balanced scorecard

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Balanced Scorecard Balanced Scorecard Achieving Vision by Translating Achieving Vision by Translating Strategy into ACTIONS! Strategy into ACTIONS!

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BSC Balanced Scorecard Introduction | Strategonomic | Strategy Execution

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Page 1: Balanced scorecard

Balanced ScorecardBalanced ScorecardAchieving Vision by Translating Strategy into Achieving Vision by Translating Strategy into

ACTIONS!ACTIONS!

Page 2: Balanced scorecard

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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”

Page 3: Balanced scorecard

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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

Page 4: Balanced scorecard

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Why is It So Hard in Implementing Strategy?

Page 5: Balanced scorecard

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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…

Page 6: Balanced scorecard

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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...

Page 7: Balanced scorecard

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Our ACTIONS

• Communicate strategy• Link incentive to strategy execution• Link budget to strategy• Spend more time on strategy

Result

Page 8: Balanced scorecard

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“BSC provides management with the instrumentation they need to navigate to future competitive success”

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Page 10: Balanced scorecard

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Evolution of Balanced Scorecard

1996 2000 2003 20061996 2000 2003 2006

Strategic Communication Strategic ManagementStrategic Communication Strategic Management

Page 11: Balanced scorecard

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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

Page 15: Balanced scorecard

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Objectives Measures InitiativesTargetsFIN

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Objectives Measures InitiativesTargetsCU

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Objectives Measures InitiativesTargetsINT

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M, V, V, M, V, V, SS

M, V, V, M, V, V, SS

Objectives Measures InitiativesTargetsLE

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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 %

Page 19: Balanced scorecard

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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

Page 23: Balanced scorecard

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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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