Basics of BSC

8/6/2019 Basics of BSC

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BALANCED SCORECARD

Do we need to be clear about?

GoalObjectiveMission

Vision


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A goal or objective consist of a projected state of affairs which

a person or a system plans or intends to achieve or bring aboutA personal or organizational desired endpoint in some sort ofassumed development.


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Goal2009

Objective2014

Mission2029

7000 Cr 15,000 Cr 55,000 Cr


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4Perspectives

Financial

PerspectiveCustomer

Perspective

Internal

BusinessProcess

Perspective

Learning &Growth

Perspective


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Develop

Strategic Goals

Mission Vision

Clarify mission &Vision statement

Strategic Goals

DeriveSub-Goals

Sub-Goals

Map Sub-Goals to

each quadrant of theBalanced Score Card

- identify measurement areas- develop measurement goals- postulate indicators- identify data elements

For each BSC Quadrant

Data Elements

Module

TroubleReports

Indicators

BalancedScorecard

Internal Business

Sub-Goals

Learning & Growth

Sub-Goals

Customer Sub-Goals

Financial

Sub-Goals

Internal Business

Sub-Goals

Learning & Growth

Sub-Goals

Customer Sub-Goals

Financial

Sub-Goals

MethodologyOverview


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A Balanced Scorecard Perspectiveon Performance

Objective

Measures

Targets

InitiativesCUSTOMER

How do our

customers

see us?

Objective

Measures

Targets

Initiatives

LEARNING and

GROWTH

Can we

continue to

improve and

create value?

Objective

Measures

Targets

InitiativesFINANCIAL

How do we

look to

shareholders?

Objective

Measures

Targets

Initiatives

INTERNAL BUSINESSPROCESS

What must

we excel at?

Vision

and

Strategy

Objective

Measures

Targets

InitiativesCUSTOMER

How do our

customers

see us?

Objective

Measures

Targets

Initiatives

LEARNING and

GROWTH

Can we

continue to

improve and

create value?

Objective

Measures

Targets

InitiativesFINANCIAL

How do we

look to

shareholders?

Objective

Measures

Targets

Initiatives

INTERNAL BUSINESSPROCESS

What must

we excel at?

Vision

and

Strategy

Vision

and

Strategy


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4Perspectives

Financial

Perspective

Financial Perspective Evaluatethe Profitability of the Strategy


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4Perspectives

Customer

Perspective

Customer Perspective identifies TargetedCustomer and market Segments andMeasuresthe Organizations success in these Segments


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4PerspectivesInternal

BusinessProcess

Perspective

This perspective focuses on internaloperationsthat create value for customers that ,in turn,

furthers the financial perspective byincreasingthe shareholder value


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4

Perspectives

Internal

BusinessProcess

Perspective

3 subProcess

es

Innovation Process

Creating ProductsServices &ProcessesTo meet the demandOf Customers

Operations Process

Producing &deliveringExisting products that

Will meet the needsOf Customers

Postsales-ServiceProcessProviding service andSupport to the customerAfter the sale of aproduct or service


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4Perspectives

Learning &GrowthPerspective

This perspective identifies the capabilities theorganization must excel at to achieve superior

internal processes that create value forCustomers and shareholders


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Target Actual

Objective Measures Initiatives Perform Perform

FinancialPerspective

IncreaseShareholdervalue

Operating incomeFrom ProductivityGain

Operating IncomeFrom Growth

Revenue Growth

Manage CostAnd UnusedCapacity

Build StrongCustomerRelationship

Rs 20 Cr Rs 20.12Cr

Rs 30 Cr Rs 34.20 Cr

6% 6.48%

FINANCIAL PERSPECTIVE


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Target Actual

Objective Measures Initiatives Perform Perform

CustomerPerspective

IncreaseCustomerSatisfaction

Market Share inCommunicationNetwork Segment

Number of NewCustomers

CustomerSatisfactionRating

Identify futureNeeds ofCustomers

Identify newTargetCustomer Seg

Increase Cust

Focus of Sales

6% 7%

1% 2%

90% give 87%GaveTop two top twoRatings Rating

Customer Perspective


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Target ActualObjective Measures Initiatives Perform Perform

ReduceDelivery Time

Meet SpecifiedDelivery dates on time delivery

Improve postSales Services

ImproveProcesses

ImproveManufacturingCapability

Reduce Setup timeAutomation of Orders

Re-engineer orderDelivery process

Re-engineer order 92% 90%

Delivery process

Improve CustomerService process

30 days 30 days

Service ResponseTime

Number of Impv.In BusinessProcesses

% of processesWith Advanced

Controls

Within4 hrs

Within3 hrs

Organize teamsfrom Sales & Manuf

Organize R&D/MfgTeams to implementAdv. control

5 5

75% 75%

INTERNAL BUSINESS PROCESS PERSPECTIVE


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Target ActualObjective Measures Initiatives Perform Perform

Align EmployeeAndOrganizationalGoals

DevelopProcessSkill

EmpowerWorkForce

Learning and Growth Perspective

Employee Satisfac-tion Rating

% EmployeesTrained in Process& Quality Mgt

% WorkersEmpowered toManageProcesses

EmployeeParticipation toBuild Team Work

EmployeesTrainingProgramme

Supervisors asCoaches ratherDecisionMakers

80% 88%EmployeesGive topTwoRatings

90% 92%

80% 80%


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Features of Balance Score Card

vIndicate companys strategy and its link with perspectivesv

vStrategy is communicated to allv

vStrategy translated into measurable targetsv

vMotivates Managers to achieve targetsv

vBSC limits the measures to only fourv

vHighlights effect of one perspective on another

SCO C


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Pitfalls in Implementing Balanced Score Card

vDifficult to establish Fin-Non financial Linkages

vvImprovements at all levels may not be possiblev

vBoth subjective-objective measures Considerationv

vConsidering Cost & benefits of initiativesv

vNon-financial Achievements are ignoredv

v

SCORECARD


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Vision & Strategies not actionable

Strategies not linked to departmental andIndividual Goals

Strategies not linked to Long term/short term

Resource Allocation

Feedback that is tactical not strategic

Barriers to effective Implementation of BSC

SCORECARD


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Cant be translated into actionCant be acted Upon

Cant be understoodFragmentation & Sub optimizationof effortsLacking consensus & ClarityDifferent AgendasNo integration

Not linked coherently to overall strategy

Barrier No 1: Vision and strategy not Actionable

SCORECARD


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Separate Processes for Long term &Short term Strategic planningFunding to unrelated prioritiesPoor Monthly ReviewsUnfocused New Mgt TechniquesPoor Integration

Barrier No 3: Strategy not Linked to Resource Allocation

SCORECARD


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Bulk of feedback is only financial measuresLittle time on strategy implementation & successNo priority to periodic review and meetingsInadequate informationPoor tactical review process

Barrier No 4: Feed back not tactically strategic

SCORECARD


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BALANCED SCORECARDDifferent Management System for Strategic Implementation

Clarifying &Translating

The Strategy & Vision

Planning &Target Setting

CommunicatingAnd Linking

Strategic Feedback&Learning

BalanceScorecard

Goal alignments fromtop to bottom

Education and opencommunication about strategy

Compensation is linkedTo Strategy

Stretch targets are established and acceptedStrategic initiatives are clearly identifiedInvestments are determined by strategyAnnual Budgets are linked to long term planning

The strategy is the reference point for the entire management processThe shared vision is the foundation for strategic planning

Feedback system used to testThe hypothesis on which strategyIs based

Team problem solvingStrategy development is aContinuous Process

BA ANCED SCORECARD


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BALANCED SCORECARD4

Perspectives

Financial

Perspective

Customer

PerspectiveInternal

BusinessProcess

Perspective

Learning &Growth

Perspective

BALANCED SCORECARD


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BALANCED SCORECARDTranslating the strategy to operational terms

If we succeed, how willWe look to ourShareholders?

The Strategy

Financial Perspective

To satisfy our customers,Which processes must

We excel ?

Internal Perspective

To achieve our vision,How must we look to our

Customers ?

Customers Perspective

To achieve our vision, how must

our organisation teamImproves?

Organizational Learning

Measurement is the

language that gives clarityTo vague concepts

Measurement is used tocommunicate,Not to control

Strategy can be described as a series ofCause and Effect relationship

BALANCED SCORECARD


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BALANCED SCORECARDMake Strategy a continuous Process

Strategy

BalancedScorecard

Budget

PerformanceInput Output

Strategic LearningLoop

Management ControlLoop

85% of Mgtteams

Spends less

than1 hr per monthOn strategy

issues

60% OF OrgDont linkStrategy &

budgets

78% orgs lockBudgets to anAnnual cycle

92% of orgsDo not report

On lead

indicators

BALANCED SCORECARD


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Knowledge, Skills, Systems, and ToolsKnowledge, Skills, Systems, and Tools

Financial ResultsFinancial Results

To Build the Strategic Capabilities..

Needed to Deliver UniqueSets of Benefits to Customers...

To Drive FinancialSuccess...

And Realizethe Vision

Equip our People...

InternalInternalCapabilitieCapabilitiess

Customer Benefits

We Use the Scorecard to Articulate Strategic-Hypotheses in Cause effect Terms

Basics of BSC

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