financial information for management, planning and control

Financial Information for Financial Information for Management, Planning and Management, Planning and

ControlControl

Road MapRoad MapSession 1: Session 1:

Basics of Financial Information for Basics of Financial Information for Management, Planning and ControlManagement, Planning and Control

Short Term Tactical Decision Making – C-V-P Short Term Tactical Decision Making – C-V-P RelationshipsRelationships

Session 2:Session 2:Relevant Costs for Decision MakingRelevant Costs for Decision MakingTime and SpaceTime and Space


Long Term Strategic Decision Making – Long Term Strategic Decision Making – Relevance of Full CostRelevance of Full Cost

Allocation, Apportionment and AbsorptionAllocation, Apportionment and AbsorptionPredetermined Overhead RatePredetermined Overhead Rate Introduction to ABCIntroduction to ABC

Session 4:Session 4:ABC/MABC/M


Basics of ControlBasics of ControlPerformance MeasuresPerformance MeasuresStrategic Cost Management BasicsStrategic Cost Management Basics

People behave in People behave in the way their the way their

performance is performance is measuredmeasured

Sujoy Auto Industries Sujoy Auto Industries LimitedLimited

Sujoy Auto Industries LimitedSujoy Auto Industries Limited SAIL is an Auto AncillarySAIL is an Auto Ancillary SAIL wanted to re-orient shared services from SAIL wanted to re-orient shared services from

Cost Centers to Profit CentersCost Centers to Profit Centers It was felt that Production departments unduly It was felt that Production departments unduly

trouble Maintenancetrouble Maintenance Maintenance department performed following Maintenance department performed following

activitiesactivities Preventive maintenancePreventive maintenance Break-down maintenanceBreak-down maintenance Special Projects (Reconditioning, Installing new Special Projects (Reconditioning, Installing new

machines, shifting machines etc)machines, shifting machines etc)

Activity Analysis was performed and the Activity Analysis was performed and the following composite man-hour Charging rates following composite man-hour Charging rates were arrived atwere arrived at Preventive maintenance Rs. 65.40Preventive maintenance Rs. 65.40 Break-down maintenance Rs. 42.80Break-down maintenance Rs. 42.80 Special Projects Rs.153.00Special Projects Rs.153.00

Production departments were given the Production departments were given the authority to decide maintenance scheduleauthority to decide maintenance schedule

Performance was evaluated on the basis of Performance was evaluated on the basis of departmental profitabilitydepartmental profitability

Sujoy Auto Industries LimitedSujoy Auto Industries Limited

Couple of months after implementationCouple of months after implementation Call requirement for both preventive and break-Call requirement for both preventive and break-

down maintenance reduced substantiallydown maintenance reduced substantially Profitability of the production departments Profitability of the production departments

enhanced substantiallyenhanced substantially Surplus resources in maintenance department Surplus resources in maintenance department

identifiedidentified Surplus resources are released or redeployedSurplus resources are released or redeployed Effective Net Saving realisedEffective Net Saving realised

Sujoy Auto Industries Limited - Sujoy Auto Industries Limited - ResultsResults

Four months later vehicles fitted with Four months later vehicles fitted with spares procured from Sujoy started spares procured from Sujoy started returning returning Electroplating quality Electroplating quality

OEMs started rejecting spare parts for OEMs started rejecting spare parts for want of precisionwant of precision

Internal rejection down graded OEM parts Internal rejection down graded OEM parts to Secondary Marketsto Secondary Markets


Analysis brought out the following:-Analysis brought out the following:-Very low preventive maintenance at Very low preventive maintenance at

ElectroplatingElectroplatingPrecision corrections were not reset by Precision corrections were not reset by

experts (done by line workmen)experts (done by line workmen)Higher life of pressing dies (Rework was Higher life of pressing dies (Rework was

delayed)delayed)Loss of precisionLoss of precision


Why this has happened?Why this has happened?Negative branches of the shift was not Negative branches of the shift was not

thought offthought offService level agreements were not drawnService level agreements were not drawnPerformance measure was introduced without Performance measure was introduced without

test runtest run


What is the impact of not aligning What is the impact of not aligning the control system to the strategy?the control system to the strategy?

How the people behave in tangent How the people behave in tangent with the strategy and not in tandem?with the strategy and not in tandem?

Why is it important to gear the Why is it important to gear the organisation to a control system?organisation to a control system?

Who stole my steel?Who stole my steel?

1For long time “tons/hour”

has been the primeoperational measurement

in the steel industry

2Most people behavein line with the waythey are measured

3Departments try to

maximise theirperformance as

measured by “tons/hour

3Departments try to


measured by “tons/hour”

4In most departments

some items require lesstime per ton than others

7To maximise their

performance of “tons/hour in a given measurement period,

departments tend to produce the fast items at the expense

of the slow ones

3Departments try to



5Non-productionresults in zero

tons/hour

8To maximise their performance

of “tons/hour”, departmentstend to produce for stock

even when there is no marketrequest for the short or

medium horizon

3Departments try to



6Every additional

setup reduces themeasured

“tons/hour”


of “tons/hour” departmentstend to pull ahead orders thatenable increasing a batch size

7To maximise their

performance of “tons/hour” in a given measurement period,

departments tend to produce the fast items at the expense

of the slow ones8

To maximise their performanceof “tons/hour”, departments

tend to produce for stockeven when there is no market

request for the short ormedium horizon


of “tons/hour” departmentstend to pull ahead orders thatenable increasing a batch size

10Plant produces

items through a processhaving many

divergent points


of “tons/hour” departmentstend to take actions

that result in “stealing”

Goal conflict!Goal conflict!Local Optima Local Optima

leading to overall leading to overall sub-optimisation!!sub-optimisation!!

Impact of Control Measures on Impact of Control Measures on Organisational BehaviourOrganisational Behaviour

Specific challenging goals consistently lead to Specific challenging goals consistently lead to better performance than the general goal of better performance than the general goal of doing one’s best. Specific goals direct action doing one’s best. Specific goals direct action more reliably than vague or general goals. more reliably than vague or general goals.

People behave in the way their performance is People behave in the way their performance is measuredmeasured

Managers’ reactions to control measures were Managers’ reactions to control measures were affected both by their own personality and by affected both by their own personality and by more general and organisational normsmore general and organisational norms

Impact of Control Measures on Impact of Control Measures on Organisational BehaviourOrganisational Behaviour

It is unlikely that one set of budgets can, at the It is unlikely that one set of budgets can, at the same time, meet both planning and motivational same time, meet both planning and motivational requirements.requirements.

Dysfunctional consequences of control Dysfunctional consequences of control measures arise when performance measures measures arise when performance measures motivate managers to engage in behaviour that motivate managers to engage in behaviour that is not organisationally desirable. (Lack of goal is not organisationally desirable. (Lack of goal congruence)congruence)

CYA, NIMBY CYA, NIMBY Pseudo-participationPseudo-participation

If companies do not choose If companies do not choose performance measures performance measures

wisely, they run the risk of wisely, they run the risk of paying managers to do the paying managers to do the

wrong things!wrong things!

Transfer PricingTransfer Pricing

Briefly…Briefly…

Objectives of Transfer Pricing Objectives of Transfer Pricing SystemSystem

To enable divisional manager make sound To enable divisional manager make sound decisions (ensure that the goal congruence is decisions (ensure that the goal congruence is encouraged)encouraged)

To report a divisional profit that is a reasonable To report a divisional profit that is a reasonable measure of the managerial performance of the measure of the managerial performance of the divisiondivision

To ensure that the divisional autonomy is not To ensure that the divisional autonomy is not undermined.undermined.

To provide a mechanism whereby profits of the To provide a mechanism whereby profits of the company as a whole is shared out between company as a whole is shared out between individual profit centresindividual profit centres

Variants of Transfer PricingVariants of Transfer PricingMarket Price based TP Market Price based TP

Full market price or Full market price or Market price discounted by any costs saved Market price discounted by any costs saved

by making internal transfersby making internal transfersFull Cost Plus (Standard or Actual)Full Cost Plus (Standard or Actual)Marginal Cost Plus (Standard or Actual)Marginal Cost Plus (Standard or Actual)

Market Price as TP - benefitsMarket Price as TP - benefitsStimulates competitive characteristics of Stimulates competitive characteristics of

the free marketthe free marketBoth transferor and transferee behave as Both transferor and transferee behave as

if they are dealing in a free marketif they are dealing in a free marketFair price Fair price Profits achieved are more realistic and Profits achieved are more realistic and

comparablecomparable

Market Price as TP - flawsMarket Price as TP - flaws If the market price is temporary – distress If the market price is temporary – distress

sale, adverse economic conditions or sale, adverse economic conditions or dumpingdumping

Disincentive to use spare capacityDisincentive to use spare capacityFinding the equivalent market price is Finding the equivalent market price is

difficult.difficult.

Cost based TP -benefitsCost based TP -benefitsTP can be fixed in advanceTP can be fixed in advanceMotivates the divisional managers to Motivates the divisional managers to

increase output and reduce expenditure increase output and reduce expenditure levelslevels

Fair division of profits among divisionsFair division of profits among divisions

Cost based TP - flawsCost based TP - flawsAgreement between transferor and Agreement between transferor and

transferee may be difficulttransferee may be difficultDepends on cost behaviour and can be Depends on cost behaviour and can be

used only in ranges within which costs are used only in ranges within which costs are linearlinear

Can encourage dysfunctional behaviour Can encourage dysfunctional behaviour No motivation to control costsNo motivation to control costs

Resolving TP conflictsResolving TP conflictsMarginal Cost plus a fixed feeMarginal Cost plus a fixed feeDual TPDual TPNegotiated TPNegotiated TP

Akhurdi Division and Akhurdi Division and Baramati DivisionBaramati Division

Resolving a TP conflictResolving a TP conflict

Divisional Profits and ROCEDivisional Profits and ROCE

Akhurdi Division

Baramati Division

Contribution from outside sales 15,000,000 2,500,000 Contribution from internal transfers 3,750,000 Total contribution 18,750,000 2,500,000 Fixed Costs 5,000,000 2,250,000 Profit 13,750,000 250,000 Capital Employed 66,250,000 12,500,000 ROCE 20.75% 2.00%

Current scenario - Current Current scenario - Current Transfer pricing systemTransfer pricing system

Does the Rs.300 price facilitate correct decisions from Does the Rs.300 price facilitate correct decisions from both the managers?both the managers?

Is there any motivational problems with the current Is there any motivational problems with the current transfer price?transfer price?

From the overall company perspective, is the profit From the overall company perspective, is the profit made by Baramati division “correct”?made by Baramati division “correct”?

Is there a capacity constraint in Akhurdi division?Is there a capacity constraint in Akhurdi division? So what is the relevant cost of the transfers?So what is the relevant cost of the transfers? Will that be fair for Division A?Will that be fair for Division A? Why?Why? So what do you suggest?So what do you suggest?

Cost plus a reasonable FCCost plus a reasonable FC Proportion of capacity utilised for BaramatiProportion of capacity utilised for Baramati

20%20% Reasonable proportion of FC to be borne by Reasonable proportion of FC to be borne by

BaramatiBaramati Rs.1000000Rs.1000000

So the ideal transfer price can beSo the ideal transfer price can be Rs.150 per unit plus Rs.10,00,000 paRs.150 per unit plus Rs.10,00,000 pa

But, what if the demand from But, what if the demand from outside market exceed the outside market exceed the capacity? capacity?

Proposal for new branchProposal for new branch- Company’s perspective- Company’s perspective

Selling Price 500 Less: Direct Material 50

VC of Aye 150 Direct Labour 30 Variable OH 20 Total Variable Cost 250

Contribution 250 Additional Contribution from 5000 1,250,000 Additional FC for the Establishment 500,000 Incremental profit from the proposal 750,000

Will Baramati Division “like” the Will Baramati Division “like” the proposal?proposal?

Selling Price 500 Less: Direct Material 50

TP of Aye 300 Direct Labour 30 Variable OH 20 Total Variable Cost 400

Contribution 100 Additional Contribution from 5000 500,000 Additional FC for the Establishment 500,000 Incremental profit from the proposal -

Revised TP mechanismRevised TP mechanismAkhurdi Division

Baramati Division

Contribution from outside sales 15,000,000 6,250,000 Contribution from internal transfers - - Total contribution 15,000,000 6,250,000 Lump sum payment 1,000,000 -1,000,000 Fixed Costs -5,000,000 -2,250,000 Profit 11,000,000 3,000,000 Capital Employed 66,250,000 12,500,000 ROCE 16.60% 24.00%

If companies do not If companies do not choose performance choose performance

measures wisely, they measures wisely, they run the risk of paying run the risk of paying managers to do the managers to do the

wrong things!wrong things!

Share Capital& Reserves

Long TermLiabilities

FixedAssets

CurrentAssets - Current

liabilities

Liabilities - Financing Side

Assets - Investment Side

Balance Sheet BlocksBalance Sheet Blocks

CE

Profit & Loss Account BlocksProfit & Loss Account BlocksSales (NSR)

Less: Cost of GoodsSold

Less: Dividend

Less: Interest= PBIT

Less:Taxation= PBT

= PAT

= Retained Earnings

Share Capital& Reserves

Long TermLiabilities

FixedAssets

CurrentAssets - Current

liabilities

Liabilities Assets

ROI (ROCE) =

PBIT/CE

ROI (ROCE) =

PBIT/CE

ROI - The most popular and convenient

measure of economic performance

Which division will “attract” more capital?Which division will “attract” more capital?

Division A Division BPresent ROI 25% 9%

What is the “hurdle rate” of investment for the two divisions?

What are the chances of identifying investmentsthat can give > 25% ROI?What are the chances of identifying investmentsthat can give > 9% ROI?

Which division will “Which division will “attractattract” more ” more capital?!capital?!

Which division will “dispose” more profitable Which division will “dispose” more profitable assets?assets?Division A Division B

Present ROI 25% 9%

What is the “hurdle rate” for divestment decision for the two divisions?

Which division will “Which division will “disposedispose” more ” more profitable assets?!profitable assets?!

ROI (ROCE) has ROI (ROCE) has the potential of the potential of

leading the leading the managers to take managers to take

sub-optimal sub-optimal decisions!decisions!

XVI: Geezer LimitedXVI: Geezer LimitedROCE as a performance ROCE as a performance

measurementmeasurement

As MD of Geezer As MD of Geezer which of the which of the

proposals you proposals you would recommend?would recommend?

Current ROCE of GeezerCurrent ROCE of Geezer

Profit 3,300,000 Capital Employed:Fixed Assets 7,800,000 Net Current Assets 3,750,000 Total 11,550,000 ROCE 28.57%

ROCE of Geezer on taking each ROCE of Geezer on taking each proposalproposal

Which will you recommend as MD?

A B C DProfit 3,220,000 3,450,000 3,200,000 3,540,000 Capital Employed:Fixed Assets 7,800,000 7,800,000 7,200,000 9,240,000 Net Current Assets 3,450,000 4,150,000 3,750,000 3,750,000 Total 11,250,000 11,950,000 10,950,000 12,990,000 ROCE 28.62% 28.87% 29.22% 27.25%Recommend Yes Yes Yes No

Current ROCE 28.57%

NPV for each proposalNPV for each proposal

Which will you accept as chief accountant?

Trans-action Year

Cash inflows

Cash outflows

Net Cash flow DCF factor NPV

A 1 300,000 -80,000 220,000 0.86957 191,304 2 to 4 -80,000 -80,000 1.98541 -158,833

Yes 32,471 B 1 150,000 -400,000 -250,000 0.86957 -217,391

2 to 4 150,000 150,000 1.98541 297,812 Yes 80,421

C 350,000 350,000 1.00000 350,000 1 -450,000 -450,000 0.86957 -391,304

No -41,304 D -1,800,000 -1,800,000 1.00000 -1,800,000

1 to 5 600,000 600,000 3.35216 2,011,293 Yes 211,293

Goal conflictGoal conflict

Geezer will recommend A, B and C only;Geezer will recommend A, B and C only; C will be rejected by GAP Limited.C will be rejected by GAP Limited. D will not come to the notice of GAP at all.D will not come to the notice of GAP at all.

A B C DPerformance Appr. Yes Yes Yes NoInvestment Appr. Yes Yes No Yes

Is there a solution?Is there a solution?

EVAEVA…….. Economic Value Added.. Economic Value AddedWhat it is?What it is?How is it superior?How is it superior?How to compute?How to compute?

Economic Value AddedEconomic Value Added

Rs.4. Divisional PBIT 1500Less: Taxes 500Net Operating Profit after Tax (NOPAT) 1000Less: Capital Charges (Invested capital x Cost of Capital) 750EVA 250

EVA… answer to the three EVA… answer to the three questions...questions...

Can be calculated at divisional levels, thus Can be calculated at divisional levels, thus providing line of sight for divisional providing line of sight for divisional managersmanagers

Are flows, not stocks, and thus are Are flows, not stocks, and thus are amenable to performance evaluation over amenable to performance evaluation over periods of timeperiods of time

Promote the creation of share-holder Promote the creation of share-holder wealth.wealth.

EVA… The terms to be EVA… The terms to be defined...defined...

NOPATNOPAT Operating profits net of tax and measures the profits the Operating profits net of tax and measures the profits the

company/division has generated from its ongoing operationscompany/division has generated from its ongoing operations Capital ChargesCapital Charges

Capital invested x Wt. Ave. Cost of CapitalCapital invested x Wt. Ave. Cost of Capital Capital InvestedCapital Invested

Share holders funds + Interest bearing debt (both short term and Share holders funds + Interest bearing debt (both short term and long term)long term)

Fixed Assets + Working CapitalFixed Assets + Working Capital WACCWACC

Cost of Debt (after tax) + Cost of equityCost of Debt (after tax) + Cost of equity

Let’s get back to the two Let’s get back to the two divisions...divisions...

EVA and NPVEVA and NPVInitial Investment: FA 1000

Wcap 1500Total 2500

Year PBDIT1 6002 6503 7004 7505 800

Depreciation SLM 20%WCAP is recovered at the end of the five yearsTax is assumed to be Zero.WACC is 10%

Capital Charge Year 1 Year 2 Year 3 Year 4 Year 5Tangible assets 1000 800 600 400 200WCAP 1500 1500 1500 1500 1500Invested Capital 2500 2300 2100 1900 1700Capital Charge 250 230 210 190 170EVA Year 1 Year 2 Year 3 Year 4 Year 5PBDIT 600 650 700 750 800Less: Depr. 200 200 200 200 200NOPAT 400 450 500 550 600Less: Cap. Ch 250 230 210 190 170EVA 150 220 290 360 430

EVA and NPVEVA and NPV

Cash flows

PV factors

PV of cash flows EVA

PV of EVA

(2,500) 1.0000 (2,500) 600 0.9091 545 150 136 650 0.8264 537 220 182 700 0.7513 526 290 218 750 0.6830 512 360 246

2,300 0.6209 1,428 430 267 1,049 1,049

Case XVII: Computing EVACase XVII: Computing EVA

Computing NOPATPBIT 2,500 Less: Tax (600) Less: Tax advantage of Interest [(Taxrate) x Int] (245) NOPAT 1,655

Computing NOPATPAT 1,200 Add: Tax advantage of Interest [(Int x (1-taxrate)] 455 NOPAT 1,655

Case XVII: Computing EVACase XVII: Computing EVAComputing Invested Capital (Operating Approach)Working Capital 3,800 Investment 3,500 Fixed Assets 9,200 Total 16,500 Opening Invested Capital 13,500 Average Invested Capital 15,000

Computing Invested Capital (Financing Approach)Short-term Debt 1,500 Long-term Debt 8,400 Share-holders Equity 6,600 Total 16,500 Opening Invested Capital 13,500 Average Invested Capital 15,000

Case XVII: Computing EVACase XVII: Computing EVA

Computing EVANOPAT 1,655 Less: Capital Charges (12% of Average Capital) 1,800 EVA (145)

Calculating Economic Value AddedOperating Income+ Interest Income+ Equity Income+ Other Investment Income - Income Taxes - Tax shield on interest expense=Net Operating Profit after Tax (NOPAT)

Short Term Debt+ Long term debt + Other Long term liabilities+ Share holders' equity= Invested Capital (IC)

Average IC = (IC Opening + IC Closing)/2

NOPAT- Capital Charges (Average IC x Cost of Capital)= EVA

Relationship between planning Relationship between planning and control functionsand control functions

Strategy Formulation

Activity Nature of end product

Goals, strategies and policies

Management Control

Implementation of Strategies

Task Control

Efficient and Effective performance of individualtasks

EVA:EVA: Bridging the Gap between Valuation and Performance Bridging the Gap between Valuation and Performance MeasurementMeasurement

Balanced Score Card Balanced Score Card (1992)(1992)

Marrying non-financial and Marrying non-financial and financial measures of financial measures of

performanceperformance

Why Balanced Scorecard?Why Balanced Scorecard?

Financial measures alone do not tell the Financial measures alone do not tell the whole storywhole storyNot consistent with business realitiesNot consistent with business realitiesDriving by rearview mirrorDriving by rearview mirrorTend to reinforce functional silosTend to reinforce functional silosMay sacrifice long term thinkingMay sacrifice long term thinkingNot relevant at many levels of the Not relevant at many levels of the

organizationorganization

Why Balanced Scorecard?Why Balanced Scorecard? Increasing importance of Intangible AssetsIncreasing importance of Intangible Assets

Developing Customer RelationshipDeveloping Customer RelationshipCustomer LoyaltyCustomer LoyaltyProduce customized high quality products in Produce customized high quality products in

short lead times and at low costshort lead times and at low costEmployee Skills, Organizational LearningEmployee Skills, Organizational Learning Information TechnologyInformation Technology

Why Balanced Scorecard?Why Balanced Scorecard? Changing ScenarioChanging Scenario

Cross Functional TeamsCross Functional Teams Extended familyExtended family

CustomersCustomers SuppliersSuppliers

Mass CustomizationMass Customization Global ScaleGlobal Scale InnovationInnovation

Shrinking Product Life CyclesShrinking Product Life Cycles Knowledge WorkersKnowledge Workers

The Four Pillars of Balanced The Four Pillars of Balanced ScorecardScorecard

Financial PerspectiveFinancial PerspectiveCustomer PerspectiveCustomer Perspective Internal Business PerspectiveInternal Business PerspectiveLearning and GrowthLearning and Growth

Translating Vision and Strategy Translating Vision and Strategy – Four Perspectives– Four Perspectives

Vision &

Strategy

Financial:To succeed financially how should we appear

to our shareholders?

Internal Business ProcessTo satisfy our Shareholders& customers what businessProcesses must we excel in?

Learning & GrowthTo achieve our vision,

how will we sustain ourability to change & improve?

CustomerTo achieve our vision,

how should we appear to our customers?

Vision &

Strategy

Financial

Internal Business Process

Customer

Learning & Growth

No BSC is complete No BSC is complete without financial without financial measuresmeasures

Represent the Represent the destination or the end destination or the end of your strategyof your strategy

Lag measures of Lag measures of performanceperformance

Common measuresCommon measures Return on EquityReturn on Equity Gross SalesGross Sales Revenue by Revenue by

SegmentSegment

Vision &

Strategy

Financial


Customer

Learning & Growth

Should answer two Should answer two questionsquestions Who are our Who are our

customers?customers? What is our value What is our value

proposition in serving proposition in serving them?them?

Operational Operational excellenceexcellence

Product LeadershipProduct Leadership Customer IntimacyCustomer Intimacy Common MeasuresCommon Measures

Customer loyaltyCustomer loyalty Market ShareMarket Share Customer retentionCustomer retention

Vision &

Strategy

Financial


Customer

Learning & Growth

Key processes we Key processes we must excel at to drive must excel at to drive value for customersvalue for customers ManageManage

OperationsOperationsCustomersCustomersInnovationInnovationRegulatory & Regulatory &

Social ProcessesSocial Processes Common measuresCommon measures

On time deliveryOn time delivery Product development Product development

life cyclelife cycle Patents pendingPatents pending

Vision &

Strategy

Financial


Customer

Learning & Growth

Often overlookedOften overlooked Represents the enablers of Represents the enablers of

the other three the other three perspectivesperspectives Human CapitalHuman Capital Information CapitalInformation Capital Organization CapitalOrganization Capital

Soft measures which can Soft measures which can drive hard resultsdrive hard results

Common MeasuresCommon Measures Employee satisfactionEmployee satisfaction Strategic Job Coverage Strategic Job Coverage

RatioRatio Internal Communication Internal Communication

RatingRating

Cause & Effect is Key to the BSC

E. L. & G. - Skills, Tools, CultureE. L. & G. - Skills, Tools, Culture

FinancialFinancial

Develop Innovative Products

Drive Customer Loyalty

Increase Profitability

And Realize the Vision

Increase Employee Productivity...

Internal Internal ProcessesProcesses

Customer

The Balanced Scorecard-The Balanced Scorecard-The Complete PictureThe Complete Picture

Long term Shareholder

Value

Productivity Strategy Growth Strategy

Improve CostStructure

Increase AssetUtilisation

Expand RevenueOpportunities

Enhance CustomerValue

FinancialPerspective

Price Quality Availability Selection Functionality Service Partnership Brand

Customer Value Proposition

CustomerPerspective

Regulatory & SocialProcesses

•Environment•Safety and Health•Employment•Community

InnovationProcesses

•Opportunity ID•R&D Portfolio•Design/Develop•Launch

Customer Management Processes

•Selection•Acquisition•Retention•Growth

Operations Management Processes

•Supply•Production•Distribution•Risk Management

Product/Service Attributes Relationship Image

Human Capital

Information Capital

Organisation CapitalCulture Leadership Alignment Teamwork

Learning and Growth Perspective

Internal Perspective

Cause-Effect RelationshipsCause-Effect Relationships

Learning &Growth

Employee Skills


Process Quality/Process Cycle Time

On-Time Delivery

Customer

Financial

ROCE/EVA

Customer Loyalty

financial information for management, planning and control

Documents