using the balanced

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


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


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.


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

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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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using the balanced

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