Balanced scorecard

Balance Scorecard

Eng. Murhaf Ashi

10 March , 2010

Cascading to Details

Strategic point of view

“ Do not repeat the tactics which have gained you one

victory, but let your methods be regulated by the

infinite variety of circumstances ”infinite variety of circumstances ”

Sun Tzu c. 490 BC, Chinese military strategist

Eng. Murhaf Ashi

Balance Scorecard

Company

BSC

Eng. Murhaf Ashi

Company

current

situation Target

Strategy

Agenda

• Introduction to BSC

• Measure Performance

• BSC history

• Stake Holder analysis

• S.W.O.T Analysis

• BSC four perspective

• Key Performance Indicators (KPI)

• Initiatives Matrix

• BSC strategy map examples

• References

Eng. Murhaf Ashi

Dose it work

• By 2004, the balanced scorecard has been at least partially

implemented in about 57% of global corporations, according

to a survey by Bain. This site contains some examples of

companies and government organizations that have reported

their use of the balanced scorecard. We have prepared atheir use of the balanced scorecard. We have prepared a

database of over 130 of these organizations. For details please

see our examples of balanced scorecard usage.

Eng. Murhaf Ashi

Success Stories

AMEDD Finds Direction in Strategic Planning

The Army Surgeon General and Commander of the US Army MedicalCommand champion the use of the balanced scorecard as "the principal toolby which they improve operational and fiscal effectiveness and better meetthe needs of patients and stakeholders.

Award for ExcellenceAward for Excellence

The Institute honors Mecklenburg County, NC with an Award for Excellence for successfully transforming the county government and positioning it for tough times.

Scorecard Driving Strategy at Veolia Water North America

With a new CEO and ambitious revenue goals, Veolia NA first successfullyimplemented a balanced scorecard and then integrated the scorecarddeeper into its organization using an e-learning tool

Eng. Murhaf Ashi

Agenda



• BSC history







• References

Eng. Murhaf Ashi

Why We Should Measure Performance ?

Performance measurement improves communications internallyamong employees, as well as externally between the organization andas customers and stakeholders.

The emphasis on measuring and improving performance (i.e.,"results- oriented management") has created a new climate, affectingall government agencies, and most private sector and nonprofitinstitutions as well.

Eng. Murhaf Ashi

Good Performance Measures

• Provide a way to see if our strategy is working

• Focus employees' attention on what matters most to success

• Allow measurement of accomplishments, not just of the work that is

performed

• Provide a common language for communication• Provide a common language for communication

• Are explicitly defined in terms of owner, unit of measure, collection

frequency, data quality, expected value(targets), and thresholds

• Are valid, to ensure measurement of the right things

• Are verifiable, to ensure data collection accuracy

Eng. Murhaf Ashi

Agenda



• BSC history







• References

Eng. Murhaf Ashi

What is the balanced scorecard?

• The balanced scorecard is a strategic planning and management system

that is widely applicable to organizations regardless of size or type of

business.

• The system, extensively used in business and industry, government, and

nonprofit organizations worldwide, provides a method of aligning business

activities to the vision and strategy of the organization, improving internalactivities to the vision and strategy of the organization, improving internal

and external communications, and monitoring organization performance

against strategic goals

Eng. Murhaf Ashi

BSC history

• It was originated by Robert Kaplan and David Norton of Harvard University in

about 1990, but the roots of the balanced scorecard are deep, and include the

pioneering work of General Electric on performance measurement reporting in the

1950’s and the work of French process engineers in the early part of the 20th

century in France.

Eng. Murhaf Ashi

David Norton Robert Kaplan

Basic Concepts

Balanced Scorecard views the organization from 4 distinct

perspectives:

Learning and Growth Perspective

– What do we excel at?

Business Process PerspectiveBusiness Process Perspective

– How do we continue to grow and create value?

Customer Perspective

– How do our customers see us?

Financial Perspective

– How do we achieve the lowest cost?

Eng. Murhaf Ashi

Basic Concepts


• What do we excel at?

Business Process Perspective

Balanced Scorecard views the organization from 4 distinct perspectives:


• How do we continue to grow and create value?


• How do our customers see us?


• How do we achieve the lowest cost?

Eng. Murhaf Ashi

Agenda



• BSC history







• References

Eng. Murhaf Ashi

Stake Holder analysis

Manage CloselyKeep SatisfiedHigh

CEO- John

VP- David. A

GM- Peter

Mngr- Vector .S

Mngr- H.Q

This tool should be

applied at the early

stages of the BSC to

identified all

stakeholder who will

benefit from the BSC

Monitor Minimum Effort

Keep Informed

low

low

Power

Interest High

VP- David. A

contractor

Coworker-

press

Government sector

benefit from the BSC

strategy.

Identifying the nature

of each stakeholder

Blocker, Neutral and

Supporter will help to

understand their

demand and to find

what the new strategy

could promises them

Agenda



• BSC history







• References

Eng. Murhaf Ashi

S.W.O.T Analysis

Strengths Weaknesses

SWOT analysis is a tool for auditing an

organization and its environment. It is

the first stage of planning

SWOT stands for strengths,

Opportunities Threats

SWOT stands for strengths,

weaknesses, opportunities, and

threats. Strengths and weaknesses

are internal factors. Opportunities

and threats are external factors.

Agenda



• BSC history







• References

Eng. Murhaf Ashi

BSC four perspective

Customer

satisfaction

Product quality

& quantity

Process

Employees

Skills and

education

Branch and

leafs strength

Quality of Soil


BSC four perspective





� Customer focus, orientation, and satisfaction are key

components

� Customer will find other suppliers if they are not satisfied or

their requirements are not being met

� Poor customer satisfaction is a leading indicator of future� Poor customer satisfaction is a leading indicator of future

financial decline. Even if the current financial picture is good

� Developing metrics in this area requires that customer

profiles be done as well as the processes that provide the

products and services to them


� This refers to internal business processes.

� Metrics are used in this perspective to determine how well theorganization’s businesses are running.

� Determine whether the businesses products and services conformto customer requirements (the Mission).

� Metrics must be carefully designed by those who know thebusiness processes best.

� Typically there are 2 types of business processes relative to BSC:

1) Mission Oriented Processes that are special functions of major lines of

business. Typically this requires specialized metrics.

2) Support Processes that are the day-to-day processes that support the

business and organization. Typically they can be measured and benchmarked

with generic metrics.


� Employee training.

� Corporate culture attitudes on individual and corporate self-

improvement.

� Knowledge worker organization with people as the repository of

knowledge.knowledge.

� Continuous learning mode of operation driven by rapid technology

advancements.

� Learning is more than training (for example, it includes mentors and

tutors, ease of communication, etc.).

� Utilization of technology tools, “high technology work systems” (for

example, the intranet).


� Based on financial data that is timely and accurate funding

data

� Implementation of a corporate financial database is key

� Centralization and processing, accessibility, and automation of

financial data is keyfinancial data is key

� Special attention must be paid to any possible “skewing” of

the Financial Perspective

� Risk Assessment and Cost/Benefit Analysis should be included

in this

� perspective

Two type of structures (Depend on organization nature)

Customer PerspectiveFinancial Perspective

Non profitable organization Profitable organization

Stakeholder Mission

Eng. Murhaf Ashi









BSC objective example

Operate in the black with 5% margin by increasing

revenuesFinancial Perspective

Increase utilization of servicesCustomer Perspective

Eng. Murhaf Ashi

Provide high quality servicesBusiness Process Perspective

Motivate, recognize and retain staffLearning and Growth Perspective

Cause & Effect relationship

Increase

utilization

Increase the

annual

profit Financial Perspective

Increase

employers

computer

skills

Increase

employers

Marketing

skills

Provide

high quality

services

utilization

of servicesCustomer Perspective



Agenda



• BSC history







• References

Eng. Murhaf Ashi

Key Performance Indicators (KPI)

� Key performance indicators (KPI) are quantifiable measures of

progress toward an organization’s goals.

� For example, the timely collection of receivables is a KPI for

the goal of maintaining healthy cash flow, and value added

per factory payroll hour is a KPI for the goal of maximizingper factory payroll hour is a KPI for the goal of maximizing

factory productivity.

� Key performance indicators can be financial or non-financial.

But they must be quantifiable—measurable—accurately and

consistently over time.

� Each objective of the BSC map has a number of KPI’s to

measure the accomplishment of the objective.

Eng. Murhaf Ashi

Types of KPI’s

By Format

Number

Ratio

By what is

measured

Input

Process

Forward/Backward

Measure

Lag

Lead

By Strategic/Operational

Strategic Measures (KPIs)

1 2 3 4

Eng. Murhaf Ashi

Ratio

Percentage

Ranking

Rating

Index

Process

Output

Outcome

LeadStrategic Measures (KPIs)

appearing in a BSC

Operational Measures

not appearing in a BSC

Agenda



• BSC history







• References

Eng. Murhaf Ashi

Initiatives Matrix

� The Initiatives Matrix include all the objectives of the balance

scorecard strategy map and all the projects that support each

objective.

� The next slide shows an example of the Initiatives Matrix

Eng. Murhaf Ashi

Example of Initiatives Matrix

Initiatives Matrix

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objective

C1: Become a Capital of Islamic Culture 3 -3 3 2 2 1 2 3

C2: Attain a High Quality of Life for All 3 -1 2 1 1

C3: Achieve and Maintain Sustainable Development 3 2 2 2

C4: Make Jeddah a Dynamic & Resilient International Commercial & Tourism Centre 1 1 2 2 1 2 2

IP1:Foster Cultural Development

IP2: Build Effective Infrastructure 3 1 2 3 1

IP3:Offer high quality of integrated services 3 1 2 1 2

IP4 Plan strategically and build future capacity 2 1 1 1 1 3 1 1

IP5: Advocate Jeddah Vision and Strategy 2 1 1 1 2

IP6: Ensure Effective Governance and Partnership 1 2 1 1 1 1 1 1 1 1 1 1 1

LG1: Recruit and retain talented and motivated people 1 1 2 2 3

LG2: Align employee to strategy 2 3 1 3 3

LG3: Foster innovative and ethical culture 3 1 2 3

LG4: Make effective use of technology 1 2

F1:Use resources effectively 3 1 2

F2: Maximize return of investments 3 2 2 3

F3:Ensure diversified and sustained sources of income 3 3 1 2 1 1 3

Objective

without

projects

Objective

with 4

projects

Agenda



• BSC history







• References

Eng. Murhaf Ashi

BSC strategy map examples

BSC STRATEGY MAP EXAMPLES Examples of BSC strategy map of global organization

Eng. Murhaf Ashi

Agenda



• BSC history







• References

Eng. Murhaf Ashi

References

� Dr. Mohammed Mustafa Mahmoud workshop & material

� Epstein, Marc, and Jean-François Manzoni. "Implementing Corporate Strategy: From Tableaux de Bord to Balanced Scorecards."

European Management Journal , April 1998, pp. 190-203.

� "Harvard Business Review Balanced Scorecard Report." Harvard Business Review, 2002 to present (bimonthly).

� Kaplan, Robert S., and David P. Norton. Alignment: Using the Balanced Scorecard to Create Corporate Synergies. Harvard Business

School Press, 2006.

� Kaplan, Robert S., and David P. Norton. "The Balanced Scorecard: Measures That Drive Performance." Harvard Business Review, July

2005, pp. 71-79.

� Kaplan, Robert S., and David P. Norton. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New

Business Environment. Harvard Business School Press, 2000.

� Kaplan, Robert S., and David P. Norton. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Harvard Business School

Press, 2004.

� Niven, Paul R. Balanced Scorecard Diagnostics: Maintaining Maximum Performance. John Wiley & Sons, 2005.

� Niven, Paul R. Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results, 2d ed. John Wiley & Sons, 2006

� 2005 Oak Ridge Associated Universities

� RL Information Consulting LLC

� http://www.balancedscorecard.org

� http://www.bain.com

� NAPAL excellence in business management , http://www.napl.org

� www.gate2quality.com

� www.kellen.net

� purestonepartners.com/tag/strategy-management/

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Balanced scorecard