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Balanced Scorecard Eng

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  • 1. BALANCED SCORECARD December 2009 Ersin EKER (eeker@thy.com)
  • 2. Management Tools in 2008 USAGE Usage and Satisfaction 80% Benchmarking Strategic Planning 70% CRM Outsourcing Mission and Vision Statements Balanced Scorecard 55% Core Competencies Mergers and Acquisitons Business Process Reengineering Supply Chain Management Strategic Alliances Scenario & Contingency Planning Knowledge Management Growth Strategy Tools 40% Shared Service Centers Lean Six Sigma TQM Downsizing Online Communities Voice of the Customer Innovation Price Optimization Models 25% Collaborative Innovation Loyalty Management Tools Decision Rights Tools 10% 3.50 3.60 3.70 3.80 3.90 4.00 4.10 SATISFACTION 2 2 / 18 Source : Management Tools And Trends 2009, Bain & Company / 16
  • 3. Management Tools in 2008 Largest Satisfaction Changes 2006 2008 2006 2008 mean mean rank rank 1 Balanced Scorecard 3.60 3.83 21 8 2 Lean Six Sigma* 3.66 3.87 18 5 3 Loyalty Management Tools 3.59 3.79 22 17 Mission and Vision 4 3.78 3.91 8 3 Statements 5 Growth Strategy Tools 3.75 3.87 13 5 *Called Six Sigma in 2006 Source : Management Tools And Trends 2009, Bain & Company 3 / 18 3 / 16
  • 4. Intangible Assets in Industry and Information Ages 75% 62% 38% 1982 1992 2002 4 / 18
  • 5. One-dimensional to Multi-dimensional Performance Measuring  Today, the center of value creation has shifted from tangible assets to intangibles such as  Customer relations  Innovative products and services  High quality and responsive business processes  Information technologies and customer databases  Employee capabilities, skills and motivation  One-dimensional financial-based models measure past performance and sacrifice long term to short term results and fail to successfully measure the performance of today’s firm. • One of the most widespread multi-dimensional performance measurement models is the Balanced Scorecard (BSC), which was invented in 1992 by Drs. David Norton and Robert Kaplan. 5 / 18
  • 6. World Countries Investing in Intellectual Property Resource-Poor Countries 1970 GDP per Capita 2007 GDP per Capita South Korea 1.954 19.751 Taiwan 2.987 16.606 Singapore 4.438 35.163 Hong Kong 5.695 29.660 Israel 8.102 22.475 Denmark 12.685 57.261 Turkey 506 9.629 Resource-Rich Countries 1970 GDP per Capita 2007 GDP per Capita Indonesia 1.194 1.925 Nigeria 1.233 1.159 Former USSR 5.569 (Russia) 9.075 Saudi Arabia 7.624 15.481 Venezuela 10.672 8.596 Source: A. Maddison, The World Economy: A Millennial Perspective. Numbers are in constant 1990 dollars. 6 / 18
  • 7. Balanced Scorecard Framework CUSTOMER FINANCIAL How do we exceed What do our customers/ customer/stakeholder stakeholders look for in expectations? financial results? STRATEGY LEARNING & GROWTH INTERNAL PROCESSES What skills, tools, and What process do we culture are required to need to improve to fulfill perform these processes? these expectations? 7 / 18
  • 8. Build Strategy-Focused Organization •M o b i l i z a t i o n •Gov ernanc e Proc ess MOBILIZE CHANGE •Strategic Management THROUGH EXECUTIVE LEADERSHIP •Link Budgets & Strategy •S t r a t e g i c L e a r n i n g •Analysis & Inform. System TRANSLATE MAKE •S t r a t e g y M a p STRATEGY STRATEGY A •Balanced Scorecards INTO CONTINUOUS OPERATIONS PROCESS STRATEGY ALIGN •C o r p o r a t e R o l e sORGANIZATION MAKE STRATEGY •Business Unit Synergies TO STRATEGY EVERYONE’S JOB •Strategic Awareness •Support Unit Synergies •Personal Scorecards •Balanced Paychecks 8 / 18
  • 9. Performance measuring - a tool to measure strategic performance under perspectives financial, customer, internal processes and learning & growth Strategy communication (strategy maps) - a tool to communicate corporate Balanced strategies from top management Scorecard down to the floor by means of strategy maps Strategy implementation - a tool to implement corporate strategies by aligning distributed day-to-day activities with strategic goals and objectives 9 / 18
  • 10. Generic Strategy Map Increase Shareholder Value Financial PRODUCTIVITY STRATEGY REVENUE GROWTH STRATEGY Perspective Improve Increase Enhance Expand Revenue cost structure asset utilization customer value Opportunities CUSTOMER VALUE PROPOSITION Customer Perspective Price Quality Availability Selection Functionality Service Partnership Brand PRODUCT / SERVICE ATTRIBUTES RELATIONSHIP IMAGE Operations Management Customer Management Innovation Regulatory & Social Processes Perspective Processes that produce Processes that enhance Processes that create Processes that improve and deliver products and customer value new products and communities and the services services environment CREATING CREATING READINESS ALIGNMENT Strategic Job Families Strategic IO Portfolio Organization Change Agenda Learning and Human Capital Skills  Information Capital Systems  Organization Capital Growth Culture Alignment Training Databases Leadership Teamwork Knowledge Networks 10 / 18
  • 11. Alignment through Balanced ScoreCard All organizational activities support strategic objectives Strategic objectives & goals Plan, processes, actions, initiatives, decisions 11 / 18
  • 12. MISSION Why We Exist VALUES What’s important to us VISION What we want to be STRATEGY Our game plan BALANCED SCORECARD Translate, Focus and Align STRATEGIC INITIATIVES What are the priorities TOTAL QUALITY MANAGEMENT What we must improve EMPOWERMENT / PERSONAL OBJECTIVES What I need to do STRATEGIC OUTCOMES Satisfied Delighted Efficient and Effective Motivated and Prepared SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE 12 / 18
  • 13. BSC Aligns & Focuses All Resources on Strategy Executive Team Business Units STRATEGY Information Human Resources Technology Budgets & Capital Investments 13 / 18
  • 14. 6 EVA EFQM Sigma TQM 3rd Generation Balanced Scorecard is an umbrella concept that links together organizational philosophies and management tools Source : Performance Management & 3rd Generation Balanced Scorecard, http://www.2gc.co.uk 14 / 18
  • 15. BALANCED SCORECARD – QUALITY (6 SIGMA) COLLABORATION Process Classification “Quality (6 Sigma) teaches you HOW TO Improve to Maintain High Strategic fish. Levels of Quality Levels The Balanced Scorecard Quality Excellence teaches you WHERE TO fish.” BSC ASSESSMENT Improve to Potential to Cut Vital Minimum Back Current Acceptable Investment Quality Levels Needs Improvement Excellent QUALITY ASSESSMENT 15 / 18
  • 16. BSC Allows You To Do the Right Things Right Balanced Scorecard Objectives Business Strategy-Focused Excellence Management -100 -200 -1000 Time (TBM) Quality (TQM) Do Things Right Do the Right Things Cost (ABM) 16 / 18
  • 17. MOBIL NAM&R’s Relative Profitability, 1990-1998 + MOBIL Profitability: 100% Cents per gallon (percent above 80% Industry 56% 60% average) 42% 40% 34% 23% 20% 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 -3% -3% MOBIL -13% -14% -20% Profitability: New Strategy and -40% Balanced Scorecard Cents per gallon (percent below introduced -60% Industry average) -80% -100% -92% #4 #3 #6 #6 #6 #1 #1 #1 #1 - MOBIL Industry Ranking 17 / 18
  • 18. 1 Balanced Scorecard, Paul Niven, 2nd Edition. Execution Premium, Robert S. 2 Kaplan, David P. Norton Strategy-Focused Organization, Robert S. 3 Kaplan, David P. Norton 18 / 16

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