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THE TIME SAVING BENEFITS OF USING BALANCED SCORE CARD AT THE WORKPLACE
- 1. Mr. Abraham M.Ncunge BALANCEDSCORECARD
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- 3. Performance management component Threecritical components for effective process of performance management Performance management infrastructure Performance management culture Performance management processes Logistic support and performance management administration Culture that is based on performance accountability Performance management cycle is continuous and consistent
- 4. Performance Management Cycle Strategy Setmeasures and target Plan and Execute Reward and Coach Monitor and Evaluate
- 5. What is aBalanced Scorecard A Measurement System? A Management System? A Management Philosophy?
- 6. Definition • The balancedscorecard is a management system (not only a measurement system) • It enables organizations to clarify their vision and strategy and translate them into action • It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results • Fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise
- 7. Managing Performance withBalanced Scorecard 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 – Balances financial and non-financial measures – Balances short and long-term measures – Balances performance drivers (leading indicators) with outcome measures (lagging indicators) – Leads to strategic focus and organizational alignment.
- 8. Four Perspective ofthe balanced score card Vision and Strategy Objectives Measures Targets Initiatives FINANCIAL “To succeed financially, how should we appear to our shareholders?” Objectives Measures Targets Initiatives LEARNING AND GROWTH “To achieve our vision, how will we sustain our ability to change and improve?” Objecti ves Measur es Targets Initiatives CUSTOMER “To achieve our vision, how should we appear to our customers?” Objecti ves Measur es Targets Initiatives INTERNAL BUSINESS PROCESS “To satisfy our shareholders and customers, what business processes must we excel at?”
- 9. The Balanced Scorecardfocuses on Factors that Create Long Term Value Traditional financial reports look backward – Reflect only the past: spending incurred and revenues earned – Do not measure creation or destruction of future economic value The Balanced Scorecard identifies the factors that create long-term economic value in an organization, for example: – Customer Focus: satisfy, retain and acquire customers in targeted segments – Business Processes: deliver the value proposition to targeted customers innovative products and services high-quality, flexible, and responsive operating processes excellent post-sales support – Organizational Learning & Growth: develop skilled, motivated employees; provide access to strategic information align individuals and teams to business unit objectives Processes Customers People
- 10. Four perspective Applyto mission Driven as well as profit driven organization Profit Driven Mission Driven • What must we do to satisfy our shareholders? • What do our customers expect from us? • What internal processes must we excel at to satisfy our shareholder and customer? • How must our people learn and develop skills to respond to these and future challenges? • What must we do to satisfy our financial contributors? • What are our fiscal obligations? • Who is our customer? • What do our customers expect from us? • What internal processes must we excel at to satisfy our fiscal obligations, our customers and the requirements of our mission? • How must our people learn and develop skills to respond to these and future challenges? Financial Perspective Customer Perspective Internal Perspective Learning & Growth Perspective Answering these questions is the first step to develop a Balanced Scorecard
- 11. The Balanced ScorecardFramework Is Readily Adapted to Non-Profit and Government Organizations The Mission, rather than the financial / shareholder objectives, drives the organization’s strategy "If we succeed, how will we look to our financial donors?” “To achieve our vision, how must our people learn, communicate, and work together?” The Mission “To satisfy our customers, financial donors and mission, what business processes must we excel at?" ”To achieve our vision, how must we look to our customers?”
- 12. Strategy and BalancedScorecard Mission –Why We Exist Vision –What We want to be Values –What’s Important to Us Strategy :Our Game Plan Strategy Map :Translate the Strategy Balanced Scorecard :Measure and Focus Strategic outcomes satisfied Shareholde rs Delighted Customers Excellent Processes Motivated Workforce
- 13. Strategy Map Framework This framework describes the types of strategic target that should be presented in each perspective, namely the financial perspective, customers, internal business process, and learning & growth perspective.
- 14. Strategy Map Framework Financial Customers Internalprocess Learning & Growth Long-term Shareholder Value Cost Efficiency Revenue Growth quality service availability brand price Operations Management Processes customer Mana gement processes Innovation Processes Regulatory and Social Processes Human capital Organizational capital Information capital
- 15. Financial Perspective inprivate companies, the financial perspective is the main objective (ultimate goal) – without having to sacrifice the interests of other relevant stakeholders (community, environment, government, etc.) In the financial perspective, the strategic goal is the long-term shareholder value This goal is driven by two factors, namely : revenue growth and cost efficiency
- 16. Strategic Objectives inFinancial Long-term Shareholder Value cost Efficiency Improve Cost Structure Increase Asset Utilization Revenue Growth Expand Revenue Opportunities Enhance Customer Value
- 17. Customer Perspective Thisperspective is very instrumental, because without customers, how can a company survive? Customer perspective covers the following elements: – Customer acquisition – Customer retention – customer profitability – Market share – Customer satisfaction
- 18. Strategic Objectives inCustomer Customer Retention Customer Profitability Customer Satisfaction Market share customer Acquisition Price Quality Service Availability brand
- 19. Internal Process Perspective This perspective reflects on the processes in key business that should be optimized in order to meet the needs of the customers There are four main themes in this perspective, namely: – Operations Management Process – Customer Management Process – Innovation Process – Regulatory and Social Process
- 20. Strategic Objectives inInternal Process Operations Management Processes Innovation Processes Customer Manage ment Processes Regulatory and Social Processes Processes that produce and deliver products and services Supply Production Distribution Processes that enhance customer value Selection Acquisition Retention Growth Processes that create new products and services Environment Safety &Health Employment Community Selection Acquisition Retention Growth Processes that improve communities and the environment
- 21. Learning & GrowthPerspective This perspective reflects the capability that a company should have, namely: – Human Capital – Organization Capital – Information Capital This perspective shows us that good human resource development system, organizational system and information system forms a solid foundation for improving company performance
- 22. Strategic Objectives inLearning & Growth Human capital Organizational capital Information capital •Systems •Database •Net works •Culture •Leadership •Organization Development Attitude Skills knowledge
- 23. Strategy Map Template The following slide displays the strategy map template comprising of four perspectives : financial, customer, internal business process, and learning & growth
- 24. Strategy Map Template Financial Customer Internal process Learningand growth Long-term Shareholder Value Cost Efficiency Revenue Growth quality service availability brand Operations Management Processes price Customer Ma nagement Processes innovation Processes Regulatory and Social Processes Information capital Organizatio nal capital Human capital
- 25. Identifying Key PerformanceIndicators (KPI) Strategic Objectives Vision Mission and Values Strategy KPI = Measurement or indicator that provides information on how far we have succeeded in achieving the strategic objectives Key Performance Indicators • Financial • Customer • Internal business process • HR development
- 26. 1. Leadership Fromthe Top – Create the Climate for Change – Create a Common Focus for Change Activities – Rationalize and Align the Organization 3. Unlock and Focus Hidden Assets – Reengineer Work Processes – Create Knowledge Sharing Networks 2. Make Strategy Everyone’s Job – Comprehensive Communication to Create Awareness – Align Goals and Incentives – Integrate Budgeting with Strategic Planning – Align Resources and Initiatives 4. Make Strategy a Continuous Process – Strategic Feedback That Encourages Learning – Executive Teams Manage Strategic Themes – Testing Hypotheses, Adapting, and Learning The Ingredients of Highly Successful Balanced Scorecard Programs STRATEGY Formulate Navigate Communicate Execute
- 27. Key Pitfalls toAvoid 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
- 28. The BSC ManagementSystem STRATEGY ALIGNMENT LEVERAGE PERFORMANCE PERFORMANCE KNOWLEDGE BASE INSIGHTS LEARNING
- 29. KPI Guidelines Themeasure of success must show clear, specific and measurable performance indicators. The measure of success should be declared explicitly and in detail so that it is clear what is being measured. Costs to identify and monitor the measure of success should not exceed the value that will be known from the measurement.
- 30. KPI Guidelines Relevant toDoes KPI have a linkage The Strategic Objective with the strategic objectives Controllable Are the KPI achievements still under control Actionable Can any action be taken to improve the performance Simple Is the KPI easy to explain Credible Is the KPI not easy to manipulate
- 31. KPI Family Dimension Measuresemployee output (units/transactions/ dollars), the uptime levels and how employees use their time (sales-to-assets ratio, dollar revenue from new customers, sales pipeline) Measures the ability to meet and/or exceed the requirements and expectations of the customer (customer complaints, percent returns, DPMO -- defects per million opportunities) Quality productivity
- 32. KPI Family Dimension Measuresthe overall effectiveness of the management organization in generating profits (profit contribution by segment/customer, margin spreads). Measures the point in time (day/week/month) when management and employee tasks are completed (on-time delivery, percent of late orders) Profitability Timeliness
- 33. KPI Family Dimension Measureshow effectively the management organization incorporates quality control, Six Sigma and best practices to stream line operational processes (yield percentage, process uptime, capacity utilization). Measures how effectively the management organization leverages existing business resources such as assets, bricks and mortar, investments (sales per total assets, sales per channel, win rate) Process Efficiency Resource Utilization
- 34. KPI Family Dimension measureshow successfully the management organization achieves economies of scale and scope of work with its people, staff and practices to control operational and overhead costs (cost per unit, inventory turns, cost of goods) measures the ability of the management organization to maintain competitive economic position in the growth of the economy and industry (market share, customer acquisition/retention, account penetration) Cost Savings Growth
- 35. KPI Category Dimension Theactual raw data value as measured (e.g.,sales volume) The comparison of the changes in performance of one value relative to the same value at a different time, geography, etc. (e.g., percentage change in sales direct percentage
- 36. KPI Category Dimension Thecomparison of one value relative to another to provide a benchmark for comparison of performance (e.g., average sales per day) A combination of several separate Measures added together that result in an overall indicator of performance (e.g., (company sales growth)/(industry sales growth) for a specific geography) Simple ratio index
- 37. KPI Category Dimension Theaddition of the weighted averages of several similar measures that result in an overall composite indicator of performance (e.g., customer satisfaction composite is mixture of results from surveys, focus groups and product returns) Multiple measures such as mean, variance, standard deviation that capture the spread and distribution of the performance measures (e.g., sales distribution by demographics, geography, channel) Composite Average Statistics
- 38. Conclusion The BalancedScorecard is a management system used to focus and prioritize management energy toward achieving both short and long term organizational goals and with the ability to give early warning signals for midcourse correction
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