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Balanced Scorecard The successful way to implement your strategy www.consenec.ch
Balanced Scorecard
The successful way to implement your strategy
www.consenec.ch
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Implementing business strategy
How to secure successful implementation?
How to define appropriate actions?
How to communicate your strategy, actions
and progress?
How to measure the progress?
How to make sure the actions are coordinated?
How to do all this efficiently?
How to link itwith the budget?
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The Strategy Process – common weak points
BusinessIdea
MarketCompetitionLocation
SWOTBusinessIdea
KPISWOT
Strategy Development
Strategy
Business Controlling
Strategic Controlling
Financial Controlling
Non financial goals are missed out
Insufficient planning transparency
Unsatisfactory communication tools
Insufficient consistency of actions and budget
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The Balanced Scorecard (BSC) approach
The balanced scorecard is a management system (not only a
measurement system) that enables organizations to clarify their strategy
and translate it into action.
The balanced scorecard suggests that we view the organization from
four perspectives:
FinancialCustomersProcessesLearning
Source: www.balancedscorecard.org
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BSC - a popular method to implement strategy
2’500’000 Entries !
In 1987 a measuring system (score card) has been uses by Analog Devices Ltd in the US.
In the beginning of the nineties die BSC was further developed to a management system by Robert S. Kaplan und David P. Norton at the Harvard University
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Balanced Scorecard - sometimes misunderstood
The Balanced Scorecard is a management concept to implement
business strategy is applicable to every size of organization requires direct management involvement requires a culture of open communication
The Balanced Scorecard is NOT a substitute for a business strategy a quick fix for a business a system of operational key data a performance measurement tool
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How to implement BSC successfully? The implementation process is crucial for success
Involve all relevant persons
Communicate ongoing
Plan enough time
Strategy Check
Define strategic objectives
Set up strategic program
Determine performance indicators
Compile annual plan
Create a strategy map
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Get the full picture of the strategic planning process
LeistungsprozessBusiness Process
Business Plan(3 years)
Business Idea Strategy Strategic Scenario
Annual Plan(1 year)
Annual Plan
Strategic Program
Balanced Scorecard Strategic Objectives
Performance indicatorsStrategy Map
Strategic ObjectivesStrategic ActionsResponsible Person & Dates
Supporting ActionsResponsible PersonDetailed DatesCost & BenefitsBudget
(1 year)
Costs / Benefits
Budget
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The impact of soft issues – mostly underestimated
They are the most serious barriers
Costs
Market share Hard FactsProductivity
Revenues
Taboos
Frustration
Soft Facts
Sympathy
Trust
Power
Relations
Emotions
Values
Personal vision
Personal agenda
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Start with a check of your strategy
Is the strategy fit for implementation?
Are the underlying data and assumptions of the strategy realistic and well documented?
Is the strategy specific enough to be able to derive actions?
Is the strategy consistent with the parent organization?
Is there a common understanding about the strategy?
Is there consensus about the strategy in the management team?
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Set your strategic objectives
Urgency to act
Strategic Importance
Strategic change
necessary
Selective attention
Important at deviations
Low priority
Strategic importance
„cruising altitude“
Need for action
Reduce number of objectives
“twenty is plenty”
Concrete and measurable
Do it in a team; all relevant areas should be
represented (e.g. HR; finance; sales; production …)
Strategic objectives based on your business strategy
Recommendations:
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Set your “balanced” strategic objectives
Objectives
Market
Processes
Finance
Learning
Perspectives
Expectations of the investor?
Business Strategy
Expectations of the market?
Which competences do we have to develop?
Which processes do we have to optimize?
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Prepare your strategy map
Map the objectives according to their perspective
Connect the objectives the way they support each other
The strategy map tells the story of your strategy
is a check for completeness
shows conflicts and missing links
Entwicklungsprozessfür Produkte undDienstleistungen
aufgebaut
3.5
Projektmanagement-prozess für die Ab-wicklung komplexerProjekte optimiert
3.3
ABB internes / externesNetzwerk aufgebaut
4.2
Retrofit & Support inden zugeteilten
Länderorganisationen eingeführt
4.4
Montage- undIBS-Prozess integriert
3.7
In AZ fehlendeFähigkeiten aufgebaut
4.1
Fin
ance
Mar
ket
Lea
rnin
gP
roce
sses
Vorgegebene Marge beim Betriebsergebnis
erreicht
BestellungseingangAZ gesteigert
Bestellungseingangin den zugeteiltenLändern gesteigert
Kundenpräsenzqualitativ und
quantitativ erhöht
Kunde nimmt AZ alsumfassenden
Problemlöser und Partner wahr
1.2 1.31.1
2.1 2.22.3
Beschaffungs-management anAZ-Strategie an-
gepasst
3.1
Consultingprozesseingeführt
3.2
Retrofitlösungen anbieten
Von der Strategieüberzeugte Mitarbeiter
haben
4.3
Ersatzteilprozessoptimiert
3.6
Akquisitionsprozessverbessert
3.4
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Each strategic objective needs …
Entwicklungsprozessfür Produkte undDienstleistungen
aufgebaut
3.5
Projektmanagement-prozess für die Ab-
wicklung komplexerProjekte optimiert
3.3
ABB internes / externesNetzwerk aufgebaut
4.2
Retrofit & Support inden zugeteilten
Länderorganisationen eingeführt
4.4
Montage- undIBS-Prozess integriert
3.7
18
19
30
32
8
9
In AZ fehlendeFähigkeiten aufgebaut
4.1
31
15
14
13
Fin
ance
Mar
ket
Ler
nin
gP
roce
sses
Vorgegebene Marge beim Betriebsergebnis
erreicht
BestellungseingangAZ gesteigert
Bestellungseingangin den zugeteiltenLändern gesteigert
Kundenpräsenzqualitativ und
quantitativ erhöht
Kunde nimmt AZ alsumfassenden
Problemlöser und Partner wahr
1.2 1.31.1
2.1 2.22.3
Beschaffungs-management anAZ-Strategie an-
gepasst
3.1
Consultingprozesseingeführt
3.2
1
2
7
20
21
22 23 24
25
27
28
29
26
Retrofitlösungen anbieten
Von der Strategieüberzeugte Mitarbeiter
haben
4.3
Ersatzteilprozessoptimiert
3.6
Akquisitionsprozessverbessert
3.4
33
6
34
16
35
12
3
17
4
10
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an owner
2. Market
2.1 Market Presence Increased (Quality and Quantity)
Offering services is very challenging. To accomplish ourgrowth target we have to increase our presence in themarket so potential clients become aware of us.It is our aim that clients know about our solutions / servicesand that our department has a good reputation based onperformance.
2. Market
2.1 Market Presence Increased (Quality and Quantity)
Offering services is very challenging. To accomplish ourgrowth target we have to increase our presence in themarket so potential clients become aware of us.It is our aim that clients know about our solutions / servicesand that our department has a good reputation based onperformance.
a short description
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Define your key performance indicators (KPI)
Define at most two measurements
per strategic objective
Measure process output (results)
and check for relevance
Define owner, data source and
frequency of measurement
Integrate the measurements into
you bonus and reporting system
Engineeringkosten
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Fokussierung Verkauf
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95.0%
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The key performance indicators are used to monitor the
progress of the strategic actions
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Compile your Balanced Scorecard
Balanced Scorecard Nr. Strategic Objectives Key Performance Indicators A04 05 06 07 Strategy MapF11 Achieve profitable growth Revenues (MCHF) 91
F12 Improve productivity Revenues / Total employees (kCHF) 319
F13 Improve asset management Net op. working capital / Revenues (%) 21
M21 Develop xx module business Revenues with xx / xx (MCHF) -
M22 Develop xx business Revenues with xx (MCHF) 10
M23 Grow xx business Revenues with xx (MCHF) 4.5
M24 Develop business in fast growing markets Revenues xx (MCHF) 5
P31 Improve product development processes Revenues with new products (%) 20
P32 Improve customer interface processes CCRP customer satisfaction index (%) 85
On-time delivery POTD (%) 96
Rolled throughput yield (%) 80
Product infant mortality (dpm) 440
P34 Secure supplies of strategic materials Raw material availability (%) 96
P35 Align IT to support business processes IT costs / Revenues (%) 2.7
P36 Provide a sustainable work environment Number of severe accidents 0
L41 Create a culture of business excellence Scoring vs. EFQM BE model (%) -
L42 Identify with business processes Cross functional trainings (N° of peoples) -
L43 Develop Six Sigma competence Savings from Six Sigma initiatives (MCHF) -
L44 Manage employee development Employee appraisals (% accomplishment) 95
P33 Achieve operational excellence in production
Fina
nce
Mar
ket
Lear
ning
Proc
esse
s
Achieve profitable
growth
Improve productivity
Improve asset
management
Develop xx
business
Develop xx module
business
Grow xx
business
Develop business in fast growing
markets
Achieve operational
excellence in production
Create a culture of business
excellence
Master product
development processes
Master customer interface
processes
Provide a sustainable
work environment
Manage employee
development
Identify with Business
Processes
Secure supplies of strategic materials
Align IT to support
business processes
Develop Six Sigma
competence
Example
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Prepare your strategic program
LeistungsprozessBusiness Process
Business Plan(3 years)
Business Idea Strategy Strategic Scenario
Annual Plan(1 year)
Balanced Scorecard
Strategic ProgramStrategic Actions for the planning periodResponsible Person & Dates
Budget(1 year)
Budget
Strategic ObjectivesKey performance indicatorsStrategy Map
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Example of a strategic program
…. Start and finish dates of activities
The strategic program is the action plan to implement your strategy
WhoStrategic Objective KPI Nr. Supporting ActionsNr. 05
Mar
ket
Develop modulebusiness
M 22
M 24
M 23
M 21
04 06 07
Revenues by modules (M€) M 211
Design-in at customer A RV
Develop X-productbusiness
Revenues by X-products (M€)
M 221 Develop USmarket
CM M 222 Penetrate medical
market
M 223 Develop tractionmarket
RV
RV
Develop Y-product
businessRevenues by
Y-products (M€)M 224
Penetrate Indianmarket
RevenuesIndia market (M€)
M 225
Conduct promotionproject
Prepare businessplan
AL
CM
RVM 226Develop local
sales organization
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Linking actions to objectives
The Balanced Scorecard and the Strategic Program are a strong and transparent pond between
Balanced Scorecard
Strategic Program
PerformanceIndicator
Actions
Objective
objectives,
performance indicators and
actions
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Prepare your annual plan
LeistungsprozessBusiness Process
Business Plan(3 years)
Business Idea Strategy Strategic Scenario
Annual Plan(1 year)
Strategic Program
Balanced Scorecard
Budget(1 year)
Budget
Annual Plan
Supporting ActionsResponsible PersonDetailed DatesCost & Benefits
Costs / Benefits
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Example of an annual plan
Detailed action plan for the current year This is your tool for strategic controlling
Budget Budget
WhoSupporting ActionsNr.
Mar
ket
M 211
Q1
Design-in at customer A RV
Product qualified
Close frame contract
System qualified
Ship first product batch
ResultQ3Q2 Q4
W18
W10
W39
W46
RV
RV
RV
RV 0,2 M€
0,3 M€
Activity
Production planning
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In this way you secure consistency of actions
BALANCED SCORECARD
Nr Strategische Zielsetzung(Objective)
Messwert(repräs. Kennzahl)
Ziel-wert
98 98 99 00 01
FINANZ
F1
F2
F3
F4
Gewinnsteigerung
Umsatzsteigerung
Produktivitätssteigerung
Net Working Capital Mgt.Verbessern
OEAD / Rev (%)
Revenues (MCHF)
Va / Pex
NWC / Rev (%)
MARKT
M1
M2
M3
M4
Aufbau von Neukunden
Kundenzufriedenheit steigern
Liefertermintreue verbessern
Time to market verkürzen
Umsatz (MCHF)
Umfrage-Index (%)
OTD (%)
DLZ (Wo)
PROZESSE
P1
P2
P3
P4
Kundenbetreuung verbessern
Komplexitätsreduktion
Planungsprozess optimieren
Produktionskosten senken
Face-to-face-time (Tg p.a.)
Datenmenge / Rev. (%)
OTD (%)
Pex Prod. MA / Anzahl BE(Fr.)
LERNEN
L1
L2
L3
L4
Kulturentwicklung fördern
Strateg. Personalplanung
Polivalenz der MA steigern
Fach- & Prozess-Know-howsteigern
MA-Umfrage (immat.Zufriedenh.)
MA Anford. „2000+“ erfüllt(%)
% MA Job Rotations p.a.
Ausbildungstage / MA p.a.
EtappenzieleIst BU
Ursache-Wirkungsverknüpfung
2 2
3
3
4
4
Kunden- zufriedenheit / -rentabilität
strateg. Personalplanung & Rekurtierung
Produktivität
Umsatz Stammkunden
Profit
Net Working Capital
Time To Market
OTD
Bestandes- & Beschaffungs- Management
Produktions- kosten
Qualität
Komplexitäts- reduktion
Produktionsfähigkeit Volumenflexibilität Fertigungstechnologie
Aufbau von Neukunden
Produktivitätssteigerung Personal
Fachkompetenz - Verkauf - Planung & Steuerung - Beschaffungs-Mgt. - Bestandes-Mgt. - SAP, IT-Tools - Projektleitung - Fertigung
Polivalenz der MA
Kulturentwicklung
Lieferzeit 1
1
Margen- steigerung
Prozessoptimierung Produktionsplanung ProdukteLlifecycle Mgt.
Umsatz
Kunden- bindung/ -betreuung
5
5
Balanced Scorecard
Strategic Program
P3
P32
Annual Plan
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Implement your strategic controlling process
LeistungsprozessBusiness Process
Business Plan(3 years)
Business Idea Strategy Strategic Scenario
Annual Plan(1 year)
Annual Plan
Strategic Program
Balanced Scorecard
Budget(1 year)
Costs / Benefits
Budget
Progress of actions and results
Operational and financial data
StrategicControlling
Planning-Data
Feedback fornext planning period
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Strategy implementation as a continuous process
Balanced Scorecardrevision every year
revisestrategic program
revisestrategy map
assess strategyand progress
prepareannual plan
Strategic Controlling
strategic actions
assessprogress
correctiveactions
Strategic Controllingassessment every quarter
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Consider these recommendations
Secure the motivation of the involved people
“Here we go again”
Reduce objectives and actions
“What is strategically important?”
Select the “right” performance indicators
Which are the right?
Don’t underestimate the time to introduce BSC
Consider iterations
Communicate your strategy comprehensible
Everybody knows the key messages
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Here is what you get from Balanced Scorecard
Efficient communication tool
Common understanding of your strategy
Better transparency and controllability
Better alignment of strategic actions
Effective business controlling toolSuccessfu
l strategy
implementation!
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