balanced score sheet to work

8/8/2019 Balanced Score Sheet to Work

1/12


2/12

Introduction

y Today's managers recognize the impact that measures have onperformance. But they rarely think of measurement as an essential partof their strategy

y

Effective measurement must be an integral part of the managementprocess

y Balanced scorecard was proposed in the Jan Feb 1992 issue of HBR

y It provides the executives with an comprehensive framework that

translates a companies strategic objective into a coherent set ofperformance measures

y The scorecards provides the managers with four different perspectivesfrom which to choose (product, process, customer and marketdevelopment)


3/12

About balanced scorecard

y It complements traditional financial indicators with measures of performancefor customers, internal processes, and innovations and improvement activities

y Where traditional financial measures report on what happened last periodwithout indicating how managers can improve on performance, the scorecardfunctions as a cornerstone of a companys current and future successes

y Balanced scorecard can serve as a focal point for which the organizationsefforts, defining and communication priorities to managers, employees,investors and even customers

y

Its is now used as the language, the benchmark against which all newbusinesses and projects are evaluated

y It is not a template that can be applied to business in general or even industry.Different product, situations and competitive environment need differentscorecard


4/12

Responding to a changing industry

y Rockwater is a worldwide leader in ground water engineering and construction

y Vision: As our customers preferred provider, we shall be the industry leader inproviding the highest standard of safety and quality to our clients

y Five Strategic elements were: high level of service, customer satisfaction,continuous improvement of safety, equipment reliability, responsiveness andcost effectiveness

y Rockwater senior management team transformed its vision and strategy intobalanced scorecard's four sets of performance measures

y Financial Measures, Customer Satisfaction, Internal Processes, Innovation &Improvement


5/12

Uses scorecard to plan long term

y Apple computer development a balanced scorecard to focus senior management ona strategy that would expand discussions beyond gross margin, return on equity andmarket share

y A small steering committee, intimately familiar with the deliberations and strategicthinking of Apples executives management team, chose to concentrate onmeasurement categories within each of the four perspectives and to select multiplemeasurements within each category

y Apples management stressed these categories in the following order: customersatisfaction, core competencies, employee commitment and alignment, marketshare and shareholder value

y The five performance indicators have helped Apples senior managers to focus theirstrategy in a number ways:

The balance score card at apple serves as a planningdevice and not as a control device

It has also helped Apple develop a language of measureable outputsfor how to launch and leverage programs


6/12

Consolidating strategic information

y AMD a semiconductor company made a quick and easy transition to balance dscore card

y It had clearly defined mission, strategy statement, and shared understanding

among senior executive about its competitive niche

y The balanced scorecard consolidated and focused these diverse measures intoquarterly briefing books which contained seven sections: financial measure,consumer based measure, such as on-time-delivery, lead time, andperformance to schedule, measures of critical business processes in wafer

fabrication, assembly and test new products, process technology developmentand finally measures for corporate quality

y The limited success of AMD with the balanced scorecard demonstrates that thescorecard has its greatest impact when used to drive a change

y The scorecard is not just a measurement system, it is a management system tomotivate breakthrough competitive performance


7/12

What kinds of measures were you using

y The FMC corporate executive team, like most corporate offices, reviews thefinancial performance of each operating division monthly

y The return on capital employed measure was especially important for FMC

y At the end of the year, the division managers who delivered predictableperformance were rewarded

y But still it was becoming less clear from the companies future growth wouldcome from and where the company should look for breakthrough

y As a result the company had become a high return on investment company buthad less potential for further growth and it was not clear from our financialreports what progress the company was making in implementing long terminitiatives

y The company had to give each division strategy that would give it sustainablecompetitive advantage


8/12

How did the balanced scorecard emerge as the remedy

to the limitation of measuring only short term financial

result?

y Division managers generally missed targets due to reasons generally notinternal

y Typically the division management had inaccurately estimated market

demands or had failed to forecast competitive reactions

y A new system was needed to lead operating managers beyond achievinginternal goals to searching for competitive breakthrough in global marketplace

y They used the scorecard as the focal point of discussion point for discussion. Itforced the division managers to answer these questions: how do we become ourcustomers most valued suppliers? How do we become more externallyfocused? What is my divisions competitive advantage? What is its competitivevulnerability?


9/12

How did you launch the scorecard effort at FMC?

y Six division managers were selected as prototype

y Each division had to perform a strategic analysis to identify its sources ofcompetitive advantage

y 15-20 measures in the balanced scorecard had to be organization specific andhad to communicate clearly what short term measures of operating

performance were consistent with a long term trajectory of strategic successes

Were the six divisions managers free to develop

their own scorecard?

y

Managers were allowed to perform their own strategic analysis and to developtheir own measures

y FMC wanted that measures of the objective should be quantifiable

y Second, they preferred output oriented measures not process orientedmeasures


10/12

Benchmarking has become popular with lot of

companies. Does it tie in to the balanced scorecard

measurements?

y 95% of the companies that have tried benchmarking have spent lot of moneybut have got very less return

y In case of balanced scorecard it is lot easier to benchmark the process that to

benchmark the process

Were the division managers able to develop able to

develop output oriented measures

y Divisional manger did encounter some obstacles

y The measures the mangers proposed tended to be non-quantifiable and inputrather than output oriented

y But later they did realize that customer survey was an excellent vehicle forpromoting external focus


11/12

Did you encountered any problems are you launched the

six pilot projects?

y There was initial resistance amongst managers

y They realized that the system was extremely transparent

yTo offset their concern we designed targets around long term objectives

y They also wanted to focus from a measurement system to achievingperformance results

y But the process was not easy . One division manager described his own threestage implementation process after receiving the companies directives to build

a balanced scorecardy But in the end the company was successful. They now have six converts who are

helping us to spread the message throughout the organization


12/12

Thank you

balanced score sheet to work

Documents