BALANCED SCORECARD

Prepared by: Mukul bhalla Kishor Chandra Pragun Thadani

Submitted to: Deepali Bhradwaj

INTRODUCTION: Balanced Scorecard

Companies today are in the midst of a revolutionary transformation as Industrial age competition is shifting to Information age competition. The cut-throat competition that businesses faced in the last two decades has made them to look for improvement initiatives like Total Quality Management, Just-in-Time (JIT) systems; Activity based cost management, Employee empowerment and Re-engineering. Though these initiatives resulted in enhanced shareholder value, their structure was disjointed and focused on the short-term survival and growth. The programs centered on achieving breakthrough performance merely by monitoring and controlling financial measures of past performance. This collision between the irresistible force to build long-range competitive capabilities and the immovable object of the historical-cost financial accounting model has led to a new blend the Balanced scorecard. The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Dr. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance. While the phrase BALANCED SCORECARD was coined in the early 1990s, the roots of the this type of approach are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950s and the work of French process engineers (who created the TABLEAU DE BORD literally, a "dashboard" of performance measures) in the early part of the 20th century.

The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. The new balanced scorecard transforms an organizations strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies. This new approach to strategic management was first detailed in a series of articles and books by Kaplan and Norton. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective. The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise. In a nutshell, the need to link financial and non-financial measures of performance and identifying key performance measures led to the emergence of Balanced Score Card approach developed by Norton and Kaplan (1992) in the U.S. The Balanced score card is defined as an approach to the provision of information to management to assist strategic policy formulation and achievement. It emphasized the need to provide the user with a set of information, which addresses all relevant areas of performance in an objective and unbiased fashion.

Kaplan and Norton identified four perspectives representing the important facets of the organization. These were:

1. Financial perspective (how do we look to shareholders) 2. Customer perspective (how the customer see us) 3. Internal business perspective (what we excel at?) 4. Innovation & Learning perspective (can we continue to improve and create value)

The idea behind the four perspectives represents a balanced view of any organization and by creating measures under each of these headings all the important areas of business would be covered. It is important to note that the balanced score card itself is just a frame work and it doesnt say what the specific measures should be. It is a matter for people within the organization to decide upon. The set of measures for each organization or even sections with the organization will be different. Much of the success of score card depends on how the measures are agreed, the way they are implemented and how they are acted upon. So the process of designing a score card is as important as the score card itself.

NEED FOR THE BALANCED SCORECARD (BSC) The balanced scorecard is a way of Measuring organizational, business unit or department success;

Balancing long and short term actions; Balancing different measures of success and
o o o o

Financial Customer Internal Operations Human growth) Resource Systems & Development (Learning &

A way of tying strategy to measures of action

The Need for the scorecard The objective of any measurement system should be to motivate all managers and employees to implement successfully the business unit strategy. Those companies that can translate their strategy into measurement system will be able to execute their strategy because they communicate their objectives and their targets. The communication makes managers and employees focus on the critical drivers enabling them to align investments, initiatives and actions accomplishing strategic goals. Historically, the measurement system for any business has been financial. Accounting was considered to be the language of business .Innovations in measuring the financial performance of the industrial age companies played a vital role in their successful growth. And financial innovations, such as the Return on Investment (ROI) metric, and operating and cash budgets, were critical to the success of these corporations. However, an over emphasis on achieving and maintaining short-term financial results can cause companies to over invest in short-term fixes

and to under invest in long-term value creation, particularly in the intangible and intellectual assets that generate future growth. The pressure for short-term financial performance often causes companies to reduce the resources spent on new product development, process improvements, human resource development, Information technology, databases and systems as well as customer and market development. In the short run, the financial accounting model reports these spending cutbacks as increases in reported income, even when the reductions have cannibalized a companys stock of assets and its capabilities for creating future economic value. In short, these organizations use the financial and non-financial performance only for tactical feedback and control of shortterm operations.

Linking Strategy with Performance Measures The essential thrust of the balanced scorecard is based on the fundamental proposition that within organizations what gets measured gets done however, organizations dont always get what they measure. If measurement, by itself, had that much impact on human behavior, then anyone that had weighing scales would never get fat. An appropriate measurement system is one that energizes employees in the context of what the organization is trying to do. Thus, the logical starting point for the development of any performance measurement system for an organization must be a clear statement of mission, objectives and resultant strategy. An organizations mission is its basic function in society and is the reason why the organization exists. Related to this are the objectives to be achieved and they represent a precise statement of purpose for a specific period. Basically a strategy is a shared understanding about how the organizations mission is to be achieved in a competitive environment. Strategic thinking will focus on customers and competitors as well as internal capabilities and resources. It will include

reference to the firms competitiveness, quality of output and levels of customer service. In turn, specified performance measures allow all employees understand what the strategy is and how their performance is linked to that overall strategy. The relationship between Mission, Objectives, Strategy and Performance Measures is depicted in Fig.1.

Fig.1

There are at least three reasons why organizations should, and often do, measure their performance: 1. To align mission, strategy, values and behavior 2. To improve the right things 3. To numerically define the meaning of success

4 MAJOR PERSPECTIVES OF A BSC The aim of the Balanced Scorecard is to direct, help manage and change in support of the longer-term strategy in order to manage performance. The scorecard reflects what the company and the strategies are all about. It acts as a catalyst for bringing in the change element within the organization. This tool is a comprehensive framework which considers the following perspectives and tries to get answers to the following questions 1. Financial Perspective - How do we look at shareholders? 2. Customer Perspective - How should we appear to our customers? 3. Internal Business Processes Perspective - What must we excel at? 4. Learning and Growth Perspective - Can we continue to improve and create value?

Hence, from the above lines we can say that this tool has considered not only the financial results to be important but also those factors which actually drive an organization towards future successes as mentioned earlier. The tool has given stress on the other areas which are required to balance the financial perspective in order to get a total view about the organizational performance and improve the same. The framework tries to bring a balance and linkage between the (a) Financial and the Non-Financial indicators, (b) Tangible and the Intangible measures, (c) Internal and the External aspects and (d) Leading and the Lagging indicators.

 The Learning & Growth Perspective This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Government agencies often find themselves unable to hire new technical workers, and at the same time there is a decline in training of existing employees. This is a leading indicator of 'brain drain' that must be reversed. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization. Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools. The Business Process Perspective This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants. In addition to the strategic management process, two kinds of business processes may be identified: a) mission-oriented processes, and b) support processes. Mission-oriented processes are the special functions of government offices, and many unique problems are encountered in these
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processes. The support processes are more repetitive in nature and hence easier to measure and benchmark using generic metrics. The Customer Perspective Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups. The Financial Perspective Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives. There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

The Four Perspectives: Cause and Effect Relationship The four perspectives as mentioned above are highly interlinked. There is a logical connection between them. The explanation is as follows : If an

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organization focuses on the learning and the growth aspect, it is definitely going to lead to better business processes. This in turn would be followed by increased customer value by producing better products which ultimately gives rise to improved financial performance.

A strategy is a set of hypotheses about cause and effect. The chain of cause-and- effect should pervade all four perspectives of the Balanced Scorecard therefore a properly constructed Balanced Score Card should tell the story of the company's strategy.(figure 2)

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Figure 2 Performance Drivers A good Balanced Score Card should also have a mix of outcome measures (lagging indicators) and performance drivers (leading indicators). Outcome measures without performance drivers do not communicate how the outcomes are to be achieved or give an early indication about whether the strategy is being implemented successfully. Conversely performance drivers without outcome measures (may achieve short term operational improvements) fail to reveal whether operational improvements have translated into expanded business with enhanced financial performance. Example (Figure 3)

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Figure 3

A completed organizational score card needs to have the following components:

Strategic Themes Identified Strategic Objectives Identified Measures for the execution of the strategic objectives Competitive Bench Marks for the measures selected Short Term and Long term targets for identified measures Initiatives aligned to the Strategic objectives for execution and review.

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Once the organizational score card is prepared and finalized the scorecard is to be used as an effective method of alignment see (figure 4). Departmental, Process, and Individual score cards aligned to corporate score card will translate your strategy to daily management.

Links to Six Sigma Six Sigma is a unique variability reduction management strategy for Business improvement. The most powerful aspect of Six Sigma is in the application of the rigorous DMAIC philosophy to projects to achieve higher customer satisfaction and Business results. While Six Sigma helps organizations in elimination of waste in their pursuit to excellence the Balanced Score Card lays the foundation for the implementation of an effective Six Sigma strategy. When one attempts to view the evolution of various measurement systems you could see that Balanced Score Card encompasses Financial, Strategic and Operational measurements. See (Figure 5).It is clear to
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visualize that implementation of Balanced Score Card followed by the deployment of Six Sigma is a better approach towards Six Sigma deployment. While the proven statistical tool set of Six Sigma operates at the operational level the Balanced Score Card provides the rationale for identification of areas for improvement.

BUILDING AND IMPLEMENTING THE SYSTEM USING A BALANCED SCORECARD

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Step One of the scorecard building process starts with an assessment of the organizations Mission and Vision, challenges (pains), enablers, and values. Step One also includes preparing a change management plan for the organization, and conducting a focused communications workshop to identify key messages, media outlets, timing, and messengers. In Step Two, elements of the organizations strategy, including Strategic Results, Strategic Themes, and Perspectives, are developed by workshop participants to focus attention on customer needs and the organizations value proposition.

In Step Three, the strategic elements developed in Steps One and Two are decomposed into Strategic Objectives, which are the basic building blocks of strategy and define the organization's strategic intent. Objectives are first initiated and categorized on the Strategic Theme level,

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categorized by Perspective, linked in cause-effect linkages (Strategy Maps) for each Strategic Theme, and then later merged together to produce one set of Strategic Objectives for the entire organization. In Step Four, the cause and effect linkages between the enterprise-wide Strategic Objectives are formalized in an enterprise-wide Strategy Map. The previously constructed theme Strategy Maps are merged into an overall enterprise-wide Strategy Map that shows how the organization creates value for its customers and stakeholders. In Step Five, Performance Measures are developed for each of the enterprise-wide Strategic Objectives. Leading and lagging measures are identified, expected targets and thresholds are established, and baseline and benchmarking data is developed. In Step Six, Strategic Initiatives are developed that support the Strategic Objectives. To build accountability throughout the organization, ownership of Performance Measures and Strategic Initiatives is assigned to the appropriate staff and documented in data definition tables. In Step Seven, the implementation process begins by applying

performance measurement software to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information. In short, automation helps people make better decisions because it offers quick access to actual performance data. In Step Eight, the enterprise-level scorecard is cascaded down into business and support unit scorecards, meaning the organizational level scorecard (the first Tier) is translated into business unit or support unit scorecards (the second Tier) and then later to team and individual scorecards (the third Tier). Cascading translates high-level strategy into lowerlevel objectives, measures, and operational details. Cascading is the key to organization alignment around strategy.

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Team and individual scorecards link day-to-day work with department goals and corporate vision. Cascading is the key to organization alignment around strategy. Performance measures are developed for all objectives at all organization levels. As the scorecard management system is cascaded down through the organization, objectives become more operational and tactical, as do the performance measures. Accountability follows the objectives and measures, as ownership is defined at each level. An emphasis on results and the strategies needed to produce results is communicated throughout the organization. In Step Nine, an Evaluation of the completed scorecard is done. During this evaluation, the organization tries to answer questions such as, Are our strategies working?, Are we measuring the right things?, Has our environment changed? and Are we budgeting our money strategically? THE BSC MODEL

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The Model An Explanation

Hence, from the aforesaid model, it is clear that the following are to be done so as to utilize the Balanced Scorecard as a strategic management tool : 1. The major objectives are to be set for each of the perspectives. 2. Measures of performance are required to be identified under each of the objectives which would help the organization to realize the goals set under each of the perspectives. These would act as parameters to measure the progress towards the objectives. 3. The next important step is the setting of specific targets around each of the identified key areas which would act as a benchmark for performance appraisal. Hence, a performance measurement system is build around these critical factors.Any deviation in attaining the results should raise a red signal to the management which would investigate the reasons for the deviation and rectify the same. 4. The appropriate strategies and the action plans that are to be taken in the various activities should be decided so that it is clear as to how the organization has decided to pursue the pre-decided goals. Because of this reason, the Balanced Scorecard is often referred to as a blueprint of the company strategies. An example will help to understand it better. Some of the objectives together with a measurement measures are given below.

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Hence, the above paragraphs show that all the four areas have been given equal importance in measuring performance level. The measures and the objectives, however, depend upon the type of business the organization is in. The financial indicators are complemented by the nonfinancial ones. Since, objectives and goals are set for each of the critical success factors under each of the heads, it brings about a focus on the strategic vision. Thus, all activities would be directed towards achievement of the long term goals which have been set by the top management. The identification of the key result areas (KRAs) help an organization in moving towards the right strategic direction. This tool creates a link between objectives, measures, targets and initiatives. It is, therefore, absolutely clear that the Balanced Scorecard acts as a focal point for the organizations efforts, designing and communicating priorities to the managers, employees, investors and the customers.

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FEATURES OF A GOOD BALANCED SCORE CARD:

1. It tells the story of a companys strategy, articulating a sequence of cause and effect relationships. 2. It helps to communicate the strategy to all members of the organization by translating the strategy into coherent and linked set of understandable and measurable operation targets. 3. A balanced score card emphasizes non-financial measures as a part of program to achieve future financial performance 4. The balanced score card limits the number of measures identifying only the most critical areas. The purpose in to focus managers attention on measures that most affect the implementation of strategy. 5. The balanced score card highlights less than optimal trade offs that managers may make when they fail to consider operational and financial measures together. ADVANTAGES OF BSC The balanced scorecard tool is being used by several organizations throughout the world because of certain advantages it has been able to deliver as below: It translates vision and strategy into action. It defines the strategic linkages to integrate performance across organizations. It communicates the objectives and measures to a business unit. It aligns the strategic initiatives in order to attain the long-term goals.

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 It aligns everyone within an organization so that all employees understand how they support the strategy. It provides a basis for compensation for performance.

The scorecard provides a feedback to the senior management if the strategy is working.

Focusing the whole organization on the few key things needed to create breakthrough performance. Helps to integrate various corporate programs. Such as: quality, reengineering, and customer service initiatives. Breaking down strategic measures towards lower levels, so that unit managers, operators, and employees can see what's required at their level to achieve excellent overall performance. DISADVANTAGES OF BSC

It is not easy to implement this tool because it involves a lot of subjectivity.

The tool is much more complex compared to the other tools The measures that need to be taken is contingent upon the kind of environment, industry and the business the organization is in.

A lot of refinement is still required to be done so that it becomes understandable organization. to every stakeholder associated with the

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Tata Motors is the first Indian company to be inducted in the Balance Scorecard Hall of Fame.,Joining the thirtymember elite club of organizations including Hilton Hotels, BMW Financial Services, U.S. Army, Korea Telecom, Norwegian Air Force and the city of Brisbane for achieving excellence in

UTILISING THE BALANCED SCORECARD AS A STRATEGIC MANAGEMENT TOOL

The tool has become a weapon for organizations to identify the pressure points, conflicting interests, objectives setting, prioritization of objectives, planning and budgeting. The four main important steps that need to be taken care of are

1. Translating the Vision It is to be remembered that the vision of any organization should be understood by each and every employee of the organization. If it is understood by the top management only, then it is definite that the organization will fail to realize its goals. Hence, before starting with the strategic implementation process, the organizations needs to be clear about the reason for its existence, where it wants to see itself after a certain number of years and properly decide its business definition. The managers should build a consensus around the organisations vision and strategy. The strategies, in fact, emanate from the vision and mission of the company which means that a linkage is formed between the

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strategies of the different business units and the vision of the organization. The lofty statements must be translated into an integrated set of objectives and measures. Thus, by using this tool, the overall strategic objectives for the company gets clarified which helps to achieve consensus across different business units on the overall strategic objectives for the company.

2. Communicating and Linking Just communicating the vision and the strategies is not an end in itself. The strategic goals and the measures to be set in the different areas have to be decided upon. The long-term strategic goals have to be translated into both departmental and individual goals which should be aligned to each other in order to realize the long-term goals. In fact, each and everyone at different levels in the organizational hierarchy needs to be educated about the action plans and reasons for accepting the same. The tool contains three levels of information: (i) It describes the corporate objectives, measures and the targets (ii) It helps in deciding the business unit targets and (iii) It helps in framing the departmental and the individual objectives which will help in attaining the objectives of the business unit directly which would lead to the attainment of the corporate goals. The employees are given the freedom to decide their measures, objectives and the targets attainment of which would move the organization in the right strategic direction. Then the compensation level is linked to the performance level which in reality involves a lot of subjectivity. 3. Business Planning

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This step helps in the resource allocation process. One has to keep in mind that objectives form an important criteria in deciding the quantum of resources that are required to be allocated to the various departments, activities and the processes. No strategy can bring successful results to an organization if the allocation is not in line with what is required to meet the results. This allocation is dependent on the budgeted estimates which are decided on the basis of the said objectives. Hence, through this step the Balanced Scorecard tries to bring about an integration between strategic planning and the budgeting exercise. The short-term milestones are also needed to be figured out which in totality brings about a linkage between strategic goals and the budgets. This procedure helps in actualizing what has been set by the organization. Thus, this step brings about a shift from the thinking exercise to the doing stage and the organization tries to achieve the long-term goals through the short-term actions.

4. Feedback and Learning The first three steps as mentioned above help in the strategic implementation process. But, for knowing whether the organization is in a position to achieve the strategic goals and whether it is in the right track, the process of feedback and learning is essential. The strategic learning consists of acquiring knowledge about which way the organization is moving to, testing whether the premises considered before hold true even now and finally making adjustments wherever required. The corrective measures are required so that the necessary rectifications are made which will help an organization pursue the correct path. Another point is that an organization gets to know whether the cause-andeffect relationships among the different perspectives really hold true, to what extent they are strongly linked and also whether positive results are being obtained. In case, an organization realizes the existence of a gap in the cause effect relationships, an immediate correction would be required
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so that a positive relationship can be build among the various factors. Thus, the tool with its specification of the causal relationships between performance drivers and objectives allows corporate and the business unit objectives executives to use their periodic review sessions in order to evaluate the validity of the units strategy and the quality of its execution. Also, this feedback and learning exercise may force an organization to change the measures set in each of the perspectives and adopt those, which if attained would ensure the success of the corporate and the business strategies.

CONCLUSION The Balanced Scorecard is therefore a very important strategic

management tool which helps an organization to not only measure the performance but also decide the strategies which are needed to be adopted so that the long-term goals are achieved. Thus, in other words, the application of this tool ensures the consistency of vision and action which is the first step towards the development of a successful organization. Also, its proper implementation can ensure the development of competencies within an organization which will help it to develop a competitive advantage without which it cannot expect to outperform its rivals.

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Case study Introduction: M/s. Aqua Minerals is a manufacturing unit. It is unit of packaged drinking water the product name is Aqua. M/s. Aqua Minerals is decentralized organization where employees are encouraged to participate in every activity of the organization as like in decision making and other activities. It is a partnership firm. The firm was established in the year 2002. It started its operation by manufacturing 20 liter cans at initial stage and then started manufacturing 1liter, 2liter, liter and pouches. The unit has more than 50 distribution centers covering the area of Districts like Delhi, Gurgoan. It has around 45 employees working in the organization. Organization Structure:

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M/s. Aqua Minerals follow a very simple organization structure which is shown below:

Managing Partner

Purchase and Store Department

Quality Control Department

Manufacturin g Department

Accounts Department

Dispatch Departmen t

Subordinators / workers

Research Matrix: Research matrix includes the interaction with the managing partner and the advisor Summary of Interview with Managing Partner: Name Designation Managing Partner Define business? Good sells things always and Questions Answers

Who

is

the

main Kemps

competitor? How do you distinguish Quality, Brand name

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with your competitors? Any strategic plans are No adopted Factors for the success Sincerity, of the business? Accounts, intention Any trainings programs Only on hygiene but provided employees? to the we are planning more on it. and Open good

What all extra benefits Yes, benefits like life you are providing to insurance your employees? provident funds. is the and

Any problems faced by Transportation the company? main problem.

What is the strength of Employees the company?

are

the

main strength is problem of

Any problems related There to the operation?

layout design on which we are working now

Growth

rate

of

the 25% to 30% every year

company? How do you estimate By past records the demand? Where you what to see To cover whole India your company in next 5 to 10 years?

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Summary of Interview with Advisor Name Designation Advisor Define business? Making profit without affecting the society Define value system? Societal values Should not cheat and Questions Answers

anyone in the business How do you distinguish Quality with your competitors? which means

everything

Any strategic plans are No adopted Factors for the success Quality, common goal of the business? of all the partners

Any trainings programs We are working on it provided employees? to the and we want to bring more HR aspects

What all extra benefits Yes, benefits like life you are providing to insurance your employees? provident funds. is the and

Any problems faced by Transportation the company? main problem.

What is the strength of Employees the company? simplicity

are

the

main strength and our

Any problems related Maintenance problem to the operation? Growth rate of the 25% to 30% every year

company? How do you estimate Referring past records

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the demand? Where you what to see For the present target your company in next area 5 to 10 years? we want to introduce new products

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Based on the research matrix the Balanced Scorecard is developed. Suggested Balanced Scorecard for M/s. Aqua Minerals: Financial Performance

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Perspecti ve

Objectives

Measureme nts

Targe ts

Program

Financial Performa nce

Increase Revenues

Increase sales by 25%

Increase the distribution network Increase the volume of sales Increase market share Use of appropriate vehicle Routing and scheduling Handle optimal Quantity Outsource Reach more customers where the road conditions are good Reduce idle time of vehicle and drivers Transport other materials on return journey Use fuel efficient vehicles Maintaining the schedule of vehicle properly Use economies of scale Optimum utilization of recourse Adopting new technologies (automated machines) Reduce wastage

Reduce the Reduce the Transportatio transportatio n cost n cost Re. 0.10 per liter

Operating Improvement s

Reduce the manufacturin g cost by 10%

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Customer Service Perspecti ve Objectives Measureme nts Targe ts Program

Customer Service

Improve service Quality Value

Customer feedback and

Expand customer base Customer Retention Increase of target area of market Evaluate the customer data base with past records Measure the customer retention Percentage of customer satisfied

By taking customer feedback every quarterly by Survey method and develop corrective measures Maintain quality standards of ISI Entering into New market area By being the price leader By building brand name in the market

Improve Customer Relations Maximize Customer Satisfaction

CRM activities (Customer Relationship Management By taking customer feedback by Survey method and improving on them Delivering the best quality and maintaining the same

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Internal Process

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Perspecti ve Internal Process

Objectives

Measuremen ts Market study

Targets Program Attending the fairs and exhibitions Store management EOQ/EPQ (economic order quantity/econom ic production quantity) Reducing manufacturing cycle time Adoption of New Technology Optimum Utilization of raw material (water) Minimizing the lead time orders Maximizing the quality standards to get ISO certification

Analyze customer needs Improve Operational Efficiency

Measuring overall performance monthly

Improve marketing activities

Number of new distribution centers

Advertising through Newspapers Local cable channel Taking order well in advance On time delivery of the orders Use of efficient vehicles for transportation Checking quality every day

Delivery product

of Evaluating number of complaints received for not delivering on time

Quality control Comparing and with the improvement quality standards of ISI Optimum utilization space Measuring the of down time

Layout Redesign Use of automated 37 material handling in dispatching

Learning and growth Learning and Perspecti ve Objectives Measuremen Targets Program ts Percentage of employees are satisfied with the work environment Work efficiency of employees Feedback from the employees Recreation activities

Employee Satisfaction

Training Employee

Training based on Safety Hygiene

Linking each perspective to the unit: Financial performance: Financial performance can differ considerably at each stage of a businesss life cycle. Business strategy theory suggested several different strategies that business units can follow, ranging from aggressive market share growth down to consolidation, exit and liquidation. For simplification purposes, we can identify just three stages. Growth Sustain Harvest

Financial Performance In the financial performance the organization can have the following objectives: Increase Revenues Reduce the Transportation cost Operating Improvements

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The organization can achieve these objectives by following the specific program suggested in the framework and it can be measured. 1. Increase Revenues To fulfill this objective the following programs should be followed: i. ii. iii. Increase the distribution network Increase the volume of sales Increase market share

And these can be measured or said to be achieved if sales are increased by 25%. Increase the distribution network: Presently the firm has 50 distribution centers that are 50 distributors. By expand the network through entering into new market area will lead to increase in the sales and revenue. Increase the volume of sales: This program states that by increasing the sales volume the revenue can be increased. Sales volume means for the present customers we need to sale more for that we need to create the demand for the product in the market and how to create demand is explained in one of the further program. Increase market share: Increase market share means expanding the business in the present targeted market. It also means increasing the share of the present market over the competitors. This can be done only my quality service. 2. Reduce the Transportation cost:

To fulfill this objective the following programs should be followed: Use of appropriate vehicles Routing and scheduling Handle optimal Quantity Outsource Reach more customers where the road conditions are good Reduce idle time of vehicle and drivers

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Transport other materials on return journey Use fuel efficient vehicles Maintaining the schedule of vehicle properly

These all programs will lead to reduce the transportation cost and it can be measured by reducing transportation cost by Re. 0.10 per liter Here use of appropriate vehicles can be explained by the example: If an order of 100 boxes of 1 liter bottles is made by x customer who is 50km away from the factory site. For the transportation if the company uses the vehicle which as the capacity of transporting 200 boxes for the transportation of 100 boxes then the vehicle is underutilized and cost will be more so, they need to use appropriate vehicles. Routing and scheduling means the orders should be transported to many distribution centers at a time. That is before transporting goods we need to check whether any other distribution center has any orders which comes under same rout accordingly we can schedule and transport the goods to the distributors. Handle optimum quantity this program relates to the previous point that is while transporting we need utilize the vehicles appropriately and optimally. Outsource: outsourcing of vehicles is more appropriate because it reduces the maintenance cost, driver cost etc. Reduce the idle time of vehicles and drivers: To use vehicles and driver optimally the transportation of goods should be done at night time that is evening time rest of the morning time the vehicle can be used for the rent by this the income or revenue will be increased and transportation cost will be decreased. 3. Operating Improvements: The programs to achieve the objective are as follows: Use economies of scale

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Optimum utilization of recourse Adopting new technologies (automated machines) Reduce wastage

By using economies of scale we can reduce the production cost. Economies of scale state that increasing the production quantity at a time will reduce the cost of production. By using adopting new technologies we can reduce the manpower cost and can invest the same in R & D department and improve the operation. At the end we can measure whether by adopting these programs the operating improvements are achieved or not. The measurement standard took for this is Reduction in the manufacturing cost by 10% Customer Service: Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups. Customer Service: Perspecti ve Objectives Measureme nts Targe ts By customer feedback quarterly Survey every by method taking Program

Customer Service

Improve service Quality Value and

Customer feedback

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and measures Maintain

develop

corrective quality

Expand customer base Customer Retention

Increase market

of

standards of ISI Entering into New market area

target area of

Evaluate the customer data with records base past

By being the price leader By building brand name in the market

Improve Customer Relations Maximize Customer Satisfaction

Measure customer retention

the

CRM (Customer

activities

Relationship Management) By taking customer feedback by Survey method and improving on them Delivering the best quality maintaining same and the

Percentage of customer satisfied

Customer Service has the following objectives: Improve service Quality and Value Expand customer base Customer Retention Improve Customer Relations Maximize Customer Satisfaction
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1. Improve service Quality and Value: To achieve this objective the following programs has to be followed: By taking customer feedback every quarterly by Survey method and develop corrective measures Maintain quality standards of ISI

Now-a-days the companies fail to take the customer feedback because they only concentrate on their competitor and try to compete with them without caring what customers need. So we need to concentrate on customer needs by taking their feedback which will also helps to improve the quality. According to ISI there are some specific quality standards which need to be maintained. These can be measured by taking the feedback of the customers. 2. Expand customer base: It is one of the objectives which can be achieved by following the program stated below: Entering into New market area: Entering into new market area means expanding the business that is entering into new market and introducing the product in the market. For this first we need to conduct the market study and make a research on the new market. During this particular target period whether we have entered into new market or can be measured by number of new distributors. 3. Customer Retention: To achieve this objective the following programs has to be followed: By being the price leader By building brand name in the market

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For very company it is very important retain the brand name in the market. To build good brand name the company needs to work on many aspects like it needs to develop the good relationship with the customers, it should build the CRM activities etc And it also important to be a price leader in the market. Here price leader means maintaining the same price in the market at all the time with very slight variations with respect to any environment conditions. Customer retention can measure by analyzing the customer data base with the previous years customer data base. Whether number of customer are increased or decreased can be analyzed. 4. Improve Customer Relations: To achieve this objective the company should adopt CRM activities (Customer Relationship Management) like providing education facilities to the children of workers, providing hospital facilities, conducting some awareness programs like global warming etc. It can be measured and we can say that customer relations are good if customers are retained with the company. 5. Maximize Customer Satisfaction: To achieve this objective the following programs has to be followed: By taking customer feedback by Survey method and improving on them Delivering the best quality and maintaining the same

Satisfying the customers is the most important job of the company. To check whether the customers are satisfied or not can be evaluated by taking the customers feedback by survey method and identify if any areas are to be improved. We can measure the customer satisfaction by the percentage of customers satisfied with the service. Internal Process:

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The internal business process perspective provides a view of what the company must excel at to be competitive. The focus of this perspective then is the translation of customer-based measures into measures reflecting the company's internal operations. The highest level in this measurable should be on customer satisfaction and factors affecting such issues as cycle time, quality, employee skills, and productivity. Kaplan and Norton recommend that, "companies also attempt to identify and measure their company's core competencies, the critical technologies needed to ensure continued market leadership."

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Perspectiv Objectives e Internal Process Analyze customer needs Improve Operational Efficiency

Measuremen ts Market study

Targets Program Attending the fairs and exhibitions Store management EOQ/EPQ (economic order quantity/econom ic production quantity) Reducing manufacturing cycle time Adoption of New Technology Optimum Utilization of raw material (water) Minimizing the lead time orders Maximizing the quality standards to get ISO certification

Measuring overall performance monthly

Improve marketing activities

Number of new distribution centers

Advertising through Newspapers Local cable channel Taking order well in advance On time delivery of the orders Use of efficient vehicles for transportation Checking quality every day

Delivery product

of Evaluating number of complaints received for not delivering on time

Quality Comparing control and with the improvement quality standards of ISI Optimum utilization space Measuring the of down time

Layout Redesign Use of automated 46 material handling in dispatching

Internal Process has following objectives: Analyze customer needs Improve Operational Efficiency Improve marketing activities Delivery of product Quality control and improvement Optimum utilization of space

1. Analyze customer needs: Fairs and exhibitions means were similar products are exhibited. By attending the fairs and exhibitions we can make the comparative study and can understand customers changing needs through which we can analyze the customers needs. 2. Improve Operational Efficiency: To achieve this objective we need to follow the following programs: Store management EOQ/EPQ (economic order quantity/economic production quantity) Reducing manufacturing cycle time Adoption of New Technology Optimum Utilization of raw material (water) Minimizing the lead time of orders Optimizing the quality standards to get ISO certification

These all programs aim at improving the operational efficiency and all are interlinked to each others. Store management means maintaining the correct stock level which is attained by applying the EOQ (economic order quantity). The total cost incurred by the organization on caps is 3, 20,000 Rs per year which includes ordering cost, carrying cost etc. If organization adopts the EOQ model the Cost is calculated as below:

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Economic Order Quantity (EOQ) EOQ = (2*D*Co) Cc D = 132000 per month 132000*12 = 1584000 D = 15, 84,000 Co = Rs. 400 approximate Cc = Rs. 0.012 per cap EOQ = Q = 1, 02,956.30 Order Interval = Q/D = 0.064*365 = 23.36 24days No of order = D/Q = 15.38516 orders per year Total Cost = (price *D) + [(D/Q)*Co] + [(Q/2)*Cc] (Price *D) = 190080 [(D/Q)*Co] = 6400 [(Q/2)*Cc] = 617.73 Total Cost = 1, 90,080 + 6,400 + 617.73 Total Cost = 1, 97,097.73 Organization spends is Rs. 3, 20,000 and actual cost incurred by adopting EOQ the total cost is Rs. 1, 97,097.73. Therefore organization can save up to Rs. 1, 22,902.27

Cycle time means time period taken for conversion of raw materials to finished good that time should be very less. So that it reduces the cost of maintenance, labor etc. Here minimizing the lead time orders means minimizing the time period between . For Ex: If we order for a box of caps then it will take minimum 3 day to reach us the ordering is done when they are required (3 days

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includes manufacturing and transportation). We can minimize it by ordering the caps well in advance so that it reaches the organization well in time without affecting the production. At present the organization is certified by ISI quality standards. It is aiming to certify the ISO quality standards. To achieve ISO certification they have to incur some cost to increase to increase the quality and they need to invest in R & D for which organization is willing to invest. 3. Improve marketing activities: Marketing activities mainly includes branding, promotion, advertisement etc. Every product needs advertisement. It is one of the mode to compete with competitors here the company can use two media for advertisement that are News papers and Local cable channels. These two Medias because the product has local target market so, it is better to advertise with local Medias. By advertising we can increase the number of distributor. Learning and growth: Kaplan and Norton underscore the importance of innovation and learning in their statement that, "a company's ability to innovate, improve, and learn ties directly to the company's value." While the financials perspective deals with the projected value of the company, the innovation and learning perspective sets measures that help the company compete in a changing business environment. Their focus for this innovation is in the formation of new or the improvement of existing products and processes. The measures in the Learning and Growth perspective of the Balanced Scorecard are really the enablers of the other three perspectives. In essence, they are the foundation upon which the Balanced Scorecard is built. Once we identify measures and related initiatives in your Customer and Internal Process perspectives, it can be certain of discovering some gaps between your current organizational infrastructure of employee
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skills, information systems, and organizational climate (e.g., culture) and the level necessary to achieve the results which we desire. The measures we design in this perspective will help us to close that gap and ensure sustainable performance for the future. Learning and growth

Perspectiv Objectives e Learning and growth Improve management and leadership competencies Employee Satisfaction

Measuremen ts

Targets Program

Percentage of employees are satisfied with the work environment

Feedback Recreation

from the employees activities

Training Employee

Work efficiency employees of

Training based on Safety Hygiene

Learning and growth has following Objectives: Employee Satisfaction Training Employee

1. Employee satisfaction: For every organization employees are the back bones. Company should satisfy the employees first are also known as internal customer if they are satisfied then organization will run smoothly. Every monthly we need to take feedback from the employees so that we can identify their needs and try to satisfy them. In the same way we need

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to provide recreation activities for their refreshment. This will motivate the employees and we can measure the percentage of employees satisfied in the organization by feedback system. 2. Training Employee: Work efficiency of the employees can measure by their performance. To improve the work efficiency we need to provide training on different aspect like safety and hygiene. Here in this organization hygiene part is most important. Major Findings: Balanced Scorecard is a measurement tool. It can be adopted even for small scale industries M/s. Aqua Minerals presently it is not following any strategic planning or mapping. But it needs to have them because those will direct the organization to go in a right direction and helps in achieving the goals of the organization M/s. Aqua Minerals follows democratic style of leadership In this organization Quality, Employees and Society are given importance Major Key Performing Areas (Objectives) have been identified and programs are been developed to implement. Based on past records following details are calculated during the research work: Economic Order Quantity = Q = Rs. 1, 22,902.27

Order Interval = Q/D = 0.064*365 = 23.36 24days

No of order = D/Q = 15.385 16 orders per year Total Cost = 1, 97,097.73 Organization presently incurs total cost of Rs. 3, 20,000 on caps but actual cost incurred by adopting EOQ, the total cost is Rs. 1, 97,097.73. Therefore organization can save up to Rs. 1, 22,902.27 The data received was analyzed based on reception of positive responses towards questions. A positive response stood for a positive perception

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towards BSC as a tool. The data is represented graphically for Executive responses, Non-Executive responses and the overall response of the employees of the organization. Based on this evaluation we can reach conclusions on the perceptions of employees of the various aspects of Balanced Scorecard and their opinions on it. Suggestions: Some of the suggestions for M/s. Aqua Minerals for adopting the balanced scorecard are as follows: Framework for implementing programs: Objective: How Program 1: Program 2: Program 3: Program 4: Program 5: Who What When Where Why

First step is to define the objective for a particular task To achieve a particular objective we need to plan for different programs for accomplish the objective Then we need to prioritize the programs to be performed like program 1,2 so on Lastly we need to decide on 5W and H. That is o How to do? o Who to do? o What to do? o When to do? o Where to do? o Why to do?

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These all steps will help in implementing the programs to achieve to objectives For Example: Objective:

Employee Satisfaction How Who many HR manage What Take feedba When At end every quarter Where the In on Why the To what Percentag e s with work environm ent of are the employee satisfied know

Pro 1: the

gram from s

As

Feedback employee

employees

of Organizati

are unskilled r or top ck so, we need level to orally take employe e and feedback document it.

Framework for implementing the balanced scorecard stage wise: Stages Perspectives Financial Performance Reduce 10% Customer Service the Reduce Re. 0.10 per liter Customer Measure the customer retention, Percentage of customer satisfied Internal Process Measuring overall Market study Number distribution of new centers, the Increase sales by 25% cost Stage I Stage II Stage III

manufacturing cost by transportation

Increase of target area Get of market feedback

performance monthly

Comparing with the quality standards of ISI, Evaluating

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number of complaints received for not delivering on time Learning and Growth Get feedback employees Percentage employees with the environment of Measure satisfied efficiency work employees the work of

Above table will explain process of implementing the balanced scorecard

Feed Back
AWARENESS ABOUT BSC: Question 1: BSC WAS IMPLEMENTED IN AQUA IN THE YEAR? The correct response is assumed to be a yes and scoring is done accordingly. Responses for Non-Executives:

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The above table shows that a majority of the employees of the Nonexecutive level are not aware of when BSC was implemented.

The above table shows that a majority of the employees of the Executive level are not aware of when BSC was implemented.

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The above pie-chart shows that on the whole, the employees of the organization are unable to recall when BSC was implemented in the organization. This can be for a variety of reasons: 1. BSC was implemented; a few of the employees joined the organization after that date and hence did not know the answer. 2. Employees were likely to remember the first time they received BSC incentive, so a majority responded with that answer.

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An extremely high percentage of executives are aware of their departmental goals.

On the whole almost all of the employees in the organization are aware of their targets. This is, of course, an extremely positive trend since it shows that the implementation of BSC has been done effectively and has been consciously intertwined with the working of the organization. The employees are responding positively to the goals, and awareness is, of course, the first and most important step in attaining these targets.

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Question 3: BSC MOTIVATES AND GIVES ME DIRECTION IN MY WORK. Responses for Non-Executives:

A lesser percentage of executives as compared to non-executives believe that BSC is a motivator and a guide to their work. Overall Result:

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The data for non-executives hangs in balance.

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The data for executives is even lower than for non-executives, also because the number of executives surveyed was larger than nonexecutives. Overall result:

The overall result for this question in weighed towards the negative side. This shows that discussions on BSC do not take place on a fortnightly basis, but this can mean that reviews are done on maybe monthly or bimonthly basis. Since reviews are highly important, they do take place but at the same time, a fortnightly review will be an ideal situation in the organization.

Question 7: PEOPLE IN THE ORGANIZATION HAVE A POSITIVE ATTITUDE TOWARDS BSC. Responses for Non-Executives:

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A very high number of executives believe that employees in the organization have a positive attitude towards BSC. Overall result:

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On the whole a majority of the respondents believe that people in the organization have a positive attitude towards BSC, but this question is based wholly on perception, so people may be inclined to believe this for appearances sake or they may project their own opinion on this response.

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On the whole a large part of the respondents trust that BSC has improved their performance which is good since this means that BSC has set out to achieve what it should, at the same time, the population which does not agree with this point states that their performance has been consistent and was of the same level even before implementation of BSC.

Question 2: BSC WORKS TO IMPROVE TEAM MOTIVATION. Responses for Non-Executives:

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Less number of executives than non-executives believes that BSC motivates teams. Overall result:

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A large chunk of the overall population believe that BSC is a motivator of teams, this is an important function of BSC since the purpose of teams is to achieve set targets and they work towards set goals, this is where BSC would be invaluable and extremely helpful in achieving team targets.

Question 3: THE EFFICIENCY OF MY DEPARTMENT HAS INCREASED BECAUSE OF BSC. Responses for Non-Executives:

A lot of the non-executives believe that BSC has indeed contributed to increasing the efficiency of their department. Responses for Executives:

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Almost the same numbers of executives as non-executives believe that BSC has increased the efficiency of their department. Overall result:

On the whole a healthy number of employees believe that BSC is a contributor to departmental efficiency, this signifies that BSC is able to expedite the work process in the department and help smoothen the process of target accomplishment.

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