Balanced Scorecard Training 26042014

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The Balanced Scorecard The Balanced Scorecard Approach Approach Pradyut Mohan Dash Program Manager 26-April-2014 Something that can be measured can be done..

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Balanced Scorecard Concept for Pre-sales.

Transcript of Balanced Scorecard Training 26042014

  • The Balanced Scorecard ApproachThe Balanced Scorecard Approach Pradyut Mohan Dash Program Manager 26-April-2014 Something that can be measured can be done..
  • What is a Balanced Scorecard?What is a Balanced Scorecard? The Balanced Scorecard is a strategic planning and management system used to align business activities to the vision and strategy of the organization by monitoring performance against strategic goals.
  • BackgroundBackground Was first published in 1992 by Kaplan and Norton, a book followed in 1996. Traditional performance measurement that only focus on external accounting data are obsolete. The approach is to provide 'balance' to the financial perspective.
  • Why use Balance Scorecard?Why use Balance Scorecard? Improve organizational performance by measuring what matters Increase focus on strategy and results Align organization strategy with workers on a day-to-day basis Focus on the drivers key to future performance Improve communication of the organizations Vision and Strategy Prioritize Projects / Initiatives
  • 4 Business Perspectives4 Business Perspectives BSC Model suggests we view the organisation from 4 Perspectives Financial Internal Business Process Learning & Growth Customer Then Develop metrics, collect data and analyse it relative to each of these perceptive
  • 4 Business Perspectives4 Business Perspectives
  • 4 Business Perspectives Questions4 Business Perspectives Questions Financial What must we do to create sustainable economic value? Internal Business Process To satisfy our stakeholders, what must be our levels of productivity, efficiency, and quality? Learning and Growth How does our employee performance management system, including feedback to employees, support high performance? Customer What do our customers require from us and how are we doing according to those requirements?
  • Balance Scorecard MeasurementsBalance Scorecard Measurements
  • Steps in Implementing BSCSteps in Implementing BSC 1. Assess the mission and culture of the group 2. Focus on customer needs 3. Define the organization's intent 4. Map out the process 5. Develop performance measures 6. Assign initiatives 7. Implement the process 8. Cascade the scorecard 9. Evaluate the scorecard and the process 10.Adjust the balanced scorecard as needed
  • Steps in Implementing BSCSteps in Implementing BSC
  • Key implementation Success FactorsKey implementation Success Factors Obtainingexecutivesponsorshipandcommitment Involvingabroadbaseofleaders,managersand employeesinscorecarddevelopment ChoosetherightScorecardChampion Beginninginteractive(two-way)communicationfirst Viewingthescorecardasalong-termjourneyrather thanashort-termproject Gettingoutsidehelpifneeded
  • STRATEGY MAP STRATEGY MAP BALANCED SCORECARD BALANCED SCORECARD MEASUREMENT MEASUREMENTPROCESS: MANUFACTURING EXCELLENCE PROCESS: MANUFACTURING EXCELLENCE THEME: ROCE > xx%, VOLUME = xx,xxx units THEME: ROCE > xx%, VOLUME = xx,xxx units OBJECTIVES OBJECTIVES TARGET TARGET ACTION PLAN ACTION PLAN INITIATIVE INITIATIVE BUDGET BUDGET FINANCIAL PERSPECTIVE Improve Productivity Improve Productivity OFFER PRODUCTS & SERVCIES THAT ARE CONSISTENT, TIMELY and LOW-COST OFFER PRODUCTS & SERVCIES THAT ARE CONSISTENT, TIMELY and LOW-COST Long-Term Shareholder Value ROCE > xx% Long-Term Shareholder Value ROCE > xx% Grow Revenue Grow Revenue CUSTOMER PERSPECTIVE Operating Cost & EfficiencyOperating Cost & Efficiency Capacity UtilizationCapacity Utilization Capability UtilizationCapability Utilization Brand / ImageBrand / Image Cost/Unit, Efficiency Cost/Unit, Efficiency % Utilization% Utilization Monthly Monitoring Monthly Monitoring Weekly/Monthly Monitoring Weekly/Monthly Monitoring Monthly Monitoring Monthly Monitoring Weekly/Monthly Monitoring Weekly/Monthly Monitoring Low Cost ManufacturingLow Cost Manufacturing World-Class Quality Standards World-Class Quality Standards World-Class Delivery TimingWorld-Class Delivery Timing Knowledgeable & Skilled Partner Knowledgeable & Skilled Partner High Customer SatisfactionHigh Customer Satisfaction Reinforce Brand ImageReinforce Brand Image Man-hour per Unit Man-hour per Unit Defect per Unit Defect per Unit Sales Delivery Sales Delivery Direct Pass Rate Direct Pass Rate Market Feedback Market Feedback Sales Volume Sales Volume Weekly Monitoring Weekly Monitoring Daily Monitoring Daily Monitoring Daily Monitoring Daily Monitoring Daily Monitoring Daily Monitoring Weekly Monitoring Weekly Monitoring Monthly Monitoring Prod. & Sales Mtg. Monthly Monitoring Prod. & Sales Mtg. Low Cost Low Cost World Class World Class ENSURE OPERATIONAL EXCELLENCE WITH INNOVATION AS WELL BEING SOCIALLY RESPONSIBLE ENSURE OPERATIONAL EXCELLENCE WITH INNOVATION AS WELL BEING SOCIALLY RESPONSIBLE INTERNAL PERSPECTIVE Customer Satisfaction Customer Satisfaction Enhance Brand Enhance Brand Operational Excellence Operational Excellence Process Innovation Process Innovation Alliances with SBUs Alliances with SBUs Socially Responsible Socially Responsible ProductivityProductivity DeliveryDelivery Continuous ImprovementContinuous Improvement NPINPI Safety & HealthSafety & Health EnvironmentEnvironment Cycle Time Cycle Time Meet Daily Plan WIP Meet Daily Plan WIP KAIZEN ICC KAIZEN ICC Timely Introduction Timely Introduction Industrial Accident Commuting Accident Industrial Accident Commuting Accident Toxic Waste Disposal ISO 9002 Toxic Waste Disposal ISO 9002 Hourly Monitoring Hourly Monitoring Daily Monitoring Daily Monitoring Daily Monitoring Daily Monitoring Monthly follow-up Specific Programmed Monthly follow-up Specific Programmed Weekly Follow-up Weekly Follow-up Cross Audits Defensive Driving Cross Audits Defensive Driving Facility Readiness Certification Facility Readiness Certification STRATEGIC JOB & SYSTEMSSTRATEGIC JOB & SYSTEMS LEARNING & GROWTH PERSPECTIVE Skills Skills Info. System Info. System Develop the Necessary SkillsDevelop the Necessary Skills Information Systems Availability Information Systems Availability Strategic AwarenessStrategic Awareness R&D & Development R&D & Development ALC, Procurement, Financial ALC, Procurement, Financial Alignment Alignment Training and Skill Build-up Training and Skill Build-up Set-up, Test and Validation Set-up, Test and Validation Communication Programmed Communication Programmed Trial Prod. Spare Parts Prod Trial Prod. Spare Parts Prod Warranty CostWarranty Cost tt OPEX RM XX M CAPEX RM xx M OPEX RM XX M CAPEX RM xx M Balance Scorecard ExampleBalance Scorecard Example
  • Balance Scorecard Generic Strategy MapBalance Scorecard Generic Strategy Map
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Vision To establish GNPOC as a Premier Petroleum Operating Company. Mission Maintain High Health, Safety and Environmental Standards Maximize Shareholders' Return on Investment Contribute Towards Achieving Sudan's National Aspirations as a Net Oil Exporter Develop a Competent Sudanese Workforce Optimize Operations Through Technology, Teamwork and Synergy Objectives Tofullyexplore,developandproducethereservepotentialinBlocks1,2and4,andto transportthecrudeoiltotheRedSeaCoastforexportinasafeandcosteffectivemanner.
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Reduce Operating CostsStrategy Objectives Value Driver Production Increase New Field Develop. Exploration Program Improve Operating Efficiency Add Reserves Manpower Growth (Add Value) Deliverables 50 MMbbl RSRR To be The Premier Petroleum Operating Company 120kbwpd of water injection in unity Vision Increase Revenue Initiatives 20 Wildcat 4 Appraisal 2D/3D Seismic Diffra+ Neem Area 87 wells drill, 95well Comp, 95 well tie- in Neem FPF expansion & co2 removal Bioremediation at other fields Facility Improvement 88 MMbbl Developed Reserves 250 KBOPD (Average) Margin (Optimize NPV) Including Contractors in HSE Program Competent Workforce Transportation Volume Increase HSE Oriented Sudanization , Training and Quality Culture Development Effort EOR Study & Infill- Satellite Program Capability Devt & Experience Sharing 0 1 12 MMbbl RSRR Optimize operation cost (UPC,UFC,U DC)
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Business Objectives Pipeline throughput GNPOC 252.3 WNPOC: 25.4 Revenue USD 2.78 vs 2.23 billion target Reserves added 25.1 of 62 mmstb annual target Reserves dev. 45 of 77 mmstb annual target Production 252.3 vs 240 kbopd Cash Margin : USD 11.7/bbl vs 8.9 planned 44 producers tied in and commissioned Exploration: from Alful & Neem S-3 wells Development: From Unity 87 and 89
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Actual 2006 Target 2007 2007 Mid Year Actual Remarks 1 Reserve Replacement Ratio 2P (%)0.97 0.68 N/A Calculated on annual basis 2 Reserve Addtion-EV(mmstb) 89.2 62.0 25.1 From Exploration & Development -Exploration 26.7 50.0 19.1 Alful & Neem S-3 wells -Development 62.5 12.0 6.0 From Unity 87&89 3 Reserve Developed (mmstb) 136.0 77.0 45.0 44 producers tied-in & commissioned 4 Production (mbopd) 252.9 240.0 252.3 44 new wells put in production 5 Revenue (MM$) 5,710 4,271 2,782 65% of 2007 forecast revenue. Annual target based on 87 MMbbl annual production & 50$/bbl average FOB price ( forecast) 6 Lost Time Injury Frequency (#) 1.68 1.50 1.05 LTIF improved with HSE mitigation measures on road & operational safety 7 Budget Performance (%) 99% 95% 96% KEY PERFORMANCE INDICATOR
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study 2006 Actual 2007 Target 2007 Mid year Actual Justication 1 Unit Finding Cost ($/bbl) 1.22 1.33 1.31 Underspent - Block 2A WC delayed 2 Unit Development Cost ($/bbl) 1.73 1.98 1.88 Higher cumulative production 3 Unit Production Cost ($/bbl) 3.30 3.70 3.20 Higher daily production rate + Chemical optimization .Lower ESP rental due to negotiation effort with contractor. 4 Unit Transportation Cost ($/bbl) 0.72 0.77 0.65 Opex included accredit of $8.9M received from PDOC. If excluded, UTC is 0.82 5 Lost Production Index (%) 3.3% 3.2% 3.0% Higher availability of Power Plants Engines and improved reliability of equipments 6 Well Cost ($/m) - Exploration Well 1055 1150 1143 11 wells were drilled up to end Q2 - Development Well 780 830 813 40 wells were drilled up to end Q2 7 Cash Margin ($/bbl) 9.80 8.9 11.70 Lower government take with the cost recovery from block 4 after Neem production KEY PERFORMANCE INDICATOR
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Blk 1A Blk 2A Bk 4 Blk 1B Blk 2B 2007 Revision Total Exploration 2D Seismic Hl (km) 1,268 754 1000 1,268 0 2D Seismic TZ (km) 670 646 750 920 250 3D Seismic(km) 200 113 113 113 -87 Wildcats(well) 13 8 5 2 12 1 20 7 Appraisals(well) 7 3 0 0 4 4 -3 Development Well Drilling (no) 58 40 23 13 11 18 22 87 29 Well Completion (no) 58 40 26 11 20 19 19 95 37 Tie-in New Well (no) 77 44 27 6 19 18 25 95 18 Production ESP Services (no) 296 268 314 18 Production (kbopd) 240 252.4 96.6 12.9 43.7 51.5 45.0 250 10 Road Construction Main Road (km) 60 30 30 30 -30 268 170 2007 Revision Plan 2007 Mid year Actual Description +/- 2007 Orig Plan
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Item Value Unit Production 250 Kbopd Expenditure 1,130.50 $MM Upstream 1,035.90 $MM Downstream 94.60 $MM Anticipated FOB Oil Price 61.7 $/bbl Sensitivity / Oil Price 55,61.7,65,70$/bbl Discount Rate 12 % 4,983 935 5,594 1,085 5,895 1,160 6,351 1,272 0 1000 2000 3000 4000 5000 6000 7000 8000 55 61.7 65 70 Oil Price $/bbl NCF Revenue 3,058.4 60.4% 1,115.4 19.4% 516.6 8.1% 747.5 12.1% Capex Opex GNPOC Govt 2007R Revenue & NCF @Price Sensitivity2007R Cash Flow Assumption 2007R Revenue Split $5,594 MM * 2007R anticipated $61.7/bbl Average Tariff Cost Oil Profit OilTotal 0 500 1000 1500 2000 2500 CashInflow(US$Million) Total Profit Oil Cost Oil Tariff 2,217.7 880.2 993.1 344.3 2007R PARTNERS CASH INFLOW
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Data input Finance ExecutiveFinance Executive Head Section / managerHead Section / manager Verification & Publish Report Net Adjusted Production Revenue Unit Cost Oil Blend price Drilling EngineerDrilling Engineer Development plannerDevelopment planner Head Section / managerHead Section / manager Total meterage drilled Total NPT days Head Section/ managerHead Section/ manager Reserve to be developed Reserve added Direct key in of data (manual input) by executives in charge Single Source reports
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Exploration ExecutiveExploration Executive Head Section / managerHead Section / manager 2D seismic 3D seismic Wildcats wells Appraisal wells Testing wells Pipe line ExecutivePipe line Executive Head Section / managerHead Section / manager Demurrage Data input Verification & Publish Report Single Source reports Direct key in of data (manual input) by executives in charge
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Data input Report Multiple Source reports Verification & Publish Reserve developed manual input Reserve developed manual input Head Section Business Info, Planning Dept Head Section Business Info, Planning Dept Formulated calculation Development target Unit Development Cost ERPERP Multiple data from various sources (system or departments) combined and calculated in EIS Exploration Reserve addition (manual input) Exploration Reserve addition (manual input) Head Section Business Info, Planning Dept Head Section Business Info, Planning Dept Formulated calculation Unit Exploration Cost ERPERP
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Through put volumes (fieldview) Through put volumes (fieldview) Head Section Business Info, Planning Dept Head Section Business Info, Planning Dept Formulated calculation Unit Transportation Cost ERPERP Multiple Source reports Data input ReportVerification & Publish Production data: Fieldview Production data: Fieldview Head Section Business Info, Planning Dept Head Section Business Info, Planning Dept Formulated calculation Unit Production Cost ERPERP Multiple data from various sources (system or departments) combined and calculated in EIS
  • BSC in Practice GNPOC as Case StudyBSC in Practice GNPOC as Case Study Cross department KPI calculation Reserve Addition From Exploration Reserve Addition From Exploration Reserve Addition From Development Reserve Addition From Development Production DataProduction Data Data Input Verification Head Section / manager Exploration Department Head Section / manager Exploration Department Head Section / manager Development Department Head Section / manager Development Department Head Section / manager Production Department Head Section / manager Production Department Report RRR For Exploration RRR for Development RRR 2P RRR 2P Average Formulated calculation Field View System
  • Scorecard Potential Pitfalls & CriticismsScorecard Potential Pitfalls & Criticisms
  • Scorecard Potential Pitfalls & CriticismsScorecard Potential Pitfalls & Criticisms Lack of a well Defined Strategy The balanced scorecard relies on a well defined strategy and understanding of linkages between strategic objectives and metrics. Without this foundation the implementation could fail. Too much focus on the lagging measures Focusing on only the lagging measures may cause a lack of priority or opportunity for the leading measures. Use of Generic Metrics Dont just copy metrics from another firm. Identify the measures that apply to your strategy and competitive position . Self-serving managers Managers whose goal is to achieve a desired result in order to obtain a bonus or other self reward.
  • BSC BenefitsBSC Benefits Helps align key performance measures with strategy at all levels of an organization Facilitates communication and understanding of business goals and strategies at all levels of an organization Strategic initiatives that follow "best practices" methodologies that cascade through the entire organization Transforms an organizations mission statement and strategic plan from a passive document into the "marching orders" for the organization on a daily basis. It enables executives to truly execute their strategies by identifying what should be done and measured.
  • Balanced ScorecardBalanced Scorecard Recipe of good decision is 90% information & 10% inspiration Thank you for your time..