Scorecard Balanced · Balanced Scorecard Bürgenstock, 28.5.97 SPS-IN / JAR Balanced Scorecard Linking Strategy to Actions KPMG Swiss Practice Benchmarking …

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Balanced ScorecardBürgenstock, 28.5.97

SPS-IN / JAR

BalancedScorecardLinking Strategy to Actions

KPMG Swiss PracticeBenchmarking Congress, BürgenstockMay 28th, 1997, Roger Jaquet

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Contents

� Objectives 1

� What’s the historical background of the BSC? 2 - 4

� BSC - What is it? 5 - 12

� Case Study trading company XYZ 13 - 19

� Benefits and roll out 20 - 21

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Objectives

1. Explain the BSC-approach

2. Show a case study of a BSC implementation

3. Why should the BSC interest KPMG?

4. Benefits of the BSC

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BSC History (origins)

� In the sixties development of the so called “Tableau de bord”in France

� 1990: Nolan Norton Institute (research arm of KPMG)sponsored a one-year multicompany study “MeasuringPerformance in the Organization of the Future”

� 1992: David P. Norton (CEO of Nolan Norton) and Robert S.Kaplan (Academic Consultant) summarized the findings ofthe study in an article “The Balanced Scorecard - MeasuresThat Drive Performance” (Harvard Business Review - HBR)

� 1993: Second HBR article “Putting the Balanced Scorecardto Work”

� 1996: New developments in a third HBR article “Using theBalanced Scorecard as a Strategic Management System”

� 1996: Norton and Kaplan published the book “The BalancedScorecard-Translating Strategy into Action”

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Phase 4Phase 3Phase 2Phase 1

Historical Backround in Switzerland

• 1992 ZfU-Meeting withR.Kaplan andKPMG

• first articles ofKaplan/Norton

• ABM in practice• little BSC

actions

• improve financialmeasurement

• market: more andmore finance driven

• Mergers &Acquisitions

• trend towardsIntegrated SoftwarePackages

• MIS/EIS

• Use of conven-tional accountingmethods

• plus new methods- ABC- JIT- BPR- TQM- Team

empowerment

• Presentation ABBCH

• Competitors C&LHorvath &Partners (seminar)

• KPMG Pilot FritzNauer AG

• 3-4 interestedclients

• roll out KPMG CH

BSC:integrated

performancesystem

process and HR orientation

traditionalcontrolling

(packages)

theoreticalback ground

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The BSC Approach

VisionVision

StrategyStrategy

ObjectivesObjectives

MeasurementMeasurement

FinancialFinancial

Learningand

Growth

Learningand

Growth

InternalBusinessInternal

BusinessCustomerCustomer

What do wewant to achieve?

What actions dowe need?

How do wemeasure strategyimplementation

Where arewe going?

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The Questions

Financial Perspective“To suceed financially,

how should we appear toour shareholders?”

Internal Business Process“To satisfy our share holders

and customers, whatbusness processes must we

excel at?”

Learning and Growth“To achieve our vision,how will we sustain ourability to change and

improve?”

Customer Perspective“To achieve our vision,

how should we appear toour customers?”

Visionand

Strategy

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What is a Balanced Scorecard?The 4 perspectives

Financial• operating income• return on capital employed• economic value added

Customer• customer satisfaction• new customer acquisition• customer profitability• market and account share

in targeted segments

Internal BusinessProcess• product development cycle• service error rate• new Product revenue

Learningand Growth

• employee satisfaction• employee climate survey• training rating• skill rating

Vision andStrategy

Vision andStrategy

future focus whit the critical success factors of the companytraditional focus data based and historical oriented

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Linking the measures

Financial Perspective

Customer Perspective

Learning and Growthemployees

morale

improve

ROCE

customer satisfaction

employeessuggestions

operatingexpense

accountsreceivable

Internal Business Process

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What is special about the BSC?

Vision/Strategy

Financial

Learningand Growth

InternalBusinessProcess

Customer

Operational Level

Balanced Scorecard

1 2

3

4

5

3

5

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What is special about BSC?

Linking key measurements to the operational level

Ongoing learn process for employees

Regular feedback regarding direction and progressof strategy

overall system for business assessment and measurement

operational feedback wether the BSC is balanced andpractical

1

2

3

4

5

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How do we Implement BSC?

FinancialPerspective

CustomerPerspective

InternalBusinessProcess

Key Performance DriversLearning

and Growth

How do we measure ourprogress?

Critical Success FactorsWhat do we need to “do well”?

StrategyHow do we get there?

VisionWhere is the Organisation going?

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The Benefits

� The Balanced Scorecard is “balanced” in different ways- past and future performance- soft and hard factors- internal and external indicators- etc.

� It puts the company’s strategy into practice

� It helps to communicate and align the strategy throughoutthe organisation

� Ongoing learning process

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Case Study Trading Company XYZ

1. company figures / environment

2. company problems/challenges

3. strategical success factors

4. measures

5. link between the different aspects

6. conclusions

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Business Environment

� medium sized family owned company� annual turnover: 130 million CHF� staff: 750 employees� retailer� products: - furniture

- clothing- others

� 62 stores� previous yearly growth: on average 30%

Vision: to become market leader and fulfillthe consumers requirements

Vision: to become market leader and fulfillthe consumers requirements

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The company’s problems

� Communication between different functionsacross the organization

� Information is not distributed systematically

� success depends on a few key employees

� driven only by financial key figures

� etc.

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Strategical success factors

Price Quality SponsoringCompany Slogan

closeness to customeravailability of goods

Process qualityProductivity

Quality ofPurchasing

Image-Management

Information flowof main processes

Employee skilldevelopment

improve ITinfrastructure

cultivate an opencompany culture

Client-Perspectives

Process-Perspectives

Employee-Perspectives

Strategic measurements� employee-motivation� qualification index

� percentage of on-linecompany data

� system downtime

� number of employeesuggestions put into practice

� percentage of employeeslinked to the new controllingsystem

example: linking the customer dimension (to employeean process development)

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Connection of the Strategical Objectives

sales growth

Price Leader

Company Logo

Sponsoring

availability of goodscloseness to

customer

Profitability

Return to Equity

(quality of)shopping

experience

employee skilldevelopment

Image-Management

Information flowMain processes

quality ofprocesses,productivity

"open company"

EDP Performance

Financial-Perspectives

Prozess-Perspectives

Employee-Perspectives

Client-Perspectives

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Store manager cockpit

0%

50%

100%Customer

satisfaction

0%

50%

100%Employee

morale“company health”

index

0%

50%

100%

1

2

3

merchandiseturnover

% of articlesnot available

% write-offs

% contribution from sales

employee costsin % of sales

other.........sales

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Systematic order of Performance-Measurements

StrategyStrategy

BudgetingBudgeting

Performance-Performance-measurementmeasurement

Performance-Performance-managementmanagement

ImpleImple--mentationmentation

EmployeeEmployeesalariessalaries

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What is the benefit for KPMG?

Audit

ManagementConsulting

BalancedScorecard

MeasurementMeasurement

BusinessBusinessControl Control

BusinessBusinessImprovementImprovement

• Establishing of currentposition and quantitativetargets, with timing

• Measurement / evaluation of“lag indicators” and reporting(=results)

• Advice on “lead indicators”(=activities)

• Measurement / evaluation of“lead indicators”

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1997

Involvementwith BSC

PartnerAnnouncement

Distribution toall Partners

Road Show forLead Partners

Extend WCForganization

TargetingWeek

Core TeamSet up

BSCDesk

Training BSCPilot

Audit 200Pilot

Responseteam/Projectwork

WCF Practice

BSC Team

Invest.Planning

WCF Roll Out Switzerland 1997

1996

BSC Pilotproject

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Author: Roger JaquetPartner, Leader WCF-Services CH

Address: KPMG FidesMühlemattstrasse 58P.O. Box 27015001 Aarau / Switzerland

Tel.: +41 (0)62 834 48 41Fax: +41 (0)62 834 48 50

Balanced Scorecard presentation

Documents

Scorecard Balanced · Balanced Scorecard Bürgenstock, 28.5.97 SPS-IN / JAR Balanced Scorecard Linking Strategy to Actions KPMG Swiss Practice Benchmarking …