Download - SHRM Balanced Scorecard
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Balanced Scorecard
By : Fareed Virk
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Executing Strategy...Is the greatest challenge for organizations
• VisionOnly 5% of workforce gets it!
• People 25% of managers have incentives linked to strategy
• Management 85% of executive teams spend less than 1 hour/mo discussing strategy
• Resource 60% of organizations don’t link budgets to strategy
• 9 out of 10 companies fail to execute their strategies.
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Bad execution, not bad strategy is the cause of 70% of CEO failures
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Challenges in Executing Strategy
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Financial Management Tools
Balance SheetsIncome Statements
Statement of Cash Flow
People ManagementToolsMBO
Training ProgramsHRIS
360 Feedback
Customer ManagementToolsC R M
Customer Segment AnalysisCustomer Surveys
Process ManagementTools
Six SigmaSupply Chain Management
TQMStrategy Management
Tools
???
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• Situation
Navigating an organization is as complex as an Aero plane
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Industrial Age Financial Control
ROCE Prod Control Profitability Physical Capital
Many measures like these
are obsolete now.
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Information Age
Develop Customer Relationship
Introduce innovative products/services
Quality products at low cost Employee development and
motivation Deploy information
technology
Newer capabilities required
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BSC provides managers with
the instrumentations they
need to Navigate future
competitive success.
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Why Use a Balanced Scorecard?
A Balanced Scorecard framework can provide:
Focus Alignment Accountability Communication
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What a Balanced Scorecard is NOT
It's Not Just an Executive Report It's Not Just an Analyst's Tool It's Not Generic It's Not One-Size-Fits-All It's Not a Panacea
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BSC translates an organizational mission and strategy into
comprehensive set of performance measures that provides the frame work
for strategic measurement and
Management system.
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If we succeed, how will we look to our
shareholders?
Financial Perspective
To achieve our vision, how must we
look to our customers?
Customer Perspective
To satisfy our customers, which processes must we
excel at?
Internal Perspective
To achieve our vision, how must our
organization learn and improve?
Learning & Growth Perspective
The Strategy
4 Perspectives in BSC
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Develop Strategic
Goals
Mission VisionClarify mission & Vision statement
Strategic Goals
Derive Sub-Goals
Sub-Goals
Map Sub-Goals to each quadrant of the Balanced Score Card
- identify measurement areas - develop measurement goals - postulate indicators - identify data elements
For each BSC Quadrant
Data Elements
Module
Tro
uble
Report
sIndicators
Balanced Scorecard
Internal Business• Sub-Goals
Learning & Growth• Sub-Goals
Customer• Sub-Goals
Financial• Sub-Goals
Internal Business• Sub-Goals
Learning & Growth• Sub-Goals
Customer• Sub-Goals
Financial• Sub-Goals
Methodology Overview
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If an organization is to be profitable (financial), the customers must
be loyal (customer) and if they are to be loyal ,the organization has
to provide good service. In order to provide good service, the
organization needs appropriate and well-functioning processes
(internal processes) and for that purpose it has to develop the
capabilities of its employees (learning and growth). At every step the
scorecard serves as the means of communication in the
organization.
BSC
Learning and
Growth
Internal Process
es
Customer
Financial
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Cost Efficiency
Long-term Shareholder Value
Revenue Growth
Price Availability BrandServiceQuality
Operations Management
Processes
Human Capital
CustomerManagement
Processes
Innovation Processes
Regulatory and Social Processes
Organization Capital Information Capital
Financial
Customer
Internal Process
Learning & Growth
Strategy Map Framework
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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.
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Long-term Shareholder Value
Revenue Growth
Improve Cost Structure
Increase Asset Utilization
Cost Efficiency
Expand Revenue Opportunities
Enhance Customer Value
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Customer Perspective
Customer perspective covers the following elements: Customer acquisition Customer retention Customer profitability Market share Customer satisfaction
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Price Availability BrandServiceQuality
Customer Acquisition
Customer Satisfaction
Customer Retention
Customer Profitability
Market Share
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Internal Process Perspective
This perspective reflects 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
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Operations Management
Processes
CustomerManagement
Processes
Innovation Processes
Regulatory and Social Processes
Processes that produce and
deliver products and
services
Processes that enhance
customer value
Processes that create new
products and services
Processes that improve
communities and the
environment
• Supply
• Production
• Distribution
• Selection
• Acquisition
• Retention
• Growth
• New Ideas
• R&D Portfolio
• Design/ Develop
• Launch
• Environment
• Safety & Health
• Employment
• Community
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Learning & Growth Perspective
This perspective reflects the capability that a company should have, namely:
Human Capital Organization Capital Information Capital
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Human Capital
Organization Capital
Information Capital
• Skills• Knowledge• Attitude
• Systems• Database• Networks
• Culture• Leadership• Organization Development
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Benefits of BSC
Better Strategic Plannning
Improved Strategy communication and execution
Better Management Information
Improved Performance Reporting
Better Strategic Alignment
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Difficult to establish Fin-Non financial Linkages
Improvements at all levels may not be possible
Both subjective-objective measures Consideration
Considering Cost & benefits of initiatives
Non-financial Achievements are ignored
Pitfalls in Implementing BSC
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Balanced Scorecard Example
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• % Ground crew trained
• % Ground crew stockholders
Objectives Measurement
• Market Value
• Seat Revenue
• Plane Lease Cost
• FAA On Time Arrival Rating
• Customer Ranking (Market Survey)
• On Ground Time• On-Time
Departure
Strategic Theme:Operating Efficiency
Initiative
• Cycle time optimization program
• ESOP
• Ground crew training
• Quality management
• Customer loyalty program
Target
• 30% CAGR
• 20% CAGR
• 5% CAGR
• #1
• #1
• 30 Minutes• 90%
• yr. 1 70%yr. 3 90%yr. 5 100%
ProfitabilityFinancial
Learning
MoreCustomers
Ground Crew Alignment
Lowest Prices
Fewer Planes
Customer
Internal
Fast Ground Turnaround
Flight Is on Time
• Profitability
• More Customers
• Fewer planes
• Flight is on -time
• Lowest prices
• Fast ground turnaround
• Ground crew alignment
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BSC at Taj
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Optimize HR Efficiency
Drive Long termShareholder Value
Enhance People & Organizational Effectiveness
Achieve HR Process
Excellence
Develop Strategic & Functional HR Competencies
Build Strategic Employee
Competencies
Drive Organizational
Performance
Enhance Technology for HR
Create Climate for HR Action
HR Strategy Map Template
Financial
Customer
HR Internal Process
Learning & Growth
Create Positive Work Environment
Provide Quality HR
Service
Provide High Performance
People
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Optimize IT Efficiency
Drive Long termShareholder Value
Enhance IT Impact on Enterprise Outcome
Maintain a Reliable IT
Infrastructure
Develop Strategic & Functional IT Competencies
Develop Effective Decision
Support System
Propose and Deliver Transformational
Applications
Enhance IT Tools that Enhance the IT Function
Promote Customer-focused Culture
IT Strategy Map Template
Financial
Customer
IT Internal Process
Learning & Growth
Deliver Consistent, High Quality IT
Service
Provide Business Units with Innovative IT
Solutions
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Optimize Financial Efficiency
Drive Long termShareholder Value
Enhance Finance Effectiveness on
Enterprise Outcome
Achieve FinanceProcess
Excellence
Develop Strategic & Functional Finance
Competencies
Develop Financial Information to
Improve Decision Making
Ensure Compliance with Regulatory Requirements
Use Technology to Improve Financial
Information Delivery
Finance Strategy Map Template
Financial
Customer
Finance Internal Process
Learning & Growth
Deliver Responsive & Efficient Finance
Operations
Provide Clear & Reliable Required Disclosure
Promote Customer-focused Culture
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Optimize Marketing Efficiency
Drive Long termShareholder Value
Increase Sales Revenue
Develop Innovative Marketing
Communication Program
Develop Strategic & Functional Marketing
Competencies
Develop Marketing Business
Intelligence
Accelerate New Product Development
Ideas
Enhance Technology for Marketing
Foster Creative Thinking & Innovative
Solutions
Marketing Strategy Map Template
Financial
Customer
Internal Process
Learning & Growth
Create Satisfied and Loyal Customers
Enhance Brand Image
Develop Effective Customer Relation
Management
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Thank You