Balanced Scorecard Adoption

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Factors that influence the implementation of Balanced Scorecard.

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Balanced Scorecard Adoption

  1. 1. Balanced Scorecard Henry Hirschel H.Hirschel@comcast.net 1 Sunday, May 9, 2010
  2. 2. A framework of growth 2 Sunday, May 9, 2010
  3. 3. Practices to consider 16 3 Sunday, May 9, 2010
  4. 4. Continuous Improvement 4 Sunday, May 9, 2010
  5. 5. Continuous Improvement Small improvements in processes and products, with the objective of increasing quality and reducing waste. 4 Sunday, May 9, 2010
  6. 6. Williams Edwards Deming 5 Sunday, May 9, 2010
  7. 7. Williams Edwards Deming When people and organizations focus primarily on quality, quality tends to increase and costs fall over time. Results of work efforts Quality = Total costs When people and organizations focus primarily on costs, costs tend to rise and quality declines over time. 5 Sunday, May 9, 2010
  8. 8. More is better... The more process improvement methods that are incorporated into the organization the higher the overall quality improvement trends (Sun, 1999). – This supports the concept that companies that implemented TQM achieved higher levels of improvement than those that do not. – The improvement is the result of an increase learning effect as quality improvement methods are applied to the organization. 6 Sunday, May 9, 2010
  9. 9. Start with life issues... 7 Sunday, May 9, 2010
  10. 10. Reactions... • Process improvement recommendations • What did you learn? • What was the experience like? • Is this a form of training? • Was language a problem? • Do you know of anyone that folds like this? 8 Sunday, May 9, 2010
  11. 11. From budget focus to strategy focus Steady, Continuous Change Unpredictable, Discontinuous Change Shareholders demand incremental improvements Financial capital is dominant Shareholders demand “best-in-class” Innovation is steady performance Uncertainty Prices reflect costs Intellectual capital is dominant Customers are loyal Innovation is rapid Investors and regulators ignore Globalization is driving prices down ethical standards Customers are fickle Investors and regulators are demanding higher ethical standards 1960 1970 1980 1990 2000 2010 2020 2030 Beyond Budgeting – Hope and Fraser (2003) 17 9 Sunday, May 9, 2010
  12. 12. Adaptive and decentralized 10 Sunday, May 9, 2010
  13. 13. Performance contract... 11 Sunday, May 9, 2010
  14. 14. Holistic... 12 Sunday, May 9, 2010
  15. 15. Holistic... “Relating to or concerned with wholes or with complete systems rather than with the analysis of, treatment of, or dissection into parts” (Merriam-Webster Dictionary) 12 Sunday, May 9, 2010
  16. 16. What is holistic integration? 13 Sunday, May 9, 2010
  17. 17. WHAT DID WE LEARN? 14 Sunday, May 9, 2010
  18. 18. WHAT DID WE LEARN? • Synchronicity of movement • WOW the audience • Feel passion during performance • Connection to each individual • Never disappointed 14 Sunday, May 9, 2010
  19. 19. Leadership through emotions • Emotional quality of chief executive officer sets the level of importance of TQM organizations (Wiele, Williams, Brown, Dale, 2001) – Higher the level of importance placed on implementation the more likely companies were able to apply TQM principles – Executive team was more likely to support implementation of TQM 15 Sunday, May 9, 2010
  20. 20. Tips from learning organizations… When there is a genuine vision (as opposed to the all-too-familiar ‘vision statement’), people excel and learn, not because they are told to, but because they want to. The practice of shared vision involves the skills of unearthing shared ‘pictures of the future’ that foster genuine commitment and involvement rather than compliance. Visions spread because of a reinforcing process. Increased clarity, enthusiasm and commitment rub off on others in the organization. ‘As people talk, the vision grows clearer. As it gets clearer, enthusiasm for its benefits grows’ 16 Sunday, May 9, 2010
  21. 21. Welcome to transparency North South West East 17 Sunday, May 9, 2010
  22. 22. Welcome to transparency North South West East 17 Sunday, May 9, 2010
  23. 23. Welcome to transparency Up Down North South West East 17 Sunday, May 9, 2010
  24. 24. Strategy-Focused Organization 1. Translate the strategy to operational terms 2. Align the organization to the strategy. 3. Make strategy everyone’s everyday job. 4. Make strategy a continual process. 5. Mobilize change through executive leadership. 18 Sunday, May 9, 2010
  25. 25. Steps to value creation Mission Why We Exist Values What’s Important to Us Vision What We Want to Be Strategy Our Game Plan Translate the Strategy Map Strategy Measurement Measure and Focus Targets and Initiatives What We Need to Do Personal Objectives What I Need to Do Strategy Outcomes 19 Sunday, May 9, 2010
  26. 26. On Communication “The greatest problem with communication is the illusion that it has been accomplished.” George Bernard Shaw Just because a message has been sent, it does not mean that it has been received 20 Sunday, May 9, 2010
  27. 27. What is a Balanced Scorecard 21 Sunday, May 9, 2010
  28. 28. What is a Balanced Scorecard • Balanced Scorecard (BSC) is built upon an organization’s vision and strategy that measures transitions through four key perspectives: Financial, Customer, Internal Business Process, Learning and Growth (Kaplan & Norton, 1992) • BSC is a strategy-focused management methodology used to manage organizational performance (Kristensen, Juhl, & Eskildsen, 2003) • BSC is structured to measure a company’s actions in building capabilities to acquire the assets necessary for future growth (Kaplan & Norton, 2006) 21 Sunday, May 9, 2010
  29. 29. Four Perspectives of Balanced Scorecard Financial Objectives Measures Targets Initiatives “To succeed financially, how should we appear to our shareholders?” Customer Internal Business Process Objectives Measures Targets Initiatives Objectives Measures Targets Initiatives “To achieve “To satisfy our our vision, Vision and shareholders how should we Strategy and customers, appear to our what business customers?” processes must we excel at?” Learning and Growth “To achieve Objectives Measures Targets Initiatives our vision, how will we sustain our ability to change and improve?” 66 22 Sunday, May 9, 2010
  30. 30. Success Comes From Alignment Strategy/Vision Executive Leadership What business are we in? Behavior How will we compete? Information What’s our vision? Symbolic action Key Success Factors What specific tasks have to get done to implement the strategy? Human Resources Culture Do people have the What are the norms, necessary competencies? Values, attitudes, and Are they motivated? Behaviors needed? Formal Organization Structure? Controls? Rewards? Careers? 23 Sunday, May 9, 2010
  31. 31. Cascading of measurement Customer Objective Financial Objective Level “Increase customer “Decrease cost of materials” satisfaction” Corporate Customer satisfaction rating Operating margin Operating Division Customer retention Operating margin Cascaded Variable costs VP of Operations On-time delivery Period expenses Schedule adherence Manufacturing overhead Plant Manager Returns and rejects Variable costs Line availability Scrap rate Shift Supervisor First pass yield Labor per unit 24 Sunday, May 9, 2010
  32. 32. Cascading of measurement Customer Objective Financial Objective Level “Increase customer “Decrease cost of materials” satisfaction” Corporate Customer satisfaction rating Operating margin Operating Division Customer retention Operating margin Cascaded Variable costs VP of Operations On-time delivery Period expenses Schedule adherence Manufacturing overhead Plant Manager Returns and rejects Variable costs Line availability Scrap rate Shift Supervisor First pass yield Labor per unit 24 Sunday, May 9, 2010
  33. 33. Cascading of measurement Customer Objective Financial Objective Level “Increase customer “Decrease cost of materials” satisfaction” Corporate Customer satisfaction rating Operating margin Operating Division Customer retention Operating margin Cascaded Variable costs VP of Operations On-time delivery Period expenses Schedule adherence Manufacturing overhead Plant Manager Returns and rejects Variable costs Line availability Scrap rate Shift Supervisor First pass yield Labor per unit 24 Sunday, May 9, 2010
  34. 34. Cascading of measurement Customer Objective Financial Objective Level “Increase customer “Decrease cost of materials” satisfaction” Corporate Customer satisfaction rating Operating margin Operating Division Customer retention Operating margin Cascaded Variable costs VP of Operations On-time delivery Period expenses Schedule adherence Manufacturing overhead Plant Manager Returns and rejects Variable costs Line availability Scrap rate Shift Supervisor First pass yield Labor per unit 24 Sunday, May 9, 2010
  35. 35. Cascading of measurement Customer Objective Financial Objective Level “Increase customer “Decrease cost of materials” satisfaction” Corporate Customer satisfaction rating Operating margin Operating Division Customer retention Operating margin Cascaded Variable costs VP of Operations On-time delivery Period expenses Schedule adherence Manufacturing overhead Plant Manager Returns and rejects Variable costs Line availability Scrap rate Shift Supervisor First pass yield Labor per unit 24 Sunday, May 9, 2010
  36. 36. Cascading of measurement Customer Objective Financial Objective Level “Increase customer “Decrease cost of materials” satisfaction” Corporate Customer satisfaction rating Operating margin Operating Division Customer retention Operating margin Cascaded Variable costs VP of Operations On-time delivery Period expenses Schedule adherence Manufacturing overhead Plant Manager Returns and rejects Variable costs Line availability Scrap rate Shift Supervisor First pass yield Labor per unit 24 Sunday, May 9, 2010
  37. 37. Cascading of measurement Customer Objective Financial Objective Level “Increase customer “Decrease cost of materials” satisfaction” Corporate Customer satisfaction rating Operating margin Operating Division Customer retention Operating margin Cascaded Variable costs VP of Operations On-time delivery Period expenses Schedule adherence Manufacturing overhead Plant Manager Returns and rejects Variable costs Line availability Scrap rate Shift Supervisor First pass yield Labor per unit 24 Sunday, May 9, 2010
  38. 38. Balanced Scorecard Strategy Map (Kaplan & Norton, 2000) Improve Shareholder Value Financial Revenue Growth Strategy Productivity Strategy Perspective Build the Increase value Improve cost Improve use franchise to customers structure of assets Revenue from Customer Operating cost Asset utilization new sources profitability per unit produced Product Leadership Customer Customer Intimacy Perspective √ √ Operational Excellence Customer Value Proposition √ √ Customer acquisition, retention, and satisfaction Internal Achieve operational Become a good Process Increase customer Build the franchise excellence through corporate citizen Perspective value through customer through innovations operations and through regulatory and management processes logistics processes environmental processes Learning and employee competencies technology corporate culture Growth Perspective 25 Sunday, May 9, 2010
  39. 39. Information Technology – Strategy Map Financial Change Financial P&L Labor G&A COGS Consumer Internal Customer Business Partner Customer Customer Partners Operations Franchise Support Center Vendors Service Non-Traditional Internal Sales and Best In Build More Best People Process Marketing Class Stores Learning and Learning Knowledge Accountability Growth Organization Management and Achievement Technology Browser Universal Business Continuity Reporting POS Security Based Technology Messaging 26 Sunday, May 9, 2010
  40. 40. Engage in dialogue… The discipline of team learning starts with ‘dialogue’, the capacity of members of a team to suspend assumptions and enter into a genuine ‘thinking together’. To the Greeks dia-logos meant free-flowing meaning through a group, allowing the group to discover insights not attainable individually…. [It] also involves learning how to recognize the patterns of interaction in teams that undermine learning. 27 Sunday, May 9, 2010
  41. 41. Transparency of reporting n io at oc Function L Business Channel 28 Sunday, May 9, 2010
  42. 42. Transparency of reporting n io at oc Function L Business Channel 28 Sunday, May 9, 2010
  43. 43. Transparency of reporting n io at oc Function L Business Channel 28 Sunday, May 9, 2010
  44. 44. Transparency of reporting n io at oc Function L Business Channel 28 Sunday, May 9, 2010
  45. 45. Three success factors of Information Technology Management Business Management Vision and mission execution Best practice Process improvement Solution evaluation Manage expectations Tools to enable business Customer focus 29 Sunday, May 9, 2010
  46. 46. Three success factors of Information Technology Management Business Management Technology Management Vision and mission execution How best to use technology Best practice Hardware/software/network Process improvement Technical knowledge Solution evaluation Manage expectations Manage expectations Security Tools to enable business Customer focus 29 Sunday, May 9, 2010
  47. 47. Three success factors of Information Technology Management Magic Informal networks Serendipity Education Humor Business Management Technology Management Vision and mission execution How best to use technology Best practice Hardware/software/network Process improvement Technical knowledge Solution evaluation Manage expectations Manage expectations Security Tools to enable business Customer focus 29 Sunday, May 9, 2010
  48. 48. CIO magazine, Dec 2004 “The more closely the IT organization (or other organizations) participates in business process design, the harder it becomes to distinguish its contributions. What is the impact of business process and what is the impact of the tools that enable the business process.” 30 Sunday, May 9, 2010
  49. 49. The Paradox of Innovation… 2003 Ralph Katz 31 Sunday, May 9, 2010
  50. 50. The Paradox of Innovation… The dilemma: Innovation and change require positive energy. 2003 Ralph Katz 31 Sunday, May 9, 2010
  51. 51. The Paradox of Innovation… The dilemma: Innovation and change require positive energy. The paradox: Creativity creates tension between the generation and reduction of uncertainty. 2003 Ralph Katz 31 Sunday, May 9, 2010
  52. 52. The Paradox of Innovation… The dilemma: Innovation and change require positive energy. The paradox: Creativity creates tension between the generation and reduction of uncertainty. Organizations are naturally… Motivated by reducing uncertainty. 2003 Ralph Katz 31 Sunday, May 9, 2010
  53. 53. Thank you... Henry Hirschel H.Hirschel@comcast.net 32 Sunday, May 9, 2010

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