Balanced Score card is applied by organizations to promote performance and productivity through efficiency and effective management by embracing Strategic Management

1. Mr. Abraham M.Ncunge
BALANCED SCORECARD

2. Performance management framework
Key
performance
indicators
Vision
Mission
strategy
Strategy
map
Identifying
Defining
Measuring
Monitoring
Reporting
Company
strategy

3. Performance management
component
 Three critical components for effective
process of performance management
Performance
management
infrastructure
Performance
management
culture
Performance
management
processes
Logistic support and
performance management
administration
Culture that is based on
performance
accountability
Performance management
cycle is continuous and
consistent

4. Performance Management Cycle
Strategy
Set measures and target
Plan and Execute Reward and Coach
Monitor and Evaluate

5. What is a Balanced Scorecard
 A Measurement
System?
A Management
System?
A Management
Philosophy?

6. Definition
• The balanced scorecard is a management
system (not only a measurement system)
• It enables organizations to clarify their vision
and strategy and translate them into action
• It provides feedback around both the internal
business processes and external outcomes in
order to continuously improve strategic
performance and results
• Fully deployed, the balanced scorecard
transforms strategic planning from an
academic exercise into the nerve center of an
enterprise

7. Managing Performance with Balanced
Scorecard
 Balanced Scorecard is a management tool that
provides stakeholders with a comprehensive
measure of how the organization is progressing
towards the achievement of its strategic goals
– Balances financial and non-financial measures
– Balances short and long-term measures
– Balances performance drivers (leading
indicators) with outcome measures (lagging
indicators)
– Leads to strategic focus and organizational
alignment.

8. Four Perspective of the balanced
score card
Vision and
Strategy
Objectives Measures Targets Initiatives
FINANCIAL
“To succeed
financially, how
should we appear
to our
shareholders?”
Objectives Measures Targets Initiatives
LEARNING AND GROWTH
“To achieve
our vision,
how will we
sustain our
ability to
change and
improve?”
Objecti
ves
Measur
es
Targets Initiatives
CUSTOMER
“To achieve
our vision,
how should
we appear
to our
customers?”
Objecti
ves
Measur
es
Targets Initiatives
INTERNAL BUSINESS PROCESS
“To satisfy our
shareholders
and customers,
what business
processes must
we excel at?”

9. The Balanced Scorecard focuses on Factors
that Create Long Term Value
 Traditional financial reports look backward
– Reflect only the past: spending incurred and revenues earned
– Do not measure creation or destruction of future economic value
 The Balanced Scorecard identifies the factors that create long-term economic
value in an organization, for example:
– 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

10. Four perspective Apply to mission Driven as
well as profit driven organization
Profit Driven
Mission Driven
• What must we do to satisfy our
shareholders?
• What do our customers expect from
us?
• What internal processes must we
excel at to satisfy our shareholder and
customer?
• How must our people learn and
develop skills to respond to these and
future challenges?
• What must we do to satisfy our financial
contributors?
• What are our fiscal obligations?
• Who is our customer?
• What do our customers expect from
us?
• What internal processes must we excel
at to satisfy our fiscal obligations, our
customers and the requirements of our
mission?
• How must our people learn and develop
skills to respond to these and future
challenges?
Financial Perspective
Customer Perspective
Internal Perspective
Learning & Growth
Perspective
Answering these questions is the first step to develop a Balanced Scorecard

11. The Balanced Scorecard Framework Is Readily
Adapted to Non-Profit and Government
Organizations
The Mission, rather than the financial / shareholder objectives,
drives the organization’s strategy
"If we succeed, how
will we look to our
financial donors?”
“To achieve our vision, how
must our people learn,
communicate, and work
together?”
The Mission
“To satisfy our customers,
financial donors and mission,
what business processes
must we excel at?"
”To achieve our vision,
how must we look to
our customers?”

12. Strategy and Balanced Scorecard
Mission –Why We
Exist
Vision –What We
want to be
Values –What’s
Important to Us
Strategy
:Our Game
Plan
Strategy Map
:Translate the
Strategy
Balanced
Scorecard
:Measure and
Focus
Strategic
outcomes
satisfied
Shareholde
rs
Delighted
Customers
Excellent
Processes
Motivated
Workforce

13. Strategy Map Framework
 This framework describes the types of
strategic target that should be presented in
each perspective, namely the financial
perspective, customers, internal business
process, and learning & growth perspective.

14. Strategy Map Framework
Financial
Customers
Internal process
Learning & Growth
Long-term Shareholder Value
Cost Efficiency Revenue Growth
quality service availability brand
price
Operations
Management
Processes
customer Mana
gement
processes
Innovation
Processes
Regulatory and
Social
Processes
Human capital Organizational
capital
Information
capital

15. Financial Perspective
 in private companies, the financial perspective is the
main objective (ultimate goal) – without having to
sacrifice the interests of other relevant stakeholders
(community, environment, government, etc.)
 In the financial perspective, the strategic goal is the
long-term shareholder value
 This goal is driven by two factors, namely : revenue
growth and cost efficiency

16. Strategic Objectives in Financial
Long-term Shareholder Value
cost Efficiency
Improve Cost Structure
Increase Asset Utilization
Revenue Growth
Expand Revenue Opportunities
Enhance Customer Value

17. Customer Perspective
 This perspective is very instrumental, because
without customers, how can a company survive?
 Customer perspective covers the following elements:
– Customer acquisition
– Customer retention
– customer profitability
– Market share
– Customer satisfaction

18. Strategic Objectives in Customer
Customer Retention Customer Profitability
Customer Satisfaction Market share
customer Acquisition
Price Quality Service Availability brand

19. Internal Process Perspective
 This perspective reflects on the processes in
key business that should be optimized in
order to meet the needs of the customers
 There are four main themes in this
perspective, namely:
– Operations Management Process
– Customer Management Process
– Innovation Process
– Regulatory and Social Process

20. Strategic Objectives in Internal Process
Operations
Management
Processes
Innovation
Processes
Customer Manage
ment Processes
Regulatory and
Social
Processes
Processes that produce
and deliver products
and services
Supply
Production
Distribution
Processes
that enhance
customer value
Selection
Acquisition
Retention
Growth
Processes that create
new products
and services
Environment
Safety &Health
Employment
Community
Selection
Acquisition
Retention
Growth
Processes
that improve
communities and the
environment

21. Learning & Growth Perspective
 This perspective reflects the capability that a
company should have, namely:
– Human Capital
– Organization Capital
– Information Capital
 This perspective shows us that good human
resource development system, organizational
system and information system forms a solid
foundation for improving company performance

22. Strategic Objectives in Learning &
Growth
Human capital Organizational
capital
Information capital
•Systems
•Database
•Net works
•Culture
•Leadership
•Organization
Development
Attitude
Skills
knowledge

23. Strategy Map Template
 The following slide displays the strategy map
template comprising of four perspectives :
financial, customer, internal business
process, and learning & growth

24. Strategy Map Template
Financial
Customer
Internal
process
Learning and
growth
Long-term Shareholder Value
Cost Efficiency Revenue Growth
quality service availability brand
Operations
Management
Processes
price
Customer Ma
nagement
Processes
innovation
Processes
Regulatory
and Social
Processes
Information
capital
Organizatio
nal capital
Human
capital

25. Identifying Key Performance Indicators
(KPI)
Strategic Objectives
Vision
Mission
and Values
Strategy
KPI = Measurement
or indicator that
provides information
on how far we have
succeeded in
achieving the strategic
objectives
Key Performance
Indicators
• Financial
• Customer
• Internal business process
• HR development

26. 1. Leadership From the
Top
– Create the Climate for
Change
– Create a Common
Focus for Change
Activities
– Rationalize and Align
the Organization
3. Unlock and Focus Hidden Assets
– Reengineer Work Processes
– Create Knowledge Sharing Networks
2. Make Strategy Everyone’s Job
– Comprehensive Communication to
Create Awareness
– Align Goals and Incentives
– Integrate Budgeting with Strategic
Planning
– Align Resources and Initiatives
4. Make Strategy a Continuous
Process
– Strategic Feedback That
Encourages Learning
– Executive Teams Manage Strategic
Themes
– Testing Hypotheses, Adapting, and
Learning
The Ingredients of Highly Successful
Balanced Scorecard Programs
STRATEGY
Formulate
Navigate
Communicate
Execute

27. Key Pitfalls to Avoid
 Measurement to control; not
to communicate
 Management dictating
actions vs. employee
improvisation to achieve
desired outcomes
 For management only, not
shared with all employees
Process
Philosophy

28. The BSC Management System
STRATEGY
ALIGNMENT
LEVERAGE
PERFORMANCE
PERFORMANCE
KNOWLEDGE BASE INSIGHTS
LEARNING

29. KPI Guidelines
 The measure of success must show clear,
specific and measurable performance
indicators.
 The measure of success should be declared
explicitly and in detail so that it is clear what is
being measured.
 Costs to identify and monitor the measure of
success should not exceed the value that will be
known from the measurement.

30. KPI Guidelines
Relevant to Does KPI have a linkage
The Strategic Objective with the strategic objectives
Controllable Are the KPI achievements
still under control
Actionable Can any action be taken to
improve the performance
Simple Is the KPI easy to explain
Credible Is the KPI not easy to
manipulate

31. KPI Family Dimension
Measures employee output
(units/transactions/ dollars), the
uptime levels and how employees
use their time (sales-to-assets
ratio, dollar revenue from
new customers, sales pipeline)
Measures the ability to meet
and/or exceed the requirements
and expectations of the customer
(customer complaints,
percent returns, DPMO -- defects
per million opportunities)
Quality
productivity

32. KPI Family Dimension
Measures the overall effectiveness of the management
organization in generating profits (profit contribution by
segment/customer, margin spreads).
Measures the point in time (day/week/month)
when management and employee tasks are
completed (on-time delivery, percent of late
orders)
Profitability
Timeliness

33. KPI Family Dimension
Measures how effectively the
management organization incorporates quality
control, Six Sigma and best practices to
stream line operational processes (yield
percentage, process uptime, capacity utilization).
Measures how effectively the
management organization leverages existing
business resources such as assets, bricks and
mortar, investments (sales per total assets, sales
per channel, win rate)
Process
Efficiency
Resource
Utilization

34. KPI Family Dimension
measures how successfully the
management organization achieves
economies of scale and scope of
work with its people, staff
and practices to control operational
and overhead costs (cost per unit,
inventory turns, cost of goods)
measures the ability of the
management organization to maintain competitive
economic position in the growth of the economy
and industry (market share,
customer acquisition/retention, account
penetration)
Cost
Savings
Growth

35. KPI Category Dimension
The actual raw data value as
measured (e.g.,sales volume)
The comparison of the changes
in performance of one value
relative to the same value at a
different time, geography, etc.
(e.g., percentage change in sales
direct
percentage

36. KPI Category Dimension
The comparison of one value
relative to another to provide
a benchmark for comparison
of performance (e.g., average
sales per day)
A combination of several separate
Measures added together that result
in an overall indicator of performance
(e.g., (company sales growth)/(industry
sales growth) for a specific geography)
Simple ratio
index

37. KPI Category Dimension
The addition of the weighted averages of
several similar measures that result in an
overall composite indicator of performance
(e.g., customer satisfaction composite is
mixture of results from surveys, focus groups
and product returns)
Multiple measures such as mean, variance,
standard deviation that capture
the spread and distribution of the performance
measures (e.g., sales distribution by demographics,
geography, channel)
Composite
Average
Statistics

38. Conclusion
 The Balanced Scorecard is a management
system used to focus and prioritize
management energy toward achieving
both short and long term organizational goals
 and with the ability to give early warning
signals for midcourse correction

39. Area of focus