BALANCED SCORE CARD-A TOOL OF PERFORMANCE

MANAGEMENT15 DEC 2012

April 12, 2023

Programme of work

• Session 1• Current performance challenges• Understanding , vision and values of

the organization• Introduction to the balanced

scorecard• Session 2• Recap of the case studyApril 12, 2023

Contd---

• Requirement 1- the financisl perspective

• Requirement 2-the learnning and development perspective

• Session 3• Requirement 3the internal business

process perspective• Requirement 4-The customer

perspectiveApril 12, 2023

Contd---

• Requirement 5- linking the perspectives- the strategic 4 Box Model

• Session 4• Benefits of implementing the

balanced scorecard• Traps in implementation• CLOSING REMARKS

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KEYS TO EFFECTIVE PERFORMANCE

PART- I

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WHERE IS THE KEY TO PERFORMANCE?

An old man was walking home late one night when he saw a friend on his knees under a light searching for something” What are you doing ?” he asked his friend

“ I dropped the key to my house”‘ I’ll help you look”After a few minutes of frustrated

searching the old man asked his friend” where exactly were you when you dropped this key?:

The friend pointed towards the darkness” over there”“Then why are you searching for it here?”“Because this is where the light is”

Sun parable

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PERFORMANCE CHALLENGES

• Patchwork styles- superficial results

• Default future

• Stereotyping- making faceless groups

• Not letting go old assumptions

• Self deception

• What do i care about an issue being resolved??

• Inability to use future focused language

• How people perform depends on how the situation

occurs to themApril 12, 2023

KEYS TO EFFECTIVE PERFORMANCE

• Personal relationships• Operational excellence• Shared vision• Managing for results• Shaping performance oriented behaviour-identifying

hidden agendas• `Planning precisely with clear goals• Aligning employee goals• Having a clear set of performance standards/ measures• Focus on cooperative communication• Transparency• Mutual respect• Continuous improvement

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VISION AND VALUESPART II

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WHAT ------

• IS A VISION?• ARE VALUES?

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WHY------

• IS A VISION IMPORTANT?• ARE VALUES IMPORTANT?

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FORMULATING A VISION

• Bring together all stakeholders in a vision planning exercise

• Gather responses to vision questions from stakeholders

• Develop a draft set of vision statements for review by stakeholders

• Adjust the draft based on recommendations

• Develop the final vision statement

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VALUES RELATED TO----

• Standards for action• Internal and external relationships• Ethical standards• Self- development• Ideals• Financial matters

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Strategic themes

• Need for a thematic approach as a compass bearing.

• Future state vs current reality• Translation into measures and

actions • Importance of time frame

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BALANCED SCORE CARD-A CURTAIN RAISER

PART III

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WHAT YOU MEASURE IS WHAT YOU GET

YOU CAN’T IMPROVE WHAT YOU CANNOT MEASURE

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What Is a Balanced Scorecard?

A Measurement A Measurement System?System?

A Management A Management System?System?

A Management A Management Philosophy?Philosophy?

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Elements of a good Management System

• Derived from the Vision and Strategy of the organization• Planning

– Long term strategic plan– Short term business plan and budgets

• Measurement– Focused set of measures– Measures represent organization's plan and vision

• Review– Plans are regularly reviewed and suitably revised

• Performance – Rewards are linked to driving key measures

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Genesis of Balanced Scorecard

• The ‘Balanced Scorecard’ solution - Kaplan & Norton– A set of measures based on

• Finance• Customer• Internal processes• Learning and growth

– Linked to vision and strategy– ‘Balances’ short and long term needs– Builds ‘leading’ and ‘lagging’ indicators

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financial and ... nonfinancial indicators

external and ... internal measures

outcomes and ... performance drivers

quantitative and ... qualitative factors

Balanced Scorecard because:

Advantages

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• Situation– Bias towards Financial Measures– Initiatives not all linkable to financials,

hence•Either not undertaken•Or too many initiatives

– Top Management need to focus

Why Balanced Scorecard

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WHY BALANCED SCORECARD

• Increasing importance of intangible assets for competitive advantage

• Need to make strategy and its implementation the central focus of any organization

• Alignment of strategy to organizational departmental and personal goals

• Use of measurement and management systems derived from strategies and capabilities

• Role of executive leadership in mobilizing and implementing change

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A PICTORIAL REPRESENTATION---

The Mission, rather than the financial / shareholder objectives, drives the organization’s strategy

"If we succeed, how will we look to our financial donors?”

“To achieve our vision, how must our people learn,

communicate, and work together?”

“To achieve our vision, how must our people learn,

communicate, and work together?”

The Mission

“To satisfy our customers, financial donors and mission,

what business processes must we excel at?"

“To satisfy our customers, financial donors and mission,

what business processes must we excel at?"

”To achieve our vision, how must we look to

our customers?”

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FUNCTIONS OF THE BALANCED SCORECARD

• Helps implement vision and strategy• Develops metrics based on the priorities of the

overall strategic plan• Designs processes relevent to these metrics• Reduces metrics into numeric form for storage

and analysis• Examines outcomes of various strategies

outcomes and measures• Tracks results to guide the company and provide

feedback

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METRICS PROVIDE----

• STRATEGIC FEEDBACK• DIAGNOSTIC FEEDBACK• TRENDS IN PERFORMANCE OVER

TIME• CONTINUOUS FEEDBACK ABOUT THE

MEASURES ADOPTED- WHICH METRICS NEED TO BE TRACKED.

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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

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1. Leadership From the Top– Create the Climate for Change– Create a Common Focus for

Change Activities– Rationalize and Align the

Organization

3. Unlock and Focus Hidden Assets– Reengineer Work Processes– Create Knowledge Sharing Networks

2. Make Strategy Everyone’s Job– Comprehensive Communication to

Create Awareness– Align Goals and Incentives– Integrate Budgeting with Strategic

Planning– Align Resources and Initiatives

4. Make Strategy a Continuous Process

– Strategic Feedback That Encourages Learning

– Executive Teams Manage Strategic Themes

– Testing Hypotheses, Adapting, and Learning

The Ingredients of Highly Successful Balanced Scorecard Programs

STRATEGY

FormulateFormulate

NavigateNavigateCommunicateCommunicate

ExecuteExecute

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CHAIN OF CAUSATIONCHAIN OF CAUSATION Our Survival is dependent upon growing the

business Our business growth is largely determined by

customer satisfaction Customer satisfaction is governed by quality,

price and delivery Our process capability is greatly limited by

variation Process variation leads to an increase in

defects, costs and cycle time To eliminate variation, we must apply the

right knowledge In order to apply the right knowledge, we

must first acquire it To acquire new knowledge means that we

must have the will to surviveApril 12, 2023

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April 12, 2023

Customer Perspective

Financial Accountability Perspective

Internal Process Perspective

Learning and Growth Perspective

Reduce Crime

Reduce Crime

Increase Perception

of Safety

Increase Perception

of Safety

Availability of Safe,

ConvenientTransportation

Availability of Safe,

ConvenientTransportation

Maintain CompetitiveTax Rates

Maintain CompetitiveTax Rates

Improve Service Quality

Improve Service Quality

Promote Economic

Opportunity

Promote Economic

Opportunity

Strengthen Neighborhoods

Strengthen Neighborhoods

Enhance Knowledge

Management Capabilities

Enhance Knowledge

Management Capabilities

Close Skills Gap

Close Skills Gap

Achieve Positive

Employee Climate

Achieve Positive

Employee Climate

StreamlineCustomer

Interactions

StreamlineCustomer

Interactions

Improve Productivity

Improve Productivity

IncreasePositiveContacts

IncreasePositiveContacts

Secure Funding/ServicePartners

Secure Funding/ServicePartners

ExpandNon-CityFunding

ExpandNon-CityFunding

MaximizeBenefit/Cost

MaximizeBenefit/Cost

Grow Tax Base

Grow Tax Base

Maintain AAA

Rating

Maintain AAA

Rating

Promote Community

Based Problem Solving

Promote Community

Based Problem Solving

The City of Charlotte Corporate-level Linkage Model

Increase Infrastructure

Capacity

Increase Infrastructure

Capacity

Promote Business

Mix

Promote Business

Mix

TOP-LEVEL METRICS OF SUCCESSTOP-LEVEL METRICS OF SUCCESS

•Time to develop

next gen product

•No of times design

modified

•Quality standards

•Asset Utilization

•Service quality.

Time-to-market Warranty cost Market share Customer satisfaction Key financials:

Sales margin Operating profit Return on net assets Cash flow

Employee satisfactionApril 12, 2023

COMPANIES THAT HAVE IMPLEMENTED THE BALANCED SCORE CARD

• GODREJ• TATA MOTORS• TCS• CASTROL INDIA LTD• PHILIPS ELECTRONICS• INFOSYS• TAJ GROUP OF HOTELS

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THE FINANCIAL PERSPECTIVE

PART IV

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Finance

• To succeed financially, how should we appear to our shareholders

• Financial measures

– Show economic consequences of actions already taken

– Show if strategy, implementation have given results

• Typically can be:

– Operating Income– ROCE

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GROWTH STAGE

• PRODUCTS HAVING GROWTH POTENTIAL

• COMMITMENT OF RESOURCES• EXPAND PRODUCTION CAPACITY• OPERATING CAPABILITIES• INVESTMENT IN

SYSTEMS/INFRASTRUCTIURE• MORE CASH OUTFLOWApril 12, 2023

SUSTENANCE STAGE

• ATTRACT INVESTMENTS• ENHANCING IMPROVEMENTS• ENHANCING PROFITABILITY• ROI• ROCE• EVA

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HARVEST STAGE

• ENOUGH TO MAINTAIN EQUIPMENT• NO EXPANSION• INVESTMENT S WITH A VIEW TO

SHORT TERM RETURNS• PAY BACKS• MAXIMIZE CASH FLOW

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Customer• To achieve our vision, how should we appear to our

customers• Measures typically can be related to:

– Customer satisfaction– Customer retention/business expansion with existing– New customer acquisition– Value delivery - to customer– Market and account share in targeted segments

• Segment specific drivers could be:– Shorter lead times– Innovative products and services– Better quality

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Core Measures

CustomerSatisfaction

CustomerAcquisition

CustomerRetention

CustomerValue

MarketShare

Perceived imagePerceived

quality

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Internal Business Processes

Identifythe

market

Create the Product/ Service Offering

Servicethe

Customer

Build the Products/

Services

Deliver the Products/

Services

Innovation Process

•Operating Processes

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Learning and Growth• To achieve our vision, how will we sustain our ability to

change and improve• The infrastructure that the organisation must build to create

long-term growth and improvement• Come from:

– People– Systems– Organisational procedures

• Measures include– Employee Satisfaction– Retention– Training– Skills

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Learning & Growth Measurement Framework

Results

EmployeeProductivity

EmployeeRetention

ClimateTechnologyInfrastructure

EmployeeSatisfaction

StaffCompetencies

Enablers

Core Measurements

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Measures• Employee Satisfaction

– Satisfaction rating– Suggestions per employee– Improvement projects implemented/employee

• Employee Productivity– Revenue per employee– Value added per employee– Output produced to employee compensation

• Employee skill/competency building– Skill matrix score

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Barriers to Strategic Implementation

You Can’t Manage Strategy With a System Designed for Tactics

Only 5% of the work force understands the strategy

60% of organizations don’t link budgets to strategy

Only 25% of managers have incentives linked to strategy

85% of executive teams spend less than one hour per month

discussing strategy

9 of 10 companies fail

to execute strategy

The People Barrier

The Vision Barrier

The Management Barrier

The Resource Barrier

LinkageAlignment

Key Business Objectives(Business Plans)

Vision

Strategic Goals

Key Business Processes

Learning

Process

CSF's

BalancedBusinessScorecard(BBS)

KeyPerformanceIndicators(KPI's)

Fin. $$

BalancedBusinessScorecard

Cust.

Developing the Scorecard

April 12, 2023

Key Pitfalls to Avoid

• Middle management task force

• Not driven by senior executive team

• Only one or a few individuals involved

• Too long a development process (allowing the “best” to be the enemy of the “good”)

• Delay introduction because of missing measurements

• Static not dynamic process

• Treating the BSC as an EIS

• Measurement to control; not to communicate

• Management dictating actions vs. employee improvisation to achieve desired outcomes

• For management only, not shared with all employees

Process Philosophy

Thank You

Questions?

April 12, 2023