Balancedscorecard

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Balancedscorecard

  1. 1. The Balanced Scorecard Approach
  2. 2. What is a Balanced Scorecard? 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.
  3. 3. Balanced Scorecard Concept  Was first published in 1992 by Kaplan and Norton, a book followed in 1996.  Traditional performance measurement that only focus on external accounting data are obsolete.  The approach is to provide 'balance' to the financial perspective.
  4. 4. Why Use a Balanced Scorecard?  Improve organizational performance by measuring what matters  Increase focus on strategy and results  Align organization strategy with workers on a day-to-day basis  Focus on the drivers key to future performance  Improve communication of the organization’s Vision and Strategy  Prioritize Projects / Initiatives
  5. 5. 4 Original Business Perspectives Adapted from The Balanced Scorecard by Kaplan & Norton  The Balanced Scorecard model suggests that we view the organization from 4 perspectives.  Then Develop metrics, collect data and analyze it relative to each of these perspectives
  6. 6. 4 Business Perspectives Questions  Financial  What must we do to create sustainable economic value?  Internal Business Process  To satisfy our stakeholders, what must be our levels of productivity, efficiency, and quality?  Learning and Growth  How does our employee performance management system, including feedback to employees, support high performance?  Customer  What do our customers require from us and how are we doing according to those requirements?
  7. 7. Balanced Scorecard Measurements
  8. 8. Key Implementation Success Factors  Obtaining executive sponsorship and commitment  Involving a broad base of leaders, managers and employees in scorecard development  Choose the right Scorecard Champion  Beginning interactive (two-way) communication first  Viewing the scorecard as a long-term journey rather than a short-term project  Getting outside help if needed
  9. 9. Balanced Scorecard Example STRATEGY MAP STRATEGY MAP BALANCED SCORECARD BALANCED SCORECARD MEASUREMENT MEASUREMENTPROCESS: MANUFACTURING EXCELLENCE PROCESS: MANUFACTURING EXCELLENCE THEME: ROCE > xx%, VOLUME = xx,xxx units THEME: ROCE > xx%, VOLUME = xx,xxx units OBJECTIVES OBJECTIVES TARGET TARGET ACTION PLAN ACTION PLAN INITIATIVE INITIATIVE BUDGET BUDGET FINANCIAL PERSPECTIVE Improve Productivity Improve Productivity OFFER PRODUCTS & SERVCIES THAT ARE CONSISTENT, TIMELY and LOW-COST OFFER PRODUCTS & SERVCIES THAT ARE CONSISTENT, TIMELY and LOW-COST Long-Term Shareholder Value ROCE > xx% Long-Term Shareholder Value ROCE > xx% Grow Revenue Grow Revenue CUSTOMER PERSPECTIVE •Operating Cost & Efficiency•Operating Cost & Efficiency •Capacity Utilization•Capacity Utilization •Capability Utilization•Capability Utilization •Brand / Image•Brand / Image • Cost/Unit, Efficiency• Cost/Unit, Efficiency •% Utilization•% Utilization • Monthly Monitoring• Monthly Monitoring • Weekly/Monthly Monitoring • Weekly/Monthly Monitoring • Monthly Monitoring• Monthly Monitoring • Weekly/Monthly Monitoring • Weekly/Monthly Monitoring •Low Cost Manufacturing•Low Cost Manufacturing •World-Class Quality Standards •World-Class Quality Standards •World-Class Delivery Timing•World-Class Delivery Timing •Knowledgeable & Skilled Partner •Knowledgeable & Skilled Partner •High Customer Satisfaction•High Customer Satisfaction •Reinforce Brand Image•Reinforce Brand Image • Man-hour per Unit• Man-hour per Unit • Defect per Unit• Defect per Unit • Sales Delivery• Sales Delivery • Direct Pass Rate• Direct Pass Rate • Market Feedback• Market Feedback • Sales Volume• Sales Volume • Weekly Monitoring• Weekly Monitoring • Daily Monitoring• Daily Monitoring • Daily Monitoring• Daily Monitoring • Daily Monitoring• Daily Monitoring • Weekly Monitoring• Weekly Monitoring • Monthly Monitoring Prod. & Sales Mtg. • Monthly Monitoring Prod. & Sales Mtg. Low Cost Low Cost World Class World Class ENSURE OPERATIONAL EXCELLENCE WITH INNOVATION AS WELL BEING SOCIALLY RESPONSIBLE ENSURE OPERATIONAL EXCELLENCE WITH INNOVATION AS WELL BEING SOCIALLY RESPONSIBLE INTERNAL PERSPECTIVE Customer Satisfaction Customer Satisfaction Enhance Brand Enhance Brand Operational Excellence Operational Excellence Process Innovation Process Innovation Alliances with SBUs Alliances with SBUs Socially Responsible Socially Responsible •Productivity•Productivity •Delivery•Delivery •Continuous Improvement•Continuous Improvement •NPI•NPI •Safety & Health•Safety & Health •Environment•Environment • Cycle Time• Cycle Time • Meet Daily Plan • WIP • Meet Daily Plan • WIP • KAIZEN • ICC • KAIZEN • ICC • Timely Introduction• Timely Introduction • Industrial Accident • Commuting Accident • Industrial Accident • Commuting Accident • Toxic Waste Disposal • ISO 9002 • Toxic Waste Disposal • ISO 9002 • Hourly Monitoring• Hourly Monitoring • Daily Monitoring • Daily Monitoring • Daily Monitoring • Daily Monitoring • Monthly follow-up • Specific Programmed • Monthly follow-up • Specific Programmed • Weekly Follow-up• Weekly Follow-up • Cross Audits • Defensive Driving • Cross Audits • Defensive Driving • Facility Readiness • Certification • Facility Readiness • Certification STRATEGIC JOB & SYSTEMSSTRATEGIC JOB & SYSTEMS LEARNING & GROWTH PERSPECTIVE Skills Skills Info. System Info. System •Develop the Necessary Skills•Develop the Necessary Skills •Information Systems Availability •Information Systems Availability •Strategic Awareness•Strategic Awareness • R&D & Development• R&D & Development • ALC, Procurement, Financial • ALC, Procurement, Financial • Alignment• Alignment • Training and Skill Build-up • Training and Skill Build-up • Set-up, Test and Validation • Set-up, Test and Validation • Communication Programmed • Communication Programmed • Trial Prod. • Spare Parts Prod • Trial Prod. • Spare Parts Prod •Warranty Cost•Warranty Cost tt OPEX RM XX M CAPEX RM xx M 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  Lack of a well Defined Strategy  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.  Too much focus on the lagging measures  Focusing on only the lagging measures may cause a lack of priority or opportunity for the leading measures.  Use of Generic Metrics  Don’t just copy metrics from another firm. Identify the measures that apply to your strategy and competitive position .  Self-serving managers  Managers whose goal is to achieve a desired result in order to obtain a bonus or other self reward.
  14. 14. Balanced Scorecard Benefit Re-Cap  Helps align key performance measures with strategy at all levels of an organization  The methodology facilitates communication and understanding of business goals and strategies at all levels of an organization  Strategic initiatives that follow "best practices" methodologies that cascade through the entire organization  Transforms an organization’s mission statement and strategic plan from a passive document into the "marching orders" for the organization on a daily basis.  It enables executives to truly execute their strategies by identifying what should be done and measured. To date, some form of a Balanced Scorecard is used by nearly 60% of Fortune 500 companies
  15. 15. Thank You for Your Time Questions?

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