. BSC allows for the strategic vision to be translated and communicated to the organization—and assists in the business planning process Four Processes – Description 1 • By tying visions and missions statements to measurable scorecard, the Balanced Scorecard Translating the forces management to come to agreement on how to operationalize their lofty visions into metrics Vision • This also helps build a consensus around the organization’s vision and strategy • The scorecard becomes a communication tool as it is distributed up and down the 2 organization—in fact, as the scorecard is passed down the organization, the overarching Communicating and strategic objectives and measures and translated into objectives and measures appropriate Linking to each particular group • Tying these targets to individual performance and compensation systems creates “personal scorecards” 3 • For most organizations, the business planning processes of strategic planning and budgeting are two separate procedures—the Balanced Scorecard approach forces Business Planning companies to integrate the two processes • This ensures financial budgets support strategic goals—moreover, organizations can identify the most influential non-financial drivers of the financial objectives and set milestones to gauge progress of these drivers 4 • The Balanced Scorecard provides a mechanism for strategic feedback and review—it allows Feedback and for continual strategic refinements Learning • Information that can be tracked by the scorecard for this include feedback on products, new learnings about internal processes, and technological discoveriesSource: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 9
  10. 10. BSC measures the organization’s performance against 4 perspectivesOverview – Four Perspectives The BSC approach evaluates and measures an organization’s performance across 4 perspectives—1 financial and 3 non-financial To success 1 2 To achieve our financially, how vision, how should should we appear we appear to our to our shareholders? Financial Customer customers? Measures Relationships To satisfy our To achieve our shareholders and customers, what 3 4 vision, how will we sustain our ability processes must we excel at? Internal Business Learning and to change and improve? Processes GrowthPPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 10
  11. 11. Contents  Overview  Four Processes – Translating the Vision – Communicating and Linking – Business Planning – Feedback and Learning  Examples and TemplatesPPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 11
  12. 12. 1 2 Communication Translating Translating the Vision “translates” the vision the Vision and Linking 3 4 Feedback and statement into operational terms Business Planning Learning Translating the Vision OVERVIEW EXAMPLES  This first process helps management build a • Metro Bank is the result of a merger consensus around the company’s vision • The executive team thought it had reached agreement on the new organization’s and strategy overall strategy: “to provide superior service to targeted customers”  It allows the company to translate vague visionary statements (e.g. “best in class,” • While formulating the measurements of the customer-perspective section of the “number one supplier”) into operational Balanced Scorecard, it became apparent that although the 25 senior executives terms that provide useful guidance to action agreed on the words of the strategy, each one had a different definition of the at the lower levels “superior service” and a different image of the “targeted customers”  In order for employees to act on the vision • The Balanced Scorecard creation process forced the 25 execs to clarify the and strategy statements, those statements meaning of the strategy statement—they developed scorecard measures for the must be expressed as a set of integrated specific products and services that should be delivered to customers in the and cohesive set of objectives and measures that describe the long-term targeted segments, as well as for the relationship the bank should build with drivers of success customers in each segment • The scorecard also highlighted gaps in employees’ skills and in information systems that the bank would have to close in order t deliver the selected value propositions to targeted customers Often, a large gap exists between the mission statement and employees’ knowledge of how their day-to-day actions contribute to the company’s vision.Source: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 12
  13. 13. 1 2 Communication TranslatingTranslating the vision involves measuring against the Vision and Linking 3 4 Feedback and4 perspectives Business Planning LearningTranslating the Vision – Four Perspectives FINANCIAL MEASURES “To success Objectives Measures Targets Initiatives financially, how should we appear to our shareholders?”CUSTOMER RELATIONSHIPS INTERNAL BUSINESS PROCESSES“To achieve our vision, how should we appear to “To satisfy our shareholders and customers,our customers?” what business processes must we excel at?” Objectives Measures Targets Initiatives Objectives Measures Targets Initiatives Translating the Vision LEARNING AND GROWTH “To achieve our Objectives Measures Targets Initiatives vision, how will we sustain our ability to change and improve?”PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 13
  14. 14. 1 2 Communication Translating Communicating and Linking ties objectives from all the Vision and Linking 3 4 Feedback and levels of the company to its long-term goals Business Planning Learning Communicating and Linking OVERVIEW EXAMPLES  This second process allows management to • One company involved 3 layers of management in the creation of its Balanced communicate its strategy up and down the Scorecard—the senior execs formulated the financial and customer objectives; the organization and link it to departmental and next two levels of management were then responsible for formulating the internal individual objectives business process and learning-and-growth objectives that would drive  The scorecard ensures all levels of the achievement of the financial and customer goals organization understand the long-term • For instance, knowing the importance of satisfying customers’ expectations of on- strategy and that both departmental and individual objectives are aligned with it time delivery, the broader group identified several internal businesses (e.g. order processing, scheduling, fulfillment) in which the company had to excel  To align employee’s individual performances with the overall corporate • Note: broad participation takes longer, but offers several advantages: 1) strategy, BSC users generally engage in 3 information from a larger number of managers if incorporated into the internal activities: 1) communication and educating, objectives; 2) management gain a better understanding of the company’s long- 2) setting goals, and 3) linking rewards to term objectives; 3) broad participation builds a stronger commitment to achieving performance measures those goals • Pioneer Petroleum uses its scorecard as the sole basis for calculating incentive compensation—it ties 60% of bonuses to 4 financial indicators (ROC, profitability, cash flow, operating cost) and 40% on indicators of customer satisfaction, dealer satisfaction, employee satisfaction, and environmental responsibility This phase not only allows employees at all levels to understand how they contribute to the company’s long term goals—but also tie their performance incentives to these goals.Source: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 14
  15. 15. 1 2 Communication Translating Business Planning integrates the company’s business the Vision and Linking 3 4 Feedback and and financial plans Business Planning Learning Business Planning OVERVIEW EXAMPLES  Most companies have separate processes • Shortly after the merger, Metro Bank launched 70+ different initiatives—these for strategic planning and for resource initiatives were intended to produce a more competitive and successful institution, allocation and budgeting—this third process but they were not adequately integrated into the overall strategy enables companies to integrate their business and financial plans • After building their BSC, the company’s managers dropped many of these initiatives (e.g. marketing effort directed at individuals with high net worth) and  A separate resource-allocation and budgeting process run by finance sets consolidated others into initiatives that were better aligned with the company’s financial numbers that generally bear little strategic objectives relation to the targets in the strategic plan • Once the strategy is defined and the drivers are identified, the scorecard  Also, companies often undertake numerous, influences managers to concentrate on improving or re-engineering those diverse initiatives that don’t integrate well to processes most critical to the organization’s strategic success—this is how a achieve the company’s strategic goals scorecard most clearly links and aligns action with strategy  When using the Balanced Scorecard’s measures as the basis for resource allocation and priority setting, management can undertake and coordinate only those initiatives that the company toward its long- term strategic objectives The final step in linking strategy to actions is to establish specific short-term targets—i.e. milestones—for the BSC measures.Source: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 15
  16. 16. 1 2 Communication Translating Feedback and Learning allows the company for the Vision and Linking 3 4 Feedback and strategic learning and double-loop learning Business Planning Learning Feedback and Learning OVERVIEW EXAMPLES  The fourth process gives organizations the • A CEO of an engineering company said: “With the Balanced Scorecard, I can capacity for strategic learning continually test my strategy. It’s like performing real-time research.”  In addition to purely budgeted financial • Most companies today operate in a turbulent competitive environment with goals, a Balanced Scorecard at the center complex strategies that, though valid when launched, may lose their validity as of a company’s management systems market conditions change—the BSC framework gives management the ability to allows management to monitor short-term results from the three additional know at any point in its implementation whether the strategy they have formulated perspectives—1) customers, 2) internal is, in fact, working and if not, why not business processes, and 3) learning and • Budget reviews and financially based management tools do not allow this, as they growth—and evaluate strategy under the address performance from only the financial perspective; also, they do not involve light of recent performance strategic learning  In other words, the scorecard enables companies to modify their strategies to reflect real-time learning BSC allows a company for “double-loop learning” (learning that produces a change in people’s assumptions about cause-and-effect relationships).Source: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 16
  17. 17. 1 2 Communication Translating The Balanced Scorecard supplies 3 elements that are the Vision and Linking 3 4 Feedback and essential to strategic learning Business Planning Learning Feedback and Learning – Elements to Strategic Learning Balanced Scorecard 1 2 3 • The scorecard articulates the • The scorecard supplies the essential • The scorecard facilitates the strategy company’s shared vision—defining in strategic feedback system review that is essential to strategic clear and operational terms the results • A strategic feedback system should be learning that the company, as a team, is trying able to test, validate, and modify the • With its specification of the causal to achieve hypotheses embedded in a business relationships between performance • It communicates a holistic model that unit’s strategy—by establishing drivers and objectives, the scorecard links individual efforts and milestones within the business allows executives to use the accomplishments to business unit planning process, management is company’s periodic review sessions to objectives forecasting the relationship between evaluate the validity of the business changes in performance drivers and unit’s strategy and quality of its the associates changes in one or more execution specific goalsSource: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 17
  18. 18. Contents  Overview  Four Processes – Translating the Vision – Communicating and Linking – Business Planning – Feedback and Learning  Examples and TemplatesPPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 18
  19. 19. This 26-month timeframe portrays how a company can adopt BSC as its strategic management system … Example – BSC Strategic Management Process (1 of 3) Communication to middle Develop business unit Refine the vision. The management. The top scorecards. Using the review of business unit three layers of corporate scorecard as a scorecards identifies management (100 people) template, each business several cross-business are brought together to unit translates its strategy issues not initially included learn about and discuss the into its own scorecard. in the corporate strategy. new strategy. The The corporate scorecard is Balanced Scorecard is the updated. communication vehicle. MONTHS 1 2 3 4 5 6 7 8 9 10 11 12 Clarify the vision. Ten members Eliminate non-strategic investments. The Review business unit of a newly formed exec team work corporate scorecard, by clarifying strategic scorecards. The CEO and together for 3 months. A Balanced priorities, identifies many programs that are the exec team review the Scorecard is developed to not contributing to the overarching strategy. individual business units’ translate a generic vision into a scorecards. The review strategy that is understood and Launch corporate change programs. The permits the CEO to can be communicated. The corporate scorecard identifies the need for participate knowledgeably process helps build consensus cross-business change programs. They are in shaping business unit and commitment to the strategy. launched while the business units prepare strategy. their scorecards.Source: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 19
  20. 20. … By year 2, we see BSC has now become a routine part of the strategic management process Example – BSC Strategic Management Process (2 of 3) This step is performed on a regular Communicate the Update long-range plan schedule. The BSC is now a routine BSC to the company. and budget. Five-year part of the management process. At the end of year one, goals are established for when the management each measure. The teams are comfortable investments required to meet with the strategic those goals are identified approach, the and funded. The first year of scorecard is distributed the 5-year plan becomes the to the entire company. annual budget. 13 14 15 16 17 18 19 20 21 22 23 24 Establish individual Conduct monthly and quarterly reviews. After corporate approval of the performance objectives. The top business unit scorecards, a monthly review process, supplemented by 3 layers of management link their quarterly reviews that focus more heavily on strategic issues, begins. This is individual objectives and incentive an ongoing process. compensation to their scorecards.Source: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 20
  21. 21. Example – BSC Strategic Management Process (3 of 3) This step is performed on a regular Conduct annual strategy review. At the schedule. The BSC is now a routine start of the third year, the initial strategy part of the management process. has been achieved and the corporate strategy requires updating. The executive committee lists ten strategic issues. Each business unit is asked to develop a position on each issue as a prelude to updating its strategy and scorecard. 25 26 27 28 … … … … … … … … Link everyone’s performance to the Balanced Scorecard. All employees are asked to link their individual objectives to the Balanced Scorecard. The entire organization’s incentive compensation is linked to the scorecard.Source: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 21
  22. 22. An example of a Personal Scorecard—note how it contains both financialand non-financial objectivesExample – Personal Scorecard CORPORATE OBJECTIVES  Double our corporate value in 5 years Name:  Increase our earnings by an average or 20% per year Location:  Achieve an internal rate of return 2% above the cost of capital Team/Individual Objectives Corporate Targets Scorecard Measures Business Unit Targets and Initiatives 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 1. Financial 100 120 160 180 220 Earnings in ($ USD MM) 2. 100 420 220 230 235 Net cash flow 100 85 80 75 72 Overhead and operating expenses 3. Operating 10 78 75 73 70 Production costs per barrel 4. 100 95 93 90 85 Development costs per barrel Team/Individual Measures Targets 5. 1. 2. 3. 4. 5.PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 22
  23. 23. This diagram illustrates how measures from the Four Perspectives are interlinked and drive each other Example – Linking Measures from Four Perspectives (+) FINANCIAL Return on (–) Accounts Capital Employed Receivable CUSTOMER Operating Expense (–) Customer Satisfaction (+) INTERNAL BUSINESS PROCESSES (+) Rework LEARNING AND GROWTH Employees’ (–) Suggestions Employees’ Morale (+)Source: Using the Balanced Scorecard as a Strategic Management System, Kaplan and Norton (2005)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 23
  24. 24. BSC Implementation 2-Year Timeline TemplateTemplate – BSC Implementation Timeline (1 of 2) Communication to middle Develop business unit Refine the vision. management. scorecards.. MONTHS 1 2 3 4 5 6 7 8 9 10 11 12 Clarify the vision. Eliminate non-strategic investments. Review business unit scorecards. Launch corporate change programs.PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 24
  25. 25. BSC Implementation 2-Year Timeline TemplateTemplate – BSC Implementation Timeline (2 of 2) This step is performed on a regular Communicate the Update long-range plan schedule. The BSC is now a routine BSC to the company. and budget. part of the management process. 13 14 15 16 17 18 19 20 21 22 23 24 Establish individual Conduct monthly and quarterly reviews. performance objectives.PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 25
  26. 26. Personal Scorecard Template CORPORATE OBJECTIVES  Name:  Location:  Team/Individual Objectives Corporate Targets Scorecard Measures Business Unit Targets and Initiatives 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 1. Financial 2. Operating 3. Team/Individual Measures Targets 4. 1. 2. 3. 5. 4. 5.PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 26
  27. 27. PPT Lab (www.pptlab.com) is the only crowdsourced presentation design service. Get consulting-quality presentations at a fraction of the cost!www.PPTLab.comsupport@pptlab.com Each month, we will create well over 50 slides of for our members. As a member, you will drive what business slides we create by submitting your own presentation projects to our team. All presentations will be created by a team of management consultants and follow the Consulting Presentation Framework.PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 27

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