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Balanced Scorecard implementation in SMEs: From theory to practice

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In theory, Balanced Scorecard implementation is a clear and not so complicated process. While the implementation and usage of a performance management system in large companies has been thoroughly …

In theory, Balanced Scorecard implementation is a clear and not so complicated process. While the implementation and usage of a performance management system in large companies has been thoroughly analyzed, the characteristics of the SMEs raise question on how should a Balanced Scorecard be customised and implemented in order to generate the benefits a SME needs.

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  • 1. International Conference Business Excellence
    16 - 17 of October 2009
    Balanced Scorecard implementation in SMEs:
    from theory to practice 
  • 2. About us
    Acumen Integratis a Romanian management consulting company specialised in performance management solutions, project management and technology integration services. Our business model is based on working along organisations to understand their objectives and challenges and identify customised solutions that add value to their activities. Our vision is to be recognised as one of the most capable, progressive and innovative Romanian consulting companies.
  • 3. Balanced Scorecard implementation in SMEs:From theory to practice
    In theory, Balanced Scorecard implementation is a clear and not very complicated process. While the implementation and usage of a performance management system in large companies has been thoroughly analyzed, the characteristics of the SMEs raise question on how should a Balanced Scorecard be customised and implemented in order to generate the benefits a SME needs.
  • 4. The path
    The premises
    Benefits of Balanced Scorecard
    Balanced Scorecard in SMEs
    Limitations
    Balance Point
    Conclusion
  • 5. No matter the size and industry, every organization wants to achieve performance, and strives to find new and better ways for this purpose.
    Organizations aim for:
  • 6. Star
    Processes
    Employees
    Resources
  • 7. Star
    Company
  • 8. Performing company
    Just as performance, profit is an implicit desire of any company. If profit is never let at free will, and there are always being searched new ways to maximise it, why shouldn’t this happen with performance too?
  • 9. Performing company
    One way to increase the performance of a company is to use business tools, like Balanced Scorecard.
  • 10. The path
    The premises
    Benefits of Balanced Scorecard
    Balanced Scorecard in SMEs
    Limitations
    Balance Point
    Conclusion
  • 11. A clear sense of direction
    Source: “Dilbert - A Treasury Of Sunday Strips: Version 00” by Scott Adams, (Andrews McMeel Publishing 2000)
  • 12. An ability to focus and prioritize
  • 13. Organizational agility
    Management teams need systems that are simple and easy to use.
    With Balanced Scorecard this aspect can be achieved, so the organization will not have to deal with formulas or graphs like these.
  • 14. A profound understanding of the business model
  • 15. A profound understanding of the business model
  • 16. The path
    The premises
    Benefits of Balanced Scorecard
    Balanced Scorecard in SMEs
    Limitations
    Balance Point
    Conclusion
  • 17. Balanced Scorecard in SMEs
    Small business should think about Balanced Scorecard in a different way than large-sized corporations do.
  • 18. Balanced Scorecard in SMEs
    • Low degree of formality needed to monitor
    • 19. Quicker and easier re-prioritization
    • 20. No expensive administrative procedures
    • 21. Fewer time to act upon the Balanced Scorecard measurement
    Less complexity and fewer people generally speeds up the process in SMEs, and changes are much more easier to be managed.
  • 22. Balanced Scorecardin SMEs
    In a large organization, much of the impetus behind the balanced scorecard’s design will be driven by a desire to get a clear picture of the business. As organizations grow and become more complex, senior managers can lose track of their business’s culture and lose control of its performance as a result – something a balanced scorecard can fix.
    Managers in an SME don’t have this problem, and can focus instead on creating a strategic vision and set of objectives for the business – which they can then easily and clearly share with the rest of the organization.
  • 23. Steps in Balanced Scorecard implementation
  • 24. Steps in Balanced Scorecard implementation
    Management engagement
    • Process Owners Identified
    • 25. Management Agenda Design
    • 26. Identify purpose and objectives for Balanced Scorecard implementation
    Current state analysis
    • Assess the company reality
    • 27. Identify tools and instruments for performance management
    • 28. Create an analysis report to start with
    Step
    2
    Step
    1
    Step
    3
    Step
    4
    Step
    5
    Balanced Scorecard design
    andstrategy alignment
    • First Report, Targets and Initiatives
    • 29. Review and Approve First Scorecard Report
    • 30. Link Initiatives to Strategy Map
    • 31. Implement “Strategy Focused” Management Agenda
    Communicate the strategy –
    Organizational engagement
    • Cascading and Department Integration
    • 32. Identify Departments for Cascading
    • 33. Balanced Scorecard Education
    • 34. Indicator Selection and Target Setting
    • 35. Scorecards Linked into Department Meetings
    Embedding the Balanced Scorecard -
    Monitor, maintain and manage
    • Update the Strategic Plan using the Scorecard
    • 36. Link the Budget to the Scorecard
    • 37. Link Performance Evaluations to the Scorecard
    • 38. Link Compensation to the Scorecard
  • Some Critical Success Factors/Best Practices for implementation in SMEs
    • Clear scope definition & plan implementation in phases.
    • 39. Top Management support & leadership.
    • 40. Educating the employees about the importance of Balanced Scorecard and its impact on the organization and themselves.
    • 41. Making BSC a part of Strategy and conducting monthly review meetings.
    • 42. Committed team with a good Coordinator.
    • 43. Reward points for successfully implementing the initiative.
  • The path
    The premises
    Benefits of Balanced Scorecard
    Balanced Scorecard in SMEs
    Limitations
    Balance Point
    Conclusion
  • 44. Limitations in implementation and use of Balanced Scorecard in SMEs
    • Antrepreneurial orientation
    • 45. Focus on sales and extensive growth
    • 46. Feedback is received immediately
    • 47. Strategy vs execution
    • 48. Change management
  • The path
    The premises
    Benefits of Balanced Scorecard
    Balanced Scorecard in SMEs
    Limitations
    Balance Point
    Conclusion
  • 49. Which is the point from where using a Balanced Scorecard tool becomes truly useful in SMEs?
    • Shift from the “antrepreneurial” stage to the “corporate” stage
    • 50. Growth requires efficiency
    • 51. Execution does not follow strategy
    • 52. Many branch / business units
    • 53. Does not do the right things right
  • Usage
    Small organizations will find that a well-designed, well-implemented balanced scorecard presents a powerful snapshot of their organization and its goals to outside sources – potential investors, banks, and so on.
    Where the large organization can point to huge turnovers, glib shareholder presentations and powerful brand valuations, the SME can compensate with a plan shared by management, employees and external stakeholders to drive success.
  • 54. The path
    The premises
    Benefits of Balanced Scorecard
    Balanced Scorecard in SMEs
    Limitations
    Balance Point
    Conclusion
  • 55. Conclusion
    In SMEs, the Balanced Scorecard benefits can be achieved without the need for developing a complicated and administratively demanding measurement regime by simply using the measures as a mental or verbal frame of reference for addressing strategic and operational change issues, resulting from the pursuit of long-term goals.
  • 56. Conclusion
    Successful Balanced Scorecard implementation in SMEs, as in any organization, requires sustained management commitment to using it, making sure it drives the necessary behavioral changes within the organization, starting with the managers themselves.
  • 57. Conclusion
    There is undoubtedly a place for the balanced scorecard in the SMEs business strategy – and the possibility that the balanced scorecard might be even more influential for the SMEs than it is for the large corporations.
  • 58. Questions
  • 59. For more information or questions, please contact us!
    www.acumenintegrat.com

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