2. The performance Concept
• How de we judge the performance of an
organizations?
• What is behind this performance?
• Could we predict the organizational performance?
• Should we consider performance as potential to be
realized rather than just objectives?
3. Performance Criteria (1)
Campbell (in 1977) has listed 30 criteria of performance:
• Overall Effectiveness
• Efficiency
• Quality
• Growth
• Turnover
• Modification
• Control
• Flexibility/adaptation
• Objectives consensus
• Congruence between roles & norms
• Management aptitude
• Information management &
communication
• Evaluation by external entities
• Participation and influence of
shareholders
• Accomplishment
• Productivity
• Profit
• Absenteeism
• Work/job satisfaction
• Ethics
• Conflict/cohesion
• Planification and implementation
• Management relations
• Diffusion of objectives internally
• Readiness
• Stability
• Valorization of human resources
• Importance to training &
development
• Environment
4. Performance Criteria (2)
Welge/ Fessman (in 1980) based on 48 studies:
• Productivity
• Flexibility
• Profit
• Absenteeism
• Conflict elimination
• Job satisfaction
• Quality
• Costs
• Group Cohesion
• Quality of management
• Allocation of resources
• Cooperation
• Integration
• Communication
• Motivation
• Value for the society
• Objectives achievement
5. • Quinn/ Rohrbauh (1983) fine tuned 136 criteria and reduce
it to 17 criteria to be considered as the main dimensions of
organizational performance according to their model:
Performance Criteria (3)
Human Relations Open System
Means:
- Cohesion
- Morale
Ends:
HR development
Means:
- Flexibility
- Readiness
Ends:
HR & Resources Acquisition
Internal External
Means:
- Information management
& communication
Ends:
- Stability
- Control
Means:
- Planning
- Objectives determination
Ends:
Productivity Efficiency
Output
Quality
7. What variables generate performance? (2)
Kriiger (1988) defined six segments of performance (either
positive or negative):
• Quality of top management & middle management
• The organizational culture
• The strategy
• The structure
• The system (remuneration/planning/control/information/cost
accounting …etc.)
• The potential of achievement (HR, Finance, Manufacturing ..etc.)
Krieger pointed out the importance of congruency between
the six segments and their “FIT” to the environment.
9. The Baldrige National Quality Program
“Core Values & Concepts”
• Visionary leadership
• Organizational & Personnel learning
• Valuing employees & partners
• Agility
• Focus on the future
• Managing innovation
• Management by fact
• Social responsibility
• Focus on results & creating value
• Systems perspective
12. The Balanced Scorecard & its
Development
• The BSC was first introduced in the early 1990s through
the work of Robert Kaplan & David Norton of the Harvard
Business School. Since then, the concept has become
well adopted across the world.
• Be combining financial & non-financial measures in a
single report, the BSC aims to provide managers with
richer & more coherent information about activities they
are managing than is provided by financial measures
alone.
14. The three Generations of the BSC
• 1st generation: initially was allowing for considerable
interpretation
• 2nd generation: saw the idea of causality between
perspectives developed further and the introduction of the
concept of strategic objectives
• 3rd generation: triggered the development of a further
design element “the destinations statement” to check the
objectives, measures & target chosen
15. The Balanced Scorecard Is A Bridge To
Close That Gap
Strategy Is a Step
In a Continuum
MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SCORECARD
Implementation & Focus
STRATEGIC INITIATIVES
What we need to do
STRATEGIC OUTCOMES
Satisfied
SHAREHOLDERS
Delighted
CUSTOMERS
Efficient and Effective
PROCESSES
Motivated & Prepared
WORKFORCE
PERSONAL OBJECTIVES
What I need to do
17. Aligning and Focusing Resources On
Strategy
STRATEGY
HUMAN RESOURCES
BUSINESS UNITS EXECUTIVE TEAM
INFORMATION
TECHNOLOGY
BUDGETS AND CAPITAL
INVESTMENTS
18. What Is a Balanced Scorecard?
At the highest level, the Balanced Scorecard is
a framework that helps organizations put
strategy at the center of the organization by
translating strategy into operational objectives
& performance measures that drive both
behavior and performance.
“A Balanced Scorecard is not a list of
measures. A Balanced Scorecard is a
description of the organization’s strategy.”
David Norton
19. The Balanced Scorecard balances the financial perspective with the
organizational, customer and innovation perspectives which are crucial for
the future of an organization
20. BSC Perspectives
BSC
Perspectives
Financial
perspective:
tracks the financial
requirements &
performance.
Customer
perspective
scorecard:
measures customers’
satisfaction and their
performance
requirements.
Internal process
perspective
scorecard:
measures the critical
process to customer
requirements and
measures.
Employee learning &
growth perspective:
focuses on how
employees are trained
and educated, to gain
and capture knowledge,
and how it is used to
maintain the
competitive edge within
markets.
21. Measurement is the language
that gives clarity to vague
concepts
Measurement is used to
communicate, not simply to
control
Financial Perspective
• Profitability
• Growth
• Shareholder
Value
The Vision
Customer Perspective
• Price
• Service
• Quality
Internal Perspective
Learning and Growth
• New Skills
• Continuous
Improvement
• Intellectual
Assets
“If we succeed,
how will we look to
our shareholders?”
“To achieve our
vision, what
customer needs
must we serve?”
“To satisfy our
customers and
shareholders, at which
business processes
must we excel?”
“To excel in our
processes, what
must our
organization learn?”
• Cycle Time
• Productivity
• Cost
The Balanced Scorecard Provides a Four Perspective
Framework to Translate Strategy Into Operational Terms
Casual Relationship
22. The Revenue Growth Strategy
“Improve stability by broadening the sources
of revenue from current customers”
The Productivity Strategy
“Improve operating efficiency by shifting customers to
more cost-effective channels of distribution”
Improve
Returns
Improve
Operating
Efficiency
Broaden
Revenue
Mix
Increase
Customer
Confidence in
Our Financial
Advice
Increase
Customer
Satisfaction
Through Superior
Execution
Increase
Employee
Productivity
Access to
Strategic
Information
Develop
Strategic
Skills
Align
Personal
Goals
Financial
Perspective
Customer
Perspective
Internal
Perspective
Learning
Perspective
Cross-Sell
the Product
Line
Shift to
Appropriate
Channel
Provide
Rapid
Response
Develop
New
Products
Minimize
Problems
Understand
Customer
Segments
A Good Balanced Scorecard Strategy Map
Tells the Story of Your Strategy
Strategy Mapping
Strategy maps are
communication tools
used to tell a story of
how value is created
for the organization.
They show a logical,
step-by-step
connection between
strategic objectives
23. What to Balance?
1) Short term and
Long term,
2) External (for
shareholders and
customers) and
Internal (for critical
business
processes,
innovation, and
learning and growth),
3) Leading
indicators (outcomes
desired and
performance drivers)
and
Lagging
indicators (outcomes),
4) Objective
measures (e.g.,
financial) and
Subjective measures
(e.g., many
non-financial).
Financial
Perspective
Process
Perspective
Customer
perspective
Innovation &
Learning
Perspective
Financial
Non-Financial
Financial
Perspective
Process
Perspective
Customer
perspective
Innovation &
Learning
Perspective
External
Intenral
Financial
Perspective
Process
Perspective
Customer
perspective
Innovation &
Learning
Perspective
Lagging
Outcome
Result
Leading
Input
Drivers
24. BSC Development Process
(1)
Organizational
Assessment
(2) Strategy
Development
(3) Strategic
Objectives
(4) Strategy
Mapping
(5)
Performance
Measures and
Targets
(6) Strategic
Initiatives
(9) Evaluation
(8) Cascading
the BSC
Throughout the
Organization
(7)
Automation
25. BSC Team Roles and Responsibilities
Role Responsibilities
Executive
Sponsor
• Assumes ownership for the balanced scorecard implementation.
• Provides background information to the team on strategy & methodology.
• Maintains communication with senior management.
• Commits resources (both Human & financial) to the team.
• Provides support and enthusiasm for the BSC throughout the organization.
Balanced
Scorecard
Champion
• Coordinates meetings, plans, tracks& reports team results to all audiences.
• Provides thought leadership on the BSC methodology to the team.
• Ensures all relevant background material is available to the team.
• Provides feedback to the executive sponsor and senior management.
• Facilitates the development of an effective team through coaching &
support.
Team
Members
• Provides expert knowledge of business unit or functional operations.
• Informs and influences their respective senior executives.
• Acts as balanced scorecard ambassadors within their unit or department.
• Acts in the best interests of the business as whole.
Organizati
onal
Change
Expert
• Increases awareness of organizational change issues.
• Investigates change related issues affecting the balanced scorecard
implementation.
• Works with the team to produce solutions mitigating change related risks.
Source: Niven, P. R. (2006). Balanced scorecard step by step: maximizing performance and maintaining results (2nd ed.). New Jersey: Johan Wiley & Sons,
Inc. p.53.
26. Cascading Process
Mission, Values, Vision
Strategy
Team and Personal Scorecards
Highest-Level
Scorecard
Business
Unit-Level
Scorecard
Department,
Group-
Level
Scorecard
Employee Learning & Growth
Initiatives
Targets
Measures
Objectives
Internal Processes
Initiatives
Targets
Measures
Objectives
Customer
Initiatives
Targets
Measures
Objectives
Financial
Initiatives
Targets
Measures
Objectives
Employee Learning & Growth
Initiatives
Targets
Measures
Objectives
Internal Processes
Initiatives
Targets
Measures
Objectives
Customer
Initiatives
Targets
Measures
Objectives
Financial
Initiatives
Targets
Measures
Objectives
Employee Learning & Growth
Initiatives
Targets
Measures
Objectives
Internal Processes
Initiatives
Targets
Measures
Objectives
Customer
Initiatives
Targets
Measures
Objectives
Financial
Initiatives
Targets
Measures
Objectives
Source: Niven, P. R. (2006). Balanced scorecard step by step: maximizing performance and maintaining results (2nd ed.). New
Jersey: Johan Wiley & Sons, Inc. p.203
27. Personal BSC
Name: ……………… Department: ……………… Date Covered: ……………..
Mission: Vision:
Perspective Corporate Scorecard Measures Business Unit Measures Department Measures
Financial
Customer
Internal Process
Employee Learning &
Growth
Personal Part
Perspective Objective Measure Weight Threshold Midpoint Stretch Related PDP
Goals
Financial
Customer
Internal Process
Employee Learning &
Growth
Source: Cited from Niven, P. R. (2006). Balanced scorecard step by step: maximizing performance and maintaining results (2nd ed.). New Jersey: Johan
Wiley & Sons, Inc. p. 214-215.
28. Financial
Cash flow
Return on
investment
Financial
result
Return on
capital
employed
Return on
equity
Learning
and
growth
Investment
Rate
Internal
Promotions %
Employee
Turnover
Gender
Ratios
Illness rate
Internal
business
processes
Number of
activities
Accident
ratios
Opportunity
success rate
Overall
equipment
effectiveness
Customer
Delivery
performance to
customer - by rate
Quality
performance to
customer – by
quality
Customer
satisfaction
rate
Customer
loyalty
Customer
retention
BSC Perspectives & Measures
29. ABalanced Scorecard is worked out cyclically, from
corporate strategy to determining which data is needed
30. The Balanced Scorecard links the critical success
factors to the key performance indicators to translate
the strategy to the operation
32. An example (cont.): from critical success factors to
critical performance indicators
33. Objectives
• Fast ground
turnaround
Statement of
what strategy
must achieve
and what’s
critical to its
success
Target
• 30 Minutes
• 90%
The level of
performance
or rate of
improvement
needed
• Cycle time
optimization
Key action
programs
required to
achieve
objectives
Initiative
Measurement
• On Ground Time
• On-Time
Departure
How success
in achieving
the strategy
will be
measured and
tracked
Strategic Theme:
Operating Efficiency
Profitability
Financial
Learning
Increase
Revenue
Ground crew
alignment
Lowest
prices
Lower Costs
Customer
Internal
Fast ground
turnaround
Strategy Map: Diagram of the
cause-and-effect relationships
between strategic objectives
Flight
is on time
Theme Example from Southwest Airlines’
Balanced Scorecard
34. Measures Focus & Managerial Level
Source: Developd by the researcher based on Hannabarger, C., Buchman, R., & Economy, P. (2007). Balanced scorecard
strategy for dummies. Indiana: Wiley Publishing Inc.p.157.
Strategic Level
“Executive &
seniors Managers”
Strategic focus will
influence defining KIPs or
measures for the overall
organization, KPIs for
long terms goals ranging
from three years until five-
ten year.
Financial measures: overall
organization costs reduction and
revenues increase in the long term.
Customer perspective measures:
overall customer satisfaction and
market share in the long term
Internal process perspectives:
overall organization productivity in
long term.
Learning and growth measures:
overall organization turnover rate in
long term.
Operational Level
“ Middle
Managers”
Operational focus will
influence defining KIPs
and measures annually
and semiannually at
business units’,
measuring these level
objectives in middle range
period.
Financial measures: reducing costs of
certain business units.
Customer perspective measures: after
sale service customer satisfaction of
certain business unit in a year.
Internal process perspectives: certain
business unit productivity in a year.
Learning and growth measures:
turnover rate per business unit within a
year.
Tactical Level “Line
Managers”
Tactical focus will
influence to look to very
specific measures related
to daily/weekly/monthly
goals and objectives.
Financial measures: reducing costs of
specific product lines
Customer perspective measures: After
sale, service customer satisfaction for
certain product monthly.
Internal process perspective measure:
monthly productivity per product line or
department.
Learning and growth measures:
monthly turnover rate per department.
35. BSC & Strategic Benefits
Balanced Scorecard
STEP 4
Strategic
Feedback
and
Learning
STEP 3
Plan and Set
Targets
STEP 2
Communic
ates and
Links
STEP 1
Clarifies and
Translates Vision
and Strategy
• The strategy is the reference point for the entire management process.
• The shared vision is the foundation for strategic learning.
• Stretch targets are established and accepted.
• Initiatives to deliver strategic targets are clearly identified.
• Investments decisions are determined by strategic needs.
• Annual budgets are linked to long range plans.
• Feedback
Systems and to
test the
hypotheses
underpinning the
strategy.
• Team problem
solving occurs.
• Strategy
development is a
continuous
process.
• Goal alignment
exists from top to
bottom.
• Education and
open
communication
about strategy,
are the basis for
employee
empowerment.
• Employee
compensation is
linked to strategy
Source: Radnor, Z., & Lovell, B. (2003, June). Defining, justifying and implementing the balanced scorecard in the national health
service. International Journal of Medical Marketing, 3(3), 174-188. P.181.
36. BSC Uses
Clarifying Strategy
Communicating strategic objective
Planning and setting goals
Strategic feedback and learning
Drive strategy execution
Clarify strategy and make strategy operational
Identify and align strategic initiatives;
Link budget with strategy;
Align the organization with strategy;
Conduct periodic strategic performance reviews to learn about
and improve strategy.
