Building BSC

8/8/2019 Building BSC

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Building

the

Balanced Scorecard



I ntroduction

Balanced Scorecards provide a framework for communicating

strategy in operating terms (measurements and targets).

You must communicate strategy in operating terms if you expect

people to execute on your strategy.

When people are asked about strategy, they reach for their balanced

scorecard.



Why do we need Balanced Scorecard«???

I mproves how you communicate strategy

Superimposes a discipline whereby you capture cause-

effect; otherwise you create pockets of under-performance.

Forces to think about strategic measurement as opposed to

tactical or operating type measurements



HO W T O BEG IN «.!!

Begin with strategic plan ² what things are critical to future success?

Focus on customers ² what values will we add to our customers

Define the processes ² how will we deliver these

services to our customers

Build the organization ² what capabilities must we put in place



Strategic Goals

The first components of any strategy are goals.

Strategic goals establish direction in concrete terms.

Strategic goals anchor the rest of the process.

Strategic goals should fit with the vision and mission of the organization.



A ttributes of a Goal

Should be a very short statement

Directly relates to the mission

Broad in scope

Covers long time period (such as 3 years)

Examples:- I mprove Customer Service

- Leverage Core Competencies

- Develop more innovative products



Strategic O bjectives

O nce first anchor (goals) are established, develop a set of strategic objectives.

Strategic objectives define what actions must be taken to reach the strategic goals.

O bjectives are critical to future success. For example, in order to grow revenues, we must introduce new products and expand our market share.



O bjective A ttributes

Longer statement than goal statement

More specific than goal statement

Relationship to mission

Covers shorter time period than goal (such as 6 months or 1 year)

Example:

- We will expand call center services to include technical support



Strategic Themes

o Based on strategic goals, three to five strategic themes should emerge.

o From these themes, develop a strategic map.

o Four common strategic themes are: O perating Efficiencies, Customer Relations, Product I nnovation, and Growing the Business.



Strategic Model

Strategic Models can emerge from four principles:

1. Translate strategies into operating terms.

2. Link strategies throughout the entire organization.

3. Commit everyone to implementing strategy.

4. Make strategizing a continuous process of learning and adjusting to change.



4 Perspectives of BSC

Financial: Top layer in the map, represents financial outcomes (profits, revenues, etc.)

Customer:N ext layer down, enables financial results (service,

image, price, quality, etc.)

I nternal Processes: The values added to customers, such as

delivery, production, distribution, etc.

Learning & Growth: The people, systems, and organization that

enable processes.



Strategic Mapping

Strategic Maps are the foundation of the Balanced Scorecard.

You will need one strategic map for each strategic theme.

Maps are constructed over four perspectives.

Strategic objectives are mapped over the four perspectives, linked together.



Linking BSC to Business Strategy

Strategic objectives should be placed in the Strategic

Map according to which perspective fits with the

objective.

O bjectives may cross over more than one perspective.

Start at the top with outcomes and work our way down,

looking at what drives the outcome.



A pproval of Maps

A fter strategic maps are done, get approval from

executive management. A sk questions likes«.´Does this

map accurately tell the story of our strategy?µ

I f management disagrees with the map, go back and

redo the maps.



Measurements

For each strategic objective, you need one measurement.

Measurement provides us with feedback on meeting the

strategic objective.



Measurement Criteria

Measurements should drive change, providing teeth to our

strategy.

Measurements define objectives in specific terms. A good

measurement should tell you what your objective is.

Measurements should be SM A RT..!!



Examples of Good Measurements

Customer satisfaction:

- Response Time to service customer

- Customer Satisfaction Survey Scores

Process Efficiency:

- Cycle time - Downtime (time / ratio)

- N o. of Restarts



Targets Setting

O nce measurements are established, you need to set a target for each measurement.

Targets push the organization to a required level of performance.

Targets put focus on the strategy, expressing the specifics

of the strategy.

When an organization hits its targets, then it has successfully implemented its strategy .



Examples of Targets

Total Time to Recruit N ew Employees: Less than ´xµ

days by 2005

Utilization of rental facilities: I ncrease to 90% during peak summer months

Growth in top line revenues: 12% increase than 2004

I mprove overall customer satisfaction: Total scores on

satisfaction exceed 85%



I nitiatives Takers

I n order for things to happen in an organization,

you must initiate major projects or programs.

O nce you launch appropriate initiatives, you

should be able to meet your strategic objectives.This closes the loopholes and everything is linked.



I nitiative A ttributes

Sponsored by Top Management

Designated project(s) owners

I ncludes deliverables or milestones

H as some deadlines



Templates

Throughout this

process, use templates

to capture, analyze

and document data.

Templates are used for

strategic mapping,

defining

measurements, etc.

Strategic Map for Strategic Theme #1:

Internal

Learning

Financial

Customer



Pointers to keep in mind«.!!

Scorecards are built around three teams : Leadership Team

(upper level management), Core Team (middle level

management) and Measurement Team (lower level functional personnel).

Scorecards are built around frequent group meetings : Kick

O ff Meeting followed by one meeting for each of the three

teams.



I mplementation

The minimum time for developing a balanced scorecard is

3 months.

Full deployment of scorecards throughout the entire

organization can take one year or even more than that.

The best place to start building a scorecard is where all components of the value chain are in place: Customer,

I nnovation, Production, Delivery, Services, etc.



Summary

Balanced Scorecards are the best way of putting organization in its place.

Scorecards rely on a fully integrated approach: Goals,O bjectives, Mapping, Measurements, Targets, and

I nitiatives.

The building of a balanced scorecard can be experimental,

whereby you test your strategies, refine, and make changes

as you get feedback and learn what works.



T H A N K Y O U

Building BSC

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