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Bsc presentation


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Bsc presentation

  1. 1. Balanced Scorecard
  2. 2. How would you feel about boarding the plane after the following conversation with the pilot?
  3. 3. Q: I am surprised to see you operating the plane with only a single instrument. What does it measure ? A: Airspeed .I am really working on airspeed of this flight.
  4. 4. Q: That is Good. Airspeed certainly seems important. But what about altitude. Would not an altimeter be helpful? A: I have worked on altitude for the last few flights and I have gotten pretty good on it. Now I have to concentrate on proper air speed.
  5. 5. Q: But I notice you don’t have a fuel gauge. Would not that be useful ? A: You are right; fuel is significant, but I cannot concentrate on doing too many things at the same time. So on flight I am focusing on air speed. Once I get to be excellent at Air speed, as well as altitude, I intend to concentrate on Fuel consumption on the next set of flights.
  6. 6. Q: to the participants Would you like to board this plane after having this discussion ? A: Perhaps not. What could be the reasons?
  7. 7. Navigating an organization is as complex as an Aero plane
  8. 8. They also require instrumentation to guide their organizations ……… . like pilots have to guide an aeroplane
  9. 9. Would you be satisfied as manager getting one dimensional Information about your organization ?
  10. 10. Perhaps not, therefore You need instrumentations/ information to navigate in this competitive world
  11. 11. BSC provides managers with the instrumentations they need to Navigate future competitive success.
  12. 12. BSC translates an organizational mission and strategy into comprehensive set of performance measures that provides the frame work for strategic measurement and Management system <ul><li>4 Balanced Perspectives </li></ul><ul><li>Financial </li></ul><ul><li>Customers </li></ul><ul><li>Internal Business Processes </li></ul><ul><li>Learning & Growth </li></ul>
  13. 13. Measures are balanced Between the outcome measures—the results from Past efforts- --and the measures that drive future performance
  14. 14. 4 Perspectives permit a balance between <ul><li>Short term and long term objectives </li></ul><ul><li>Outcomes and performance drivers </li></ul><ul><li>Hard objectives measures and </li></ul><ul><li>Soft objective measures </li></ul>
  15. 15. Competing in the Information Age
  16. 16. Industrial Age <ul><li>Financial Control </li></ul><ul><li>ROCE </li></ul><ul><li>Prod Control </li></ul><ul><li>Profitability </li></ul><ul><li>Physical Capital </li></ul>
  17. 17. Information Age <ul><li>Financial Control </li></ul><ul><li>ROCE </li></ul><ul><li>Prod Control </li></ul><ul><li>Profitability </li></ul><ul><li>Physical Capital </li></ul>Made Many Such Measures Obsolete
  18. 18. Information Age <ul><li>Develop Customer Relationship </li></ul><ul><li>Introduce innovative products/services </li></ul><ul><li>Quality products at low cost </li></ul><ul><li>Employee development and motivation </li></ul><ul><li>Deploy information technology </li></ul>Required New Capabilities
  19. 19. Information Age <ul><li>Cross Functional </li></ul><ul><li>Links to customers and Suppliers </li></ul><ul><li>Customer Segmentation </li></ul><ul><li>Global Scale </li></ul><ul><li>Innovation </li></ul><ul><li>Knowledge Workers </li></ul>New Operating Environment
  20. 20. Information Age <ul><li>Total Quality Management </li></ul><ul><li>JIT-Production and Distribution </li></ul><ul><li>Time based Competition </li></ul><ul><li>Lean Production/Lean Enterprise </li></ul><ul><li>Building Customer-focused Org </li></ul><ul><li>Activity Based Cost Management </li></ul><ul><li>Employee Empowerment </li></ul><ul><li>Reengineering </li></ul>Improvement initiatives
  21. 21. Capital You don’t see on the Balance Sheet Human Capital The collective skill, knowledge attitudes and behavoiur of the People in the Organization Information Capital The resources and processes in place that ensure effective use of The human capital Organizational Capital The values, working relationship And cultural norms at work in The organisation
  22. 22. b alanced s corecard
  23. 23. Measurement & Reporting-1992 Alignment & Communication 1996 Enterprise Strategic Management-2000 <ul><li>Articles in HB Review </li></ul><ul><li>The BSC-Measures that </li></ul><ul><li>Drive performance---1992 </li></ul><ul><li>Putting BSC to work-1993 </li></ul><ul><li>Using BSC as a Strategic </li></ul><ul><li>Management System-1996 </li></ul><ul><li>Acceptance and Acclaim </li></ul><ul><li>BSC Translated in 18 languages </li></ul><ul><li>Selected by HBR as most </li></ul><ul><li>Important management </li></ul><ul><li>Practice in 75 years </li></ul>History
  24. 24. Financial Measures are Inadequate For Guiding Information age Organizations Must Create future Value Through <ul><li>Investment in </li></ul><ul><li>Customers </li></ul><ul><li>Suppliers </li></ul><ul><li>Employees </li></ul><ul><li>Processes </li></ul><ul><li>Technology & </li></ul><ul><li>Innovation </li></ul>
  25. 25. A balance scorecard translate a organization’s mission and strategy into set of performance measures that provide the framework for implementing its strategy
  26. 26. Strategy specify how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives Strategy
  27. 27. A strategy is a set of goals and specific action plans that, if achieved, provide the desired competitive advantage Strategic Management involves identifying and implementing these goals and action plans
  28. 28. <ul><li>Anticipating changes </li></ul><ul><li>Product/service and production designed </li></ul><ul><li>to accommodate expected changes </li></ul><ul><li>Flexibility </li></ul><ul><li>Ability to make quick changes </li></ul><ul><li>Speed to market </li></ul><ul><li>Agile manufacturing/ service </li></ul><ul><li>Driving firm by using windshield not </li></ul><ul><li>the rear view mirror </li></ul><ul><li>Creative and integrative thinking……… </li></ul>strategic thinking
  29. 29. <ul><li>Do we need to be clear about……? </li></ul><ul><li>Goal </li></ul><ul><li>Objective </li></ul><ul><li>Mission </li></ul><ul><li>Vision </li></ul>
  30. 30. A goal or objective consist of a projected state of affairs which a person or a system plans or intends to achieve or bring about A personal or organizational desired endpoint in some sort of assumed development.
  31. 31. Vision: Defines where the organization wants to be in future. Vision: Defines where the organization wants to be in future.
  32. 32. Mission: Defines where the organization is going now, describing why this organization exists
  33. 33. Targets: defines goals and objectives
  34. 34. Goal 2008 Objective 2013 Mission 2028 5000 Cr 12,000 Cr 50,000 Cr
  35. 35. Goal 2009 Objective 2014 Mission 2029 7000 Cr 15,000 Cr 55,000 Cr
  36. 36. Balance Scorecard as a Management System
  37. 37. Balance Scorecard Emphasizes Financial and Non Financial measures must be Part of Information System
  38. 38. 4 Perspectives Financial Perspective Customer Perspective Internal Business Process Perspective Learning & Growth Perspective
  39. 39. Mission Vision Strategic Goals Sub-Goals Map Sub-Goals to each quadrant of the Balanced Score Card - identify measurement areas - develop measurement goals - postulate indicators - identify data elements For each BSC Quadrant Data Elements Indicators Balanced Scorecard Methodology Overview Develop Strategic Goals Clarify mission & Vision statement Derive Sub-Goals Module Trouble Reports
  40. 40. A Balanced Scorecard Perspective on Performance
  41. 41. 4 Perspectives Financial Perspective Financial Perspective Evaluate the Profitability of the Strategy
  42. 42. 4 Perspectives Customer Perspective Customer Perspective identifies Targeted Customer and market Segments and Measures the Organization’s success in these Segments
  43. 43. 4 Perspectives Internal Business Process Perspective This perspective focuses on internal operations that create value for customers that ,in turn, furthers the financial perspective by increasing the shareholder value
  44. 44. 4 Perspectives Internal Business Process Perspective 3 sub Processes Innovation Process Creating Products Services &Processes To meet the demand Of Customers Operations Process Producing & delivering Existing products that Will meet the needs Of Customers Postsales-Service Process Providing service and Support to the customer After the sale of a product or service
  45. 45. 4 Perspectives Learning & Growth Perspective This perspective identifies the capabilities the organization must excel at to achieve superior internal processes that create value for Customers and shareholders
  46. 46. Target Actual Objective Measures Initiatives Perform Perform Financial Perspective Increase Shareholder value Operating income From Productivity Gain Operating Income From Growth Revenue Growth Manage Cost And Unused Capacity Build Strong Customer Relationship Rs 20 Cr Rs 20.12Cr Rs 30 Cr Rs 34.20 Cr 6% 6.48% FINANCIAL PERSPECTIVE
  47. 47. Target Actual Objective Measures Initiatives Perform Perform Customer Perspective Increase Customer Satisfaction Market Share in Communication Network Segment Number of New Customers Customer Satisfaction Rating Identify future Needs of Customers Identify new Target Customer Seg Increase Cust Focus of Sales 6% 7% 1% 2% 90% give 87%Gave Top two top two Ratings Rating Customer Perspective
  48. 48. Target Actual Objective Measures Initiatives Perform Perform Reduce Delivery Time Meet Specified Delivery dates on time delivery Improve post Sales Services Improve Processes Improve Manufacturing Capability Reduce Setup time Automation of Orders Re-engineer order Delivery process Re-engineer order 92% 90% Delivery process Improve Customer Service process 30 days 30 days Service Response Time Number of Impv. In Business Processes % of processes With Advanced Controls Within 4 hrs Within 3 hrs Organize teams from Sales & Manuf Organize R&D/Mfg Teams to implement Adv. control 5 5 75% 75% INTERNAL BUSINESS PROCESS PERSPECTIVE
  49. 49. Target Actual Objective Measures Initiatives Perform Perform Align Employee And Organizational Goals Develop Process Skill Empower Work Force Learning and Growth Perspective Employee Satisfac- tion Rating % Employees Trained in Process & Quality Mgt % Workers Empowered to Manage Processes Employee Participation to Build Team Work Employees Training Programme Supervisors as Coaches rather Decision Makers 80% 88% Employees Give top Two Ratings 90% 92% 80% 80%
  50. 50. BSC as Strategic Management System
  51. 51. Balanced Scorecard as a Strategic Management System 1 Clarify and Translate vision & Strategy 2 Communicate and link strategic objectives and Measures 3 Plan, Set Targets and align Strategic Initiatives 4 Enhance Strategic Feedback and Learning
  52. 52. <ul><li>Clarifying and </li></ul><ul><li>Translating the </li></ul><ul><li>Vision & Strategy </li></ul><ul><li>Clarifying the Vision </li></ul><ul><li>Gaining Consensus </li></ul><ul><li>Planning & Target Setting </li></ul><ul><li>Setting Targets </li></ul><ul><li>Aligning Strategic </li></ul><ul><li>Initiatives </li></ul><ul><li>Allocating Resources </li></ul><ul><li>Establishing Milestones </li></ul><ul><li>Communicating </li></ul><ul><li>& Linking </li></ul><ul><li>Comm and Educating </li></ul><ul><li>Setting Goals </li></ul><ul><li>Linking Rewards to </li></ul><ul><li>Performance </li></ul><ul><li>Strategic Feedback & </li></ul><ul><li>Learning </li></ul><ul><li>Articulating the shared Vision </li></ul><ul><li>Supplying Strategic Feedback </li></ul><ul><li>Facilitating Strategy review </li></ul><ul><li>and Learning </li></ul>Balance Scorecard
  53. 53. Clarifying and Translating the Vision & Strategy <ul><li>Clarifying the Vision </li></ul><ul><li>Formulation by Sr Executives </li></ul><ul><li>Reaching Consensus </li></ul><ul><li>Sorting Out Differences </li></ul><ul><li>Joint Accountability </li></ul>
  54. 54. Communicating & Linking <ul><li>Communicating and Educating </li></ul><ul><li>Newsletter </li></ul><ul><li>Bulletin board </li></ul><ul><li>Brochure </li></ul><ul><li>Videos </li></ul><ul><li>Intranet </li></ul><ul><li>meetings </li></ul><ul><li>Setting Goals </li></ul><ul><li>Linking Rewards to </li></ul><ul><li>Performance </li></ul><ul><li>Every one Understand </li></ul><ul><li>Strategy for achievement </li></ul><ul><li>Outcome Measures </li></ul><ul><li>Efforts and Initiatives required </li></ul><ul><li>On time Delivery </li></ul><ul><li>Reduce setup time </li></ul><ul><li>Buy new machines </li></ul><ul><li>Improve delivery time </li></ul><ul><li>Improve packing </li></ul><ul><li>Communicating to </li></ul><ul><li>Directors </li></ul><ul><li>Executives </li></ul><ul><li>Employees </li></ul>
  55. 55. Planning & Target Setting <ul><li>Plan to Change </li></ul><ul><li>Set target for 3-5 years </li></ul><ul><li>Stretch targets </li></ul><ul><li>Benchmarking </li></ul><ul><li>Alignment of Targets </li></ul><ul><li>Alignment of Strategic Planning </li></ul><ul><li>with operational Budgets </li></ul>
  56. 56. Strategic Feedback & Learning <ul><li>Periodic Review and Change </li></ul><ul><li>Targets-achieved or not </li></ul><ul><li>Past and future Review </li></ul><ul><li>Information from all </li></ul><ul><li>Double loop learning </li></ul><ul><li>Cause and effect Relationship </li></ul><ul><li>Validity and Viability </li></ul><ul><li>Strategy replacement according </li></ul><ul><li>to outcomes/performance drivers </li></ul>
  57. 57. Features of Balance Score Card <ul><li>Indicate company’s strategy and its link with perspectives </li></ul><ul><li>Strategy is communicated to all </li></ul><ul><li>Strategy translated into measurable targets </li></ul><ul><li>Motivates Managers to achieve targets </li></ul><ul><li>BSC limits the measures to only four </li></ul><ul><li>Highlights effect of one perspective on another </li></ul>
  58. 58. <ul><li>Pitfalls in Implementing Balanced Score Card </li></ul><ul><li>Difficult to establish Fin-Non financial Linkages </li></ul><ul><li>Improvements at all levels may not be possible </li></ul><ul><li>Both subjective-objective measures Consideration </li></ul><ul><li>Considering Cost & benefits of initiatives </li></ul><ul><li>Non-financial Achievements are ignored </li></ul>
  59. 59. <ul><li>Vision & Strategies not actionable </li></ul><ul><li>Strategies not linked to departmental and </li></ul><ul><li>Individual Goals </li></ul><ul><li>Strategies not linked to Long term/short term </li></ul><ul><li>Resource Allocation </li></ul><ul><li>Feedback that is tactical not strategic </li></ul>Barriers to effective Implementation of BSC
  60. 60. Barriers to effective Implementation of BSC Strategy & Vision Financial Plan & Capital Allocation Personal MBO & Incentives Monthly Review Budget 1 Vision & Strategy not Actionable 2 Strategy not Linked to Dept Team & Individual Goals 3 Strategy not Linked to Resource Allocation 4 feedback that is tactically not strategic
  61. 61. <ul><li>Cant be translated into action </li></ul><ul><li>Cant be acted Upon </li></ul><ul><li>Cant be understood </li></ul><ul><li>Fragmentation & Sub optimization </li></ul><ul><li>of efforts </li></ul><ul><li>Lacking consensus & Clarity </li></ul><ul><li>Different Agendas </li></ul><ul><li>No integration </li></ul><ul><li>Not linked coherently to overall strategy </li></ul>Barrier No 1: Vision and strategy not Actionable
  62. 62. <ul><li>Separate Processes for Long term & </li></ul><ul><li>Short term Strategic planning </li></ul><ul><li>Funding to unrelated priorities </li></ul><ul><li>Poor Monthly Reviews </li></ul><ul><li>Unfocused New Mgt Techniques </li></ul><ul><li>Poor Integration </li></ul>Barrier No 3: Strategy not Linked to Resource Allocation
  63. 63. <ul><li>Bulk of feedback is only financial measures </li></ul><ul><li>Little time on strategy implementation & success </li></ul><ul><li>No priority to periodic review and meetings </li></ul><ul><li>Inadequate information </li></ul><ul><li>Poor tactical review process </li></ul>Barrier No 4: Feed back not tactically strategic
  64. 64. Different Management System for Strategic Implementation Clarifying & Translating The Strategy & Vision Planning & Target Setting Communicating And Linking Strategic Feedback & Learning Balance Scorecard <ul><li>Goal alignments from </li></ul><ul><li>top to bottom </li></ul><ul><li>Education and open communication about strategy </li></ul><ul><li>Compensation is linked </li></ul><ul><li>To Strategy </li></ul><ul><li>Stretch targets are established and accepted </li></ul><ul><li>Strategic initiatives are clearly identified </li></ul><ul><li>Investments are determined by strategy </li></ul><ul><li>Annual Budgets are linked to long term planning </li></ul><ul><li>The strategy is the reference point for the entire management process </li></ul><ul><li>The shared vision is the foundation for strategic planning </li></ul><ul><li>Feedback system used to test </li></ul><ul><li>The hypothesis on which strategy </li></ul><ul><li>Is based </li></ul><ul><li>Team problem solving </li></ul><ul><li>Strategy development is a </li></ul><ul><li>Continuous Process </li></ul>
  65. 65. Let Us Review
  66. 66. 4 Perspectives Financial Perspective Customer Perspective Internal Business Process Perspective Learning & Growth Perspective
  67. 67. Translating the strategy to operational terms If we succeed, how will We look to our Shareholders? The Strategy Financial Perspective To satisfy our customers, Which processes must We excel ? Internal Perspective To achieve our vision, How must we look to our Customers ? Customers Perspective To achieve our vision, how must our organisation team Improves? Organizational Learning Measurement is the language that gives clarity To vague concepts Measurement is used to communicate, Not to control Strategy can be described as a series of Cause and Effect relationship
  68. 68. <ul><li>Clarifying and </li></ul><ul><li>Translating the </li></ul><ul><li>Vision & Strategy </li></ul><ul><li>Clarifying the Vision </li></ul><ul><li>Gaining Consensus </li></ul><ul><li>Planning & Target Setting </li></ul><ul><li>Setting Targets </li></ul><ul><li>Aligning Strategic </li></ul><ul><li>Initiatives </li></ul><ul><li>Allocating Resources </li></ul><ul><li>Establishing Milestones </li></ul><ul><li>Communicating </li></ul><ul><li>& Linking </li></ul><ul><li>Comm and Educating </li></ul><ul><li>Setting Goals </li></ul><ul><li>Linking Rewards to </li></ul><ul><li>Performance </li></ul><ul><li>Strategic Feedback & </li></ul><ul><li>Learning </li></ul><ul><li>Articulating the shared Vision </li></ul><ul><li>Supplying Strategic Feedback </li></ul><ul><li>Facilitating Strategy review </li></ul><ul><li>and Learning </li></ul>Balance Scorecard
  69. 69. Make Strategy Everyone’s Job CORP SBU The Strategy Focused Workforce Education Personal Goal Alignment Balanced Pay checks
  70. 70. Make Strategy a continuous Process Strategy Balanced Scorecard Budget Performance Input Output Strategic Learning Loop Management Control Loop 85% of Mgt teams Spends less than 1 hr per month On strategy issues 60% OF Org Don’t link Strategy & budgets 78% orgs lock Budgets to an Annual cycle 92% of orgs Do not report On lead indicators
  71. 71. Questions