Post on 07-Dec-2015
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FINANCIAL STABILITY
HAPPINESS
HEALTH
FINANCIAL STABILITY
KNOWLEDGE & CAREER
KNOWLEDGE & CAREER
FAMILY
What is a Scorecard?What is a Scorecard? A scorecard is an “easy-to-understand” A scorecard is an “easy-to-understand” generic format for:generic format for:
Describing and communicating the Describing and communicating the organization’s strategic intentions;organization’s strategic intentions;
Discussing activities that are motivated by the Discussing activities that are motivated by the strategic aims; andstrategic aims; and
Monitoring and rewarding such activitiesMonitoring and rewarding such activities
FINANCIAL PERSPECTIVE
How do we look to shareholders?
INNOVATION & LEARNING PERPECTIVE (DEVELOPMENT)
Can we continue to Improve and create value?
INTERNAL BUSINESS PERPECTIVE
What must we excel at?
CUSTOMER PERSPECTIVE
How do customers see us?
CUSTOMER PERSPECTIVE
How do customers see us?
INTERNAL BUSINESS PERPECTIVE
What must we excel at?
INNOVATION & LEARNING PERPECTIVE (DEVELOPMENT)
Can we continue to Improve and create value?
FINANCIAL PERSPECTIVE
How do we look to shareholders?
Learning & Growth (Development) PerspectiveLearning & Growth (Development) Perspective
Comes from people, systems and Comes from people, systems and procedures – the infrastructure that the procedures – the infrastructure that the organization must continually build to organization must continually build to
deliver value to customers and deliver value to customers and shareholders, in an environment of shareholders, in an environment of
intense global competition.intense global competition.
Process PerspectiveProcess Perspective
Identifies the critical Internal Identifies the critical Internal business processes in which business processes in which the organization must excel – all the organization must excel – all these have the greatest impact these have the greatest impact on customer satisfaction and on customer satisfaction and financial objectives.financial objectives.
The inclusion of innovation The inclusion of innovation measures gives the organization measures gives the organization “drivers” for long term financial “drivers” for long term financial successsuccess
Customer PerspectiveIdentifies the customer and market
segment or niche in which the business will compete and measures performance in the targeted areas.
Financial Perspective
Financial measures are important in summarizing the measurable economic consequences of actions already taken. They indicate whether a company’s strategy and its execution are contributing to bottom-line considerations.
The Balanced Scorecard
Used as customized communication tools within a management control system
First proposed in 1992 by
Robert S. Kaplan, a Harvard Business School Professor and
David P. Norton, President of Massachusetts – based Consultancy Firm
What the scorecard accomplishes:
Translating the Vision
Communicating and Linking
Business Planning
Giving Feedback and Learning
The Balanced Scorecard
Describes business activity from four (usually)
different “perspective”
Uses a small number of measures for each,
Where the description may refer to the current performance
of a business or to its goal for the next period
Objective Setting for ResultsCORPORATE or STRATEGIC
PLANS
DIVISION BUSINESS PLANS
DEPARTAMENTAL GOALS
UNIT OR TEAM GOALS
INDIVIDUAL PERFORMANCE OBJECTIVES
Is the Is the BALANCED BALANCED
SCORECARDSCORECARD another performance report another performance report
that simply combines financial that simply combines financial and non-financial metrics?and non-financial metrics?
There is more to the Scorecard
The 4 perspective aim for a complete description of what one needs to know about the business
There is a time dimension
It shows both internal and external aspects of the business
The scorecard is linked through cause and effect assumptions
FINANCIAL PERSPECTIVE
How do we look to shareholders?
INNOVATION & LEARNING PERPECTIVE (DEVELOPMENT)
Can we continue to Improve and create value?
INTERNAL BUSINESS PERPECTIVE
What must we excel at?
CUSTOMER PERSPECTIVECustomer satisfaction indices
New clients serviceResponse Time
Market ShareHow do customers see us?
INTERNAL BUSINESS PERPECTIVE
(Process)Efficiency
Manufacturing Cost
What must we excel at?
INNOVATION & LEARNING PERPECTIVE (DEVELOPMENT)
New Skills, New ProductsCan we continue to Improve and create value?
FINANCIAL PERSPECTIVE
Profitability, growth, deft, equity, cash flow, operating profit
How do we look to shareholders?
THE BALANCED SCORECARD LINKS PERFORMANCE MEASURE
FINANCIAL PERSPECTIVE
How do we look to shareholders?
INNOVATION & LEARNING PERPECTIVE (DEVELOPMENT)
Can we continue to Improve and create value?
INTERNAL BUSINESS PERPECTIVE
What must we excel at?
CUSTOMER PERSPECTIVE
How do customers see us?
CUSTOMER PERSPECTIVE
How do customers see us?
INTERNAL BUSINESS PERPECTIVE
What must we excel at?
INNOVATION & LEARNING PERPECTIVE (DEVELOPMENT)
Can we continue to Improve and create value?
FINANCIAL PERSPECTIVE
How do we look to shareholders?
To succeed financially
We need to satisfy our customers
We need to excel at business process
We need to learn in terms of internal processes and value proportions
Customer Concerns tend to fall into categories:
Market segment or niche identified
Time (lead time, delivery)
Quality (defects)
Performance (benchmarking)
Service
Cost
Internal Business Perspective means
Critical Operations that enables the company to satisfy customer needs
Critical technologies or core competencies
Innovation & Learning (development) Perspective:
Ability and willingness to change
Comes from people, systems, & procedures
E.g. product-focus and market leadership
Management information for decisions
Financial Perspective
Survive; Cash Flow
To succeed: Sales growth, operating income
To prosper: Increased market share, ROE
Ex. Car Manufacturing
Category: profitability (40% weight)Primary measurement: Operating profit2002 Target: 0.1% of ROE
Category: Market Dev.: (20% weight)Primary measurement: Market share2002 Target: 20.5%
Category: Mnfg. Productivity 920%)Primary measurement A: Hours per vehicle(HPV) “Harbour Report” Market share2002 Target: 95 HPVPrimary measurement B: <fng. Cost (exc. Material and warranty) 2002 Target: P85.5 T/unit
Car Manufacturing
Category: Quality (20% weight)Primary measurement A: Customer Sat. In.2002 Target: 1 Rank up fr. Previous survey
Primary measurement B: Sales Sat. Index
2002 Target: 2 Rank up fr. Previous survey
Primary measurement C: Claims Ratio
2002 Target : 12 %
What strategy must be achieved and what is critical to its success
How success will be measured and tracked
Key action programs required to achieve
objectives
Key actions required to achieve
objectives
OBJECTIVE MEASURES TARGET INITIATIVES
Financia
l
Broaden revenue mix
Revenue mix
10% Product A
* Sales Promotions
40% Product B
* New channel
50% Product C
* Marketing
Custo
mer
Increase customer satisfaction
Customer retention
95% * Frequent Buyer's club
Inte
rnal
Develop new products
% revenue from new products
1999 - 15% * R and D Program
2000 - 50% * Customer mailing
2001 - 60%
Learn
ing &
Gro
wth
Develop strategic skills
Cross train 90%
* Custom Training
* Knowledge Library
Identify Vision
It is easy to create a Scorecard
But to create a manageable scorecard is something else
Identify Strategies
Identify Measures Identify Critical success factors and perspective
Evaluate Critical Action PlansFollow up and
Manage
Define vision for the organization Which strategies shall we follow?
Which shall we focus?
Define vision for the organization Which should we measure in each perspective?
How do we evaluate our scorecard?
Which actions should be initiated to reach our targets?
How do we follow-up update and maintain our scorecard?
Employees or Human Resources
Is there a need for additional perspective?
Environment
Like:
Partners (Stakeholders)
MATHEMATICS
FINANCIAL STABILITY
FINANCIAL PERSPECTIVE
Human resources
CUSTOMER PERSPECTIVE
KNOWLEDGE & CAREER
INTERNAL BUSINESS
PERSPECTIVE
Development perspective
MATHEMATICS
FINANCIAL STABILITY
FINANCIAL PERSPECTIVE
Human resources
CUSTOMER PERSPECTIVE
KNOWLEDGE & CAREER
INTERNAL BUSINESS
PERSPECTIVE
In some organizations, it was the development (learning and growth) perspective that was converted into an HR perspective – on grounds that development was essentially a matter of human
performance
MATHEMATICS
FINANCIAL STABILITY
FINANCIAL PERSPECTIVE
CUSTOMER PERSPECTIVE
KNOWLEDGE & CAREER
HUMAN RESOURCES
PERSPECTIVE
Some service industries limited their scorecards to 3 perspective attributing the effects of improved competencies and attitudes on
customer satisfaction and profits
MATHEMATICS
FINANCIAL STABILITY
FINANCIAL PERSPECTIVE
DEVELOPMENT PERPERSTIVE
CUSTOMER PERSPECTIVE
KNOWLEDGE & CAREER
INTERNAL BUSINESS
PERSPECTIVE
HR Measures are already included in the 4 perspective
HUMAN RESOURCES
MATHEMATICS
FINANCIAL STABILITY
FINANCIAL PERSPECTIVE
DEVELOPMENT PERPERSTIVE
CUSTOMER PERSPECTIVE
KNOWLEDGE & CAREER
INTERNAL BUSINESS
PERSPECTIVE
FINANCIAL STABILITY
FINANCIAL
INTELLECTUAL CAPITAL
KNOWLEDGE & CAREERHUMAN CAPITAL
HR Measures are already included in the 4 perspective
FINANCIAL STABILITYCUSTOMER
CAPITAL
KNOWLEDGE & CAREER
INNOVATION CAPITAL
MATHEMATICSPROCESS CAPITAL
FINANCIAL PERSPECTIVE
The HR scorecard
By Becker, Huselid, & Urich
Extend to which a validated competency model serves as the
basis for hiring, developing, managing
and rewarding employees
Percentage of the workforce that is
regularly assessed via a normal performance
appraisal
HR SYSTEM ALIGNMENT
In R and D
Percentage of selection decisions based on competency
model
Percentage of hires made at “elite” level
Extent to which appropriate retention policies have been developed and implemented
HR alignment Index above 80%
In Manufacturing
Recruiting cycle time at or below 14 days
HR alignment Index above 80%
HR DELIVERABLES
Percentage of employees who have the requisite technical competencies
Percentage of turnover among high performing R
and D scientists
Percentage of open job requisition in
manufacturing
Cost per hire
HR EFFICIENCY
Lower R and D cycle time
IMPACT
MATHEMATICS
FINANCIAL STABILITY
Total Quality and other High Performance Work Systems
Health & Safety Workplace Management and Good
Housekeeping
Human Resource Management and
Development
KNOWLEDGE & CAREER
Employment Relations, Labor Standards and Social
Compliance
Developing your own HR Scorecard Planning the Training Program
Some Applications of the Scorecard
Management Control (totally based on scorecard)
Scorecards used as format for discussing strategies only
Scorecard used as a tool for sorting/classifying existing measures to provide an overview
Scorecards introduced as a substitute for budget
Customized scorecards for different organizational levels
Some Applications of the Scorecard
Scorecards for projects with a fairly long lifespan
Scorecards for separate corporate functions e.g. HR
Scorecards for reporting performance e.g. annual reports
Scorecards for Government and Non-Profit Organizations
A complete Organizational Scorecards will have the following components:
Strategic teams identified
Strategic objectives identified
Measures of the execution of the strategic objectives
Competitive benchmarks for the measures selected
Short-term and long-term targets for identified measures
Initiatives aligned to the strategic objectives for implementation and review
Once completed, the Scorecard is to be used as a method for aligning initiatives
Human Resources – to translate strategy to daily management.