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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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