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3/06/2016
1
The
BALANCED SCORECARD
Amie Kusumawardhani
Program Magister Manajemen
Universitas Diponegoro
Balanced Scorecard
• Is a management system that enables
organization to translate the vision and
strategy into action
• Developed by Robert Kaplan and David Norton
(1992)
.
The Balanced Scorecard Focuses on
Factors that Create Long-Term Value (1)
• Traditional financial reports look backward
– Reflect only past performance: spending incurred
and revenues earned
– Do not measure creation or destruction of future
economic value
– Do not covers the intangible assets (knowledge &
skills of workers, information system, customer
relationships etc.)
– It is common that current market value of
organization to exceed the market value of its
assets.
.
The Balanced Scorecard Focuses on
Factors that Create Long-Term Value (2)
• The BSc identifies the factors that create long-term economic
value in an organization:
– Customer Focus: satisfy, retain and acquire customers in
targeted segments
– Business Processes: deliver the value proposition to targeted
customers
• innovative products and services
• high-quality, flexible, and responsive operating processes
• excellent post-sales support
– Organizational Learning & Growth:
• develop skilled, motivated employees;
• provide access to strategic information
• align individuals and teams to business unit objectives
Processes
Customers
People
Translating Vision and Strategy:
Four Perspectives
Four Perspectives:
Goals and Performance Measures (1)
 Financial perspective
• How do we look to shareholders?
(What must we do to satisfy our shareholders?)
 Customer perspective
• How do customers see us?
(What do our customers expect from us?)
3/06/2016
2
Four Perspectives:
Goals and Performance Measures (2)
 Internal Business perspective
• What must we excel at?
(What internal processes must we excel at to satisfy our
shareholder and customer?
 Learning and Growth perspective
• Can we continue to improve & create value?
(How must our people learn and develop skills to respond
to these and future challenges?)
10 Basic Question that the BSC should
Address (Kaydos, 1998)…(1)
1. Are we satisfying our customers?
Measures: customer satisfaction, retention and behaviour
2. Are we satisfying our shareholders?
Measures: financial returns
3. Are we satisfying our stakeholders?
Measures: stakeholders satisfaction, retention and
behaviour.
4. What is happening to our customer base?
Measures: market potential and market growth rate
5. Is our company strategy working?
Measures: market share, customer acquisition, customer
profitability, product and service profitability, and
external factor that affect customers.
10 Basic Question that the BSC should
Address (Kaydos, 1998)…(2)
6. Are our individual strategies being properly executed?
Measures: strategic goals and objectives necessary to achieve
them.
7. Are we serving our customers and stakeholders effectively?
Measures: product and service quality.
8. Are we operating efficiently?
Measures: process quality and capability, productivity, waste,
and product & service costs.
9. Are stakeholders contributing what they should?
Measures: resource contribution and stakeholders contribution
quality.
10. Are we developing the abilities we need to execute our
strategies?
Measures: organizational capabilities, stakeholder capabilities,
and infrastructure capabilities.
Balanced Scorecard Perspectives
Perspectives Key Questions Key Metrics
Financialor
Stewardship
For businesses:How do we create value
for our owners
For government& non profits: how do
we maximize value & effectiveness of
our mission?
- Sales, margin,
earning
- Value, Cost
- Effectiveallocation
of resources
Customer &
Stakeholder
Through the eyes of our customers and
shareholders: how ell do our products
and services meet their needs?
- Satisfaction
- Retention
Internal
Processes
How can we improve internalprocess to
deliver
- Process efficiency
- Speed
- Quality
Learning &
Growth or
Organizational
Capacity
How can we supportour internal
processes through improvedknowledge,
skills and abilities, tools & technology
and leadership?
- Humancapital
learning
- Tools, technology
- Innovation
- Infrastructure
- Leadership
- Culture
Organizational Capacity
Perspective
If we improve our capacities :
skills & knowledge, technology,
culture, leadership
Customer Perspective
Which will increase customer
satisfaction:
Value, satisfaction, retention
Mission
Vision
InternalProcess Perspective
Our service will be better & more
efficient:
Productivity, cycle time, quality
Financial Perspective
Which will grow the business:
Profitability, sustainability, growth
Start HereStart Here
The Balanced Scorecard Translates
Strategy Into Operational Terms
(Private Sector)
Focus primarily
on Shareholder
value
Organizational Capacity
Perspective
If we improve our capacities :
skills & knowledge, technology,
culture, leadership
Financial/Stewardship
Perspective
….leading to reduce costs: Efficiency,
cost, value
Mission
Vision
InternalProcess Perspective
Our service will be better & more
efficient: Productivity, cycle time,
quality
Customer/Stakeholders
Perspective
…..and improve satisfaction for
our customers: Satisfaction,
effectiveness, coverage
Start HereStart Here
The Balanced Scorecard Translates
Strategy Into Operational Terms
(Public and Non-profit Sectors)
Focus on how
well the agency
is meeting the
mission
3/06/2016
3
A Shipping Company Strategy Map
Increase
employee
training
Improve route
planning
Fewer
trucks
Increase
Customers
Increase
customer
satisfaction
Increase
revenues
Lower cost
Reduce
travel time
Increase
profit
Organization
capacities
Internal
Processes
Customer
Financial
Adapted from Balanced Scorecard Institute
Regional Airline Balanced Scorecard
Adapted from Norton & Kaplan
Strategic Theme:
Operating Efficiency
Objectives Measures Targets Initiatives
- Profitability
- Lower Costs
- Increase
revenue
- Market value
- Seat revenue
- Plane lease
cost
- 25% per year
- 20% per year
- 5% per year
- Optimize routes
- Standardize
planes
- On-time flights
- Lowest prices
- More
customers
- FAA on-time
arrival rating
- Customer
ranking
- Number of
customers
- First in
industry
- 98%
satisfaction
- % change/yr
- Quality
management
- Customer
loyalty program
Reduce
turnaroundtime
- on-ground
time
- On-time
departure
- < 25 minute
- 93% by end yr
Cycle time
optimization
program
Align ground
crews
- % ground-crew
stockholders
- yr 1: 70%
- Yr 4: 90%
- Yr 6: 100%
- Stock ownership
plan
- Ground crew
training
Align ground
crews
Reduce
turnaround
time
Lowest
price
On-time
flights
More
custom
ers
Lower
Cost
Increase
revenue
Profitability

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Balanced Scorcard in English

  • 1. 3/06/2016 1 The BALANCED SCORECARD Amie Kusumawardhani Program Magister Manajemen Universitas Diponegoro Balanced Scorecard • Is a management system that enables organization to translate the vision and strategy into action • Developed by Robert Kaplan and David Norton (1992) . The Balanced Scorecard Focuses on Factors that Create Long-Term Value (1) • Traditional financial reports look backward – Reflect only past performance: spending incurred and revenues earned – Do not measure creation or destruction of future economic value – Do not covers the intangible assets (knowledge & skills of workers, information system, customer relationships etc.) – It is common that current market value of organization to exceed the market value of its assets. . The Balanced Scorecard Focuses on Factors that Create Long-Term Value (2) • The BSc identifies the factors that create long-term economic value in an organization: – Customer Focus: satisfy, retain and acquire customers in targeted segments – Business Processes: deliver the value proposition to targeted customers • innovative products and services • high-quality, flexible, and responsive operating processes • excellent post-sales support – Organizational Learning & Growth: • develop skilled, motivated employees; • provide access to strategic information • align individuals and teams to business unit objectives Processes Customers People Translating Vision and Strategy: Four Perspectives Four Perspectives: Goals and Performance Measures (1)  Financial perspective • How do we look to shareholders? (What must we do to satisfy our shareholders?)  Customer perspective • How do customers see us? (What do our customers expect from us?)
  • 2. 3/06/2016 2 Four Perspectives: Goals and Performance Measures (2)  Internal Business perspective • What must we excel at? (What internal processes must we excel at to satisfy our shareholder and customer?  Learning and Growth perspective • Can we continue to improve & create value? (How must our people learn and develop skills to respond to these and future challenges?) 10 Basic Question that the BSC should Address (Kaydos, 1998)…(1) 1. Are we satisfying our customers? Measures: customer satisfaction, retention and behaviour 2. Are we satisfying our shareholders? Measures: financial returns 3. Are we satisfying our stakeholders? Measures: stakeholders satisfaction, retention and behaviour. 4. What is happening to our customer base? Measures: market potential and market growth rate 5. Is our company strategy working? Measures: market share, customer acquisition, customer profitability, product and service profitability, and external factor that affect customers. 10 Basic Question that the BSC should Address (Kaydos, 1998)…(2) 6. Are our individual strategies being properly executed? Measures: strategic goals and objectives necessary to achieve them. 7. Are we serving our customers and stakeholders effectively? Measures: product and service quality. 8. Are we operating efficiently? Measures: process quality and capability, productivity, waste, and product & service costs. 9. Are stakeholders contributing what they should? Measures: resource contribution and stakeholders contribution quality. 10. Are we developing the abilities we need to execute our strategies? Measures: organizational capabilities, stakeholder capabilities, and infrastructure capabilities. Balanced Scorecard Perspectives Perspectives Key Questions Key Metrics Financialor Stewardship For businesses:How do we create value for our owners For government& non profits: how do we maximize value & effectiveness of our mission? - Sales, margin, earning - Value, Cost - Effectiveallocation of resources Customer & Stakeholder Through the eyes of our customers and shareholders: how ell do our products and services meet their needs? - Satisfaction - Retention Internal Processes How can we improve internalprocess to deliver - Process efficiency - Speed - Quality Learning & Growth or Organizational Capacity How can we supportour internal processes through improvedknowledge, skills and abilities, tools & technology and leadership? - Humancapital learning - Tools, technology - Innovation - Infrastructure - Leadership - Culture Organizational Capacity Perspective If we improve our capacities : skills & knowledge, technology, culture, leadership Customer Perspective Which will increase customer satisfaction: Value, satisfaction, retention Mission Vision InternalProcess Perspective Our service will be better & more efficient: Productivity, cycle time, quality Financial Perspective Which will grow the business: Profitability, sustainability, growth Start HereStart Here The Balanced Scorecard Translates Strategy Into Operational Terms (Private Sector) Focus primarily on Shareholder value Organizational Capacity Perspective If we improve our capacities : skills & knowledge, technology, culture, leadership Financial/Stewardship Perspective ….leading to reduce costs: Efficiency, cost, value Mission Vision InternalProcess Perspective Our service will be better & more efficient: Productivity, cycle time, quality Customer/Stakeholders Perspective …..and improve satisfaction for our customers: Satisfaction, effectiveness, coverage Start HereStart Here The Balanced Scorecard Translates Strategy Into Operational Terms (Public and Non-profit Sectors) Focus on how well the agency is meeting the mission
  • 3. 3/06/2016 3 A Shipping Company Strategy Map Increase employee training Improve route planning Fewer trucks Increase Customers Increase customer satisfaction Increase revenues Lower cost Reduce travel time Increase profit Organization capacities Internal Processes Customer Financial Adapted from Balanced Scorecard Institute Regional Airline Balanced Scorecard Adapted from Norton & Kaplan Strategic Theme: Operating Efficiency Objectives Measures Targets Initiatives - Profitability - Lower Costs - Increase revenue - Market value - Seat revenue - Plane lease cost - 25% per year - 20% per year - 5% per year - Optimize routes - Standardize planes - On-time flights - Lowest prices - More customers - FAA on-time arrival rating - Customer ranking - Number of customers - First in industry - 98% satisfaction - % change/yr - Quality management - Customer loyalty program Reduce turnaroundtime - on-ground time - On-time departure - < 25 minute - 93% by end yr Cycle time optimization program Align ground crews - % ground-crew stockholders - yr 1: 70% - Yr 4: 90% - Yr 6: 100% - Stock ownership plan - Ground crew training Align ground crews Reduce turnaround time Lowest price On-time flights More custom ers Lower Cost Increase revenue Profitability