Balanced Scorecard

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SF SF

BH

M

V S

VR VR

DC DC

Plan Plan

Do Do

Chec

k

Chec

k

Act Act

Change Vector

SQ

T

How to How to track the change?

DC...Deming Cycle

Change vector Change vector

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To know WHAT to do is not enough

It is important to know WHETHER and HOW we are doing

Therefore MbC operates with system of indicators on every level of management ◦ in accordance with development of company and

people, the target values for indicators are determined that enable continuous monitoring and management of improvement

Balanced Score Card utilization

SQ

T

Change vector Change vector

Balanced Score Card (BSC) ◦ introduced in 1990’s by Robert Kaplan and David Norton ◦ reaction to popular cost-cutting projects

Cost-cutting Projects substantially improved cost-related financial indicators in fiscal year ◦ and consultancy companies made well getting good

profit share

However, in next years cost-cut companies ◦ have seen a huge drop in their performance ◦ loose much of their ability to react to changes (stability) ◦ become less vital, i.e. able to continuously succeed

Therefore BSC ◦ introduced new kinds of indicators to existing ones to

connect corporate strategy with all operational areas of within the enterprise

PV215 - 9 4 Balanced Scorecard Balanced Scorecard

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TOP management

financial indicators revenues -> profit/loss <- costs

customer indicators number of new customers

average size of order new products ratio

number of loyal customers ...

internal processes internal processes indicators

average time to market number of complaints – quality

product cost service innovation pace

...

learning and growth learning and growth indicators

competencies/resources abilities attitudes qualities

all managers

managem

ent

of

managem

ent

of

sale

s

and

mark

eti

ng m

anagem

ent o

f m

anagem

ent o

f prim

ary

pro

cess,

logis

tics,

develo

pm

ent,

IT, ...

Balanced Scorecard Balanced Scorecard

Financial perspective

Customer perspective

Perspective of internal processes

Perspective of learning and grow

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Financial goals depend of the lifecycle of ◦ Company

◦ Unit

◦ Service

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Growing

•Early phase

•Growing potential

•Big long term

investment

•Negative cash flow

Preservation

• Interesting for

middle and short

investment (ROI)

•Elimination of

constrains

•Positive profit and

cash flow

Harvest

•No big

investments

•Only maintenance

•Positive cash flow

•High profit

Grow of turnover and mix of products

Reduction of costs and increase of

productivity

Use of resources and strategy of investment

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Strategic directions

Grow of turnover Reduction of costs Use of resources

Lif

e s

tatu

s

Pro

gre

ss

Rate of sales growth The percentage of sales from new products

Turnover per employee

Investment (per sales)

Pers

evati

on Rate on target customers

Profit per customer Costs in comparison with competitors Indirect costs

Cash to Cash cycle Usage of resources

Harv

est

Profit per customer Percentage of non-profitable customers

Unit costs Time of investment´s returns

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Segmentation of customers

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•Nation, States

•Regions, Cities Geographic

•Age, gender

•Family size

•Life cycle, Income Demographic

•Social class

•Lifestyle

•Personality Psychographic

•Occasions

•Benefits sought

•User status

•Loyality

Behavioral

market share

customer retention

acquiring new customers

customer satisfaction

customer profitability

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Customers profitable No profitable

Target segments keep move

No target segments monitor eliminate

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Attributes of product

Functionality Quality Price Time

Value Image Relationships = + +

Innovation process

Operational process

Post-sale process

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Recognition of

customer need

Innovation

process

•Determination of

market

•Order of

product/service

Operational

process

•Creation of

product/service

•Delivery

Post-sale

process

•Service provision

Customer

satisfaction

Percentage of new product / services

Number (percentage) of patents

Our indicators comparing to the competitors' performance

Time of new generation development

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Mapping the process form customer´s order to the product / service delivery

Traditionally related to financial indicators ◦ Costs

◦ Budgets and deviations

Now related with quality monitoring and time of delivery cycle ◦ Number of rejects

◦ Time of delivery

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Repairs

•Warranty

•Non – warranty

Complaints

Payment processing

Quality of service

Quality of customer support

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Employees'´ ability

Capability of information system

Motivation

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Satisfaction

• Identification

•Meaningful

work

• Information

access

Keeping

•Percentage

of turnover

of key

employees

Productivity

•Profit per

employee

•Turnover per

employee

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It is necessary not only to save information but also to

analyse them

To be able to develop new information as the basement

for strategic decision

coverage ratio of strategic information

• Analogy to key employees

• Percentage of covered processes

• Feedback of costs

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Number of initiatives per employee

Number of initiatives realized

Motivation to improve internal processes

•Measuring of deviation before and after

Measuring of personal commitment

•Number of managers/employees to be involved

Measuring of teams performance

•Level of information sharing

•Number of integrated projects

•Percentage of teams with sharing of benefit system

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Learning and grow indicator are of the big

importance

Learning and grow indicator are of the big

importance

• focuses on competences that employees must have to

successfully fulfill financial, customer, process or others

• these indicators focus the happening in the world of

possibilities whereas the others the world of

requirements

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TM TM

FI FI

CI IPI

LGI

all M all M S’n

’M P

Ms

Balanced Scorecard Balanced Scorecard

BSC is tool primarily for managers ◦ but also communication mean with leaders, owners,

shareholders

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BSC may be foundation of monitoring system

shareholders, owners, ...

Monitoring Monitoring

system

Correction

system

Correction

system

Goals Goals

Ways Ways

Results Results

Feedback

D D

S

E

U

Balanced Scorecard Balanced Scorecard

Balanced Scorecard perspective

Why to use in MbC

Structure of MbC

PV215 - 8 23