Balanced score card
- 2. Definition The 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.
- 3. The Balanced Scorecard What is it? Balances financial and non-financial measures Balances short and long-term measures Balances performance drivers with outcome measures Should contain just enough data to give a complete picture of organizational performance Leads to strategic focus and organizational alignment.
- 4. • Four key Business Perspectives • Internal & Business process of Organization • Short Run & Long Run
- 5. Why do it? • To achieve strategic objectives. • To provide quality with fewer resources. • To eliminate non-value added efforts. • To align customer priorities and expectations with the customer. • To track progress. • To evaluate process changes. • To continually improve. • To increase accountability.
- 6. The Strategy Focused Organization Mission – What we do Vision – What we aspire to be Strategies – How we accomplish our goals Measures – Indicators of our progress
- 7. The Strategy Focused Organization The Five Principles 1. Translate the strategy to operational terms. 2. Align the organization to the strategy. 3. Make strategy everyone’s job. 4. Make strategy a continual process. 5. Mobilize change through executive leadership
- 8. Deming’s 14 Points 1. Constancy of Purpose 2. Adopt the new philosophy 3. Cease dependence on mass inspection 4. Cease doing business on price tag alone 5. Continual improvement of process 6. Institute training on the job 7. Institute leadership 8. Drive out fear 9. Break down barriers between departments 10. Eliminate slogans, exhortations, and targets 11. Eliminate numerical quotas 12. Allow pride in workmanship 13. Institute a program of self- improvement 14. Do it
- 9. Advantages Of BSC • It is used to align the business activities to vision and strategy • It improves Internal & External communications • It is used to monitor organizations performance • It provides management with comprehensive picture of operations • It provides strategic feed back • It improves decisions & better solutions
- 10. Disadvantages of bsc • It Doesn’t provide Recommendations • It is not fully Efficient • It takes time • It is High Implementation of cost • It can show low profit
- 11. Why are companies Adopting BSC? • Change • Growth • Implementation
- 12. Vision & Strategy Financial Perspective Learning & Growth Perspective Customer Perspective Internal Process Perspective
- 13. Four key Business Perspectives Financial What must we do to create sustainable economic value? Internal Business Process To satisfy our stakeholders, what must be our levels of productivity, efficiency, and quality? Learning and Growth How does our employee performance management system, including feedback to employees, support high performance? Customer What do our customers require from us and how are we doing according to those requirements?
- 15. Key Implementation Success Factors Obtaining executive sponsorship and commitment Involving a broad base of leaders, managers and employees in scorecard development Choose the right Scorecard Champion Beginning interactive (two-way) communication first Viewing the scorecard as a long-term journey rather than a short- term project Getting outside help if needed
- 16. How Do They Do It? The Seven Ingredients of Highly Successful Balanced Scorecard Programs 1. A Process to Mobilize the Organization and Lead Ongoing Change 2. Scorecards That Describe the Strategy 3. Linking Scorecard to Create an Organization Alignment 4. Continuous Communication to Empower the Workforce 5. Aligning Personal Goals, Incentives, and Competencies With the Strategy 6. Aligning Resources, Budgets and Initiatives With the Strategy 7. A Feedback Process That Encourages Learning and Experience Sharing
- 17. The Ingredients of Highly Successful Balanced Scorecard Programs STRATEGY Formulate NavigateCommunicate Execute 1.Leadership From the Top 2.Make Strategy Everyone’s Job 3. Unlock and Focus Hidden Assets 4. Make Strategy a Continuous Process
- 18. Not all Environments are Appropriate for a Balanced Scorecard Balanced Scorecard must be driven from the top A clear sense of purpose is required to The dynamics of the senior executive team will determine whether the Balanced Scorecard becomes a strategic management system
- 19. THE BALANCED SCORECARD MANAGEMENT SYSTEM Implement a framework to align and focus the organization from top to bottom on its strategy Identify the related key change initiatives required to realize the strategy and mobilize the organization Create feedback processes at all levels to evaluate progress against strategy, monitor and manage issues and priorities, and measure performance and contribution to the business.
- 20. Key Pitfalls to Avoid Middle management task force Not driven by senior executive team Only one or a few individuals involved Too long a development process Delay introduction because of missing measurements Static not dynamic process Treating the BSC as an EIS Measurement to control; not to communicate Management dictating actions vs. employee improvisation to achieve desired outcomes For management only, not shared with all employees Process Philosophy