Download - Balanced Scorecard
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Balanced Scorecard : Balanced Scorecard :
Creating Strategy Map Creating Strategy Map
to Drive Corporate to Drive Corporate
PerformancePerformance
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Contents :Contents :
1. Corporate Performance Scorecard
2. Strategy Map Framework
3. Four Perspectives in Balanced Scorecard
4. Identifying Key Performance Indicators
5. Strategy Map in Corporate Functions (HR, IT,
Finance and Marketing)
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Corporate Performance Management
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Performance Management FrameworkPerformance Management Framework
IdentifyingDefining
MeasuringMonitoring Reporting
Key Key Performance Performance
IndicatorsIndicatorsCompany Company strategystrategy
VisionMissionStrategy
Strategy MapStrategy Map
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Three critical components for effective process of
performance management
Performance ManagementInfrastructure
PerformanceManagement
Culture
PerformanceManagement
Process
Performance management cycle is continuous and
consistent
Culture that is based on performance accountability
Logistic support and performance management
administration
Performance Management ComponentPerformance Management Component
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STRATEGY
Plan and Execute
Monitor and Evaluate
Reward and Coach
Set Measures and Target
Performance Management CyclePerformance Management Cycle
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Managing Performance with Managing Performance with
Balanced ScorecardBalanced Scorecard
Balanced Scorecard is a management tool that
provides stakeholders with a comprehensive
measure of how the organization is progressing
towards the achievement of its strategic goals.
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• Balances financial and non-financial measures
• Balances short and long-term measures
• Balances performance drivers (leading indicators)
with outcome measures (lagging indicators)
• Leads to strategic focus and organizational
alignment.
Managing Performance with Managing Performance with
Balanced ScorecardBalanced Scorecard
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4 Perspectives in Balanced Scorecard4 Perspectives in Balanced Scorecard
If we succeed, how will we look to our shareholders?
Financial Perspective
To achieve our vision, how must we look to our
customers?
Customer Perspective
To satisfy our customers, which processes must we
excel at?
Internal Perspective
To achieve our vision, how must our organization learn
and improve?
Learning & Growth Perspective
The Strategy
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Strategy and Balanced ScorecardStrategy and Balanced Scorecard
Mission – Why We
Exist
Vision – What We
Want to Be
Values – What’s
Important to Us
Strategy : Our Game
Plan
Strategy Map :
Translate the Strategy
Balanced Scorecard :
Measure and Focus
Strategic Outcomes
Satisfied Shareholders
Delighted Customers
Excellent Processes
Motivated Workforce
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• The strategy map framework is presented in the
following slides.
• This framework describes the types of strategic
target that should be presented in each perspective,
namely the financial perspective, customers, internal
business process, and learning & growth perspective.
Strategy Map FrameworkStrategy Map Framework
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Cost Efficiency
Long-term Shareholder Value
Revenue Growth
Price Availability BrandServiceQuality
Operations Management
Processes
Human Capital
CustomerManagement
Processes
Innovation Processes
Regulatory and Social Processes
Organization Capital Information Capital
Strategy Map FrameworkStrategy Map Framework
Financial
Customer
Internal Process
Learning & Growth
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Financial Perspective Financial Perspective
• In private companies, the financial perspective is the
main objective (ultimate goal) – without having to
sacrifice the interests of other relevant stakeholders
(community, environment, government, etc.)
• In the financial perspective, the strategic goal is the
long-term shareholder valuelong-term shareholder value. This goal is driven by
two factors, namely : revenue growthrevenue growth and cost cost
efficiency.efficiency.
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Long-term Shareholder Value
Revenue Growth
Improve Cost Structure
Increase Asset Utilization
Cost Efficiency
Strategic Objectives in FinancialStrategic Objectives in Financial
Expand Revenue
Opportunities
Enhance Customer Value
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Customer PerspectiveCustomer Perspective
• This perspective is very instrumental, because without
customers, how can a company survive?
• Customer perspective covers the following elements:
• Customer acquisition
• Customer retention
• Customer profitability
• Market share
• Customer satisfaction
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Price Availability BrandServiceQuality
Customer AcquisitionCustomer Acquisition
Customer SatisfactionCustomer Satisfaction
Customer Retention Customer Retention Customer ProfitabilityCustomer Profitability
Market ShareMarket Share
Strategic Objectives in CustomerStrategic Objectives in Customer
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Internal Process PerspectiveInternal Process Perspective
• This perspective reflects the processes in key business
that should be optimized in order to meet the needs of
the customers.
• There are four main themes in this perspective, namely:
• Operations Management Process
• Customer Management Process
• Innovation Process
• Regulatory and Social Process
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Operations Management
Processes
CustomerManagement
Processes
Innovation Processes
Regulatory and Social Processes
Processes that produce and
deliver products and services
Processes that enhance customer
value
Processes that create new
products and services
Processes that improve
communities and the environment
• Supply
• Production
• Distribution
• Selection
• Acquisition
• Retention
• Growth
• New Ideas
• R&D Portfolio
• Design/
Develop
• Launch
• Environment
• Safety &
Health
• Employment
• Community
Strategic Objectives in Internal ProcessStrategic Objectives in Internal Process
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Learning & Growth PerspectiveLearning & Growth Perspective
• This perspective reflects the capability that a company
should have, namely:
• Human Capital
• Organization Capital
• Information Capital
• This perspective shows us that good human resource
development system, organizational system and
information system forms a solid foundation for improving
company performance.
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Human Capital Organization Capital
Information Capital
• Skills• Knowledge• Attitude
• Systems• Database• Networks
• Culture• Leadership• Organization
Development
Strategic Objectives in Strategic Objectives in
Learning & GrowthLearning & Growth
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Strategy Map TemplateStrategy Map Template
• The following slide displays the strategy map template
comprising of four perspectives : financial, customer,
internal business process, and learning & growth.
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Improve Cost Efficiency
Enhance Long-term Shareholder Value
Increase Revenue Growth
Enhance Brand Image
Build High Performance Products
Achieve Operational Excellence
Develop Strategic Competencies
Drive Demand through Customer
Relation Management
Manage Dramatic Growth through
Innovation
Implement GoodEnvironmental
Policy
Build Learning Culture
Expand Capabilities with Technology
Strategy Map TemplateStrategy Map Template
Financial
Customer
Internal Process
Learning & Growth
Expand Market Share
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Identifying Key Performance Indicators (KPI)
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VisionMission
and ValuesStrategy
Finance
Customer
Internal Business Process
HR Development
Key Performance Indicators
Key Performance Indicators
Key Performance Indicators
Strategic ObjectivesStrategic Objectives
KPI = Measurement or indicator that provides
information on how far we have succeeded in
achieving the strategic objectives
Key Performance Indicators (KPI)Key Performance Indicators (KPI)
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• The measure of success must show clear, specific and
measurable performance indicators.
• The measure of success should be declared explicitly and in
detail so that it is clear what is being measured.
• Costs to identify and monitor the measure of success should
not exceed the value that will be known from the measurement.
Guidelines in Formulating the KPIGuidelines in Formulating the KPI
KPI GuidelinesKPI Guidelines
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Relevant to the Strategic Objective
Does KPI have a linkage with the strategic
objectives?
Controllable Are the KPI achievements still under control?
Actionable Can any action be taken to improve the
performance?
Simple Is the KPI easy to explain?
Credible Is the KPI not easy to manipulate?
KPI GuidelinesKPI Guidelines
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KPI KPI Family DimensionFamily Dimension
Productivity Measures employee output (units/
transactions/ dollars), the uptime levels and
how employees use their time (sales-to-
assets ratio, dollar revenue from new
customers, sales pipeline).
Measures the ability to meet and/or exceed
the requirements and expectations of the
customer (customer complaints, percent
returns, DPMO -- defects per million
opportunities).
Quality
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KPI KPI Family DimensionFamily Dimension
Profitability Measures the overall effectiveness of the
management organization in generating
profits (profit contribution by
segment/customer, margin spreads).
Measures the point in time (day/week/
month) when management and employee
tasks are completed (on-time delivery,
percent of late orders).
Timeliness
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KPI KPI Family DimensionFamily Dimension
Process Efficiency
Measures how effectively the management
organization incorporates quality control, Six
Sigma and best practices to streamline
operational processes (yield percentage,
process uptime, capacity utilization).
Measures how effectively the management
organization leverages existing business
resources such as assets, bricks and mortar,
investments (sales per total assets, sales per
channel, win rate).
Resource Utilization
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KPI KPI Family DimensionFamily Dimension
Cost Savings
Measures how successfully the management
organization achieves economies of scale and
scope of work with its people, staff and
practices to control operational and overhead
costs (cost per unit, inventory turns, cost of
goods).
Measures the ability of the management
organization to maintain competitive economic
position in the growth of the economy and
industry (market share, customer
acquisition/retention, account penetration).
Growth
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KPI Category DimensionKPI Category Dimension
DirectThe actual raw data value as measured (e.g.,
sales volume).
PercentThe comparison of the changes in
performance of one value relative to the
same value at a different time, geography,
etc. (e.g., percentage change in sales vs.
last year).
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KPI Category DimensionKPI Category Dimension
Simple Ratio
The comparison of one value relative to another to
provide a benchmark for comparison of
performance (e.g., average sales per day).
IndexA combination of several separate measures
added together that result in an overall indicator
of performance (e.g., (company sales
growth)/(industry sales growth) for a specific
geography).
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KPI Category DimensionKPI Category Dimension
Composite Average
The addition of the weighted averages of several
similar measures that result in an overall composite
indicator of performance (e.g., customer satisfaction
composite is mixture of results from surveys, focus
groups and product returns).
StatisticsMultiple measures such as mean, variance,
standard deviation and variance that capture the
spread and distribution of the performance
measures (e.g., sales distribution by demographics,
geography, channel).
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Strategy Map for Corporate Functions (HR, IT, Finance and
Marketing)
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VisionMissionStrategy
Integration between Corporate and Integration between Corporate and
Division/DepartmentDivision/Department
CorporateScorecard
DivisionScorecard
The Division Scorecard is built by referring to the corporate scorecard
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Financial
Customer
Internal Process
Learning & Growth
Corporate Finance
Corporate Marketing
Production
Supply Chain
R & D
Corporate HR
Info Technology
Corporate and Division ScorecardCorporate and Division Scorecard
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Corporate and Division ScorecardCorporate and Division Scorecard
• Division Scorecard is formulated by looking at the four
perspectives in Corporate Scorecard.
• As shown in the previous slides, the learning & growth
perspective provides guidelines for developing scorecard at
the Human Resource and IT divisions, while the internal
process perspective provides guidelines for developing
scorecard at the supply chain division or R&D.
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Corporate and Division ScorecardCorporate and Division Scorecard
Sample from GE Lighting Business Group
Level of Organization Financial Customer Internal Process Learning & GrowthCorporate Scorecard Increase profit margin Improve customer Increase inventory turns Increase level of
satisfaction level Improve internal process employee competency
Division Scorecard Optimize cost of production Improve customer Increase inventory turns Increase level ofReduce inventory levels satisfaction level Improve internal process employee competency
Plant Scorecard Optimize cost of production Increase percent of Increase inventory turns Number of "on the Increase yields ratio on time delivery Reduce number of defects job training" deliveredIncrease labor productivity Reduce customer per million Number of performanceReduce inventory levels complaints per million Improve quality incoming coaching session
materialsMaintain optimum equipment speed
Frontline Employee Reduce waste Reduce equipment downtime Number of "on the Scorecard Reduce overtime Reduce number of poor job training" attended
Increase production rates solders Number of performanceReduce number of cracked coaching session bulbs attended
The above example shows how the scorecard at corporate level is cascaded to division level, and further to plant level and employee level.
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Division Strategy Map TemplateDivision Strategy Map Template
• The strategy map for HR Division, Information Technology
Division, Finance Division, and Marketing Division are
presented in the following slides.
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Optimize HR Efficiency
Drive Long termShareholder Value
Enhance People & Organizational Effectiveness
Achieve HR Process
Excellence
Develop Strategic & Functional HR Competencies
Build Strategic Employee
Competencies
Drive Organizational
Performance
Enhance Technology for HR
Create Climate for HR Action
HR Strategy Map TemplateHR Strategy Map Template
Financial
Customer
HR Internal Process
Learning & Growth
Create Positive Work Environment
Provide Quality HR Service
Provide High Performance People
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Optimize IT Efficiency
Drive Long termShareholder Value
Enhance IT Impact on Enterprise Outcome
Maintain a Reliable IT
Infrastructure
Develop Strategic & Functional IT Competencies
Develop Effective Decision
Support System
Propose and Deliver Transformational
Applications
Enhance IT Tools that Enhance the IT Function
Promote Customer-focused Culture
IT Strategy Map TemplateIT Strategy Map Template
Financial
Customer
IT Internal Process
Learning & Growth
Deliver Consistent, High Quality IT Service
Provide Business Units with Innovative IT Solutions
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Optimize Financial Efficiency
Drive Long termShareholder Value
Enhance Finance Effectiveness onEnterprise Outcome
Achieve FinanceProcess
Excellence
Develop Strategic & Functional Finance
Competencies
Develop Financial Information to
Improve Decision Making
Ensure Compliance with Regulatory Requirements
Use Technology to Improve Financial Information
Delivery
Finance Strategy Map TemplateFinance Strategy Map Template
Financial
Customer
Finance Internal Process
Learning & Growth
Deliver Responsive & Efficient Finance Operations
Provide Clear & Reliable Required Disclosure
Promote Customer-focused Culture
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Optimize Marketing Efficiency
Drive Long termShareholder Value
Increase Sales Revenue
Develop Innovative Marketing
Communication Program
Develop Strategic & Functional Marketing
Competencies
Develop Marketing Business
Intelligence
Accelerate New Product Development
Ideas
Enhance Technology for Marketing
Foster Creative Thinking & Innovative Solutions
Marketing Strategy Map TemplateMarketing Strategy Map Template
Financial
Customer
Internal Process
Learning & Growth
Create Satisfied and Loyal Customers
Enhance Brand Image
Develop Effective Customer Relation
Management
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Recommended Further Readings:
1. Robert Kaplan and David Norton, Strategy Map : Converting Intangible
Assets into Tangible Outcomes, HBS Press
2. Robert Kaplan and David Norton, Alignment : Using the Balanced
Scorecard to Create Corporate Synergies, HBS Press
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