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Brief Presentation On
“Balanced Score Card for Strategic PMS”
Ainapur Institute of Management, Hyderabad
(Training and Consultancy Services)
Phone :09440826763
e-mail: ajaygupta@ainapur.com
Regd. No. 1133/ 2002
 Balanced Score Card for Strategy Deployment
 CII-EXIM Award(EFQM Model),
 Tata Business Excellence Model (MBNQA Model),
 Dubai Quality Award
 QMS - ISO9000,EMS - ISO14000, OH&SMS - OHSAS18000,
 TQM, Quality Circles, 5’S’,Kaizen
 Performance/ Continuous Improvement Projects ,
 Six Sigma Green Belt Training and Facilitating Projects
 Designing and Conducting Stakeholders perception surveys
(Employees, Society, Customers and Vendors satisfaction surveys)
 Comprehensive HR Audit
 Mines Safety Audits & Risk Management
 Mine Planning and Cost Analysis
Training & Consultancy Services for
We have extended our Training & consultancy services to
 NTPC Ltd. (Power Plants at Visakapatnam, Vindhyachal,
Unchahar, Auraiya, Talcher Kaniha, Kahalgaon, Korba,
Badarpur and Power Management Institute)
 NSPCL Rorkela & Durgapur
 LANCO Kondapalli Power
 BOSCH Nashik
 Tecumseh Products India Pvt. Ltd,
 Tata Projects Ltd.
 GULF Oil Corporation (Explosives, Chemicals and IDL
Consult),
 Sama Dubai, A Dubai Holding Company
 JK Group
 Ispat Industries
 Sandvik Smith Asia,
 ITC ILTD Anaparthy,
 Hospet Steels (JV of Kalyani Steels and Mukand),
 L&T AP Cement Works,
 MSPL Iron Ore Mines,
 Singareni Collieries , etc
Our Key Customers
 Earlier organizations used to think- “Today's performance
will ensure future success”.
 TQM approach says- “Today's excellence is tomorrows
mediocrity”
 So, we have to benchmark ourselves with “best in the
world” (now it is more true after globalization / open
market) and
 Continuously improve (at the rate higher than our
competitors/potential competitors).
Why Continuous Improvement
Performance Measurement For
A General rule :
“You get what you measure”
 What does not get measured cannot be Recorded.
 What does not get recorded cannot be Monitored.
 What cannot get monitored cannot be Controlled
 What cannot get controlled cannot be Improved.
Continual Improvement
 Therefore , an organization must measure the critical few parameters
that represent its strategy for long-term value creation.
 Many times measures are to measure workload rather than results
 Measures focused in one area may yield unintended consequences in
other areas
 Measurement is a powerful motivator, so “Be careful what you wish for
(measure), you might get it”
Performance Management For
Continual Improvement
According to Balanced Scorecard Collaborative
 95% of typical workforce does not understand its organizations' strategy
 90% of organizations fail to execute their strategies successfully
 86% of executive teams spend less than one hour per month discussing strategy
 70% of organizations do not link middle management incentives to strategy
 60% of organizations do not link strategy to budgeting
According to Balanced Scorecard Forum
 80% of organizations using balanced scorecard reported
improvements in operating performance
 66% of these organizations reported an increase in profits
Facts about Balanced Scorecard
Why do companies need to implement BSC?
Because:
90% of companies
that formulate
Strategy can not
implement it.
BSC helps to
deploy strategy
successfully
Helps to
clarify the
Vision/
Mission of
the company
It is an Enterprise
Performance
Management System:
Managers are working
hard to be sure things
are done right.
They hardly have time to
decide if they are doing
right things. It helps in
doing the right things
It improves
“Communica
tion of the
strategy”
across the
organization
Example: Which Aircraft you will board?
Pilot monitors only air speed
Pilot says that he had
worked on altitude for
the last few flights and
Intends to concentrate on
fuel consumption in the next
set of flights
Pilot 1 Pilot 2
Pilot monitors all the performance
parameters and control parameters
Pilot tries to balance all the things in
order to reach the destination
Obviously no one likes to board an aircraft
where only airspeed meter is there. Pilot
needs to monitor a battery of meters/
instruments to guide the plane.
Managers like pilots need instrumentation about
many aspects of their business environment and
performance to monitor the journey towards
excellent future.
Can there be an ‘unbalance’ in companies?
Oil companies tend
to be dominated by
the technical and
cost focus of the
refineries at the
expense of
marketing
Consumer goods
companies is
dominated by a
marketing and
sales focus at the
expense of
technology and
innovation
High tech
companies have a
strong engineering
and technology
culture with
manufacturing
often being a
stepchild
Harvard Business School Professor, Robert Kaplan and Management
Consultant, David Norton conceived the concept of Balanced Score
Card (BSC) in 1991.
“The Balanced Score Card is one of the most important management
practices of the past 75 years”-Harvard Business Review.
TRANSLATING STRATEGY INTO ACTION
Concept of Balanced Scorecard
What is a “Balanced” Score Card
Balanced Score Card is a multi-dimensional framework that gives
top managers a fast but comprehensive view of the business.
What is a “Balanced” Score Card
The Scorecard is
developed by a group
of senior executives
as a team project. The
scorecard creates a
shared model of the
entire business to
which everyone
contributes.
The Scorecard becomes a joint accountability of all concerned and
creates consensus and teamwork among all senior executives
regardless of previous experience or functional expertise.
What is a “Balanced” Score Card
What is a “Balanced” Score Card
The scorecard provides a framework to communicate mission and
strategy.
It uses measurement to inform employees about the drivers of current
and future success.
By Controlling the outcomes the organization desires and drivers of
those outcomes, senior executives would be able to mobilize their
energies, abilities and the specific knowledge of people throughout
the organization towards achieving the long term goals
Financial
Perspective :
To satisfy
shareholders
what financial
objectives
must we
accomplish?
Customer
Perspective :
To achieve
Financial
objectives,
what customer
needs must
we serve?
Internal
Process
Perspective :
To satisfy
shareholders
and customers
in which internal
processes must
we excel?
Innovation
and learning
perspective :
To achieve our
goals, how
must our
organization
learn and
innovate?
Logistics of a Balanced Score Card
Some Companies have a fifth perspective :
• Social Accountability : TISCO, NTPC
• Safety : Hong Kong Railway Network
Some companies have three perspectives ; Subordinate Courts,
Singapore have combined Financial and Internal Process and called it a
Business Process
Perspectives % of organizations
3 3%
4 66%
5 25%
6 6 %
Logistics of a Balanced Score Card
Financial Perspective:
 Financial performance measures indicate whether
the company’s strategy implementation is
contributing to bottom-line improvement or not
 It focuses on the strategy for growth, profitability
and risk viewed from the perspective of the
shareholder.
 Financial performance, a lag indicator, provides
the ultimate definition how an organization intends
to create sustainable growth in shareholder value
Financial Perspective:
 Traditional financial accounting measures like
ROI, EPS can give misleading signals for
continuous improvement and innovation
which are demanded by present day’s
competitive environment.
 Financial results are post mortem of past
performance. They can not indicate about
organizations future.
Financial Measures are not helpful to guide the creation of
future value through investments in
Customers Suppliers Employees
Technology InnovationProcesses
Typical measures are
 Return on investment (ROI)
 Turnover
 Earning Per Share (EPS)
 Economic Value Addition (EVA)
 Profit Before Depreciation, Interest and Tax (PBIT)
 Profit After Tax (PAT)
Financial Perspective:
The balanced score card demands that the
managers translate their general mission statement
on customer service into specific measures that
reflect the factors that really matter to customers
like :
Customer Perspective:
 Lead time measures
 Quality measures
 Performance and service measures
Some typical measures are
• Customer Satisfaction Index
• Lead-Time to bring new product
• On-time delivery,
• No. of defects
• Time for attending complaints
Customer Perspective:
Customer based measures must be translated
into measures of what the company must do
internally to meet its customer’s expectations
Internal Process Perspective:
Internal Process Perspective:
Managers need to
focus on those critical
internal operations that
enable them to satisfy
customer needs
The internal measures for BSC should stem from business processes
that have the greatest impact on customer satisfaction
Internal Process Perspective:
Internal processes create and deliver the value proposition for
customers. The performance of internal processes is a leading
indicator of subsequent improvements in customer and financial
outcomes.
The Internal-Business-Process Perspective
Innovation
Process
Operations
Process
Post sale service
process
The Generic Value-Chain Model
Identify
new
markets
Create
Product
service
offering
Build
Product /
services
Deliver
Product /
services
Service to
the
customer
Customer Need
Satisfied
Customer
Need
Identified
 Operation Management: Producing and delivering products and
services to customers
 Customer Management :Establishing and leveraging relationships
with customers.
 Innovation: Developing new products, services and relationships
 Regulatory and social: Conforming to regulations and societal
expectations and building stronger communities.
The Internal-Business-Process Perspective
Typical measures are
 Average cycle time to design new product
 Percentage of on time deliveries
 No. of defects / rejection level
 Productivity
 Overhead cost
 Production cost
The Internal-Business-Process Perspective
The customer perspective and internal processes perspective identify
the measures that the company considers most important for
competitive success.
Learning and Growth Perspective:
Intense global competition requires that
companies make continual improvements to
their existing products, processes and have
the ability to introduce entirely new products
with expanded capabilities.
Learning and Growth Perspective:
Intangible assets are the ultimate source of sustainable value creation.
Learning and growth objectives describe how the people, technology
and organization climate combine to support the strategy.
Learning and Growth Perspective:
Improvements in Learning and growth measures are lead indicators
for internal process, customer and financial performance.
Learning and Growth Perspective:
This perspective focuses on the strategic priorities to create a
climate that supports organisational change, innovation and growth.
Typical measures are:
 Employees involved in improvement teams
 Training man days on new technology
 Employees satisfaction level
 Amount spent on R&D etc
Learning and Growth Perspective:
For this companies have to manage Three Intangible assets
Human capital: Employees skills, talent and knowledge
Information capital: Databases, information systems,
networks and technology infrastructure.
Organization capital: Culture, leadership, employee alignment,
teamwork, and knowledge management.
Learning and Growth Perspective:
• Strategy Map is a Logical and Comprehensive
Architecture for describing strategy.
• It provides the visual framework for integrating
the organization’s objectives in the four
perspectives of a Balanced Scorecard.
• It provides a single-page view of the strategy.
• A properly constructed BSC should tell the story
of the business units strategy.
• It should identify and make explicit the
sequence of hypothesis about the cause-and-
effect relationships between outcome
measures and the performance drivers of those
outcomes.
Strategy Maps:
ROCE
Customer
Loyalty
On-time
Delivery
Process
Quality
Process Cycle
Time
Employe
e Skills
Financial
Customer
Internal/
Business
Process
Learning and
Growth
Cause – & – Effect Relationship
Achieve profitable Growth to be
one of top 5 Global CompaniesFinancial
Customer
Acquire Customers Through
Existing Offerings
Acquire Customers Through New
Offerings & Reach
Business ProcessesAcquire/Enhance
Capacity
Product
Rationalization
Product Development
Learning & Growth
Enhance Strategic Skills
Knowledge Mgmt Enhance Employee
Satisfaction
Attain World Class
Cost Competitiveness
Improve Market Share of
Niche products
Retain Profitable Customers
Improve Customer Satisfaction
Increase Loyalty Through
Customer Relationship Mgmt
Improve Order
Management process
Improve Process Capability
Improve Supplier Management
Create culture of high Performance &
Team Based Working
Leadership
Development
Improve ROCE/ Improve
profitabilityIncrease Turnover
Attain cost
competitiveness
Improve customer
satisfaction
Financial
Customer
Operate at high reliability
Improve safety
standards
Improve
efficiency
Achieve ISO 9001:2000
Certification
Reduce O&M
costs
Optimise MAN/
MW ratio
Conserve Energy
Adopt benchmarking concept/
Increase BM projects
Increase employee
Satisfaction level
Provide an environment to encourage
creativity & innovation among all
the employees
Enhance employee skills and
Develop multi-skilled employees
Achieve Community
Development targets
Achieve ISO 14001
Certification
Afforestation of barren
Areas in and around
Simhadri Project
Improve ash
utilisation
Internal Process
Learning &
Growth
Corporate social
responsibility
STRATEGY MAP
Improve Health and
hygiene all around
Project
Completion
Alignment of all the Scorecards with Group Strategy
ABC GROUP PURPOSE AND GROUP STRATEGY
ABC STEEL’S MISSION,VISION ,VALUES
ABC STEEL’S STRATEGIC GOALS
MD’s BALANCED SCORE CARD
QUALITY COUNCIL’S OBJECTIVES &
SCORECARD / KEY PERFORMANCE MEASURES (KPMS)
SUB COUNCIL’S OBJECTIVES & SCORECARD / KEY
PERFORMANCE MEASURES (KPMS)
DEPARTMENTAL OBJECTIVES
(GOALS) & SCORECARD / KEY
PERFORMANCE MEASURES (KPMS)
DEVELOP AQUIP,PRIORITIZE
IMPROVEMENT ACTIVITIES/PROJECTS
ALIGNED TO STRATEGIC GOALS/KMP’s
PERSONAL KRA’s ALIGNED
TO GOALS/KPM’s
Deployment of the Balanced Scorecard
Auxilliary & Losses:0.58
Other Units;0.709
(Boiler House:0.695+Power House:0.0014
Rolling Mills:0.55
(WRM:0.059+HSM:0.422+MLSM:0.033+M
M:0.036+others:0.0004
Steel making 0.313
(weighted average LDI:0.265:LD2:0.36)
Iron making:5.3
(coke 0.954+Sinter:0.603+Iron:3.743)
Vision
To be the most cost
competitive steel
plant in the World
Strategic goals
Cost
competitiveness
MDs Balanced
Scorecard target
Cost of HR coil<$160
Other cost
elements
Cost of
consumable
s
Specific
energy
consumption
Sub Councils
Scorecards
Specific Energy
Consumption
targets
Council (ED-
Opns)
Scorecard
Specific Energy
Consumption
target:7.45
Vision 2007
To seize the opportunities of tomorrow and create a
future that will make us an EVA Positive Company.
To continue to improve that quality of life our employees
and the communities we serve.
Revitalize the core business for a sustainable future.
Venture into new business that will own share of our
future.
Uphold the spirit and values of Tata’s towards
nation building.
Case Study – Tata Steel
BSC
Perspective
Corporate
Objectives
Strategic
Measures
Unit of
Measure
Type
of
Meas
ure
Actu
al
01-02
Targets Bench
mark/
Comp
arativ
es
Strategic
Initiatives
02-
03
03-
04
04-
05
Financial 1.EVA positive
core business
2.Sustainable
Growth
3. Invest in
attractive new
business
4. Divest,
merge, acquire
5. Move from
commodities to
brand
EVA steel business
EVA new business
Market
capitalisation
Retain credit rating
at AA+
Investment in new
business
Profit from new
business
Shareholder
satisfaction index
ROIC-
WACC
Rs Crores
Rating
Rs Cr.
Rs Cr
Index
(5Point
Scale)
La, R
Le, R
Le, R
Le, C
La, C
La, R
7,Posc
o
Fig.
awaite
d
Best in
Class
Investmen
t to be
globally
competitiv
e
Unique
•Reduce WACC
•Retire Costly
debts
•Improve
Reserves
• Find Superior
investment
opportunities
•Set up overseas
FeCr plant
•Obtain Mining
leases for
Titanium
•One acquisition
to be completed
MD’s Balanced Score Card for 2002-2003
La-Lagging; Le-Leading; R-Run the business; C-Cchange
the business
BSC
Perspective
Corporate
Objectives
Strategic
Measures
Unit of
Measure
Type
of
Meas
ure
Actu
al
01-
02
Targets Bench
mark/
Comp
arativ
es
Strategic
Initiatives
02-
03
03-
04
04-
05
Customer 6.Value creating
partnerships
with customers
CSI-steel Avg. Top
Box Score
Index % La,R 89,Tubes
SBU 36%
Baldrgie
winners
•Implement TOP
Box
•Implement
CVM
Long term
partnership with
customer-steel
Numbers LA,R Unique Create customer
Champions
Internal 7.Value creating
partnerships
with suppliers
Supplier
satisfaction index
Index (4
point scale)
La,R Only
TATA
Steel has
got a
survey
done in
•Set up help
desk for
suppliers and
SAP
8.Continue to be
the lowest cost
producer of steel
Employee cost Rs./T of
crude steel
Le,R
India
2,750
(Nippon
Steel)
•Optimize wage
bill
•Improve HR
skill
9.Outsource
strategically
Cost reduction thru
new initiates
Rupees
Crores
Le,C Tata Steel
is
benchmar
k
•AQUIP and
new initiates
MD’s Balanced Score Card for 2002-2003
BSC
Perspective
Corporate
Objectives
Strategic
Measures
Unit of
Measur
e
Typ
e of
Mea
sure
Act
ual
01-
02
Targets Benc
hmar
k/
Com
parat
ives
Strategic
Initiatives
02-
03
03-
04
04-
05
Internal
cont..
10.Encourage
innovation and
allow the freedom
to fail
11. Ensure safety
and environment
sustainability
Rightsizin
g
MOR Le,R •Set targets thru
the new ABP
process
•Outsource non-
core activities
12.Excel at
TBEM
JRD Qv
Score
Points La,C •Implement
OFI’s given by
JRD QV and
Baldrige
assessors
Learning 13.Manage
knowledge
14.Enthused and
happy employees
KM Index Index La,C •Share knowledge
throughout the
organization
•Set up KM
communities
MD’s Balanced Score Card for 2002-2003
BSC
Perspective
Corporate
Objectives
Strategic
Measures
Unit of
Measure
Type
of
Meas
ure
Actu
al
01-
02
Targets Benchma
rk/
Compara
tives
Strategic
Initiatives
02-
03
03-
04
04
-
05
Learning
cont.
15.Improve the
quality of life of
the employees
16. Unleash
people’s
potential and
create leaders
who will build
the future.
ESI Index
(5point
Scale)
La,C 3.6 (HP) •Do Top Box
analysis and
identify strategy
for improving
ESI
Community 17. Improve the
quality of life of
the communities
we serve.
Corporate
citizenship Index
Compose CCI at
Noamundi, Joda,
WB and Jharia
Index (10
point scale)
Index (10
point scale)
La,r
La,C
Tata Steel
is a bench
mark.
Tata Steel
is a bench
mark.
•Serve society.
•Improve water,
electricity and
other services.
•Install one
flyover.
•Introduce the
measure at out
locations on the
same basis as
Jamshedpur.
MD’s Balanced Score Card for 2002-2003
Mission & Vision
Mission
We contribute to our nation building, by producing
and exporting best quality Ferro Alloys in safe
working conditions and adding value to customers
in steel industry.
Vision - 2015
To emerge as a leading Global player in Ferro alloy
industry with profitable growth and taking care of
Environment & all stake holders.
Case Study – AFL Vizag
Increase Turnover & Profits
Cost & Inventory
Reduction
Develop new
customers and increase
market share
Financial
Customer
Improve Customer
Satisfaction
Backward Integration
Process Improvement
Implementing
Risk Management
Impl. Good QEHS &
5S Prog
Cost Rationalisation Measures
Foster high performance work culture
through multi skilling
Developing competency based Talent Mangt.Suggestion , Reward –
Recognition System Implementation
Enhancing Empl. Engagement
Internal Process
Learning &
Growth
STRATEGY MAP
Effective asset
Utilization
Realization from by product,
Scrap etc.
Improving Industrial
Relations.
Increasing Revenue generation
though trading
Penetration into
Niche Market
Developing Processes &
People for Trading
Translating Organisational Strategy Map into Balanced
Scorecard of CEO
Customer
C1
Development of
new customer and
increase Market
Share
C1.1 Sales to New Customers MT & Nos
C1.2 Total Sales Volume MT
Penetration into
Niche Market C2.1 Sales to New Markets
C2
Improve Customer
Satisfaction
C3.1 Customer's Complaints Nos.
Internal
Perspective
P1
Process
Improvement
P1.1 Manganese Recovery (SiMn) %
P1.2 Manganese Recovery (Fe. Mn) %
P1.3 Specific Power Consumption - SIMn KWH/MT
P1.4 Specific Power Consumption - FeMn KWH/MT
P1.5 Fixed Carbon Consumption [Fe Mn] Kgs/ MT
P1.6 Fixed Carbon Consumption Si Mn] Kgs/ MT
P2
Backward
Integration
P2.1
Compliance to Sinter Plant Project
Schedule
Days
behind
Schedule
P2.2 Compliance to Mines Acquisition Plan %
P3
Developing
Processes &
People for Trading
P3.1 Manpower in Trading
P3.2 Processes developed for Trading
Translating Organisational Strategy Map into Balanced
Scorecard of CEO
Internal
Perspective
P4
Effective asset
Utilization
P4.1 Furnace Availablity %
P4.2 Production MT
P4.3 Capacity Utilization %
P4.4 Power Availability [Million Units] Kvah
P5 Good QHSE & 5S
P5.1 Mandays Lost due to Accidents Nos.
P5.2 Compliance to Env. Norms %
P5.2
Compliance to EMS & OHSAS
Implementation Plan
P5.3
Compliance to NABL
Implementation Plan
P5.4
NCRs Raised in ISO9001:2008
Audits (external & Internal)
Nos
P6
Realization
from/by
Product/scrap
etc.,
P6.1 Disposal Slag MT
P6.2 Scrap Sale MT
P7
Implementing
Risk
Management
P7.1 Compliance to Risk Mitigation Plan
P8
Cost
Rationalisation
Measures
P8.1 Savings through PIPs
Rs
Lakhs
P8.2 PIPs Implemented Nos
Translating Organisational Strategy Map into Balanced
Scorecard of CEO
Translating Organisational Strategy Map into Balanced
Scorecard of CEO
HR KPIs with UoMHR Strategy
Organisational
Strategy
Enter New
Markets
Develop
Marketing
Team
Marketing Executives
Recruited
Nos
Training on Marketing Skill
Enhancement
Man Days
New Policy
for Marketing
Team
Design Incentive Scheme
for Marketing Team
Target Date
Develop HR Policy for
International Marketing
Target Date
Aligning HR to Organisational Strategy (Sample)
Customer Perspective Deployment in HR
Internal Processes Perspective Deployment in HR
L & G Perspective Deployment in HR
L & G Perspective Deployment in HR
One Financial Strategic Objective
Deployment – Unit Head to all HODs
Thank You.

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Brief on Balanced Scorecard Concept

  • 1. Brief Presentation On “Balanced Score Card for Strategic PMS” Ainapur Institute of Management, Hyderabad (Training and Consultancy Services) Phone :09440826763 e-mail: ajaygupta@ainapur.com Regd. No. 1133/ 2002
  • 2.  Balanced Score Card for Strategy Deployment  CII-EXIM Award(EFQM Model),  Tata Business Excellence Model (MBNQA Model),  Dubai Quality Award  QMS - ISO9000,EMS - ISO14000, OH&SMS - OHSAS18000,  TQM, Quality Circles, 5’S’,Kaizen  Performance/ Continuous Improvement Projects ,  Six Sigma Green Belt Training and Facilitating Projects  Designing and Conducting Stakeholders perception surveys (Employees, Society, Customers and Vendors satisfaction surveys)  Comprehensive HR Audit  Mines Safety Audits & Risk Management  Mine Planning and Cost Analysis Training & Consultancy Services for
  • 3. We have extended our Training & consultancy services to  NTPC Ltd. (Power Plants at Visakapatnam, Vindhyachal, Unchahar, Auraiya, Talcher Kaniha, Kahalgaon, Korba, Badarpur and Power Management Institute)  NSPCL Rorkela & Durgapur  LANCO Kondapalli Power  BOSCH Nashik  Tecumseh Products India Pvt. Ltd,  Tata Projects Ltd.  GULF Oil Corporation (Explosives, Chemicals and IDL Consult),  Sama Dubai, A Dubai Holding Company  JK Group  Ispat Industries  Sandvik Smith Asia,  ITC ILTD Anaparthy,  Hospet Steels (JV of Kalyani Steels and Mukand),  L&T AP Cement Works,  MSPL Iron Ore Mines,  Singareni Collieries , etc Our Key Customers
  • 4.  Earlier organizations used to think- “Today's performance will ensure future success”.  TQM approach says- “Today's excellence is tomorrows mediocrity”  So, we have to benchmark ourselves with “best in the world” (now it is more true after globalization / open market) and  Continuously improve (at the rate higher than our competitors/potential competitors). Why Continuous Improvement
  • 5. Performance Measurement For A General rule : “You get what you measure”  What does not get measured cannot be Recorded.  What does not get recorded cannot be Monitored.  What cannot get monitored cannot be Controlled  What cannot get controlled cannot be Improved. Continual Improvement
  • 6.  Therefore , an organization must measure the critical few parameters that represent its strategy for long-term value creation.  Many times measures are to measure workload rather than results  Measures focused in one area may yield unintended consequences in other areas  Measurement is a powerful motivator, so “Be careful what you wish for (measure), you might get it” Performance Management For Continual Improvement
  • 7. According to Balanced Scorecard Collaborative  95% of typical workforce does not understand its organizations' strategy  90% of organizations fail to execute their strategies successfully  86% of executive teams spend less than one hour per month discussing strategy  70% of organizations do not link middle management incentives to strategy  60% of organizations do not link strategy to budgeting According to Balanced Scorecard Forum  80% of organizations using balanced scorecard reported improvements in operating performance  66% of these organizations reported an increase in profits Facts about Balanced Scorecard
  • 8. Why do companies need to implement BSC? Because: 90% of companies that formulate Strategy can not implement it. BSC helps to deploy strategy successfully Helps to clarify the Vision/ Mission of the company It is an Enterprise Performance Management System: Managers are working hard to be sure things are done right. They hardly have time to decide if they are doing right things. It helps in doing the right things It improves “Communica tion of the strategy” across the organization
  • 9. Example: Which Aircraft you will board? Pilot monitors only air speed Pilot says that he had worked on altitude for the last few flights and Intends to concentrate on fuel consumption in the next set of flights Pilot 1 Pilot 2 Pilot monitors all the performance parameters and control parameters Pilot tries to balance all the things in order to reach the destination Obviously no one likes to board an aircraft where only airspeed meter is there. Pilot needs to monitor a battery of meters/ instruments to guide the plane.
  • 10. Managers like pilots need instrumentation about many aspects of their business environment and performance to monitor the journey towards excellent future.
  • 11. Can there be an ‘unbalance’ in companies? Oil companies tend to be dominated by the technical and cost focus of the refineries at the expense of marketing Consumer goods companies is dominated by a marketing and sales focus at the expense of technology and innovation High tech companies have a strong engineering and technology culture with manufacturing often being a stepchild
  • 12. Harvard Business School Professor, Robert Kaplan and Management Consultant, David Norton conceived the concept of Balanced Score Card (BSC) in 1991. “The Balanced Score Card is one of the most important management practices of the past 75 years”-Harvard Business Review. TRANSLATING STRATEGY INTO ACTION Concept of Balanced Scorecard
  • 13. What is a “Balanced” Score Card Balanced Score Card is a multi-dimensional framework that gives top managers a fast but comprehensive view of the business.
  • 14. What is a “Balanced” Score Card The Scorecard is developed by a group of senior executives as a team project. The scorecard creates a shared model of the entire business to which everyone contributes.
  • 15. The Scorecard becomes a joint accountability of all concerned and creates consensus and teamwork among all senior executives regardless of previous experience or functional expertise. What is a “Balanced” Score Card
  • 16. What is a “Balanced” Score Card The scorecard provides a framework to communicate mission and strategy. It uses measurement to inform employees about the drivers of current and future success. By Controlling the outcomes the organization desires and drivers of those outcomes, senior executives would be able to mobilize their energies, abilities and the specific knowledge of people throughout the organization towards achieving the long term goals
  • 17. Financial Perspective : To satisfy shareholders what financial objectives must we accomplish? Customer Perspective : To achieve Financial objectives, what customer needs must we serve? Internal Process Perspective : To satisfy shareholders and customers in which internal processes must we excel? Innovation and learning perspective : To achieve our goals, how must our organization learn and innovate? Logistics of a Balanced Score Card
  • 18. Some Companies have a fifth perspective : • Social Accountability : TISCO, NTPC • Safety : Hong Kong Railway Network Some companies have three perspectives ; Subordinate Courts, Singapore have combined Financial and Internal Process and called it a Business Process Perspectives % of organizations 3 3% 4 66% 5 25% 6 6 % Logistics of a Balanced Score Card
  • 19. Financial Perspective:  Financial performance measures indicate whether the company’s strategy implementation is contributing to bottom-line improvement or not  It focuses on the strategy for growth, profitability and risk viewed from the perspective of the shareholder.  Financial performance, a lag indicator, provides the ultimate definition how an organization intends to create sustainable growth in shareholder value
  • 20. Financial Perspective:  Traditional financial accounting measures like ROI, EPS can give misleading signals for continuous improvement and innovation which are demanded by present day’s competitive environment.  Financial results are post mortem of past performance. They can not indicate about organizations future.
  • 21. Financial Measures are not helpful to guide the creation of future value through investments in Customers Suppliers Employees Technology InnovationProcesses
  • 22. Typical measures are  Return on investment (ROI)  Turnover  Earning Per Share (EPS)  Economic Value Addition (EVA)  Profit Before Depreciation, Interest and Tax (PBIT)  Profit After Tax (PAT) Financial Perspective:
  • 23. The balanced score card demands that the managers translate their general mission statement on customer service into specific measures that reflect the factors that really matter to customers like : Customer Perspective:  Lead time measures  Quality measures  Performance and service measures
  • 24. Some typical measures are • Customer Satisfaction Index • Lead-Time to bring new product • On-time delivery, • No. of defects • Time for attending complaints Customer Perspective:
  • 25. Customer based measures must be translated into measures of what the company must do internally to meet its customer’s expectations Internal Process Perspective:
  • 26. Internal Process Perspective: Managers need to focus on those critical internal operations that enable them to satisfy customer needs
  • 27. The internal measures for BSC should stem from business processes that have the greatest impact on customer satisfaction Internal Process Perspective: Internal processes create and deliver the value proposition for customers. The performance of internal processes is a leading indicator of subsequent improvements in customer and financial outcomes.
  • 28. The Internal-Business-Process Perspective Innovation Process Operations Process Post sale service process The Generic Value-Chain Model Identify new markets Create Product service offering Build Product / services Deliver Product / services Service to the customer Customer Need Satisfied Customer Need Identified
  • 29.  Operation Management: Producing and delivering products and services to customers  Customer Management :Establishing and leveraging relationships with customers.  Innovation: Developing new products, services and relationships  Regulatory and social: Conforming to regulations and societal expectations and building stronger communities. The Internal-Business-Process Perspective
  • 30. Typical measures are  Average cycle time to design new product  Percentage of on time deliveries  No. of defects / rejection level  Productivity  Overhead cost  Production cost The Internal-Business-Process Perspective
  • 31. The customer perspective and internal processes perspective identify the measures that the company considers most important for competitive success. Learning and Growth Perspective:
  • 32. Intense global competition requires that companies make continual improvements to their existing products, processes and have the ability to introduce entirely new products with expanded capabilities. Learning and Growth Perspective:
  • 33. Intangible assets are the ultimate source of sustainable value creation. Learning and growth objectives describe how the people, technology and organization climate combine to support the strategy. Learning and Growth Perspective:
  • 34. Improvements in Learning and growth measures are lead indicators for internal process, customer and financial performance. Learning and Growth Perspective:
  • 35. This perspective focuses on the strategic priorities to create a climate that supports organisational change, innovation and growth. Typical measures are:  Employees involved in improvement teams  Training man days on new technology  Employees satisfaction level  Amount spent on R&D etc Learning and Growth Perspective:
  • 36. For this companies have to manage Three Intangible assets Human capital: Employees skills, talent and knowledge Information capital: Databases, information systems, networks and technology infrastructure. Organization capital: Culture, leadership, employee alignment, teamwork, and knowledge management. Learning and Growth Perspective:
  • 37. • Strategy Map is a Logical and Comprehensive Architecture for describing strategy. • It provides the visual framework for integrating the organization’s objectives in the four perspectives of a Balanced Scorecard. • It provides a single-page view of the strategy. • A properly constructed BSC should tell the story of the business units strategy. • It should identify and make explicit the sequence of hypothesis about the cause-and- effect relationships between outcome measures and the performance drivers of those outcomes. Strategy Maps:
  • 39. Achieve profitable Growth to be one of top 5 Global CompaniesFinancial Customer Acquire Customers Through Existing Offerings Acquire Customers Through New Offerings & Reach Business ProcessesAcquire/Enhance Capacity Product Rationalization Product Development Learning & Growth Enhance Strategic Skills Knowledge Mgmt Enhance Employee Satisfaction Attain World Class Cost Competitiveness Improve Market Share of Niche products Retain Profitable Customers Improve Customer Satisfaction Increase Loyalty Through Customer Relationship Mgmt Improve Order Management process Improve Process Capability Improve Supplier Management Create culture of high Performance & Team Based Working Leadership Development
  • 40. Improve ROCE/ Improve profitabilityIncrease Turnover Attain cost competitiveness Improve customer satisfaction Financial Customer Operate at high reliability Improve safety standards Improve efficiency Achieve ISO 9001:2000 Certification Reduce O&M costs Optimise MAN/ MW ratio Conserve Energy Adopt benchmarking concept/ Increase BM projects Increase employee Satisfaction level Provide an environment to encourage creativity & innovation among all the employees Enhance employee skills and Develop multi-skilled employees Achieve Community Development targets Achieve ISO 14001 Certification Afforestation of barren Areas in and around Simhadri Project Improve ash utilisation Internal Process Learning & Growth Corporate social responsibility STRATEGY MAP Improve Health and hygiene all around Project Completion
  • 41.
  • 42. Alignment of all the Scorecards with Group Strategy ABC GROUP PURPOSE AND GROUP STRATEGY ABC STEEL’S MISSION,VISION ,VALUES ABC STEEL’S STRATEGIC GOALS MD’s BALANCED SCORE CARD QUALITY COUNCIL’S OBJECTIVES & SCORECARD / KEY PERFORMANCE MEASURES (KPMS) SUB COUNCIL’S OBJECTIVES & SCORECARD / KEY PERFORMANCE MEASURES (KPMS) DEPARTMENTAL OBJECTIVES (GOALS) & SCORECARD / KEY PERFORMANCE MEASURES (KPMS) DEVELOP AQUIP,PRIORITIZE IMPROVEMENT ACTIVITIES/PROJECTS ALIGNED TO STRATEGIC GOALS/KMP’s PERSONAL KRA’s ALIGNED TO GOALS/KPM’s
  • 43. Deployment of the Balanced Scorecard Auxilliary & Losses:0.58 Other Units;0.709 (Boiler House:0.695+Power House:0.0014 Rolling Mills:0.55 (WRM:0.059+HSM:0.422+MLSM:0.033+M M:0.036+others:0.0004 Steel making 0.313 (weighted average LDI:0.265:LD2:0.36) Iron making:5.3 (coke 0.954+Sinter:0.603+Iron:3.743) Vision To be the most cost competitive steel plant in the World Strategic goals Cost competitiveness MDs Balanced Scorecard target Cost of HR coil<$160 Other cost elements Cost of consumable s Specific energy consumption Sub Councils Scorecards Specific Energy Consumption targets Council (ED- Opns) Scorecard Specific Energy Consumption target:7.45
  • 44. Vision 2007 To seize the opportunities of tomorrow and create a future that will make us an EVA Positive Company. To continue to improve that quality of life our employees and the communities we serve. Revitalize the core business for a sustainable future. Venture into new business that will own share of our future. Uphold the spirit and values of Tata’s towards nation building. Case Study – Tata Steel
  • 45. BSC Perspective Corporate Objectives Strategic Measures Unit of Measure Type of Meas ure Actu al 01-02 Targets Bench mark/ Comp arativ es Strategic Initiatives 02- 03 03- 04 04- 05 Financial 1.EVA positive core business 2.Sustainable Growth 3. Invest in attractive new business 4. Divest, merge, acquire 5. Move from commodities to brand EVA steel business EVA new business Market capitalisation Retain credit rating at AA+ Investment in new business Profit from new business Shareholder satisfaction index ROIC- WACC Rs Crores Rating Rs Cr. Rs Cr Index (5Point Scale) La, R Le, R Le, R Le, C La, C La, R 7,Posc o Fig. awaite d Best in Class Investmen t to be globally competitiv e Unique •Reduce WACC •Retire Costly debts •Improve Reserves • Find Superior investment opportunities •Set up overseas FeCr plant •Obtain Mining leases for Titanium •One acquisition to be completed MD’s Balanced Score Card for 2002-2003 La-Lagging; Le-Leading; R-Run the business; C-Cchange the business
  • 46. BSC Perspective Corporate Objectives Strategic Measures Unit of Measure Type of Meas ure Actu al 01- 02 Targets Bench mark/ Comp arativ es Strategic Initiatives 02- 03 03- 04 04- 05 Customer 6.Value creating partnerships with customers CSI-steel Avg. Top Box Score Index % La,R 89,Tubes SBU 36% Baldrgie winners •Implement TOP Box •Implement CVM Long term partnership with customer-steel Numbers LA,R Unique Create customer Champions Internal 7.Value creating partnerships with suppliers Supplier satisfaction index Index (4 point scale) La,R Only TATA Steel has got a survey done in •Set up help desk for suppliers and SAP 8.Continue to be the lowest cost producer of steel Employee cost Rs./T of crude steel Le,R India 2,750 (Nippon Steel) •Optimize wage bill •Improve HR skill 9.Outsource strategically Cost reduction thru new initiates Rupees Crores Le,C Tata Steel is benchmar k •AQUIP and new initiates MD’s Balanced Score Card for 2002-2003
  • 47. BSC Perspective Corporate Objectives Strategic Measures Unit of Measur e Typ e of Mea sure Act ual 01- 02 Targets Benc hmar k/ Com parat ives Strategic Initiatives 02- 03 03- 04 04- 05 Internal cont.. 10.Encourage innovation and allow the freedom to fail 11. Ensure safety and environment sustainability Rightsizin g MOR Le,R •Set targets thru the new ABP process •Outsource non- core activities 12.Excel at TBEM JRD Qv Score Points La,C •Implement OFI’s given by JRD QV and Baldrige assessors Learning 13.Manage knowledge 14.Enthused and happy employees KM Index Index La,C •Share knowledge throughout the organization •Set up KM communities MD’s Balanced Score Card for 2002-2003
  • 48. BSC Perspective Corporate Objectives Strategic Measures Unit of Measure Type of Meas ure Actu al 01- 02 Targets Benchma rk/ Compara tives Strategic Initiatives 02- 03 03- 04 04 - 05 Learning cont. 15.Improve the quality of life of the employees 16. Unleash people’s potential and create leaders who will build the future. ESI Index (5point Scale) La,C 3.6 (HP) •Do Top Box analysis and identify strategy for improving ESI Community 17. Improve the quality of life of the communities we serve. Corporate citizenship Index Compose CCI at Noamundi, Joda, WB and Jharia Index (10 point scale) Index (10 point scale) La,r La,C Tata Steel is a bench mark. Tata Steel is a bench mark. •Serve society. •Improve water, electricity and other services. •Install one flyover. •Introduce the measure at out locations on the same basis as Jamshedpur. MD’s Balanced Score Card for 2002-2003
  • 49. Mission & Vision Mission We contribute to our nation building, by producing and exporting best quality Ferro Alloys in safe working conditions and adding value to customers in steel industry. Vision - 2015 To emerge as a leading Global player in Ferro alloy industry with profitable growth and taking care of Environment & all stake holders. Case Study – AFL Vizag
  • 50. Increase Turnover & Profits Cost & Inventory Reduction Develop new customers and increase market share Financial Customer Improve Customer Satisfaction Backward Integration Process Improvement Implementing Risk Management Impl. Good QEHS & 5S Prog Cost Rationalisation Measures Foster high performance work culture through multi skilling Developing competency based Talent Mangt.Suggestion , Reward – Recognition System Implementation Enhancing Empl. Engagement Internal Process Learning & Growth STRATEGY MAP Effective asset Utilization Realization from by product, Scrap etc. Improving Industrial Relations. Increasing Revenue generation though trading Penetration into Niche Market Developing Processes & People for Trading
  • 51. Translating Organisational Strategy Map into Balanced Scorecard of CEO
  • 52. Customer C1 Development of new customer and increase Market Share C1.1 Sales to New Customers MT & Nos C1.2 Total Sales Volume MT Penetration into Niche Market C2.1 Sales to New Markets C2 Improve Customer Satisfaction C3.1 Customer's Complaints Nos. Internal Perspective P1 Process Improvement P1.1 Manganese Recovery (SiMn) % P1.2 Manganese Recovery (Fe. Mn) % P1.3 Specific Power Consumption - SIMn KWH/MT P1.4 Specific Power Consumption - FeMn KWH/MT P1.5 Fixed Carbon Consumption [Fe Mn] Kgs/ MT P1.6 Fixed Carbon Consumption Si Mn] Kgs/ MT P2 Backward Integration P2.1 Compliance to Sinter Plant Project Schedule Days behind Schedule P2.2 Compliance to Mines Acquisition Plan % P3 Developing Processes & People for Trading P3.1 Manpower in Trading P3.2 Processes developed for Trading Translating Organisational Strategy Map into Balanced Scorecard of CEO
  • 53. Internal Perspective P4 Effective asset Utilization P4.1 Furnace Availablity % P4.2 Production MT P4.3 Capacity Utilization % P4.4 Power Availability [Million Units] Kvah P5 Good QHSE & 5S P5.1 Mandays Lost due to Accidents Nos. P5.2 Compliance to Env. Norms % P5.2 Compliance to EMS & OHSAS Implementation Plan P5.3 Compliance to NABL Implementation Plan P5.4 NCRs Raised in ISO9001:2008 Audits (external & Internal) Nos P6 Realization from/by Product/scrap etc., P6.1 Disposal Slag MT P6.2 Scrap Sale MT P7 Implementing Risk Management P7.1 Compliance to Risk Mitigation Plan P8 Cost Rationalisation Measures P8.1 Savings through PIPs Rs Lakhs P8.2 PIPs Implemented Nos Translating Organisational Strategy Map into Balanced Scorecard of CEO
  • 54. Translating Organisational Strategy Map into Balanced Scorecard of CEO
  • 55. HR KPIs with UoMHR Strategy Organisational Strategy Enter New Markets Develop Marketing Team Marketing Executives Recruited Nos Training on Marketing Skill Enhancement Man Days New Policy for Marketing Team Design Incentive Scheme for Marketing Team Target Date Develop HR Policy for International Marketing Target Date Aligning HR to Organisational Strategy (Sample)
  • 56.
  • 58. Internal Processes Perspective Deployment in HR
  • 59. L & G Perspective Deployment in HR
  • 60. L & G Perspective Deployment in HR
  • 61. One Financial Strategic Objective Deployment – Unit Head to all HODs
  • 62.