Balanced Scorecard Adoption
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Transcript of Balanced Scorecard Adoption
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Balanced Scorecard Henry Hirschel
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A framework of growth
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Practices to consider
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Continuous Improvement
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Continuous Improvement
Small improvements in processes and products, with the objective of increasing quality and reducing waste.
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Williams Edwards Deming
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Williams Edwards Deming
When people and organizations focus primarily on quality, quality tends to increase and costs fall over time.
Results of work efforts Total costs
When people and organizations focus primarily on costs, costs tend to rise and quality declines over time.
Quality =
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More is better...The more process improvement methods that are incorporated into the organization the higher the overall quality improvement trends (Sun, 1999).
– This supports the concept that companies that implemented TQM achieved higher levels of improvement than those that do not.
– The improvement is the result of an increase learning effect as quality improvement methods are applied to the organization.
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Start with life issues...
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Reactions...• Process improvement recommendations
• What did you learn?
• What was the experience like?
• Is this a form of training?
• Was language a problem?
• Do you know of anyone that folds like this?
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From budget focus to strategy focusSteady, Continuous Change Unpredictable, Discontinuous Change
Shareholders demand “best-in-class” performance Intellectual capital is dominant Innovation is rapid Globalization is driving prices down Customers are fickle Investors and regulators are demanding higher ethical standards
1960 1970 1980 1990 2000 2010 2020 2030
Beyond Budgeting – Hope and Fraser (2003)
Unc
erta
inty
Shareholders demand incremental improvements Financial capital is dominant Innovation is steady Prices reflect costs Customers are loyal Investors and regulators ignore ethical standards
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Adaptive and decentralized
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Performance contract...
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Holistic...
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Holistic...
“Relating to or concerned with wholes or with complete systems rather than with the analysis of, treatment of, or dissection into parts”(Merriam-Webster Dictionary)
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What is holistic integration?
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WHAT DID WE LEARN?
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WHAT DID WE LEARN?
• Synchronicity of movement
• WOW the audience
• Feel passion during performance
• Connection to each individual
• Never disappointed
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Leadership through emotions• Emotional quality of chief executive officer sets the level
of importance of TQM organizations (Wiele, Williams, Brown, Dale, 2001)
– Higher the level of importance placed on implementation the more likely companies were able to apply TQM principles
– Executive team was more likely to support implementation of TQM
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When there is a genuine vision (as opposed to the all-too-familiar ‘vision statement’), people excel and learn, not because they are told to, but because they want to.
The practice of shared vision involves the skills of unearthing shared ‘pictures of the future’ that foster genuine commitment and involvement rather than compliance.
Visions spread because of a reinforcing process.
Increased clarity, enthusiasm and commitment rub off on others in the organization. ‘As people talk, the vision grows clearer. As it gets clearer, enthusiasm for its benefits grows’
Tips from learning organizations…
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Welcome to transparency
West East South
North
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Welcome to transparency
West East South
North
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Welcome to transparency
West East South
North
Up
Down
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Strategy-Focused Organization1. Translate the strategy to operational terms
2. Align the organization to the strategy.
3. Make strategy everyone’s everyday job.
4. Make strategy a continual process.
5. Mobilize change through executive leadership.
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Why We Exist
What’s Important to Us
What We Want to Be
Our Game Plan
Translate the Strategy
Measure and Focus
What We Need to Do
What I Need to Do
Steps to value creationMission
Values
Vision
Strategy
Targets and Initiatives
Personal Objectives
Strategy Outcomes
Map Strategy
Measurement
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“The greatest problem with communication is the illusion that it has been
accomplished.” George Bernard Shaw
Just because a message has been sent, it does not mean that it has been received
On Communication
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What is a Balanced Scorecard
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• Balanced Scorecard (BSC) is built upon an organization’s vision and strategy that measures transitions through four key perspectives: Financial, Customer, Internal Business Process, Learning and Growth (Kaplan & Norton, 1992)
• BSC is a strategy-focused management methodology used to manage organizational performance (Kristensen, Juhl, & Eskildsen, 2003)
• BSC is structured to measure a company’s actions in building capabilities to acquire the assets necessary for future growth (Kaplan & Norton, 2006)
What is a Balanced Scorecard
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Objectives Measures Targets Initiatives
Learning and Growth
“To achieveour vision,how will
we sustain ourability to
change andimprove?”
Objectives Measures Targets Initiatives
Internal Business Process
Objectives Measures Targets Initiatives
Customer
“To achieveour vision,
how should weappear to ourcustomers?”
Vision and Strategy
Objectives Measures Targets Initiatives
Financial
“To succeedfinancially,
how should weappear to ourshareholders?”
“To satisfy ourshareholders
and customers,what business
processes mustwe excel at?”
Four Perspectives of Balanced Scorecard
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CultureWhat are the norms,Values, attitudes, andBehaviors needed?
Success Comes From Alignment
Strategy/VisionWhat business are we in?How will we compete?
What’s our vision?
Executive LeadershipBehavior
InformationSymbolic action
Key Success FactorsWhat specific tasks have to get done to
implement the strategy?
Human ResourcesDo people have the
necessary competencies?Are they motivated?
Formal OrganizationStructure? Controls?Rewards? Careers?
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LevelCustomer Objective
“Increase customer satisfaction”
Financial Objective“Decrease cost of materials”
Corporate Customer satisfaction rating Operating margin
Operating Division Customer retention Operating margin
VP of Operations On-time deliveryVariable costs
Period expenses
Plant Manager Schedule adherenceReturns and rejects
Manufacturing overheadVariable costs
Shift Supervisor Line availabilityFirst pass yield
Scrap rateLabor per unit
Cas
cade
dCascading of measurement
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LevelCustomer Objective
“Increase customer satisfaction”
Financial Objective“Decrease cost of materials”
Corporate Customer satisfaction rating Operating margin
Operating Division Customer retention Operating margin
VP of Operations On-time deliveryVariable costs
Period expenses
Plant Manager Schedule adherenceReturns and rejects
Manufacturing overheadVariable costs
Shift Supervisor Line availabilityFirst pass yield
Scrap rateLabor per unit
Cas
cade
dCascading of measurement
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LevelCustomer Objective
“Increase customer satisfaction”
Financial Objective“Decrease cost of materials”
Corporate Customer satisfaction rating Operating margin
Operating Division Customer retention Operating margin
VP of Operations On-time deliveryVariable costs
Period expenses
Plant Manager Schedule adherenceReturns and rejects
Manufacturing overheadVariable costs
Shift Supervisor Line availabilityFirst pass yield
Scrap rateLabor per unit
Cas
cade
dCascading of measurement
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LevelCustomer Objective
“Increase customer satisfaction”
Financial Objective“Decrease cost of materials”
Corporate Customer satisfaction rating Operating margin
Operating Division Customer retention Operating margin
VP of Operations On-time deliveryVariable costs
Period expenses
Plant Manager Schedule adherenceReturns and rejects
Manufacturing overheadVariable costs
Shift Supervisor Line availabilityFirst pass yield
Scrap rateLabor per unit
Cas
cade
dCascading of measurement
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LevelCustomer Objective
“Increase customer satisfaction”
Financial Objective“Decrease cost of materials”
Corporate Customer satisfaction rating Operating margin
Operating Division Customer retention Operating margin
VP of Operations On-time deliveryVariable costs
Period expenses
Plant Manager Schedule adherenceReturns and rejects
Manufacturing overheadVariable costs
Shift Supervisor Line availabilityFirst pass yield
Scrap rateLabor per unit
Cas
cade
dCascading of measurement
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LevelCustomer Objective
“Increase customer satisfaction”
Financial Objective“Decrease cost of materials”
Corporate Customer satisfaction rating Operating margin
Operating Division Customer retention Operating margin
VP of Operations On-time deliveryVariable costs
Period expenses
Plant Manager Schedule adherenceReturns and rejects
Manufacturing overheadVariable costs
Shift Supervisor Line availabilityFirst pass yield
Scrap rateLabor per unit
Cas
cade
dCascading of measurement
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LevelCustomer Objective
“Increase customer satisfaction”
Financial Objective“Decrease cost of materials”
Corporate Customer satisfaction rating Operating margin
Operating Division Customer retention Operating margin
VP of Operations On-time deliveryVariable costs
Period expenses
Plant Manager Schedule adherenceReturns and rejects
Manufacturing overheadVariable costs
Shift Supervisor Line availabilityFirst pass yield
Scrap rateLabor per unit
Cas
cade
dCascading of measurement
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Product Leadership
Customer Intimacy
Balanced Scorecard Strategy Map (Kaplan & Norton, 2000)
Improve Shareholder Value
Build the franchise
Improve use of assets
Improve coststructure
Increase valueto customers
Revenue Growth Strategy Productivity StrategyFinancialPerspective
Revenue fromnew sources
Customer profitability
Operating costper unit produced
Asset utilization
Operational Excellence√ √
√ √
Customer Perspective
Customer ValueProposition
Customer acquisition,retention, and satisfaction
Build the franchisethrough innovations
Become a goodcorporate citizen
through regulatory andenvironmental processes
Achieve operationalexcellence through
operations and logistics processes
Increase customervalue through customermanagement processes
InternalProcess
Perspective
employee competencies corporate culturetechnologyLearning and
Growth Perspective
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Financial
Customer
InternalProcess
Learning and
Growth
Technology
Customer Service Operations Support Center Vendors
PartnersFranchise
Non-Traditional
Best InClass
Build MoreStoresBest People Sales and
Marketing
LearningOrganization
KnowledgeManagement
Accountability and Achievement
COGSLabor G & AP&L
Financial Change
BrowserBased Technology
Universal Messaging
Business Continuity Reporting POS Security
Information Technology – Strategy Map
Consumer Internal Customer Business Partner
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The discipline of team learning starts with ‘dialogue’, the capacity of members of a team to suspend assumptions and enter into a genuine ‘thinking together’.
To the Greeks dia-logos meant free-flowing meaning through a group, allowing the group to discover insights not attainable individually…. [It] also involves learning how to recognize the patterns of interaction in teams that undermine learning.
Engage in dialogue…
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Business Channel
Transparency of reporting
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Business Channel
Transparency of reporting
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Business Channel
Transparency of reporting
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Business Channel
Transparency of reporting
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Three success factors of Information Technology Management
Business ManagementVision and mission executionBest practiceProcess improvementSolution evaluationManage expectationsTools to enable businessCustomer focus
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Three success factors of Information Technology Management
Technology ManagementHow best to use technologyHardware/software/networkTechnical knowledge Manage expectations Security
Business ManagementVision and mission executionBest practiceProcess improvementSolution evaluationManage expectationsTools to enable businessCustomer focus
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Three success factors of Information Technology Management
Technology ManagementHow best to use technologyHardware/software/networkTechnical knowledge Manage expectations Security
Business ManagementVision and mission executionBest practiceProcess improvementSolution evaluationManage expectationsTools to enable businessCustomer focus
Informal networks
Serendipity
Education
Humor
Magic
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CIO magazine, Dec 2004
“The more closely the IT organization (or other organizations) participates in business process design, the harder it becomes to distinguish its contributions. What is the impact of business process and what is the impact of the tools that enable the business process.”
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The Paradox of Innovation…
2003 Ralph Katz
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The Paradox of Innovation…The dilemma:
Innovation and change require positive energy.
2003 Ralph Katz
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The Paradox of Innovation…The dilemma:
Innovation and change require positive energy.
2003 Ralph Katz
The paradox:
Creativity creates tension between the generation and reduction of uncertainty.
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The Paradox of Innovation…The dilemma:
Innovation and change require positive energy.
2003 Ralph Katz
The paradox:
Creativity creates tension between the generation and reduction of uncertainty.
Organizations are naturally…
Motivated by reducing uncertainty.
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