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8/8/2019 Building BSC
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Building
the
Balanced Scorecard
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I ntroduction
Balanced Scorecards provide a framework for communicating
strategy in operating terms (measurements and targets).
You must communicate strategy in operating terms if you expect
people to execute on your strategy.
When people are asked about strategy, they reach for their balanced
scorecard.
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Why do we need Balanced Scorecard«???
I mproves how you communicate strategy
Superimposes a discipline whereby you capture cause-
effect; otherwise you create pockets of under-performance.
Forces to think about strategic measurement as opposed to
tactical or operating type measurements
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HO W T O BEG IN «.!!
Begin with strategic plan ² what things are critical to future success?
Focus on customers ² what values will we add to our customers
Define the processes ² how will we deliver these
services to our customers
Build the organization ² what capabilities must we put in place
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Strategic Goals
The first components of any strategy are goals.
Strategic goals establish direction in concrete terms.
Strategic goals anchor the rest of the process.
Strategic goals should fit with the vision and mission of the organization.
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A ttributes of a Goal
Should be a very short statement
Directly relates to the mission
Broad in scope
Covers long time period (such as 3 years)
Examples:- I mprove Customer Service
- Leverage Core Competencies
- Develop more innovative products
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Strategic O bjectives
O nce first anchor (goals) are established, develop a set of strategic objectives.
Strategic objectives define what actions must be taken to reach the strategic goals.
O bjectives are critical to future success. For example, in order to grow revenues, we must introduce new products and expand our market share.
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O bjective A ttributes
Longer statement than goal statement
More specific than goal statement
Relationship to mission
Covers shorter time period than goal (such as 6 months or 1 year)
Example:
- We will expand call center services to include technical support
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Strategic Themes
o Based on strategic goals, three to five strategic themes should emerge.
o From these themes, develop a strategic map.
o Four common strategic themes are: O perating Efficiencies, Customer Relations, Product I nnovation, and Growing the Business.
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Strategic Model
Strategic Models can emerge from four principles:
1. Translate strategies into operating terms.
2. Link strategies throughout the entire organization.
3. Commit everyone to implementing strategy.
4. Make strategizing a continuous process of learning and adjusting to change.
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4 Perspectives of BSC
Financial: Top layer in the map, represents financial outcomes (profits, revenues, etc.)
Customer:N ext layer down, enables financial results (service,
image, price, quality, etc.)
I nternal Processes: The values added to customers, such as
delivery, production, distribution, etc.
Learning & Growth: The people, systems, and organization that
enable processes.
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Strategic Mapping
Strategic Maps are the foundation of the Balanced Scorecard.
You will need one strategic map for each strategic theme.
Maps are constructed over four perspectives.
Strategic objectives are mapped over the four perspectives, linked together.
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Linking BSC to Business Strategy
Strategic objectives should be placed in the Strategic
Map according to which perspective fits with the
objective.
O bjectives may cross over more than one perspective.
Start at the top with outcomes and work our way down,
looking at what drives the outcome.
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A pproval of Maps
A fter strategic maps are done, get approval from
executive management. A sk questions likes«.´Does this
map accurately tell the story of our strategy?µ
I f management disagrees with the map, go back and
redo the maps.
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Measurements
For each strategic objective, you need one measurement.
Measurement provides us with feedback on meeting the
strategic objective.
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Measurement Criteria
Measurements should drive change, providing teeth to our
strategy.
Measurements define objectives in specific terms. A good
measurement should tell you what your objective is.
Measurements should be SM A RT..!!
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Examples of Good Measurements
Customer satisfaction:
- Response Time to service customer
- Customer Satisfaction Survey Scores
Process Efficiency:
- Cycle time - Downtime (time / ratio)
- N o. of Restarts
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Targets Setting
O nce measurements are established, you need to set a target for each measurement.
Targets push the organization to a required level of performance.
Targets put focus on the strategy, expressing the specifics
of the strategy.
When an organization hits its targets, then it has successfully implemented its strategy .
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Examples of Targets
Total Time to Recruit N ew Employees: Less than ´xµ
days by 2005
Utilization of rental facilities: I ncrease to 90% during peak summer months
Growth in top line revenues: 12% increase than 2004
I mprove overall customer satisfaction: Total scores on
satisfaction exceed 85%
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I nitiatives Takers
I n order for things to happen in an organization,
you must initiate major projects or programs.
O nce you launch appropriate initiatives, you
should be able to meet your strategic objectives.This closes the loopholes and everything is linked.
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I nitiative A ttributes
Sponsored by Top Management
Designated project(s) owners
I ncludes deliverables or milestones
H as some deadlines
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Templates
Throughout this
process, use templates
to capture, analyze
and document data.
Templates are used for
strategic mapping,
defining
measurements, etc.
Strategic Map for Strategic Theme #1:
Internal
Learning
Financial
Customer
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Pointers to keep in mind«.!!
Scorecards are built around three teams : Leadership Team
(upper level management), Core Team (middle level
management) and Measurement Team (lower level functional personnel).
Scorecards are built around frequent group meetings : Kick
O ff Meeting followed by one meeting for each of the three
teams.
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I mplementation
The minimum time for developing a balanced scorecard is
3 months.
Full deployment of scorecards throughout the entire
organization can take one year or even more than that.
The best place to start building a scorecard is where all components of the value chain are in place: Customer,
I nnovation, Production, Delivery, Services, etc.
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Summary
Balanced Scorecards are the best way of putting organization in its place.
Scorecards rely on a fully integrated approach: Goals,O bjectives, Mapping, Measurements, Targets, and
I nitiatives.
The building of a balanced scorecard can be experimental,
whereby you test your strategies, refine, and make changes
as you get feedback and learn what works.
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T H A N K Y O U