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Who to compete
Where to compete
and
How to compete
Time and efforts sharing
Running the business
Changing the business
Front Line Apex Team
The Management Challenge 9 0f 10 companies fail to execute strategy
Vision Barrier: Only 5% of
the workforce understands
the strategy
People Barrier: Only 25%
of managers have
incentives linked to
strategy
Management Barrier: 85%
of executive teams spend
< 1 hour per month
discussing strategy
Resources Barrier: 60% of
organizations don’t link
budgets to strategy
Why Balance Scorecard?
The Balance Scorecard is a management system
(not only a measurement system) that enables
organizations to clarify their vision, mission and
strategy and translates them into Action. It
provides a generic framework to translate strategy
into operational terms. It also provides a clear
line of sight to the vision and strategy of the
company
Why Balance Scorecard?
� Creates a systems approach to form an Integrated
Strategic Management Process
� Provides feedback around both the internal business
processes and external outcomes in order to
continuously improve strategic performance and
results
Why Balance Scorecard?
� Draws a cause and effect roadmap to
stakeholder value - shareholder, customer and
employee
� When fully deployed, the balanced scorecard
transforms strategic planning from an academic
exercise into the nerve center of an enterprise.
Why Balance Scorecard?
“What gets measured gets done”
Why Balance Scorecard?
This is the power and the risk of
performance measurement. If you establish
a measure, and faithfully attend to it,
communicating widely your expectations
and results, your organization will being to
align to it
Premise behind BSC is that measurement motivates behavior
The Premise
Measurement communicates
Values, Priorities and Direction
The Conclusion
Measurement Must Be Linked to Strategy
StrategyBalanced
Scorecard
Measurement To Communicate, Not to Control
Making BSC a Strategic Tool Operating
Strategy
Organizations need to
language for
communicating strategy as
well as processes and
systems that help them to
implement strategy and
gain feedback about how
well the strategy is working.
The BSC Process helps
strategy to become
everyone’s everyday job
Using a Mix of Performance Measures
The traditional focus of performance measures had been
on quantitative financial measures.
What are some quantitative non-financial measures?
Customer
Retention
Schedule
Adherence
Cycle
Time
Yield
Market
Share
Making BSC a Strategic Tool Why use the BSC Approach?
Two Words
Focus
Alignment
What is BSC ?
The balanced scorecard consists of three things:
Balanced Scorecard
Strategic Management System
Communication Tool
Measurement System
What is BSC ?A carefully selected set of quantifiable measures derived fromstrategies, goals & objectives that represent a tool for leaders touse in communicating strategic direction to the organization andfor motivating change. These same measures form a basis formanagers to plan, budget, structure the organization and controlresults
Strategy & Vision
Financial Customer
Financial Learning & Growth
� Translate the strategy to operational
terms
– Formulate
– Communicate
– Execute
– Navigate
What is BSC ? 5 steps module
� Align the organization to create synergy
– Corporate role
– Business unit synergies
– Shared service synergies
What is BSC ? 5 steps module
� Make strategy everyone’s every day’s job
– Strategic awareness
– Personal scorecard
– Balanced pay cheques
What is BSC ? 5 steps module
� Make strategy a continuous process
– Strategy learning
– Analytical information system
– Link budget & strategy
What is BSC ? 5 steps module
� Mobilize change through leadership
– Management system
– Governance process
– Mobilization itself
What is BSC ? 5 steps module
Alignment & Integration
Aligned Integrated
Balance Scorecard Cause-Effect Hypothesis
4. Increased customer satisfaction
will lead to better financial results
3. Improved work processes will lead
to increased customer satisfaction
2. Skilled, empowered employees
will improve the ways they work
1. Knowledge & skills of employees
is foundation for all innovation and
improvements
Customer
Financial
Internal Process
Learning & Growth
The Four Perspective
Financial Perspective
“To satisfy our shareholders, what
financial objectives must we accomplish?”
Customer Perspective
“To achieve our financial objectives, what
customer needs must we serve?”
Internal Perspective
“To satisfy our customers, and
shareholders, in which internal business
processes must we excel?”
Growth & learning l Perspective
“Knowledge & skills of employees
is foundation for all innovation and
improvements”
Important Concepts in Balanced Scorecard
� Strategic Mapping
� Multiple Perspectives
� Balance
� Feedback of measurements
� “Cascading” Scorecards
� Cause-Effect Framework
Cascading Scorecards
While it is possible to develop a single set of performance measures for the whole organization
The likelihood is that there will be a cascade of cards that closely reflect the formal organization reporting chain
From Strategy to Budget
Strategy MapMetrics Targets Strategic Initiatives
Customer
approval
rating
Cycle
time
reduction
% strategic
skills
available
Each Strategy Initiative plan contains:
•*Sponsor
•*Schedule
•*Resources
•*Budget
BSC TerminologyStrategy Map:Diag of cause- And-effect
relationships betnStrategic objectives
Profitability
Fewer Plane More Customers
Flight is on timeLowest Prices
Fast ground Turnaround
Ground crew alignment
Strategic Theme:Operating Efficiency
Learning
Internal
Customer
Financial
Statement of what strategy must achieve
and what’s critical to its
success
How success in achieving the
strategy will be measured and
tracked
The level of performance
or rate of improvement
needed
Key action
programs reqd to achieve
objectives
Objectives Measurement Target Initiatives
Fast good
turnaround*On ground time
* On Time departure
•* 30 minutes
•* 90%
* Cycle time
optimization
Balances in the BSC
Lagging Indicators Leading Indicators
Short term objective Long term objective
Diagnostic Measurements Strategic Measurements
Desired outcome Performance driver
Cost & Risk Benefit & Value
‘Hard’ objective measures ‘Soft’ subjective measures
Los risk / low benefit High risk / high benefit
BSC is based on an understanding of the basic Blocks of the Strategy
Financial Perspective
Revenue
Strategy
ROI
Productivity
strategy
Customer Perspective
Price Qlty Functn Image R.ShipTime
Internal Process Perspective
Build the
Brand
Make the
Sale
Deliver
Product
Service
Exceptionally
Sources of growthSources of Productivity
Learning & Growth Perspective
Staff
Competencies
Tech
Infrastructure
Climate for
Action+ +
1) The economic model of key
levers driving financial performance
2) The value proposition of target customers
3) The value chain of core business processes
4) The critical enablers of performance improvement, change and learning
Corporate Balance Score CardExample
Performance
M easures
Review
Freq
Reporti
ng by
Unit Target
2004-05
Actual
Aug 04
Indicator
03-04 04-05
C1 Focus of
profitable
segments &
customers
- XYZ M onthly RS % 60 66.5 63.5 New G
- ABC M onthly RS % 50 50 49.8 41 G
- PQR M onthly RS % 16.5 15.4 15 New Y
Line Profits in
these segments
M onthly RS Lacs 229 183 206 New R
C2 Enhance reach Incremental
vo lume so ld in
new markets
M onthly RR M T 1500 p.a. 16 121 New R
C3 Create differntial
Value
Domestic Ann RS Index 78 69 69 72 R
Exports Ann RS Index 75 70 70 R
Customer Satisfaction Index (CSI_ No for "Value for M oney"
Strategic Objectives
B Customer Perspective
Cumulative Upto
Aug
M arket Share o f XYZ, ABC and profitable segments for PQR (Domestic)
Corporate Balance Score Card - Example
Performance
M easures
Review
Freq
Reporti
ng by
Unit Target
2004-05
Actual
Aug 04
Indicator
03-04 04-05
B1 Enhance
customer
relationship
Adherence to
customer
contact plan
M thly RS % 100 72 89 New R
Domestic Ann RS Indx 80 77 77 86 Y
Exports Ann RS Indx 80 79 79 97 Y
B2 Build M arketing
capabilities
Adherence to
implementation
plan o f mkg &
sales process
(Renoir)
M thly RS % 100 100 100 New G
B3 Product /
Offerings
development
% of vo lume
(tonnage) so ld
with
differentiated
prodt/o fferings
per month
M thly RS % 20 25 1.6 New R
B4 Add/relocate
capacities
Compliance to
relocation plan
M thly VKS M T 100
Additional
capacities
create incl
conversion and
alliances
M thly RR M T 10000
B5 Enhance
Operational
excellence
Reduction in
cost o f quality
M thly VKS Rs 3 L/ mth 4.71 7.52 4.3 G
Net working
capital turns
M thly DG No 4 4.53 4.5 4.05 R
Employee cost
as % of value
addn
M thly PRR % 25 Cum 27.23 R
Six Sigma
pro jects % of
identified critical
issues reso lved
M thly SSC % 100 0 0 New R
Customer repurchase intention CSI (Customer Satisfaction Index)
C Business PerspectiveStrategic Objectives Cumulative Upto
Aug
Recovery Plan
Performance Trend
97.70%
98.43%
96.96%
98.04%
97.89%
98.04%
98.37%
96.50%
97.50%
98.50%
99.50%
Apr 00 May 00 Jun 00 Jul 00 Aug 00 Sep 00 Oct 00
Improvement initiative in previous month
* Process capability of Bekaert
Galvanizing Furnace for Temp done
* Team formed in galvanizing line to
improve first compliance
Improvement action plan for this month
•Team to collect the data wrt Different reasons
•Collect data for process capability in Annealing Mid/long term
improvements planned
Team will
• Analyze & stratify resetting data under different categories
•Evolve solution to prevent retesting
•Implement the new process of testing thru’ line/dept heads
Improve statistical stability of processes & correlate with prdt CpK.
Thereby, improvement in first compliance
% First Compliance
66.06%
18.24%8.67% 4.98% 2.02%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
Galv. Ann L.R. Others FWSS
BSC Example:
Profitability
Fewer Planes More Customers
Flight is on timeLowest Prices
Fast ground Turnaround
Ground crew alignment
Strategic Theme:Operating Efficiency
Learning
Internal
Customer
Financial
Objectives Measurement Target Initiative
•Profitability
•More
Customers
•Fewer Planes
•Returns on Cap
•Seat Revenue
•Plan Lease
Cost
• 20% ROCE
•20% increase
• 5% COS
•Flight is on time
•Lowest prices
•FAA on time
arrival rating
•Customer
Ranking
(Market Survey)
• # 1
•# 1
•Quality
management
•Customer
loyalty program
•Fast ground
turnaround
•On Ground
Time
•On-Time
departure
• 30 Minutes
•90%
•Cycle time
optimization
program
•Ground crew
alignment
• % Ground
crew trained
•Ground crew
stockholders
•Yr 1 70%
•Yr 3 90%
•Yr 5 100%
•ESOP
•Ground crew
training
Common BSC Implementation Challenges
Mission, vision and strategies poorly defined or
understood and not actionable.
Strategies and goals not linked to performance
drivers, outcome measures, individual goals,
and incentives
Budget and planning processes are not linked
Common BSC Implementation Challenges
Treating performance measures as an “end”
rather than “means”
Performance targets sets too high or too low
Feedback that is tactical, rather than strategic
Lack of meaningful employee involvement