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7/27/2019 HRM Report_Section C_Group 10
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Human Resource Management Term - III
Indian Institute Of Management, Kozhikode
BALANCED
SCORECARDThe Initiative at Hindustan Petroleum Corporation Limited
Section – C, Term IIIProf. Manoranjan DhalMarch 21, 2013
SUBMITTED BY:
Group 10 :
Arkaprabha Debnath PGP/16/133Panii Ngaoni PGP/16/152Nisarg Rajvansh PGP/16/158
Ritika Kathuria PGP/16/161Ruchir Mehrotra PGP/16/162Shalinee PGP/16/164
Sharmi Halder PGP/16/166
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Table of Contents
Acknowledgement ........................................................................................................... 1
BALANCED SCORECARD ........................................................................................... 2
The Initiative at Hindustan Petroleum Corporation Limited .......................................... 2
Introduction ........................................................................................................................................ 2
Need Of Balanced Scorecard ............................................................................................ 3
Limitations of earlier performance measurement .................................................................................. 3
Reasons for organization’s failure to execute strategy ........................................................................... 4
Principles of organization focusing on strategy ..................................................................................... 5
What is Balanced Scorecard? ............................................................................................ 6
1. The Learning and Growth Perspective ............................................................................................. 6
2. The Business Process Perspective ..................................................................................................... 6
3. The Customer Perspective ............................................................................................................... 7
4. The Financial Perspective ................................................................................................................ 7
Features of Balanced Scorecard ........................................................................................ 9
Strategic Fit And Balanced Scorecard Framework ............................................................. 9
Framework to translate vision into operational terms through BSC ................................... 10
Implementation of Balance Scorecard at HPCL ............................................................... 11
Cascaded Scorecards .......................................................................................................................... 11
Challenges ...................................................................................................................... 12
Tasks Involved for successful implementation .................................................................. 12
Benefits of Balanced Scorecard ........................................................................................ 13
Some Excerpts ................................................................................................................ 13
Conclusion ..................................................................................................................... 15
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AcknowledgementWe would like to thank our Prof. Manoranjan Dhal for giving us the opportunity to work
on the project, which helped us in understanding the concept, need and business
implications of the HRM practice called Balanced Scorecard. Also, we would not have been
able to accomplish the project without the guidance we received from you.
We would also like to thank the employees of HPCL, for helping and guiding us
throughout the entire project.
We would finally like to thank our institute for providing us the resources.
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BALANCED SCORECARDThe Initiative at Hindustan Petroleum Corporation Limited
Introduction
A new approach to strategic management of firms was
developed in the early 1990's by Drs. Robert Kaplan of
the Harvard Business School and David Norton
(Balanced Scorecard Collaborative). They called this
system the ' balanced scorecard'. With the objective of
removing the inherent weaknesses and vagueness of
traditional management approaches, the balanced scorecard approach was devised to
provide a clear prescription as to what companies should measure in order to 'balance' the
financial perspective.
The balanced scorecard is a management system (not only a measurement system) that enables
organizations to clarify their vision and strategy and translate them into action. It provides feedback
around both the internal business processes and external outcomes in order to continuously improve
strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise 1.
Or, as HPCL says,
“A framework that helps organizations to translate strategy into operational objectives that drive both
behavior and performance”
Norton and Kaplan describe the innovation of the Balanced Scorecard as follows:
"The Balanced Scorecard retains traditional financial measures. But financial measures tell
the story of past events, an adequate story for industrial age companies for which
investments in long-term capabilities and customer relationships were not critical for
success. These financial measures are inadequate, however, for guiding and evaluating the
1 http://www.balancedscorecard.org/bscresources/aboutthebalancedscorecard/tabid/55/default.aspx Accessed
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journey that information age companies must make to create future value through
investment in customers, suppliers, employees, processes, technology, and innovation2
."
The balanced scorecard suggests that any organization should be viewed from four
perspectives and its objective should be to develop metrics, collect data and analyze it with
respect to each of these perspectives:
Need Of Balanced Scorecard
Limitations of earlier performance measurement
! No communication of Drivers of Future performance – Lead indicators
! Drawbacks of managing only with financial measures
! There is no clue on Value Propositions for the existing and new customers –Differentiation
" Creating Excellence and Core Competency
2 Kaplan and Norton
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" Corporate Climate that supports Change
! No inclusion for Innovation and Growth which drives sustainability ! Other Initiatives being taken by the Corporates are not enough
o Quality Initiatives like Malcolm Baldrige in US, Deming Prize in Japan, Six
Sigma etc.
o Customer Relationship Management (CRM)
o Business Process Re-engineering (BPR)
o Supply Chain Management (SCM)
o Enterprise Resource Planning (ERP)
All these initiatives were touching upon a key aspect of the business and at best were Strategic
Initiatives but not Strategy
Successful execution of strategy is found to be elusive
Reasons for organization’s failure to execute strategy
• 95% of typical workforce does not understandstrategy
• 60% of organizations do not link budget tostrategy
• 70% of organizations do not link middle
management incentives to strategy
• 85% of executive teams spend less than onehour per month discussing strategy
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Principles of organization focusing on strategy
Thus,
“A framework that helps organizations to translate strategy into operational objectives that drive both
behavior and performance”
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What is Balanced Scorecard?
1. The Learning and Growth Perspective
This perspective includes employee training and corporate cultural attitudes related to both
individual and corporate self-improvement. It recognizes people -- the only repository of
knowledge -- as the main resource in today’s knowledge-worker organization. In the current
climate of rapidly changing technology, continuous learning is necessary for knowledge
workers. In case of government agencies, like HPCL, the inability to hire new technicalworkers and a decline in training of existing employees is often seen. This is a leading
indicator of 'brain drain' that must be reversed. Metrics, to guide managers in focusing
training funds where they can help the most, can be put into place. In any case, learning and
growth constitute the essential foundation for success of any knowledge-worker
organization.
Kaplan and Norton differentiated between learning and training and emphasized that
'learning' is more than 'training' as it also encompasses supporting roles like mentors and
tutors within the organization. Also, the ease of communication among workers, that allows
them to readily get help from peers and seniors on a problem when it is needed, also forms apart of learning.
2. The Business Process Perspective
This perspective refers to internal business processes. Metrics based on this perspective
allows the managers to know how well the business is performing, and whether the products
and services it provides is conforming to customer requirements (the mission) or not. These
metrics must be designed with care by people who know these processes most intimately as
the uniqueness of a firm’s mission hinders the development of metrics by outside
consultants.
Two kinds of business processes may be identified apart from the strategic management
process: a) mission-oriented processes, and b) support processes. The latter refers to the
special functions of government offices which are historically proven to have unique
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problems. On the other hand, the support processes being repetitive in nature are relatively
easier to measure and can be benchmarked using generic metrics.
3. The Customer Perspective
Recent management philosophy indicates the increasing realization among firms of the
importance of customer focus and customer satisfaction in their businesses. The leading
indicator being: dissatisfaction of customers will eventually lead them into finding other
suppliers that will meet their needs. This means that poor performance from this perspective
will lead to decline in the medium to long run, despite the fact that the current financial
picture may look good.
During the development of metrics for satisfaction, customers should be analyzed in terms
of kinds of customers and the kinds of processes for which we are providing a product or
service to those customer groups.
4. The Financial Perspective
The traditional need for financial data cannot be disregarded3. Timely and accurate funding
data will always be among the top priorities, and managers will do whatever is necessary to
provide it. In fact, it is seen that there is more than enough handling and processing of
financial data. The implementation of corporate databases will mean that more of the
processing can be centralized and automated. But the important point is that the current
emphasis being laid by firms on their financials’ is leading to the "unbalanced" situation
with regard to other perspectives.
There is perhaps a need to include additional financial-related data, such as risk assessment
and cost-benefit data, in this category.
3 Kaplan and Norton
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To Summarize:
Why is it called Balanced?
It derives its name as it provides a balance between the following parameters:
• Measures theultimateresults that the
businessprovides to its
shareholders
• Focuses oncustomerneeds andsatisfaction aswell as market
share
• Focusesattention ontheperformance ofthe key
internalprocesseswhich drivethe business
• Directsattention to the
basis of allfuture success -the
organization'speople andinfrastructure
Financial measuresInternal customer
Short term objectiveHard objective measures
Lagging indicatorsInternal performance perspectives
Non Financial measuresExternal customer
Long term objectiveSofter subjective measures
Leading indicatorsexternal performance perspectives
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Features of Balanced ScorecardThe following are the noticeable features:
1. It helps to translate strategy into measurable targets and actionable objectives
2. All across the organization it cascades from top to down
3. It addresses interdependencies and encourages cross functional synergy
4. It not only links financial and non-financial objectives and but also establishes cause
and effect relationship
5. It enables recognition and fulfillment of internal customer needs
Strategic Fit And Balanced Scorecard
Framework
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Framework to translate vision intooperational terms through BSC
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Implementation of Balance Scorecard at
HPCLCorporate Scorecards were designed and being implemented on quarterly basis.
Cascaded Scorecards
! Level 1 - Scorecards for the SBU / Function Heads were designed
! Level 2 - 64 Scorecards were designed
! Level 3 - 116 Scorecards were designed
! Level 4 - Scorecards were designed for:
o Chief / Sr. Installation Managers – Terminals / TOPs
o Depot Managers – Inland Relay Depots
o Plant Managers – LPG bottling Plants / Import Facilities / Lube Plants
! Individual performance linked to Unit / Department level performance
! From F.Y. 2005-06, KPIs for all the officers were finalized based on Balanced Scorecard
format
o For senior officers from EDs up to DGM / CM level, respective scorecards are
the base for KPIs
o For officers in Grade A/B/C/D, the KPIs were finalized in KPI workshops for
various SBUs / Functions
o Separate KPI workshops were organized for Marketing SBUs, Refineries,
Finance, HR & IR, ERP & IT, and Audit etc. covering more than 2700 officers
! The KPIs were finalized for various categories of officers in each of the SBU / Function
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ChallengesThe major challenges faced by HPCL while implementing the Balanced Scorecard approach
across the organizations were as follows –
! Requires significant Senior Management Time
! Issues arise to create the right organizational climate and strategic awareness
! Creation of Core Team and Supporting Teams in various Functions and SBUs
! Aligning the Organization / Process realignment
! Selecting the right measures and targets for various Metrics and Adopting Best
Practices
! Setting up of data collection system
Tasks Involved for successful implementation
The important tasks involved in implementing the BSC as a performance management
system across HPCL were as follows –
! Significant time and efforts is required for scorecard designing
! Identifying Unique Positions in the entire organizational structure
! Determining initiatives and Initiative Owners
! Training and Workshop designing
! Communication of the organization Strategy to Employees
! Identifying interdependencies
! Finalizing SLA
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Benefits of Balanced ScorecardThe major benefits HPCL received through the implementation of the Balanced Scorecard
approach for performance management are as follows –
! Provided focus for strategy execution
! Communication of corporate strategy to employees was improved
! The BSC gives importance to lead factors like Internal processes and Human Capital
which in turn ensure future financial achievements and customer delight. This effect
was noticed at HPCL
! It helped HPCL align its SBU’s operation with organizational objectives
! Aligned the individual performance of an employee to that of the SBU or
Department
Some Excerpts
“ Balance Scorecard gives organized and structured way of identifying our roles. It helps in systematic
working by giving clarity to our KPIs. Now, I am able to focus on 4 parameters, viz. financial – metrics
of performance, customer – to keep him happy so that he comes again, process – to identify new
processes for effective working and most importantly, learning and growth, which is very important for
us.”
-Mr. Ganesh Kolambakar, Chief Regional Manager, Mumbai Regional Office, HPCL
“ Most important advantage, I feel, is the overcoming of role conflict which was prevalent earlier. Now,
I have more clarity in my roles. Also, I am able to monitor and achieve my goals and targets. I can
groom my subordinates well. My BSC is more focused on leadership parameters and helps me grow in
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the organization. Apart from physical, there are now non-financial parameters, which are very
important for the organization to sustain in the market.
The disadvantage, I feel, is the pressure through which we go through once our goals are set for the year
and once committed, we have to honor our goals and targets. The support sometimes is not sufficient, in
terms of infrastructure and finance to meet our goals, for which our goals should be revised. Now the
company has introduced half yearly appraisals (from quarterly), in which we can change our goals and
targets as per the market conditions. This was a sign of flexibility shown by the management with
change in market dynamics”
-Mr. Rajesh Tupkar, Senior Regional Manager, Aurangabad RO, HPCL
“Now we have to plug in the goals and targets at the start of the year, and cannot edit them, and
neither the performance is undermined/altered by anyone. It gives transparency and is a foolproof
system”
- Ms. Pink Sarvaiya, Senior Officer – Retail, Pune Region, HPCL
“It is very effective tool for performance management and helps in aligning the goals of company to the
employees.
- Mr. Biswajyoti Choudhury, Officer – Vigilance, Mumbai HQO, HPCL
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Conclusion
As per the study and having interviews with employees, stretching from lower level
management to middle level management, across regions and strategic business units, we
could found out that the Balance Scorecard framework is of immense importance for anyorganization to effectively implement strategy. It covers all aspects holistically, financials
and non-financials, which are critical for growth and sustainability for any organization. It
gives a road map to the employees, following a two-way flow of communication, and helps
to align themselves with the vision of the company. Thus, it gives clarity and focus of Key
Performance Indices, and aids the employees and organization, as a whole, to implement
the strategy in a structured and well-defined manner.
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Bibliography
1. Kaplan, Robert S., Norton, David P.,, The Balanced Scorecard – Measures That
Drive Performance. Harvard Business Review, Jan-Feb 1992
2. Kaplan, Robert S., Norton, David P.,, Putting The Balanced Scorecard to Work.
Harvard Business Review, Sep-Oct 1993 3. Kaplan, Robert S., Norton, David P.,, Using the Balanced Scorecard as a Strategic
Management System. Harvard Business Review, Jan- Feb 1996
4. www.hindustanpetroleum.com