Balance Scorecard(066BCT 529-532)

BALANCE SCORECARD

PRESENTED BY

SABIN BHANDARI066/BCT/529

SABINA SHRESTHA066/BCT/530

SANAT MAHARJAN066/BCT/531

SANJANA SHRESTHA066/BCT/532

Part-IIntroduction To Balanced

Scorecard

The Balanced Scorecard (BSC) is a strategic performance management framework that allows organizations to manage and measure the delivery of their strategy.

The concept was initially introduced by Robert Kaplan and David Norton in a Harvard Business Review Article in 1992 and has since then been voted one of the most influential business ideas of the past 75 years.

INTRODUCTION

INTRODUCTION (CONTD.) A Strategic Management System that-

Translates corporate Vision and Strategy into action,

Communicates and ties together strategic objectives and measures,

Helps to establish corporate targets, Increase feedback and learning

There are 4 ”generally” accepted target areas within the Balanced Scorecard:

TARGET AREAS

Finance & Stakeholders

Goal Measures

Customers & Markets

Goal Measures

Operations & Productivity

Goal Measures

Growth & Learning

Goal MeasuresVision & Strategy

TARGET AREAS(CONTD.)

Finance & Stakeholders

Goal Measures TargetReduce overheads by 10% to $250K this year.

Survey score

Time

10% ($250K)

1 year

Reduce purchasing cost by 20% to $1ooK by the year end.

Survey score

Time

20% ($100K)

1 year

How do our financial Shareholders identify financial success?

FINANCIAL MEASURES

How do we appear to our customers in achieving our vision?

Customers & Markets

Goal Measures TargetIncrease new Customers to 100 per month by year end.

Survey score

Time

100 customers per month

1 year

Increase market share to 35% of total market in UK.

Survey score 35%

CUSTOMER’S MEASURES

What process you must be exceptional at with customers, & shareholders?

Operations & Productivity

Goal Measures TargetReduce sickness & absence rates by 80% to 5 days per month.

Survey score 80%(5 days per month)

Produce 100 more ‘widgets’ per day by year end.

Survey score

Time

100 widgets

1 year

PRODUCTIVITY MEASURES

SKILL BASED MEASURE How will we sustain the ability to change

and improve our time?

Growth & Learning

Goal Measures TargetInvest $100K in training this year to create $250K of income.

Survey score

Time

($250K)

1 year

Develop 4 new managers this year to run their own profit centres.

Survey score

Time

4 managers

1 year

BALANCE SCORECARD DASHBOARD

BALANCE SCORECARD DASHBOARD (CONTD.)

BALANCE SCORECARD DASHBOARD (CONTD.)

PART IIBALANCE

SCORECARD IMPLEMENTATION

INTRODUCTION Before an organization can start implementing

a Balanced Scorecard it needs a clear understanding of its vision and strategy.

It is the management's responsibility to define a vision, formulate a strategy and set strategic goals regardless of a Balanced Scorecard being implemented.

COMMON TOOLS Strategy Mapping PEST (Political, Economical, Societal,

Technological) analysis SWOT (Strengths-Weaknesses-

Opportunities-Threats) analysis Porter value chain analysis Porter Five forces of compétition analysis BCG Matrix analysis

PORTER FIVE FORCES OF COMPÉTITION ANALYSIS Inbound logistics: material handling,

transportation Operations: machine operating, assembling,

packaging, testing & maintenance Outbound logistics: order processing,

warehousing, transportation & distribution Marketing & sales: advertising, promotion,

selling, pricing, channel management Service: installation, servicing, spare part

management

BCG MATRIX ANALYSIS

High low

High Star Question mark

Low Cash cow Dogs

Market share

Gro

wth

ra

te

BCG MATRIX ANALYSIS Dogs- Low Market Share, Low Growth Rate,

Neither generate nor consume Cash, not good organization

Question Mark-Market share high, high growth rate, cash consumption is high whereas cash generation is low

Star- High market share, high growth rate, highly consumes cash & generates cash highly as well

Cash cow- generates more cash with little investment, highly profitable organization

PROJECT PLANNING Installing the Balanced Scorecard within

corporate is a challenge. Because the Balanced Scorecard requires

every action to answer to established corporate goals.

Using the Scorecard can still help promote alignment and eliminate projects that contribute little or no strategic value.

So we have intentionally suggested some dramatic architecture, in an effort to meet the radically implementation of Balance Scorecard.

CONSIDERATION What is the goal of the BSC project? What current problem does the Balanced

Scorecard solve? What is the goal state? Who leads the project? Who participates in the project?

IMPLEMENTATION PHASES

TECHNICAL IMPLEMENTATION Installation of the software, Basic training for the persons building

scorecards Building of the scorecards Setting target and alarm levels Setting calculation formulas to consolidate

the data Defining graphical properties for graphs

ESTIMATIONThe total costs for a typical Balanced Scorecard project consist of: Time used by customer's own resources

(50%) Outside process consultancy (20%) Outside implementation consultancy (15%) Software licences (15%)

MAINTAINABILITY “Software change ability” Strict engineering sense usually taken to

mean “Bug fixing” Define maintainability requirements

quantitatively Design to meet those requirements, if

possible and economic Implement the design Quality control and test

EFFECTIVE RESULTS Improved processes Motivated/educated employees Enhanced information systems Monitored progress Greater customer satisfaction Increased financial usage

CONCLUSION Balance Scorecard is a strategic planning and

management system used to align business activities to the vision statement of an organization.

Must know:

organizations' mission statement

organizations' strategic plan/vision Then:

financial status of organization

how the organization is structured and operating, level of employees expertise

customers satisfaction level

CASE STUDYOF

BALANCE SCORECARDON

ARRAN LTD.

INTRODUCTION Arran Ltd. is a multi-divisional retail financial

services firm based in UK. The Balanced Scorecard concept was first

introduced to Arran Ltd. in the mid 1990’s by the General Manager of the Retail Division (the largest division in the organization).

It was initially developed as a performance measurement system for the Retail Division with the objective of providing core management information on retail branch performance.

IMPLEMENTATION OF BALANCE SCORECARD ON THEIR COMPANY

If an organization is using Balanced Scorecard as a performance measurement and management tool it is likely that there will be conflict or overlap with existing systems.

In the case of Arran Ltd, Balanced Scorecard was chosen as the preferred performance management tool because it was recognized that the Retail Division of Arran Ltd. needed ‘better sources of management and performance information’ and ‘better ways of rewarding management performance’.

(CONTD.) They was felt that the Balanced Scorecard

approach offered a more clearly organized methodology to presenting an array of performance measures including the traditional financial elements of control.

It was applied in a similar way in other divisions of the firm as well.

Balanced Scorecard as the dominant management system, adding to and binding together existing systems rather than trying to run two sets of management control systems in parallel.

BENEFITS BY USING BALANCE SCORECARD The Balanced Scorecard design was supported by

implementation activities that led to complementary changes in the Retail Division’s operating processes.

Successful application of Balanced Scorecard within the Retail Division prompted Arran Ltd. to consider wider use of this approach.

Many elements of the Balanced Scorecards introduced were already regularly reviewed as standard performance indicators by staff. This helped ensure the acceptance of the Balanced Scorecards, and was helped by the continuity of activity being monitored across the whole retail division.

CONCLUSION FROM CASE STUDY It is clear that, at least initially, the Balanced Scorecard

systems at Arran Ltd. met the firm’s expectations and the initiative was considered as a success; the need for a more organized performance management system drove wider changes in management style and persistently beneficial to the organization.

They wanted ‘a system that examined a number of different factors rather than focusing solely on financial data’.

Arran Ltd. believed that if they used the concept it would help them in the long run.

Modern Balanced Scorecard theory has clarified many of the causes of the issues experienced by Arran Ltd., and best practice design and implementation methods are able to reflect and accommodate these causes.

REFERENCES Software engineering – Ian Summerville Wikipedia QPR- Guidelines for implementing Balance

Scorecard Maintainability in software engineering- Tom

Gilb

THANK YOU