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Balanced Score Card.pptx

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BALANCED SCORE CARD
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Page 1: Balanced Score Card.pptx

BALANCED SCORE CARD

Page 2: Balanced Score Card.pptx

Atul Kulkarni

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Management Truism

You cannot control what you cannot measure

Thus checking is in the heart of the control loop

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Pilot Overheard……

Yesterday I had used altitude to control the flight. Today I will use speed……

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Which alignment do we prefer?

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Twin objectives

Control using metrics Alignment of efforts

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Traditional Measures

Traditional organizations used financial measures to control their operations

Companies like Du-Pont led these efforts These models could not incorporate non-

financial measures for capturing intangible assets

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Limitations of financial measures

We cannot measure (so control) strategically important non financial aspects such as

Brand Value (Rolex) Processes (HUL) Human Capital (3M)

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Balanced Scorecard- Going Beyond Financials

Balanced scorecard retains the financial perspective but also gives equal emphasis to non financial perspectives

The scorecard balances use of financial and non-financial measures

The scorecard balances the external measures and internal measures

The scorecard balances outcome measures and their drivers (lag and lead indicators)

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Balance scorecard-strategy map Strategy of an SBU is articulated on one

A4 sheet In all four organizational perspectives

and their linkages (alignment) are explicitly considered in making the strategy map

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Four perspectives

Learning

Process

Customer

Financial

Mission/

Vision

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Financial Perspective

How do the shareholders see the company performance?

Core Metrics (common to all) include Return On Equity EVA

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Financial Perspective

Company specific metrics1. Revenue from new products and

markets2. Additional revenue from existing

customers3. Cost Reduction/productivity4. Asset utilization

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Customer perspective core

Customer acquisition, retention, satisfaction, profitability and market share

Note these are all lag indicators which will be common for all organizations

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Customer perspective Value proposition

Product service attributes1. Cost2. Quality3. Time4. Others Customer relationship Brand

These are lead indicators which will differ from company to company. They will depend on the market segment that the company targets.

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Atul Kulkarni

What will their customers value

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What is lead and lag indicator Lead indicator Lag Indicator

Animal behavior and earthquake Product that wows is a lead indicator

that I will retain my customer (lag indicator)

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Linkage between customer and financial perspective

Customer

Satisfaction

Financial Success

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Internal Process

Types of processes1. Innovation-Identify Market, Create

product2. Operations-Build products, deliver

product3. Post sale- Service customer Parameters of any process: time, cost,

quality and flexibility

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Linkage between process and customer perspective

Robust processe

s

Customer

Satisfaction

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BSC view of strategically important process

Processes required to deliver customer value proposition and financial objectives

Some processes (that add efficiency) contribute directly to the financial perspective without impacting customer perspective

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Identifying the missing process Processes which would be required to

deliver customer value may be missing as of now. Such processes have to be introduced

E.g. construction company having problems with recovery

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Learning and growth perspective

Core 1. Employee satisfaction2. Employee retention3. Employee productivity Enablers1. Staff competencies2. Climate3. Technology infrastructure

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Four perspectives- Total picture

Learning

Process

Customer

Financial

Mission/

Vision

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Importance of metrics

You cannot control what you cannot measure

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Choice of metrics

Include lead and lag indicators Beware of starting a tom and jerry game

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Set Targets

Set stretch targets Check actually achieved performance

with targets

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Cascading the scorecard

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Cascading the scorecard

All targets add up- Actions to achieve targets (initiatives)

become more operational as we go down the ladder

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An example

Microsoft Word Document

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Thank You


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