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BALANCE SCORECARD
TOOL FOR PERFORMANCE
MANAGEMENT
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Traditional Methods of
Performance Management
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Why was it developed ?
The concept of Balanced Scorecard was developed in the early1990s by Robert S. Kaplan and David P. Norton. They describethis innovation as follows:
"The balanced scorecard retains traditional financial measures. Butfinancial measures tell the story ofpast events, an adequate story forindustrial age companies for which investments in long-termcapabilities and customer relationships were not critical for success.These financial measures are inadequate, however, for guiding andevaluating the journey that information age companies must make
to create future value through investment in customers, suppliers,employees, processes, technology, and innovation."
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Leading and Lagging Indicators
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What Is Balance Scorecard
Developed in the early 1990's by Drs. Robert
Kaplan and David Norton.
The balanced scorecard is a management
system that enables organizations to clarify
their vision and strategy and translate them
into action .
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Financial Perspective
What financial steps are necessary to ensure theexecution of our strategy/goals?
Are the programs/ departments goals,
implementation, and execution contributing to thebottom line?
Are we meeting operational and financial targets?
Dimensions of Quality:
Efficiency
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Internal Service Process
PerspectiveWhat critical processes must we excel at to satisfy
our customers/stakeholders?
What must be done internally to meet
patient/customer expectations?Dimension of Quality:
Effectiveness
Appropriateness
Safety
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Customer Relations Perspective
Who are our target customers?
How do our patients/customers see us?
How do patients/customers rate our
performance?
Dimension of Quality:
Accessibility
Acceptability Continuity
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Learning, Innovation and Growth
Perspective
How can we continue to improve?
What capabilities and tools do our
employees need to execute our
strategy/goals?
Dimension of Quality:
Competence
Participation
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Strategy Maps
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What is a Strategy Map?
A strategy map is a visual representation of the strategy of anorganization. It illustrates how the organization plans toachieve its mission and vision by means of a linked chain ofcontinuous improvements.
For a commercial business, the strategy map illustrates thelong-term game plan or competitive strategy to achieveincreased profitability. For a nonprofit or governmentalorganization, it illustrates the plan by which the organizationintends to improve performance of its mission.
In either case it illustrates the cause-and-effect relationships
between different strategic objectives and their measures,or key performance indicators (KPIs) that are included ina balanced scorecard.
http://en.wikipedia.org/wiki/Key_performance_indicatorshttp://en.wikipedia.org/wiki/Balanced_scorecardhttp://en.wikipedia.org/wiki/Balanced_scorecardhttp://en.wikipedia.org/wiki/Key_performance_indicators -
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SAMPLE STRATEGY MAPS
DESIGNING STRATEGY
MAPS
http://localhost/var/www/apps/conversion/tmp/scratch_11/Sample%20strategy%20maps.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_11/Designing_a_Strategy_Map.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_11/Designing_a_Strategy_Map.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_11/Designing_a_Strategy_Map.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_11/Designing_a_Strategy_Map.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_11/Sample%20strategy%20maps.pdf -
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HOW FINANCIAL AND NON FINANCIAL
MEASURES ARE CONNECTED
Understand how value is
created for customers and
shareholders.
Link strategic objectives in
cause and effect relationship tocreate a strategic map.
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BUILDING A SCORECARD Assessment of the organizations foundation and its core beliefs.
Core balanced scorecard team.STEP-1 Development of overall Business Strategy.
STEP-2
Decomposition of business strategy into smaller componentcalled strategy.STEP-3
A strategic map of the organizations overall business strategy iscreated.STEP-4
Performance Measure are developed to track both strategic andoperational progress.STEP-5
Initiatives are identified that needed to be funded andimplemented.STEP-6
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IMPLEMENTING BUSINESS
SCORECARD1. Make the
strategy explicit
2. Choose themeasure
3. Define and
Refine
3. Deal with
people
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BALANCE SCORECARD MANAGING
CHANGE
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BALANCE SCORECARD AS A STRATEGIC
MANAGEMENT SYSTEM
1. Overcoming the vision barrier through the Translation of Strategy
2. Cascading the scorecard overcomes the people barrier.
3. Strategic resource allocation the resource barrier.
4. strategic learning overcomes the management barrier.
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ADVANTAGES
Focusing the whole organization on the key few things needed to create abreakthrough.
Helps to integrate various corporate programs like quality ,re-engineeringand customer service initiatives
Breaking down the strategic measures towards lower level, so that unitmanagers ,operators and employees can see what's required at their levelto achieve excellent overall performance
Periodic reviews are conducted which helps in reviewing the strategy.
Alignment of strategic activities to the strategic plan-real deployment andimplementation of strategy
DOUBLE LOOP FEEDBACK
Employee motivation.
Assigning weight age to KRAs enables the employees to prioritize their work.
The weight age assignment also gives the employees a clear picture of issuescritical to the organization and individual contribution in the achievement oforganizational objectives.
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What is a Balanced Score Card?
1) A measurement system
2) A strategic management system3) A communication tool
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BSC as a Measurement System
Translates mission, vision and strategy throughobjectives and measures
Provides a framework to describe the key
elements in the achievement of the strategy
Measures four perspectives
- Customer Relations
- Financial- Internal Service Process
- Learning, Innovation and Growth
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BSC as a Strategic Management
System
Translates strategy into:
Objectives
Measures
Targets
Initiatives
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Translating with the BSC
Desired state
Differentiating activities
What must be done
well to implement
strategies
How strategic
success is
measured
Mission
Vision
Strategy/Goals
ObjectivesIn each perspective
MeasuresIn each perspective
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Continue
Executives now need newer ways to assess
how well their organization is functioning,
how to predict future performance, and how to
align the organization toward new strategies.
Hence the Balanced Scorecard.
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The balanced scorecard suggests that we view
the organization from four perspectives, andto develop metrics, collect data and analyze it
relative to each of these perspectives:
The Learning and Growth Perspective
The Business Process Perspective
The Customer Perspective The Financial Perspective
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http://www.balancedscorecard.org/basics/learning.htmlhttp://www.balancedscorecard.org/basics/process.htmlhttp://www.balancedscorecard.org/basics/customer.htmlhttp://www.balancedscorecard.org/basics/financial.htmlhttp://www.balancedscorecard.org/basics/financial.htmlhttp://www.balancedscorecard.org/basics/customer.htmlhttp://www.balancedscorecard.org/basics/process.htmlhttp://www.balancedscorecard.org/basics/learning.html -
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Map Sub-goals to Balanced
ScorecardFinancial Perspective
revenue growth and mix
cost reduction/
productivity improvement
asset utilization/investment strategy
Internal Business
Process Perspective
innovations
operations
after sales service
Customer Perspective
market share
customer acquisition
customer satisfaction
customer profitability
Learning & Growth
Perspective
employee satisfaction
employee retention
employee productivity
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Financial Perspective
Long-termShareholder Value
RevenueGrowth
Improve Cost Structure
Increase Asset Utilization
Cost Efficiency
Expand Revenue
Opportunities
Enhance Customer Value
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Strategic Objectives in Customer
Price Availability BrandServiceQuality
Customer Acquisition
Customer Satisfaction
Customer Retention Customer Profitability
Market Share
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St t i Obj ti i I t l
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OperationsManagement
Processes
CustomerManagement
Processes
Innovation
Processes
Regulatoryand Social
Processes
Processes thatproduce and
deliver products
and services
Processes thatenhance
customer value
Processes thatcreate new
products and
services
Processes thatimprove
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
Process
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Human CapitalOrganization
CapitalInformation
Capital
Skills
Knowledge
Attitude
Systems
Database
Networks
Culture
Leadership
Organization
Development
Strategic Objectives in Learning
& Growth
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ADVANTAGES OF BALANCE
SCORECARD
Focusing the whole organisation on the key few things
needed to create a breakthrough.
Helps to integrate various corporate programs like quality ,re-
engineering and customer service initiatives
Breaking down the strategic measures towards lower level, so
that unit managers ,operators and employees can see what's
required at their level to achieve excellent overall
performance
Periodic reviews are conducted which helps in reviewing the
strategy.
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Continue.
Alignment of strategic activities to the strategic plan-real
deployment and implementation of strategy
DOUBLE LOOP FEEDBACK
Employee motivation.
Assigning weightage to KRAs enables the employees to
prioritize their work.
The weightage assignment also gives the employees a clear
picture of issues critical to the organisation and individual
contribution in the achievement of organisational objectives.
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Effective implementation issues
Ill-defined strategy
Management style(MBO)
Paper chase
Centralized measures
Lack of ignorance-parameters of organisation
as a whole Ignoring conceptual issues
Excluding stakeholders
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Issues for enabled users
Strategy process
Inflexibility
Failure to evolve
Reification
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Problems with the balanced
scorecard?
It is somewhat difficult and time-consuming toimplement a comprehensive balanced scorecardsystem in a large organization.
It will require sustained top-level support andcommitment to ramp-up and put the system inplace.
A sustained effort at change management andeducation is needed
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