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8/6/2019 Basics of BSC
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BALANCED SCORECARD
Do we need to be clear about?
GoalObjectiveMission
Vision
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BALANCED SCORECARD
A goal or objective consist of a projected state of affairs which
a person or a system plans or intends to achieve or bring aboutA personal or organizational desired endpoint in some sort ofassumed development.
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Goal2009
Objective2014
Mission2029
7000 Cr 15,000 Cr 55,000 Cr
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4Perspectives
Financial
PerspectiveCustomer
Perspective
Internal
BusinessProcess
Perspective
Learning &Growth
Perspective
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BALANCED SCORECARD
Develop
Strategic Goals
Mission Vision
Clarify mission &Vision statement
Strategic Goals
DeriveSub-Goals
Sub-Goals
Map Sub-Goals to
each quadrant of theBalanced Score Card
- identify measurement areas- develop measurement goals- postulate indicators- identify data elements
For each BSC Quadrant
Data Elements
Module
TroubleReports
Indicators
BalancedScorecard
Internal Business
Sub-Goals
Learning & Growth
Sub-Goals
Customer Sub-Goals
Financial
Sub-Goals
Internal Business
Sub-Goals
Learning & Growth
Sub-Goals
Customer Sub-Goals
Financial
Sub-Goals
MethodologyOverview
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BALANCED SCORECARD
A Balanced Scorecard Perspectiveon Performance
Objective
Measures
Targets
InitiativesCUSTOMER
How do our
customers
see us?
Objective
Measures
Targets
Initiatives
LEARNING and
GROWTH
Can we
continue to
improve and
create value?
Objective
Measures
Targets
InitiativesFINANCIAL
How do we
look to
shareholders?
Objective
Measures
Targets
Initiatives
INTERNAL BUSINESSPROCESS
What must
we excel at?
Vision
and
Strategy
Objective
Measures
Targets
InitiativesCUSTOMER
How do our
customers
see us?
Objective
Measures
Targets
Initiatives
LEARNING and
GROWTH
Can we
continue to
improve and
create value?
Objective
Measures
Targets
InitiativesFINANCIAL
How do we
look to
shareholders?
Objective
Measures
Targets
Initiatives
INTERNAL BUSINESSPROCESS
What must
we excel at?
Vision
and
Strategy
Vision
and
Strategy
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BALANCED SCORECARD
4Perspectives
Financial
Perspective
Financial Perspective Evaluatethe Profitability of the Strategy
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4Perspectives
Customer
Perspective
Customer Perspective identifies TargetedCustomer and market Segments andMeasuresthe Organizations success in these Segments
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4PerspectivesInternal
BusinessProcess
Perspective
This perspective focuses on internaloperationsthat create value for customers that ,in turn,
furthers the financial perspective byincreasingthe shareholder value
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4
Perspectives
Internal
BusinessProcess
Perspective
3 subProcess
es
Innovation Process
Creating ProductsServices &ProcessesTo meet the demandOf Customers
Operations Process
Producing &deliveringExisting products that
Will meet the needsOf Customers
Postsales-ServiceProcessProviding service andSupport to the customerAfter the sale of aproduct or service
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4Perspectives
Learning &GrowthPerspective
This perspective identifies the capabilities theorganization must excel at to achieve superior
internal processes that create value forCustomers and shareholders
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Target Actual
Objective Measures Initiatives Perform Perform
FinancialPerspective
IncreaseShareholdervalue
Operating incomeFrom ProductivityGain
Operating IncomeFrom Growth
Revenue Growth
Manage CostAnd UnusedCapacity
Build StrongCustomerRelationship
Rs 20 Cr Rs 20.12Cr
Rs 30 Cr Rs 34.20 Cr
6% 6.48%
FINANCIAL PERSPECTIVE
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Target Actual
Objective Measures Initiatives Perform Perform
CustomerPerspective
IncreaseCustomerSatisfaction
Market Share inCommunicationNetwork Segment
Number of NewCustomers
CustomerSatisfactionRating
Identify futureNeeds ofCustomers
Identify newTargetCustomer Seg
Increase Cust
Focus of Sales
6% 7%
1% 2%
90% give 87%GaveTop two top twoRatings Rating
Customer Perspective
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Target ActualObjective Measures Initiatives Perform Perform
ReduceDelivery Time
Meet SpecifiedDelivery dates on time delivery
Improve postSales Services
ImproveProcesses
ImproveManufacturingCapability
Reduce Setup timeAutomation of Orders
Re-engineer orderDelivery process
Re-engineer order 92% 90%
Delivery process
Improve CustomerService process
30 days 30 days
Service ResponseTime
Number of Impv.In BusinessProcesses
% of processesWith Advanced
Controls
Within4 hrs
Within3 hrs
Organize teamsfrom Sales & Manuf
Organize R&D/MfgTeams to implementAdv. control
5 5
75% 75%
INTERNAL BUSINESS PROCESS PERSPECTIVE
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Target ActualObjective Measures Initiatives Perform Perform
Align EmployeeAndOrganizationalGoals
DevelopProcessSkill
EmpowerWorkForce
Learning and Growth Perspective
Employee Satisfac-tion Rating
% EmployeesTrained in Process& Quality Mgt
% WorkersEmpowered toManageProcesses
EmployeeParticipation toBuild Team Work
EmployeesTrainingProgramme
Supervisors asCoaches ratherDecisionMakers
80% 88%EmployeesGive topTwoRatings
90% 92%
80% 80%
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Features of Balance Score Card
vIndicate companys strategy and its link with perspectivesv
vStrategy is communicated to allv
vStrategy translated into measurable targetsv
vMotivates Managers to achieve targetsv
vBSC limits the measures to only fourv
vHighlights effect of one perspective on another
SCO C
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Pitfalls in Implementing Balanced Score Card
vDifficult to establish Fin-Non financial Linkages
vvImprovements at all levels may not be possiblev
vBoth subjective-objective measures Considerationv
vConsidering Cost & benefits of initiativesv
vNon-financial Achievements are ignoredv
v
SCORECARD
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Vision & Strategies not actionable
Strategies not linked to departmental andIndividual Goals
Strategies not linked to Long term/short term
Resource Allocation
Feedback that is tactical not strategic
Barriers to effective Implementation of BSC
SCORECARD
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Cant be translated into actionCant be acted Upon
Cant be understoodFragmentation & Sub optimizationof effortsLacking consensus & ClarityDifferent AgendasNo integration
Not linked coherently to overall strategy
Barrier No 1: Vision and strategy not Actionable
SCORECARD
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Separate Processes for Long term &Short term Strategic planningFunding to unrelated prioritiesPoor Monthly ReviewsUnfocused New Mgt TechniquesPoor Integration
Barrier No 3: Strategy not Linked to Resource Allocation
SCORECARD
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Bulk of feedback is only financial measuresLittle time on strategy implementation & successNo priority to periodic review and meetingsInadequate informationPoor tactical review process
Barrier No 4: Feed back not tactically strategic
SCORECARD
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BALANCED SCORECARDDifferent Management System for Strategic Implementation
Clarifying &Translating
The Strategy & Vision
Planning &Target Setting
CommunicatingAnd Linking
Strategic Feedback&Learning
BalanceScorecard
Goal alignments fromtop to bottom
Education and opencommunication about strategy
Compensation is linkedTo Strategy
Stretch targets are established and acceptedStrategic initiatives are clearly identifiedInvestments are determined by strategyAnnual Budgets are linked to long term planning
The strategy is the reference point for the entire management processThe shared vision is the foundation for strategic planning
Feedback system used to testThe hypothesis on which strategyIs based
Team problem solvingStrategy development is aContinuous Process
BA ANCED SCORECARD
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BALANCED SCORECARD4
Perspectives
Financial
Perspective
Customer
PerspectiveInternal
BusinessProcess
Perspective
Learning &Growth
Perspective
BALANCED SCORECARD
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BALANCED SCORECARDTranslating the strategy to operational terms
If we succeed, how willWe look to ourShareholders?
The Strategy
Financial Perspective
To satisfy our customers,Which processes must
We excel ?
Internal Perspective
To achieve our vision,How must we look to our
Customers ?
Customers Perspective
To achieve our vision, how must
our organisation teamImproves?
Organizational Learning
Measurement is the
language that gives clarityTo vague concepts
Measurement is used tocommunicate,Not to control
Strategy can be described as a series ofCause and Effect relationship
BALANCED SCORECARD
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BALANCED SCORECARDMake Strategy a continuous Process
Strategy
BalancedScorecard
Budget
PerformanceInput Output
Strategic LearningLoop
Management ControlLoop
85% of Mgtteams
Spends less
than1 hr per monthOn strategy
issues
60% OF OrgDont linkStrategy &
budgets
78% orgs lockBudgets to anAnnual cycle
92% of orgsDo not report
On lead
indicators
BALANCED SCORECARD
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26
Knowledge, Skills, Systems, and ToolsKnowledge, Skills, Systems, and Tools
Financial ResultsFinancial Results
To Build the Strategic Capabilities..
Needed to Deliver UniqueSets of Benefits to Customers...
To Drive FinancialSuccess...
And Realizethe Vision
Equip our People...
InternalInternalCapabilitieCapabilitiess
Customer Benefits
We Use the Scorecard to Articulate Strategic-Hypotheses in Cause effect Terms