21244446 Balanced Scorecard PPT

7/30/2019 21244446 Balanced Scorecard PPT

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Managing

CorporatePerformance

with BalancedScorecard


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You can download this presentation at:

www.exploreHR.orgVisit www.exploreHR.org for more

presentations on HR management and

people strategy
http://www.explorehr.org/http://www.explorehr.org/


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Contents :

1. Corporate Performance Scorecard

2. Strategy Map Framework

3. Four Perspectives in Balanced Scorecard

4. Identifying Key Performance Indicators

5. Strategy Map in Corporate Functions (HR, IT,

Finance and Marketing)


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Corporate

Performance Management


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Performance Management Framework

Identifying

Defining

Measuring

Monitoring

Reporting

Key

Performance

IndicatorsCompany

strategy

Vision

Mission

Strategy

Strategy Map


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Three critical components for effective process of

performance management

Performance

Management

Infrastructure

Performance

Management

Culture

Performance

Management

Process

Performance management

cycle is continuous and

consistent

Culture that is based

on performance

accountability

Logistic support and

performance management

administration

Performance Management Component


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STRATEGY

Plan and Execute

Monitor and Evaluate

Reward and Coach

Set Measures and Target

Performance Management Cycle



Managing Performance with

Balanced Scorecard

Balanced Scorecard is a management tool that

provides stakeholders with a comprehensive

measure of how the organization is progressing

towards the achievement of its strategic goals.



Balances financial and non-financial measures

Balances short and long-term measures

Balances performance drivers (leading

indicators) with outcome measures (laggingindicators)

Leads to strategic focus and organizational

alignment.

Managing Performance with

Balanced Scorecard


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Strategy and Balanced Scorecard

Mission

Why We

Exist

Vision

What We

Want to Be

Values

Whats

Important

to Us

Strategy :

Our Game

Plan

Strategy

Map :

Translate theStrategy

BalancedScorecard :

Measure and

Focus

Strategic

Outcomes

SatisfiedShareholders

Delighted

Customers

Excellent

Processes

Motivated

Workforce



The strategy map framework is presented in thefollowing slides.

This framework describes the types of strategic

target that should be presented in each perspective,namely the financial perspective, customers, internal

business process, and learning & growth perspective.

Strategy Map Framework



Cost Efficiency

Long-term Shareholder

Value

Revenue Growth

Price Availability BrandServiceQuality

Operations

Management

Processes

Human Capital

Customer

Management

Processes

Innovation

Processes

Regulatory

and Social

Processes

Organization Capital Information Capital

Strategy Map Framework

Financial

Customer

Internal Process

Learning & Growth



Financial Perspective

In private companies, the financial perspective is themain objective (ultimate goal) without having to

sacrifice the interests of other relevant stakeholders

(community, environment, government, etc.)

In the financial perspective, the strategic goal is the

long-term shareholder value. This goal is driven by

two factors, namely : revenue growth and cost

efficiency.



Long-term

Shareholder Value

Revenue Growth

Improve Cost Structure

Increase Asset Utilization

Cost Efficiency

Strategic Objectives in Financial

Expand Revenue

Opportunities

Enhance Customer Value


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Customer Perspective

This perspective is very instrumental, because withoutcustomers, how can a company survive?

Customer perspective covers the following elements:

Customer acquisition

Customer retention

Customer profitability

Market share

Customer satisfaction


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Price Availability BrandServiceQuality

Customer Acquisition

Customer Satisfaction

Customer Retention Customer Profitability

Market Share

Strategic Objectives in Customer


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Internal Process Perspective

This perspective reflects the processes in key businessthat should be optimized in order to meet the needs of

the customers.

There are four main themes in this perspective, namely:

Operations Management Process

Customer Management Process

Innovation Process

Regulatory and Social Process


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Operations

Management

Processes

Customer

Management

Processes

Innovation

Processes

Regulatory

and Social

Processes

Processes thatproduce and

del iver prod ucts

and serv ices

Processes thatenhance cus tomer

value

Processes thatcreate new

products and

serv ices

Processes thatimprove

comm uni t ies and

the environm ent

Supply

Production

Distribution

Selection

Acquisition

Retention

Growth

New Ideas

R&D Portfolio

Design/

Develop

Launch

Environment

Safety &

Health

Employment

Community

Strategic Objectives in Internal Process


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Learning & Growth Perspective

This perspective reflects the capability that a companyshould have, namely:

Human Capital

Organization Capital

Information Capital

This perspective shows us that good human resource

development system, organizational system and

information system forms a solid foundation for improving

company performance.


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Human CapitalOrganization

Capital

Information

Capital

Skills

Knowledge

Attitude

Systems

Database

Networks

Culture

Leadership

Organization

Development

Strategic Objectives in

Learning & Growth


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Strategy Map Template

The following slide displays the strategy map templatecomprising of four perspectives : financial, customer,

internal business process, and learning & growth.


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Improve

Cost Efficiency

Enhance Long-term

Shareholder Value

Increase Revenue Growth

Enhance

Brand Image

Build High

Performance Products

Achieve

Operational

Excellence

Develop Strategic

Competencies

Drive Demand

through Customer

RelationManagement

Manage Dramatic

Growth through

Innovation

Implement Good

Environmental

Policy

Build Learning

Culture

Expand Capabilities with

Technology

Strategy Map Template

Financial

Customer

Internal Process

Learning & Growth

Expand

Market Share


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Identifying Key Performance

Indicators (KPI)


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Vision

Mission

and Values

Strategy

Finance

Customer

Internal BusinessProcess

HRDevelopment

Key Performance

Indicators

Key Performance

Indicators

Key Performance

Indicators

Strategic Objectives

KPI = Measurement or

indicator that providesinformation on how far we

have succeeded in

achieving the strategic

objectives

Key Performance Indicators (KPI)


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The measure of success must show clear, specific and

measurable performance indicators.

The measure of success should be declared explicitly and in

detail so that it is clear what is being measured.

Costs to identify and monitor the measure of success should

not exceed the value that will be known from the measurement.

Guidelines in Formulating the KPI

KPI Guidelines


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Relevant to theStrategic Objective

Does KPI have a linkage with the strategicobjectives?

Controllable Are the KPI achievements still under control?

ActionableCan any action be taken to improve the

performance?

Simple Is the KPI easy to explain?

Credible Is the KPI not easy to manipulate?

KPI Guidelines


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KPI Family Dimension

Productivity Measures employee output (units/

transactions/ dollars), the uptime levels and

how employees use their time (sales-to-

assets ratio, dollar revenue from new

customers, sales pipeline).

Measures the ability to meet and/or exceed

the requirements and expectations of the

customer (customer complaints, percentreturns, DPMO -- defects per million

opportunities).

Quality


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Profitability Measures the overall effectiveness of themanagement organization in generating

profits (profit contribution by

segment/customer, margin spreads).

Measures the point in time (day/week/

month) when management and employee

tasks are completed (on-time delivery,

percent of late orders).

Timeliness


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ProcessEfficiency

Measures how effectively the managementorganization incorporates quality control, Six

Sigma and best practices to streamline

operational processes (yield percentage,

process uptime, capacity utilization).

Measures how effectively the management

organization leverages existing business

resources such as assets, bricks and mortar,investments (sales per total assets, sales per

channel, win rate).

Resource

Utilization


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CostSavings

Measures how successfully the managementorganization achieves economies of scale and

scope of work with its people, staff and

practices to control operational and overhead

costs (cost per unit, inventory turns, cost of

goods).

Measures the ability of the management

organization to maintain competitive economicposition in the growth of the economy and

industry (market share, customer

acquisition/retention, account penetration).

Growth


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KPI Category Dimension

DirectThe actual raw data value as measured (e.g.,

sales volume).

PercentThe comparison of the changes in

performance of one value relative to the

same value at a different time, geography,

etc. (e.g., percentage change in sales vs.

last year).


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Simple

Ratio

The comparison of one value relative to another to

provide a benchmark for comparison of

performance (e.g., average sales per day).

IndexA combination of several separate measures

added together that result in an overall indicator

of performance (e.g., (company sales

growth)/(industry sales growth) for a specific

geography).


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Composite

Average

The addition of the weighted averages of several

similar measures that result in an overall composite

indicator of performance (e.g., customer satisfaction

composite is mixture of results from surveys, focus

groups and product returns).

StatisticsMultiple measures such as mean, variance,

standard deviation and variance that capture the

spread and distribution of the performance

measures (e.g., sales distribution by demographics,

geography, channel).


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Strategy Map for

Corporate Functions (HR, IT, Finance and

Marketing)

I t ti b t C t d


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VisionMission

Strategy

Integration between Corporate and

Division/Department

Corporate

Scorecard

Division

Scorecard

The Division Scorecard

is built by referring to the

corporate scorecard


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Financial

Customer

Internal Process

Learning & Growth

Corporate

Finance

Corporate

Market ing

Product ion

Supply Chain

R & D

Corpo rate HR

Info

Technology

Corporate and Division Scorecard


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Division Scorecard is formulated by looking at the four

perspectives in Corporate Scorecard.

As shown in the previous slides, the learning & growth

perspective provides guidelines for developing scorecard atthe Human Resource and IT divisions, while the internal

process perspective provides guidelines for developing

scorecard at the supply chain division or R&D.


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Sample from GE Lighting Business Group

Level of Organization Financial Customer Internal Process Learning & Growth

Corporate Scorecard Increase prof it margin Improve customer Increase inventory turns Increase level of

satisfaction level Improve internal process employee competency

Division Scorecard Optimize cost of production Improve customer Increase inventory turns Increase level of

Reduce inventory levels satisfaction level Improve internal process employee competency

Plant Scorecard Optimize cost of production Increase percent of Increase inventory turns Number of "on theIncrease yields ratio on time delivery Reduce number of defects job training" delivered

Increase labor productivity Reduce customer per million Number of performance

Reduce inventory levels complaints per million Improve quality incoming coaching session

materials

Maintain optimum equipment

speed

Frontline Employee Reduce waste Reduce equipment downtime Number of "on the

Scorecard Reduce overtime Reduce number of poor job training" attended

Increase production rates solders Number of performance

Reduce number of cracked coaching session

bulbs attended

The abov e examp le show s how th e scorecard at corp orate level is

cascaded to d iv is ion level, and fu rther to plant level and emp loyee level.


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Division Strategy Map Template

The strategy map for HR Division, Information Technology

Division, Finance Division, and Marketing Division are

presented in the following slides.


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Optimize HR Efficiency

Drive Long term

Shareholder Value

Enhance People & Organizational

Effectiveness

Achieve HR

Process

Excellence

Develop Strategic &

Functional HR Competencies

Build Strategic

Employee

Competencies

Drive

Organizational

Performance

Enhance Technology

for HR

Create Climate for

HR Action

HR Strategy Map Template

Financial

Customer

HR Internal Process

Learning & Growth

Create Positive Work

Environment

Provide Quality

HR Service

Provide High

Performance People


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Optimize IT Efficiency

Drive Long term

Shareholder Value

Enhance IT Impact on

Enterprise Outcome

Maintain a

Reliable IT

Infrastructure

Develop Strategic &

Functional IT Competencies

Develop Effective

Decision

Support System

Propose and Deliver

Transformational

Applications

Enhance IT Tools that

Enhance the IT Function

Promote Customer-

focused Culture

IT Strategy Map Template

Financial

Customer

IT Internal Process

Learning & Growth

Deliver Consistent, High

Quality IT Service

Provide Business Units with

Innovative IT Solutions


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Optimize Financial Efficiency

Drive Long term

Shareholder Value

Enhance Finance Effectiveness on

Enterprise Outcome

Achieve Finance

Process

Excellence

Develop Strategic &

Functional Finance

Competencies

Develop Financial

Information to

Improve Decision

Making

Ensure Compliance

with Regulatory

Requirements

Use Technology to Improve

Financial Information

Delivery

Finance Strategy Map Template

Financial

Customer

Finance Internal Process

Learning & Growth

Deliver Responsive & Efficient

Finance Operations

Provide Clear & Reliable

Required Disclosure

Promote Customer-

focused Culture


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Optimize Marketing Efficiency

Drive Long term

Shareholder Value

Increase Sales

Revenue

Develop Innovative

Marketing

Communication

Program

Develop Strategic &

Functional Marketing

Competencies

Develop

Marketing Business

Intelligence

Accelerate

New Product

Development

Ideas

Enhance Technology

for Marketing

Foster Creative Thinking

& Innovative Solutions

Marketing Strategy Map Template

Financial

Customer

Internal Process

Learning & Growth

Create Satisfied and

Loyal Customers

Enhance Brand

Image

Develop Effective

Customer Relation

Management


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Recommended Further Readings:

1. Robert Kaplan and David Norton, Strategy Map : Converting IntangibleAssets into Tangible Outcomes, HBS Press

2. Robert Kaplan and David Norton,Alignment : Using the Balanced

Scorecard to Create Corporate Synergies, HBS Press

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