balanced scorecard
DESCRIPTION
BSC Balanced Scorecard Introduction | Strategonomic | Strategy ExecutionTRANSCRIPT
Balanced ScorecardBalanced ScorecardAchieving Vision by Translating Strategy into Achieving Vision by Translating Strategy into
ACTIONS!ACTIONS!
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Non Financial Factors Influencing Shareholders Valuation
1. Strategy Execution2. Management Credibility3. Quality of Strategy4. Innovation (New Product)5. Attract Talented People
Source : “Measures That Matter”
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Less than 10% of strategis effectively
formulated are effectively executed
Less than 10% of strategis effectively
formulated are effectively executed
In the majority of failures – we estimate 70% - the real problem isn’t bad strategy, it is
bad execution
In the majority of failures – we estimate 70% - the real problem isn’t bad strategy, it is
bad execution
The Odd of Execution
Can you beat the odd?Source: Fortune Magazine
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Why is It So Hard in Implementing Strategy?
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Barriers in Implementing Strategy
• Strategy Barrier
Strategy is not understood by those who must implement it. (Only 5 % of the workforce understood)
• People Barrier
People goals, incentives and competencies are not linked to strategy. (Only 25% of managers have incentives linked to strategy)
Strategy is not everyone’s everyday job…
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Barriers in Implementing Strategy
• Resource Barrier
Budgeting process is separated from strategic planning. (60% of organization don’t link budgets to strategy)
• Management Barrier
Management systems are designed for operational. Little time is spent on strategy. (85% of executives team spend less than one hour per month)
Strategy is not a continual process...
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Our ACTIONS
• Communicate strategy• Link incentive to strategy execution• Link budget to strategy• Spend more time on strategy
Result
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“BSC provides management with the instrumentation they need to navigate to future competitive success”
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Evolution of Balanced Scorecard
1996 2000 2003 20061996 2000 2003 2006
Strategic Communication Strategic ManagementStrategic Communication Strategic Management
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What is StrategyStrategy Formulation
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Strategy Formulation Process
• Environment Analysis including – Generic Environment– Competitive Environment
• Organization’s Vision and Mission, Values, Beliefs
• Internal – External Analysis
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The Four Perspective in BSCKey Strategic Theme in Each Perspective
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Perspective of Balanced Scorecard
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Objectives Measures InitiativesTargetsFIN
AN
CIA
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Objectives Measures InitiativesTargetsCU
ST
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Objectives Measures InitiativesTargetsINT
.BU
SIN
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PR
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M, V, V, M, V, V, SS
M, V, V, M, V, V, SS
Objectives Measures InitiativesTargetsLE
AR
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& G
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A proven strategic management system that helps organizations to focus and manage their strategies, by providing a framework to translate Mission, Values, vision and strategy into a comprehensive set of performance indicators, and a tool to validate strategies
Balanced Scorecard
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Developing Top Level Scorecard
Translate strategies into strategic themes, and strategic objectives
Create cause-effect linkage between strategic objectives
Developing key outcome measures of each strategic objective
Define and cascade performance driver of each outcome measure
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Strategy Map: A Hypothesis of Strategy
• Strategy is a set of hypothesis about cause and effect.
• A good Balanced Scorecard’s Strategy Map should tell you your strategy.
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Outcome Measures vs Driver Measures Definition
Outcome Measures• How do we know how well we
are achieving our strategic objective?
• 12 to 20 measures• Lagging Indicators
Driver Measures• What are the key success factors
that will ensure the achievement of outcome measures?
• Many!• Leading Indicators
Scheduling Accuracy Part Availability On Time Delivery %
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Outcome Measures vs Driver Measures
Employee satisfaction Training plan vs. actual Infrastructure plan vs.
actual
Employee productivity Job skills coverage ratio Information availability vs.
need
Employee Satisfaction Employee skill Information
availability
Learning & Growth
Number of rejects/rework ISO 9001 certification Availability of spare parts
Number of warranty complaints
Number of work done on the same visit
Conformance to product specification
Technical Support
Internal Business Process
Number of customer complain
Customer satisfaction index
Increase Product Quality
Customer
Revenue growth Profit margin
Increase RevenueFinancial
Driver MeasuresOutcome MeasuresStrategic ObjectivesPerspective
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Common Financial Measures ROI Return on Investment Sales growth by segment % of revenue from new products, services, and customers Dividends Net Profit Margin Debt to equity Inventory turnover ratio Revenue per employee Share Price
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Common Customer MeasuresProduct Leadership• Brand awareness• Help line calls per product• Customer acquisition rates /number• Percentage sales from new products
Customer Intimacy• Customer financial loss• Rate of customer spending• Customer lost• Number of refferals from existing customers• Complaints resolved at first contact• Return rates
Operational Excellence•Average price vs. competitor’s•Product availability / stockouts•Customer complaints relating service•Service errors
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Common Business Process Measures
Innovation• New product introduction versus competitor• New product introduction versus plan• Time to develop next generation of products• Time spent with lead userOperational• Quality (rework, reject)• Cycle time• CostAfter Sales• Response time for resolution (waiting time)• Training hours on client products• Hours spent with customer
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Common Learning-Growth Measures
Human Capital• Employee satisfaction• Employee participation in professional associations• Employee productivity• Training hours
Information Systems• Duration of systems breakdown• current availability of information relative to anticipated needs
Motivation, Empowerment, and Alignment• Measures of sugestion made and implemented• Turnover rates/average years of service
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