balanced scorecards for the busy business person

Balanced Scorecards for the

Busy Business Person

Presented byWarren J. RutherfordThe Executive Suite

the executivesuite.com Copyright 2009 2

What is a Balanced Scorecard?

A strategic planning & management system.

Used to align business activities to - business vision and strategy, improve internal and external

communication, monitor performance against goals.

the executivesuite.com Copyright 2009 3

Why is it used?

1978 NYU Stern School of Business Study (5,000 companies)

95% correlation between balance sheet and business value

Balance Sheet

Intangible

95%

the executivesuite.com Copyright 2009 4

Why is it used? 2005 NYU Stern School of

Business Study 28% correlation between

balance sheet and business value

Intangibles – the 72% Intellectual Property Strategy Brand Systems Processes Access to Capital Off balance sheet items Customer reputation Executive Team

Balance Sheet

Intangible

72%72%

28%

the executivesuite.com Copyright 2009 5

Why is it used?

Financial measures not enough

Need to measure value from knowledge -centric activities and perspectives

*Balanced Scorecard Institute

the executivesuite.com Copyright 2009 6

What does it measure?

Perspectives in each company concerning –

Learning & Growth, Business Process, Customer, & Financial.

the executivesuite.com Copyright 2009 7

Why is that important to you?

Only 5% of a workforce understands their company’s strategy.

Only 15% of senior management spends more than 1 hour a month defining strategy and aligning operations to it.

Only 25% have their operations aligned to the strategy.

Only 40% align company from budget to strategy.

David Norton, Balanced Scorecard Report, Vol. 3, No. 5 (Sep/Oct 2001)

the executivesuite.com Copyright 2009 8

What is it that makes us valuable and profitable?

How can we identify, quantify, and measure the intangible assets so that we can increase value and our performance?

The Questions companies have to ask themselves today are:

the executivesuite.com Copyright 2009 9

Learning & Growth Perspective Employee training. Company cultural attitudes toward individual

& corporate self-improvement. Workforce alignment -

Person/future fit (selecting for the long-term contributions of a person to the business’ long-term strategy).

Formal processes and procedures and professional standards created the best, long-term workforce alignment

Family-like community created the best, long-term workforce alignment.

the executivesuite.com Copyright 2009 10

Business Process Perspective

Internal processes w/ metrics looking at - How well is the business running? Do products conform to customer

requirements (mission)? What are your major processes? Are they optimized – tasks, time, money? Who has participated in their review?

the executivesuite.com Copyright 2009 11

Customer Perspective

Customer focus. Customer satisfaction. Analyze by kinds of customers. Analyze the kinds of processes that we

use to provide our products & services to those different customer groups.

the executivesuite.com Copyright 2009 12

Financial Perspective

Look at change from prior year & objective for following year.

Analyze significant indicators - Revenues, Profit, COGS, Gross Margin, Operating Expense, Inventory, & Return on Assets, etc.

the executivesuite.com Copyright 2009 13

What do you put in the Scorecard?

Objectives, Measures, Targets, & Initiatives.

the executivesuite.com Copyright 2009 14

What are some ways to start?

There are many ways to start, and there are programs available to assist.

Develop your vision for a multi-year period .

Ensure your mission is in alignment with customer needs.

Develop strategies that complement your vision and mission.

the executivesuite.com Copyright 2009 15

What are some ways to start?

Develop objectives that seek annual achievement of these strategies.

Develop action plans that set and track targets for accomplishment of your initiatives.

These can be developed by project, by section, division, department, by company.

Report and discuss monthly to reinforce accountability.

the executivesuite.com Copyright 2009 16

Example The following illustrates an approach by

The One Page® Business Plan for - Development of a Strategy, Objectives by the 4 perspectives, and Action plans for 1 quarter.

the executivesuite.com Copyright 2009 17

the executivesuite.com Copyright 2009 18

the executivesuite.com Copyright 2009 19

the executivesuite.com Copyright 2009 20

the executivesuite.com Copyright 2009 21

the executivesuite.com Copyright 2009 22

the executivesuite.com Copyright 2009 23

Summary

Establish benchmarks that are manageable.

Manage the data. Use the data to improve collaboration,

communication, & accountability toward vision, mission, and strategy.

the executivesuite.com Copyright 2009 24

Thank you!For more information -

Warren J. RutherfordOwnerThe Executive Suite129 Airport RoadHyannis, MA 02601wjr@theexecutivesuite.comwww.theexecutivesuite.com508-778-7700