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The Balanced scorecard is a strategic management and communication tool that is used to effectively measure organisational performance, grow the value of intangible business assets and provide
guidance for the successful execution of business strategy.
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Why most businesses do not effectively execute on their strategic objectives?
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• Lack of strategic alignment preventing the effective cascading of strategy throughout the business
• No shared vision • Too many task based activities with limited focus on performance
outcomes • Lack of people accountability throughout the business • Performance targets overly focussed on financial measures and not
intangible measures – customer value, employee knowledge, culture • Disconnect between actions of the business and desired outcomes • Getting all employees to embrace strategic performance management • Lack of employee involvement and collaboration
The solution ?? An integrated planning and management system built on the balance scorecard will transform a business into a more results-orientated, strategy focussed entity that targets both short term and long term sustainability and success
What can the Balanced Scorecard do for you?
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The balanced scorecard is a strategic planning and management system that is used extensively in business and industry worldwide to align business activities to the vision and strategy of the organisation, improve internal and external communications, and monitor organizational performance against strategic goals. It can help your organization by translating high level organizational strategy into something that employees can understand and act upon in their day-to-day operations and initiatives. An effectively implemented balanced scorecard can help an organisation in many ways: • Increase focus on strategy and results instead of tasks • Break down communication silos between departments • Better understand and react to customer needs • Improve organizational performance by measuring what matters • Help leaders make better decisions based on leading performance indicators instead oflagging
financial data • Help leaders budget time and resources more effectively • Help leaders and employees prioritize the work they do
Getting started: Framework & Perspectives
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Kaplan and Norton describe the innovation of the balanced
scorecard as follows:
"The balanced scorecard retains traditional financial
measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-
term capabilities and customer relationships were not critical
for success. These financial measures are inadequate, however, for guiding and
evaluating the journey that information age companies must make to create future value through investment in
customers, suppliers, employees, processes,
technology, and innovation."
The steps….
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The steps (continued)….
6 The institute way TM
Strategic Map (Organisational whole)
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Cascading – throughout the organisation
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How to make sure the Balanced Scorecard works!!
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Challenges Solutions
Rushing the development and training of the Balanced scorecard in order to have the new system in place as quick as possible and thus undervaluing the importance of knowledge and understanding for successful implementation
Commitment to having people at all levels aligned with the organisations strategy by providing training and learning for the sustainability of a world class strategic management system
Management and control of the Balanced scorecards rests with a few select individuals
Executive sponsorship is required in order to demonstrate leadership/commitment for the validation of the program and must be supported by a balance scorecard team (group effort)
Not all executives and staff fully understand the Balanced scorecard Formulate a communication strategy and plan aligned with a transparent implementation plan. Train and distribute background material
The business has dozens of initiatives in place competing for scarce human resources.
Eliminate initiatives that are not aligned with the objectives of the strategic map and priorities
Are balanced scorecard results accurate? Strategies for effectively collecting and loading performance data must be developed if the tool is to be accepted and used by employees. Whether automated or not, the data gathering process is enhanced by customised collection templates
Lack of cascading of the Balanced scorecard effectively It is only through cascading to all levels of the organisation and allowing all employees to contribute to the overall success of the business that true strategic alignment can be achieved
Tracking results,scoring,reports (example 1)
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Sales Perspective: A LL Frequency: Quarterly
Period
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total
Objectives
Financial
Exceed QTR GP%
EBITDA $ Surplus
Customer
# New customers target exceeded
Projects and Processes
Deployment of SaleSforce Portal
Sales Collateral build (Digital/Tangible)
War room" equivalent process build
Sales Pipeline design
ESA Redesign plan
Lead and manage "War room" process
Data Hygeine plan
Employee Name: Employee Title:
Manger Name: Manager Title:
Timeframe Covered: January 1, 2016 to December 31, 2016
Date Completed:
Department Objective Individual Objective Description Intended Results
Objective Weight
Performance Measures Target Weight Score
1
2
Initiatives Expected Completion Date Actual Completion Date
1
2
Tracking results,scoring,reports (example 2)
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Tracking results,scoring,reports (example 3)
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Joe Blogs Inc - Balanced Scorecard Q3 FY`16
Signature for acceptance Date -------------------------------------------- ------------------- Business development: Mr Bob Uncle
Perspective KPI Weight Measure
Financial Achieve above quarterly budgeted GP of 50% 10 IF … achieved 100% ; If not = "0"
EBITDA $200,000 (Control costs within remit) 10 If savings > 5% = 10 pts, if result is 95%-105% = 8 pts , if 90%-95% = 7 pts, if 85%-90% = 6 pts , if 80%-85% = 5 pts, if 75%- 80% = 4 pts , 70%-75% = 3 pts, If 70% = "0" points
Financial Weighted score 20
Key Projects & Processes Initiative 1: FY`17 - FY`19 Sales and Budget plan 20 IF… 100% Project deliverables achieved on time, aligned with objectives and with high quality output = 45pts, If mostly delivered with approved delay = 38.25pts , if not delivered = "0"s
Expectation:
Clearly defined, comprehensive Sales plan forming the foundation of sales goals/activities over 3 years
To identify strategies , risks , market share, sales opportunities, customer activities , resourcing, systems and budget
Developed, collated and presented to all company stakeholders
Initiative 2: Data Hygiene 15 IF… 100% Project deliverables achieved on time with high quality output = 15pts, If mostly delivered with approved delay = 12pts , if not delivered = "0"s
Expectation:
Process to ensure customer/pipeline data clean on an on-going basis
Strategy Weighted score 35
Customer Customer KPI
Won and closed = 150 new customers 40 If 150 customers or more = 40pts, if > = 120 = 32pts, If >= 100 =25pts, if <= 100 = "0"
Month end BDM board pack report completed and distributed to FM ( internal customer) working day 4 from EOM
5 IF… 100% Project deliverables achieved on time aligned with expected board report output = 5pts, if not delivered = "0"s
Customer Weighted score 45
Total Scorecard weightings 100