The Balanced Scorecard

By : Jitu Mistry
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What lies Ahead

Overview of the Balanced Scorecard Why the Balanced Scorecard will help execute strategy Strategy Map and Balanced Scorecard Outcomes Discussion Ideas for scorecards
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Executing Strategy...
Is the greatest challenge for organizations Vision
- only 5% of workforce gets it!

People
25% of managers have incentives linked to strategy

Management
85% of executive teams spend less than 1 hour/mo discussing strategy

Resource
60% of organizations dont link budgets to strategy
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Strategic Execution
Bad execution, not bad strategy is the cause of 70% of CEO failures
Execution is not just tacticsit is a discipline and a system

Source: Execution: The Discipline of Getting Things Done, by Larry Bossidy, and FORTUNE Magazine, Why CEOs Fail

Challenges in Executing Strategy

Financial Management Tools
Balance Sheets Income Statements Statement of Cash Flow

Process Management Tools

Six Sigma Supply Chain Management TQM

Strategy Management Tools ???

Customer Management Tools

CRM Customer Segment Analysis Customer Surveys

People Management Tools

MBO Training Programs HRIS 360 Feedback

The Balanced Scorecard

Train and Communicate Strategy

Set goals, select performance measures and link measures to incentives

Set target for each goal and re-deploy resources to activities and initiatives to achieve targets

Feed Forward Learning

Provide feedback on performance and learn from results

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The Balanced Scorecard

A robust tool but keep it simple! Makes strategy tangible everyones job! Tracks whats important hits and misses Measurement-lead management Provides feedback for short-term course corrections and long-term learning

Balanced Scorecard Perspectives

A. Financial
How do we succeed financially?

B. Customer
How do we appear to our customers?

C. Internal Process
At what processes must we excel?

D. Learning and Growth

How do we sustain our ability to change and grow?

We Use the Scorecard to Articulate Strategic Hypotheses in Cause-effect Terms

And Realize the Vision

Financial Results

To Drive Financial Success...

Customer Benefits

Needed to Deliver Unique Sets of Benefits to Customers...

Internal Capabilities

To Build the Strategic Capabilities..

Knowledge, Skills, Systems, and Tools

Equip our People...

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Balanced Scorecard Perspectives

Financial
How do we appear to our Stockholders? Objectives Measures Targets Initiatives

Customer
How do we appear to our Customers? Objectives Measures Targets Initiatives

Vision & Strategy

Internal Business Process

At what internal processes must we excel? Objectives Measures Targets Initiatives

Learning and Growth

How do we sustain our ability to change & grow? Objectives Measures Targets Initiatives

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Cascading Scorecards to Build Alignment

Organization

Business Unit

Business Unit

Business Unit

Teams

Individual Contributors
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Financial

Sound Fiscal Mgmt

Budgeting

Long-Term Investment Strategy

Customer The Value Proposition

Product/Services Price Selection The Value Proposition Quality Availability

Relationship Partnership Services

Brand Image

Internal Process

Customer Mgmt Deepen Knowledge about customer Attract Retain Grow Relationship

Innovation New learning Partnerships Future needs

Operational Excellence Admin excellence Network of supplier for Products & services Adaptability

Learning & Growth

Climate for Action Personal Growth

Competencies Functional Excellence Leadership Skills Strategic Readiness

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Scorecard Information
Perspective: Financial / Customer / Internal Process / Learning&Growth Information Type Strategies Are. High Level Goals Example is Increase Market Share

Objectives
Measures Targets

Measures of action plans

Indicates success or failure Desired level of performance for a measure Management actions taken to achieve target

Increase Customer Satisfaction

Average Customer Rating (scale of 1-10) Achieve 9.9 of 10 Average Customer Rating Train CSR Staff in Problem Resolution Skills
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Initiatives

SPS Strategy and Balanced Scorecard Our vision is to be the leading integrator of communications equipment and services for voice solutions and data networking applications. Our Purpose for Being is to Provide Our Customers with the Finest Communications Value in the Marketplace.

Financial Financial Responsibility Integrity Beyond Reproach

Strategy Map Strategy Map

Objectives

Balanced Scorecard Measurement Target $xxxM xx%

Action Plan Initiative/Owner JF JF Budget

Grow Revenue

Improve Profitability

Grow Revenue

Revenue Attainment

Increase Profit Margin Profit Margin

Customer Excellent Service Exceptional Customer Value Integrity Beyond Reproach

The Value Proposition

Product/Services Innovation Availability

Relationship Partnership Service Customer Profitability

Brand Image Communicate value

Customer Satisfaction Customer Satisfaction Report9.0 SPS Overall Ivoice Available

Bette Francis

$xx

10 Sites by 11/1/03 MT

Internal Process Excellent Service Exceptional Customer Value Integrity Beyond Reproach

Operational Excellence Manage Customer Relationships

Manage Operations Maximize efficiency Maximize quality of business processes

Markets Enhance external Acquire new relationships relationships Grow/broaden existing relationships Customer Profitability Create Awareness

Competitive Positioning Designs/Quote

2 Replace/Qtr 5/Quote-Complex

CP MT

Learning & Growth Value of the Individual Integrity Beyond Reproach

Sustaining Our Ability to Change & Grow Organizational Readiness Information is Available Tools to do the job

Human Capital Technical Expertise Employer of Choice Understand the strategy and what needs to be done Great People

Platinum Certification Certify Technical Knowledge

Recertify as Platinum Increase Certifications Make application to EOC

B. Francis

Submit 2 applicationsB. Francis

N/A

Live the SPS Values

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Human Resources Mission Statement: The Human Resources Team will lead by example working to build a culture of high-energy, committed professionals who understand that continuous improvement and customer service are primary value competencies integrated into every position while developing SPS as a recognized employer of choice.

Learning & Growth Sustaining Our Ability to Change & Grow Value of the Individual Organizational Integrity Beyond Human Capital Readiness Reproach Technical Expertise Information is Available Employer of Choice Tools to do the job Understand the strategy and what needs to be done Live the SPS Values Great People

Platinum Certification Recertify as Platinum B. Francis Certify Technical Knowledge Increase Certifications Make application to EOC Submit 2 applicationsB. Francis

N/A

Objective Coordinate BP Certification Process

Result/Deliverable Platinum Certification Achieved

Target & Lead Lead: BF Target: 9/1/03

Initiative Develop matrix; assign responsibilities; conduct regular checkpoints

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The TCS Model

Source: Human Capital Vol.9 No.12 May 2006 Redefine the HR Agenda
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Vision
Global Top 10 by 2010 in the IT Industry

Mission
Customer delight by providing best-inclass consulting, IT solutions & services and also delivering value and joy to all stakeholders.
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FINANCIAL PERSPECTIVE

Shareholder Value

Human Capital Effectiveness

CUSTOMER PERSPECTIVE

Human Resource Efficiency

Customer delight
INTERNAL PROCESS PERSPECTIVE

Employee delight

Manage Customer relationships Deliver world class services

Competencie s Leadership
LEARNING & GROWTH PERSPECTIVE

Manage Operating efficiency

Team Integration Strategic Alignment /Motivation

Cultural Climate

Work Capability

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BSC Terminology
Strategy Map: Diagram of the cause-and-effect relationships between strategic objectives Statement of what strategy must achieve and whats critical to its success How success in achieving the strategy will be measured and tracked Strategic Theme: Operating Efficiency
Financial

Profitability
Fewer planes Customer Flight Is on time Lowest prices More customers

The level of performance or rate of improvement needed

Key action programs required to achieve objectives

Objectives
Internal Fast ground turnaround

Measurement

Target

Initiative

Fast ground
turnaround

On Ground Time On-Time

Departure

30 Minutes 90%

Cycle time
optimization

Learning
Ground crew alignment

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Balanced Scorecard Example

Strategic Theme: Operating Efficiency
Financial Profitability Fewer Planes More Customers

Objectives

Measurement

Target

Initiative

Profitability More
Customers

Customer Flight Is on Time

Fewer planes Flight is on

time Lowest prices

Market Value Seat Revenue Plane Lease

Cost FAA On Time Arrival Rating Customer Ranking (Market Survey)

30% CAGR 20% CAGR 5% CAGR

#1 #1 Quality
management Customer loyalty program

Lowest Prices

Internal Fast Ground Turnaround

Fast ground
turnaround

On Ground Time 30 Minutes Cycle time On-Time 90% optimization

Departure program 70% yr. 3 90% yr. 5 100%

Learning Ground Crew Alignment

Ground crew
alignment

% Ground crew yr. 1

trained

% Ground crew
stockholders

ESOP Ground crew

training

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Sample HR Measures
Lagging Measures Impact of Prior Decisions Budget variance Employee relationship results Executive coaching Employee productivity Cost per hire by job class People expense/Revenues Leading Measures Guide Future Outcomes Employee strategic focus Executive retention Retraining/re-skilling Internal promotion rate Exit Rate of C Players Employee relationship factor

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So Why Consider the BSC?

As an HR Professional -Strategic Thinker Business Leader

As an organization -Welcomes change vital culture today Achieves strategic objectives

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Keys to Success
Educate your Executive and Teams Devise the right metrics Follow through to completion Start small! Report immediately Dont over measure

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Getting Started Customize Your BSC

1. Describe the strategy burning platform?

Strategy Map

2. Measure the strategy

Develop the measures; critical data points

3. Manage the strategy

Gather detailed information about the measure and initiative
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The Successful Scorecard

Is a dynamic process
continues to set higher targets and achieves them

Define jobs strategically

from the perspective of where it fits in with the strategic business goals

Supports joint decision

making about what you do/dont do based on strategic goals

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Resources
The Balanced Scorecard, Kaplan & Norton Balanced Scorecard Collaborative, Lincoln, MA, www.bscol.com The Strategy-Focused Organization, Kaplan & Norton www.BetterManagement.com The HR Scorecard, Becker, Huselid, Ulrich Measure Like You Mean It, Michael Hammer The Balanced Scorecard Step By Step: Maximizing Performance and Maintaining Results, Paul R. Niven The Human Resources Scorecard, Measuring the Return on Investment, Jack J. Phillips, Ron D. Stone, Patricia Pulliam Phillips Company Case Studies Networking

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Questions?

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