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Balanced Scorecard
Kaplan & Norton: HBRJuly-August 2005: repeat of 1992 seminal article
Feb 2004: Strategy MapOct 2005: Examples
March 2006: Implementation examples
Finland 2010
Perspectives
• GOALS & PERFORMANCE MEASURES– Financial perspective
• How do we look to shareholders?
– Customer perspective• How do customers see us?
– Internal Business perspective (BPR)• What must we excel at?
– Innovation & Learning perspective• Can we continue to improve & create value?
Finland 2010
Example: anonymous semiconductor company
• FINANCIAL perspective
GOALS MEASURES
Survive Cash flow
Succeed Quarterly sales
Growth
Operating income by division
Prosper Increase in market share
Increase in Return on Equity
Finland 2010
CUSTOMER perspective
GOALS MEASURES
New products % sales from new products
% sales from proprietary products
Responsive supply
On-time delivery
(customer definition)
Preferred suppliers
Share of key accounts’ purchases
Ranking by key accounts
Customer partnerships
# of cooperative engineering efforts
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INTERNAL BUSINESS perspective
GOALS MEASURES
Technology capability
Benchmark vs. competition
Manufacturing excellence
Cycle time
Unit cost
Yield
Design productivity
Silicon efficiency
Engineering efficiency
New product innovation
Schedule: Actual vs. PlannedFinland 2010
INNOVATION & LEARNING perspective
GOALS MEASURES
Technology leadership
Time to develop next generation
Manufacturing learning
Process time to maturity
Product focus % products equalling 80% of sales
Time to market New product introduction vs. competition
Finland 2010
2004 article: Strategic Readiness
• Strategy map: framework to link intangible assets to shareholder value creation– Through the 4 perspectives
• 3 Intangible Asset categories essential to implement strategy (Learning & Growth)– Human Capital
• Skills, training, knowledge
– Information Capital• Databases, information systems, networks, infrastructure
– Organizational Capital• Culture, leadership, alignment with goals, knowledge sharing
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Strategy Map: Intangible assets link to Internal Process
• Intangible assets make up Learning & Growth perspective• Map to Internal Process perspective
– Operations Management• Produce & deliver products & services
– Customer Management• Enhance customer value
– Innovation• Create new products & services
– Regulatory & Social• Improve communities & the environment
• Customer perspective– Price, quality, availability, selection, functionality, service, partnership, brand
• Financial perspective– Productivity strategy
• Improve cost structure• Increase asset utilization
– Revenue growth strategy• Enhance customer value• Expand revenue opportunities
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Consumer Bank (anonymous) example: Human Capital
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Information Capital Readiness
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Organization Capital Readiness
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SCM & BSCBeasley, Chen, Nunez & Wright, Strategic Finance 87:9 [2006]
CATEGORY Purpose Aim
Learning & Growth for Employees
To achieve our vision How will we sustain our ability to change & improve?
Internal Business Processes
To satisfy our stakeholders & customers
Where must we excel in our business processes?
Customer Satisfaction To achieve our vision How should we appear to our customers?
Financial Performance To succeed financially How should we appear to our stakeholders?
Finland 2010
Learning & Growth for Employees
GOALS MEASURES
Increase employee process ownership Employee survey scores
Improve information flows Changes in information reportsFrequencies across supply chain partners
Increase employee identification of potential supply chain disruptions
Compare actual disruptions with reports of potential disruption drivers
RISK-RELATED GOALS
Increase employee awareness Number of employees attending risk management training
Increase supplier accountability Supplier contract provisions on risk
Increase employee awareness of supply chain risks & other enterprise risks
Number of departments participating in supply chain risk identification & assessment workshops
Finland 2010
Internal Business ProcessesGOALS MEASURES
Reduce waste across supply chain Pounds of scrap
Shorten time from start to finish Time from raw material purchase to product/service delivery to customer
Achieve unit cost reductions Unit costs per product/service delivered% of target costs achieved
RISK-RELATED GOALS
Reduce probability & impact of threats Number of employees attending risk management training
Identify specific tolerances for key processes
Number of process variances exceeding specified acceptable risk tolerances
Reduce number of exchanges of supply chain risks to other enterprise processes
Extent of risks realized in other functions from supply chain process risk drivers
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Customer Satisfaction
GOALS MEASURES
Improve product/service quality Number of customer contact points
Improve timeliness of product/service delivery
Time from customer order to delivery
Improve customer perception of value Customer scores of value
RISK-RELATED GOALS
Reduce customer defections Number of customers retained
Monitor threats to product/service reputation
Extent of negative coverage of quality in press
Increase customer feedback Number of completed customer surveys about delivery comparisons to other providers
Finland 2010
Financial PerformanceGOALS MEASURES
Higher profit margins Profit margin by supply chain partner
Improved cash flows Net cash generated over supply chain
Revenue growth Increase in customers & sales per customer% annual return on supply chain assets
RISK-RELATED GOALS
Reduce threats from price competition Number of customer defections due to price
Reduce cost overruns Surcharges paidHolding costs incurredOvertime charges applied
Reduce costs outside the supply chain from supply chain processes
Warranty claims incurredLegal costs paidSales returns processed
Finland 2010
Gaudenzi & BorghesiThe International Journal of Logistics Management 17:1 [2006]
• AHP in balanced scorecard style– Develop formula to evaluate risk within
departments
• Focus on top level criteria– On-time delivery– Completeness– Correctness– Damage/defect free products
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Gaudenzi & Borghesi Weights
Criteria Mean weights Extreme1 weights Extreme2 Weights
On-time delivery
100 0.317 100 0.402 50 0.215
Completeness 90 0.286 66 0.265 100 0.429
Correctness 75 0.238 50 0.201 50 0.215
Damage-defect free
50 0.159 33 0.133 33 0.142
315 249 233
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Weights: Contingent uponOn-time first vs. Completeness
firstCriteria On-time first Completeness firstOn-time delivery 0.36 0.22Completeness 0.29 0.43Correctness 0.21 0.21Damage-defect free 0.14 0.14
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On-time delivery evaluation – Manager subjective scores
Procurement Warehouse Order Cycle
Mfg Trans.
On-time delivery
0.36 0 0.5 1 0.5 0
Completeness 0.29 0 0.5 1 1 1
Correctness 0.21 1 1 1 1 0.5
Defect free 0.14 0.5 1 1 1 0
Value scores 0.28 0.675 1 0.82 0.395
Finland 2010
Completeness evaluation – Managerial subjective scores
Procurement Warehouse Order Cycle
Mfg Trans
On-time delivery
0.22 0 0.5 1 0.5 0
Completeness 0.43 0 0.5 1 1 1
Correctness 0.21 1 1 1 1 0.5
Defect free 0.14 0.5 1 1 1 0
Value scores 0.28 0.675 1 0.89 0.535
Finland 2010
Other Business Scorecards in Broader Perspectives
• Internal auditing in accounting– Campbell, Adams, Campbell & Rose
• Financial Executive 22:1 [2006]
• Mental health governance– Sugarman & Kakabadse
• The International Journal of Clinical Leadership 16 [2008]
Finland 2010
Marketing natural gas vehiclesJanssen, Lienin, Gassmann & Wokaun, Transportation Research Part
A 40 [2006]
INDICATORS1. Ratio of natural gas vehicles per
compress natural gas fueling stations
2. Type coverages (how many different natural gas vehicle types were available)
3. Natural gas vehicle investment pay-back time
4. Sales per type
5. Subsidies par automobile
Finland 2010