using the balanced
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USING THE BALANCED SCORECARD AS STRATEGICMANAGEMENT SYSTEM
GROUP#07
M.Rizwan
Shahzad Fasial
UzmaFazal
Nasira Aslam
WHAT IS A BALANCED SCORECARD?
A Measurement System?
A Management System?
A communication Tool?
DEFINITIONThe 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.
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
MEASUREMENT SYSTEM Translate mission, vision, strategy Provide the framework Measure four perspective
Customer relationFinancial Internal services processLearning innovation and growth
Long-Term Shareholder Value
Improve Cost Structure
Increase Asset Utilization
Expand Revenue Opportunities
Enhance Customer ValueFinance
Price Quality Availability Selection Functionality Service Partnership BrandCustomer
Operation management Customer Management Innovation Management Social & Regulatory
Internal Process
- Supply- Production- Distribution- Risk Management
- Selection- Acquisition- Retention- Growth
- Opportunities Identification- R&D Portfolio- Design & Develop- Launch
- Environment- Safety and Health- Employment- Community
- Skills- Training- Knowledge
Human Capital
- Systems- Databases- Networks
- Culture- Leadership- Alignment- Teamwork
Information Capital Organization Capital
Learning& Growth
STRATEGIC MANAGEMENT SYSTEM Translate strategy into:
ObjectiveMeasurementTargets Initiative
TRANSLATING VISION AND STRATEGY
WHY ARE COMPANIES ADOPTING A BALANCED SCORECARD?• Change Formulate and communicate a
new strategy for a more competitive environment
• Growth Increase revenues, not just cut
costs and enhance productivity
• Implement From the 10 to the 10,000.
Every employee implements the new growth strategy in their day-to-day operations
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
IncreaseCustomer Satisfaction Through Superior Execution
IncreaseEmployee Productivity
Access to Strategic Information
Develop Strategic Skills
Align Personal Goals
FinancialPerspective
CustomerPerspective
InternalPerspective
Learning Perspective
Cross-Sell the Product Line
Shift to Appropriate Channel
Provide Rapid Response
Develop New Products Minimize
Problems
Understand Customer Segments
MANAGING STRATEGY
TRANSLATING THE VISION
Clarifying the vision Gaining consensus Example???????? Metro bank
Uzma Fazal 228
COMMUNICATING AND LINKING
THE BALANCED SCORECARD METHODOLOGY: MAKING THE STRATEGY TANGIBLE,
UNDERSTOOD AND SHARED At the highest level, the Balanced Scorecard is a
framework that helps organizations to translate strategy into operational objectives that drive both behavior and performance.
The BSC is a structured approach to performance measurement and performance management that links the organization’s strategic thinking to the activities necessary to achieve desired results
The BSC is a vehicle for communicating an organization’s strategic direction and for measuring achievements towards these predetermined objectives
The BSC clearly establishes linkage between strategic objectives, the measures for determining progress, the stretch targets established, and the focused initiatives needed to move the organization forward to meet those organizational goals
COMMUNICATING AND LINKING
Three layers of managementTop management
Middle managementFirst line management
COMMUNICATING AND LINKING Advantages of Communicating and
linkingEasy information flowBetter understanding of company long term
strategic goalBuild a stronger commitment to achieve
those goals
COMMUNICATING AND LINKING
Score card users generally engage in three activitiesCommunicating and educatingSetting goals Three levels of information
Corporate objectives , measures and targets Leaves room for translating The corporate targets into
targets for each business unit The company asks both individual and teams to articulate
which of their own objectives would be consistent with the business unit and corporate objectives
Linking rewards to performance measuresE.g An oil company uses the scorecard as the basis of calculating incentive compensation.
STRATEGIC IMPLEMENTATION: BALANCED SCORECARD
Source: “Using the Balanced Scorecard as a Strategic Management System”, Kaplan and Norton, HBR, Jan-Feb 1996.
COMMUNICATING AND LINKING Lets managers communicate their strategy up and
down the organisation and links it to departmental and individual objectives
Traditionally departments are evaluated by their financial performance and individual incentives are tied to short term financial goals
The scorecard gives managers a way of ensuring that all levels of the organisation understand the long term strategy.
COMMUNICATING AND LINKING
Attractive and powerful linkages carries risk
Assigning weights to each objective
Syed Shahzad Faisal Bukhari 224
BUSINESS PLANNING
TYPES OF PLANNING
Long run planning
Short run planning
COMPANIES LONG-RANGE PLANNING PROCESS
PROBLEM Every organization have separate procedures and organizational unit for strategic planning and for resource allocation and budgeting
RESOURCE ALLOCATION
Resource allocation and budgeting process run by the finance staff set financial target for revenues , expenses , profit and investment for next fiscal year
WHAT IS THE BALANCED SCORECARD?
Financially & Non Financially measurement of the organization is called balanced scorecard
BALANCED SCORECARD Creating a balanced scorecard forces
companies to integrate there strategic planning and budgeting processes that helps to ensure that there budget support there strategies
Scorecard user select measure of progress from all set targets
The organizations determine which action will drive them toward their targets
EXAMPLE
Style Company…..
Nasira Aslam 220
FEEDBACK AND LEARNING Give capacity about strategic learning
Existing feedback and review process focus on companies budgeted financial goal
With balance scorecard company can monitor short –term results
Enable companies to modified strategies
single loop learning process
Double loop learning process
BALANCE SCORECARD SUPPLIES THREE ELEMENTS TO STRATEGIC LEARNING
1. Articulate the company shared vision
2. Supply essential strategic feedback system
3. Scorecard facilitates strategy review that essential to strategic learning
HOW 0NE COMPANY LINKED THE MEASURES FROM THE FOUR PERSPECTIVE
Company found significant correlation between
employ morals ,a measure in learning and growth perspectives, and customer satisfaction
Correlated with payment of invoices Correlation between employ moral and
employ suggestions
GEN0190n.ppt 36
CONCLUSION
¨ Balanced score card can be used to:
- clarify and update strategy
- communicate strategy throughout the company
- align unit and individual goals with the strategy
- link strategic objectives to long term targets & annual budgets
- identify and align strategic initiatives
- conduct periodic performance reviews to learn about and improve strategy
Thanks to Allah
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