The Balanced Scorecard Approach
What is a Balanced Scorecard? <ul><li>The Balanced Scorecard is a strategic planning and management system used to align b...
Balanced Scorecard Concept <ul><li>Was first published in 1992 by Kaplan and Norton, a book followed in 1996. </li></ul><u...
Why Use a Balanced Scorecard? <ul><li>Improve organizational performance by measuring what matters  </li></ul><ul><li>Incr...
4 Original Business Perspectives <ul><li>Adapted from The Balanced Scorecard by Kaplan & Norton   </li></ul><ul><li>The Ba...
4 Business Perspectives Questions <ul><li>Financial </li></ul><ul><ul><li>What must we do to create sustainable economic v...
Balanced Scorecard Measurements
Key Implementation Success Factors <ul><li>Obtaining executive sponsorship and commitment  </li></ul><ul><li>Involving a b...
Balanced Scorecard Example STRATEGY MAP BALANCED SCORECARD MEASUREMENT PROCESS: MANUFACTURING EXCELLENCE THEME: ROCE > xx%...
Balanced Scorecard Strategy Map
Department Level Scorecard Example
Scorecard Potential Pitfalls & Criticisms
Scorecard Potential Pitfalls & Criticisms  <ul><li>Lack of a well Defined Strategy  </li></ul><ul><ul><li>The balanced sco...
Balanced Scorecard Benefit Re-Cap <ul><li>Helps align key performance measures with strategy at all levels of an organizat...
Thank You for Your Time <ul><li>Questions? </li></ul>
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Balanced Scorecard Presentation

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MBA presentation explaining Kaplan and Norton's Balanced Scorecard Approach.

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Balanced Scorecard Presentation

  1. 1. The Balanced Scorecard Approach
  2. 2. What is a Balanced Scorecard? <ul><li>The Balanced Scorecard is a strategic planning and management system used to align business activities to the vision and strategy of the organization by monitoring performance against strategic goals. </li></ul>
  3. 3. Balanced Scorecard Concept <ul><li>Was first published in 1992 by Kaplan and Norton, a book followed in 1996. </li></ul><ul><li>Traditional performance measurement that only focus on external accounting data are obsolete. </li></ul><ul><li>The approach is to provide 'balance' to the financial perspective. </li></ul>
  4. 4. Why Use a Balanced Scorecard? <ul><li>Improve organizational performance by measuring what matters </li></ul><ul><li>Increase focus on strategy and results </li></ul><ul><li>Align organization strategy with workers on a day-to-day basis </li></ul><ul><li>Focus on the drivers key to future performance </li></ul><ul><li>Improve communication of the organization’s Vision and Strategy </li></ul><ul><li>Prioritize Projects / Initiatives </li></ul>
  5. 5. 4 Original Business Perspectives <ul><li>Adapted from The Balanced Scorecard by Kaplan & Norton </li></ul><ul><li>The Balanced Scorecard model suggests that we view the organization from 4 perspectives. </li></ul><ul><li>Then Develop metrics, collect data and analyze it relative to each of these perspectives </li></ul>
  6. 6. 4 Business Perspectives Questions <ul><li>Financial </li></ul><ul><ul><li>What must we do to create sustainable economic value? </li></ul></ul><ul><li>Internal Business Process </li></ul><ul><ul><li>To satisfy our stakeholders, what must be our levels of productivity, efficiency, and quality? </li></ul></ul><ul><li>Learning and Growth </li></ul><ul><ul><li>How does our employee performance management system, including feedback to employees, support high performance? </li></ul></ul><ul><li>Customer </li></ul><ul><ul><li>What do our customers require from us and how are we doing according to those requirements? </li></ul></ul>
  7. 7. Balanced Scorecard Measurements
  8. 8. Key Implementation Success Factors <ul><li>Obtaining executive sponsorship and commitment </li></ul><ul><li>Involving a broad base of leaders, managers and employees in scorecard development </li></ul><ul><li>Choose the right Scorecard Champion </li></ul><ul><li>Beginning interactive (two-way) communication first </li></ul><ul><li>Viewing the scorecard as a long-term journey rather than a short-term project </li></ul><ul><li>Getting outside help if needed </li></ul>
  9. 9. Balanced Scorecard Example STRATEGY MAP BALANCED SCORECARD MEASUREMENT PROCESS: MANUFACTURING EXCELLENCE THEME: ROCE > xx%, VOLUME = xx,xxx units OBJECTIVES TARGET ACTION PLAN INITIATIVE BUDGET FINANCIAL PERSPECTIVE Improve Productivity OFFER PRODUCTS & SERVCIES THAT ARE CONSISTENT, TIMELY and LOW-COST Long-Term Shareholder Value ROCE > xx% Grow Revenue CUSTOMER PERSPECTIVE <ul><li>Operating Cost & Efficiency </li></ul><ul><li>Capacity Utilization </li></ul><ul><li>Capability Utilization </li></ul><ul><li>Brand / Image </li></ul><ul><li>Cost/Unit, Efficiency </li></ul><ul><li>% Utilization </li></ul><ul><li>Monthly Monitoring </li></ul><ul><li>Weekly/Monthly </li></ul><ul><li>Monitoring </li></ul><ul><li>Monthly Monitoring </li></ul><ul><li>Weekly/Monthly </li></ul><ul><li>Monitoring </li></ul><ul><li>Low Cost Manufacturing </li></ul><ul><li>World-Class Quality </li></ul><ul><li>Standards </li></ul><ul><li>World-Class Delivery Timing </li></ul><ul><li>Knowledgeable & Skilled </li></ul><ul><li>Partner </li></ul><ul><li>High Customer Satisfaction </li></ul><ul><li>Reinforce Brand Image </li></ul><ul><li>Man-hour per Unit </li></ul><ul><li>Defect per Unit </li></ul><ul><li>Sales Delivery </li></ul><ul><li>Direct Pass Rate </li></ul><ul><li>Market Feedback </li></ul><ul><li>Sales Volume </li></ul><ul><li>Weekly Monitoring </li></ul><ul><li>Daily Monitoring </li></ul><ul><li>Daily Monitoring </li></ul><ul><li>Daily Monitoring </li></ul><ul><li>Weekly Monitoring </li></ul><ul><li>Monthly Monitoring </li></ul><ul><li>Prod. & Sales Mtg. </li></ul>Low Cost World Class ENSURE OPERATIONAL EXCELLENCE WITH INNOVATION AS WELL BEING SOCIALLY RESPONSIBLE INTERNAL PERSPECTIVE Customer Satisfaction Enhance Brand Operational Excellence Process Innovation Alliances with SBUs Socially Responsible <ul><li>Productivity </li></ul><ul><li>Delivery </li></ul><ul><li>Continuous Improvement </li></ul><ul><li>NPI </li></ul><ul><li>Safety & Health </li></ul><ul><li>Environment </li></ul><ul><li>Cycle Time </li></ul><ul><li>Meet Daily Plan </li></ul><ul><li>WIP </li></ul><ul><li>KAIZEN </li></ul><ul><li>ICC </li></ul><ul><li>Timely Introduction </li></ul><ul><li>Industrial Accident </li></ul><ul><li>Commuting Accident </li></ul><ul><li>Toxic Waste Disposal </li></ul><ul><li>ISO 9002 </li></ul><ul><li>Hourly Monitoring </li></ul><ul><li>Daily Monitoring </li></ul><ul><li>Daily Monitoring </li></ul><ul><li>Monthly follow-up </li></ul><ul><li>Specific Programmed </li></ul><ul><li>Weekly Follow-up </li></ul><ul><li>Cross Audits </li></ul><ul><li>Defensive Driving </li></ul><ul><li>Facility Readiness </li></ul><ul><li>Certification </li></ul>STRATEGIC JOB & SYSTEMS LEARNING & GROWTH PERSPECTIVE Skills Info. System <ul><li>Develop the Necessary Skills </li></ul><ul><li>Information Systems </li></ul><ul><li>Availability </li></ul><ul><li>Strategic Awareness </li></ul><ul><li>R&D & Development </li></ul><ul><li>ALC, Procurement, </li></ul><ul><li>Financial </li></ul><ul><li>Alignment </li></ul><ul><li>Training and Skill </li></ul><ul><li>Build-up </li></ul><ul><li>Set-up, Test and </li></ul><ul><li>Validation </li></ul><ul><li>Communication </li></ul><ul><li>Programmed </li></ul><ul><li>Trial Prod. </li></ul><ul><li>Spare Parts Prod </li></ul><ul><li>Warranty Cost </li></ul>t OPEX RM XX M CAPEX RM xx M
  10. 10. Balanced Scorecard Strategy Map
  11. 11. Department Level Scorecard Example
  12. 12. Scorecard Potential Pitfalls & Criticisms
  13. 13. Scorecard Potential Pitfalls & Criticisms <ul><li>Lack of a well Defined Strategy </li></ul><ul><ul><li>The balanced scorecard relies on a well defined strategy and understanding of linkages between strategic objections and metrics. Without this foundation the implementation could fail. </li></ul></ul><ul><li>Too much focus on the lagging measures </li></ul><ul><ul><li>Focusing on only the lagging measures may cause a lack of priority or opportunity for the leading measures. </li></ul></ul><ul><li>Use of Generic Metrics </li></ul><ul><ul><li>Don’t just copy metrics from another firm. Identify the measures that apply to your strategy and competitive position . </li></ul></ul><ul><li>Self-serving managers </li></ul><ul><ul><li>Managers whose goal is to achieve a desired result in order to obtain a bonus or other self reward. </li></ul></ul>
  14. 14. Balanced Scorecard Benefit Re-Cap <ul><li>Helps align key performance measures with strategy at all levels of an organization </li></ul><ul><li>The methodology facilitates communication and understanding of business goals and strategies at all levels of an organization </li></ul><ul><li>Strategic initiatives that follow &quot;best practices&quot; methodologies that cascade through the entire organization </li></ul><ul><li>Transforms an organization’s mission statement and strategic plan from a passive document into the &quot;marching orders&quot; for the organization on a daily basis. </li></ul><ul><li>It enables executives to truly execute their strategies by identifying what should be done and measured. </li></ul>To date, some form of a Balanced Scorecard is used by nearly 60% of Fortune 500 companies
  15. 15. Thank You for Your Time <ul><li>Questions? </li></ul>
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