Balanced Scorecard V1.0


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  • Balanced Scorecard V1.0

    1. 1. The Balanced Scorecard Measures That Drive Performance
    2. 2. Contents Concept of BSC Example of BSC Strategy Map The Strategy Focused Organization Lesson Learned 1 2 3 4 5
    3. 3. Definition of Balance Scorecard A carefully selected balanced set of measures derived from the drivers of strategies that represent a tool for leaders to use in communicating strategic direction to the organization and motivating change. BALANCE STRATEGY
    4. 4. Concept of Balanced Scorecard Customer Internal Business Growth and Learning <ul><li>How do Customers see us? </li></ul><ul><li>% of Customer Satisfaction </li></ul>Financial <ul><li>What must we excel at? </li></ul><ul><li>Cycle time </li></ul><ul><li>Can we continue to improve and create value? </li></ul><ul><li>% of sales from new product </li></ul><ul><li>How do we look to shareholders? </li></ul><ul><li>Revenue, EVA </li></ul>Finance Result Short-term External Non-Finance Cause Long-term Internal B A L A N C E
    5. 5. Concept of Balanced Scorecard <ul><li>What is our future? </li></ul><ul><li>What and how </li></ul><ul><li>should we do for vision? </li></ul><ul><li>To achieve our strategy, </li></ul><ul><li>What factors are important? </li></ul><ul><li>Which index can be judged </li></ul><ul><li>for achievement? </li></ul>Vision Strategy Financial Critical Success Factor Key Performance Index Customer Internal Business Growth & Learning
    6. 6. Example of Balanced Scorecard ECI : Electronic Circuits Incorporated. Semiconductor company Financial Perspective GOALS MEASURES Survive Succeed Prosper Cash flow Quarterly sales growth and operating income by division Increased market share and ROE Customer Perspective GOALS MEASURES New products Responsive supply Preferred suppliers Customer partnerships % of sales from new products On-time delivery (defined by customer) Share of key accounts’ purchases Number of cooperative engineering efforts Internal business Perspective GOALS MEASURES Technology Capability Manufacturing excellence Design productivity New product introduction Manufacturing geometry versus competition Cycle time, unit cost, yield Silicon efficiency, engineering efficiency Actual introduction schedule versus plan Growth and Learning Perspective GOALS MEASURES Technology leadership Manufacturing learning Product focus Time to market Time to develop next generation Process time to maturity % of products that equal 80% of sales New product introduction versus competition
    7. 7. Strategic Theme: Operating Efficiency Profitability Financial Learning Increase Revenue Ground crew alignment Lowest prices Lower Costs Customer Internal Fast ground turnaround Flight is on time - Key tool to implement your strategy - Give clear line of sight into ● How a company will achieve its desired outcome ? ● How the jobs are linked to overall objectives? ● Cause & Effect link ● What’s missing? Strategy Map
    8. 8. Balanced Strategy Map “ BSC Strategy Map” - Common visual framework to describe any strategy - Standard template to develop own strategy map - Differences with Stakeholder scorecard, KPI scorecard Objectives <ul><li>Fast ground turnaround </li></ul>what strategy must achieve ? & what’s critical to its success ? Target <ul><li>30 Minutes </li></ul><ul><li>90% </li></ul>The level of performance or rate of improvement needed ? Strategic Theme: Operating Efficiency Profitability Financial Learning More customers Ground crew alignment Lowest prices Fewer planes Customer Internal Fast ground turnaround Diagram of the cause and effect relationships between strategic objectives (Strategy Map) Flight Is on time <ul><li>Cycle time optimization </li></ul>Key action programs required to achieve objectives ? Initiative Measurement <ul><li>On Ground Time </li></ul><ul><li>On-Time Departure </li></ul>How success in achieving the strategy will be measured and tracked ?
    9. 9. BSC Strategy Map Employee Competencies Technology Corporate Culture Build the franchise through innovation Increase customer value Achieve operational excellence Become good corporate citizen through regulatory & environment processes Operational Excellence Price Quality Time Selection Product/Service attribute Service C/R Relationship Smart Shopper Image Customer acquisition, Retention, satisfaction Internal Process Perspective Learning & Growth Perspective Customer Perspective Financial Perspective Revenue from new source Customer Profitability Operating cost per unit Asset utilization Improve shareholder value Revenue Growth Strategy Productivity Strategy Build franchise Increase Value Improve cost structure Improve use of asset
    10. 10. BSC Strategy Map Price Quality Time Selection Operational Excellence Service Customer Intimacy C/R Best in class Product leadership Product/Service Attribute Relationship Image Relationship Image Relationship Image Trusted Brand Time Selection Smart shopper General requirement Differentiators Product/Service Attribute Product/Service Attribute
    11. 11. The Five Principles 1. Translate the strategy to operational terms. 2. Align the organization to the strategy. 3. Make strategy everyone’s job. 4. Make strategy a continual process. 5. Mobilize change through executive leadership Source: The Strategy Focused Organization, Norton & Kaplan The Strategy Focused Organization
    12. 12. BSC - a tool: ● Dialog and communication ● Present a great amount of results ● To get the ”whole picture” ● Serve as a basis for a rewarding-system ● Adjustable ● Keep it simple Lessons Learned
    13. 13. Thank You !
    14. 14. # Case “Mobil NAM&R” <ul><li>Mobil NAM&R ‘s problem (early 90’s) </li></ul><ul><li>- Unfocused strategy </li></ul><ul><li>Full range of products & services to all consumers </li></ul><ul><li>Low prices of discount station </li></ul><ul><li> Poor financial performance </li></ul><ul><li>Mobil NAM&R ‘s research </li></ul><ul><li>- 60% of the consumer be willing to pay price premium </li></ul><ul><li>(price-sensitive consumers : 20%) </li></ul><ul><li> &quot;differentiated value proposition&quot; </li></ul>
    15. 15. # Case “Mobil NAM&R” BSC strategy map
    16. 16. Strategic theme Strategic Objectives Measurement (KPI) Increase Return on Capital employed Revenue Growth Understand customer needs & Differentiate Productivity Max the asset use Business integrate Financial <ul><li>Return on Capital Employed </li></ul><ul><li>New revenue from Nongasoline </li></ul><ul><li>Premium brand for customer </li></ul><ul><li>Become industry leader in supply </li></ul><ul><li>chain category </li></ul><ul><li>Maximize the use of asset </li></ul><ul><li>Actual Return on Capital (ROE) </li></ul><ul><li>Nongasoline revenue </li></ul><ul><li>Profit margin </li></ul><ul><li>Cost per Gallon </li></ul><ul><li>Actual cash flow </li></ul>Delight the customer Win-Win Dealer relations Customer (Customer Intimacy Proposition) <ul><li>Speedy purchase </li></ul><ul><li>Friendly, helpful worker </li></ul><ul><li>Recognize customer royalty </li></ul><ul><li>Offer more consumer products </li></ul><ul><li>Help dealers develop biz skill </li></ul><ul><li>Share of targeted customer segment </li></ul><ul><li>Mystery shopping rating </li></ul><ul><li>Dealer profitability </li></ul><ul><li>Dealer satisfaction </li></ul>Build Franchise Customer value Operational excellence Good neighbor Internal Process <ul><li>Innovative product and service </li></ul><ul><li>Best-in-class franchise teams </li></ul><ul><li>Refinery Performance </li></ul><ul><li>Inventory management </li></ul><ul><li>Deliver product on-time </li></ul><ul><li>Become the industry cost leader </li></ul><ul><li>Improve environment health & </li></ul><ul><li>Safety </li></ul><ul><li>New product acceptance rate </li></ul><ul><li>New product ROI </li></ul><ul><li>Share of target market </li></ul><ul><li>Dealer quality rating </li></ul><ul><li>Refinery yield gap, Unplanned downtime </li></ul><ul><li>Inventory level </li></ul><ul><li>Stock out rate .. </li></ul><ul><li>Activity-based cost </li></ul><ul><li>Reduced number of environmental incidents & safety incident </li></ul>Motivated and prepared worker Learning & Growth <ul><li>Core competency and view </li></ul><ul><li>Access to strategic information </li></ul><ul><li>Align business and personal goal </li></ul><ul><li>Ratio of strategic skills to job coverage </li></ul><ul><li>On-time deployment of system </li></ul><ul><li>Employee feedback </li></ul><ul><li>Personal BSC </li></ul>Data <ul><li>6% ↑ W/I 3y </li></ul><ul><li>$1B/year </li></ul># Case Mobil NAM&R BSC
    17. 17. Financial perspective Return on Capital employed: 6%  16% Sales Growth: more than 2% annually Cash Expense: 20% decrease Operating cash flow increase: $1billion per year Customer perspective Mystery-shopper score, Dealer quality: increased each year Number of consumers using “Speedpass”: one million per year Internal process perspective Environmental & Safety accidents: 60~80% down Lost oil-refinery yields due to systems downtime: 70% drop Learning and growth perspective Employee awareness & commitment to the strategy: quadrupled # Case “Mobil NAM&R” Achievements <ul><li>Mobil NAM&R ‘s achievements (`2000) </li></ul>