Organizational AppraisalBalance

Scorecard

Presented By:Kavya M Chandra (82017)Barti Gola (82056)Rohit Verma (82037)Suhail Khan (82079)

Agenda

Introduction

Importance

Linking Balance Scorecard measures to

Business strategy

Balance Scorecard : Analysis in context of

Bain & Company

2

The balance scorecard a new approach to strategic management was

developed in the early 1990s by Robert Kaplan and David Norton.

The balance scorecard a new performance management tool helps

companies examine their performance from four perspectives:

a) Financial perspective

b) Customer perspective

c) Learning and Growth perspective

d) Internal business process perspective

3

Introduction: Balance Scorecard

WHERE DOES IT FIT?

Culture and values (leadership/style/relationships etc.)

Rew

ards

Targets

Measures

Projects

Alliances

Systems

Structure

Vision

Mission and CSFs

Strategic Objectives

BalancedScorecard

Building

Using

Customer perspectiveCorrective activity

Developmental activityBalancing compliance

with added value

BalancedScorecard

Financial MeasuresKey performance ratios

Financial healthBalancing leading with

trailing indicators

Learning and growthPeople measures

Knowledge measuresBalancing soft and

hard indicators

Business Processes

Time, cost, qualityBalancing inputs

and outputs

Agenda

Introduction

Importance

Linking Balance Scorecard measures to

Business strategy

Balance Scorecard : Analysis in context of

Bain & Company

6

The balance scorecard helps the organizations gain a wider perspective on their

strategies by focusing not only on financial aspects but also on other perspectives like

customer perceptive, learning and growth perspective and internal business

perspective.

The balance scorecard is a management system that enables organizations to clarify

their vision and strategy and translate them into action. It provides feedback

regarding both internal business processes and external outcomes, thus helping

organizations improve strategic performance and results on a continuous basis.

7

Importance: Balance Scorecard

Building a balanced score card: According to Nils Goran Olve, Jan Roy and Magnus Vetter

in their book “Performance drivers” constructing a balance score card involves an eleven

step process.

1. The firm’s internal and external framework must be analyzed. External analysis involves

an examination of the competitors and other external factors like the impact of the

economy, political, technological environment on the organization. Internal analysis

focuses on assessing a firm’s resources core competencies and other assets.

2. This step involves the development of a strategic vision. The company must ensure that

employees are informed of the vision of the company and are committed to the

implementation of vision.

8

Importance: Balance Scorecard

3. The company must decide which perspective it must adopt. It also needs to analyze the areas in which it is

not performing as expected.

4. The company must examine the implication of the vision for each perspective. For example, In the costumer

perspective, a company should clearly define as to how it is going to build market share, build loyalty with

existing costumers and acquire new costumers etc.

5. This step involves creating top five objectives for each perspective. These objectives will help a firm in

deciding the top criteria for each perspective.

6. In this step a balance set of measures should be created that bring in congruence between the short term

and the long term consideration of the organization. This stage also involves assessing the cost associated

with collecting the data for the proposed perspectives.

9

Importance: Balance Scorecard

7. The measures developed in the above step should be communicated to top management for their approval.

After approval, the measures must be communicated to the whole organization.

8. This score card should be communicated to the appropriate organizational units. Depending on the size of

the organization, score cards can be created for various divisions, business units, and department and in

some cases for each employee.

9. The next stage involves creating goals for the each measure, indicating short and long term objectives.

10. The next step involves developing an action plan for the successful implementation of the organization’s

projects.

10

Importance: Balance Scorecard

11. The final step involves implementing the balance score card

process by conducting regular reviews against the current score

card and the effectiveness of the current score card and strategy.

It also involves discussion about the progress of the score

11

Importance: Balance Scorecard

Agenda

Introduction

Importance

Linking Balance Scorecard measures to

Business strategy

Balance Scorecard : Analysis in context of

Bain & Company

12

There are three basic principles that link and organization balanced score card to its strategy and they are:

1. Cause and effect relationships: According to this principle a balance score card to be effective,

should, clearly state the sequence of the relationships between the different perspective and the

performance measures of these perspectives.

2. Balance between performance measures and outcome: A good balance score card should strike a

stability between the performance measures and the outcomes. Outcomes are called lagging

indicators while performance drives are called leading indicators.

13

LINKING BALANCED SCORE MEASURES TO BUSINESS STRATEGY

3. Linkage to financial aspects: According to this principle a balance score card should be linked to financial

aspects like return on capital employed of economic value added. Programs such as total quality

management, employee empowerment should be linked to outcomes that directly influence costumers

and deliver future financial performance.

These three principles link the balance score card to strategy.

14

LINKING BALANCED SCORE MEASURES TO BUSINESS STRATEGY

Agenda

Introduction

Importance

Linking Balance Scorecard measures to

Business strategy

Balance Scorecard : Analysis in context of

Bain & Company

15

Bain & Company is a global business consulting firm. Bain works across a wide range of industries, from corporate clients to

private equity. They think and act like owners and have the talent, the will, and the open-mindedness required to succeed.

All share passion for results and are prepared to act decisively to achieve them.

The four "perspectives” which are being proposed in BAIN & Consulting

16

Bain & Company

To construct and implement a Balanced Scorecard, managers here:

1. Articulate the business's vision and strategy;

2. Identify the performance categories that best link the business's vision and strategy to its results (e.g., financial

performance, operations, innovation, employee performance);

3. Establish objectives that support the business's vision and strategy;

4. Develop effective measures and meaningful standards, establishing both short-term milestones and long-term targets;

5. Ensure companywide acceptance of the measures;

17

Methodology

6. Create appropriate budgeting, tracking, communication, and reward systems;

7. Collect and analyze performance data and compare actual results with desired performance;

8. Take action to close unfavorable gaps.

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Methodology

Bain believes that all value-driving strategies must:

1. Target sustained value creation through leadership in chosen markets and segments

2. Be based on a robust definition of boundaries between markets, discovered through correctly analyzing cost and

customer sharing

3. Understand a company's position in the "F-E-R" growth cycle: either focus on the core, expand, or redefine

4. Clearly define which leadership model or models to pursue: cost, differentiation or industry influence

5. Challenge established industry rules of the game

19

Corporate Strategy

6. Define repeatable models that allow you to win again and again

7. Identify what it will take to win from the standpoints of organization and capabilities

8. Be dynamic and flexible, with contingency plans for reacting to leading indicators of external changes

9. Be implementable; that is be achievable, affordable and focused

10. Translate into action and drive to results

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Corporate Strategy

Over 30 years, Bain has demonstrated superior capabilities helping thousands of clients in every industry develop and

deliver winning strategies.

1. Collaborative results delivery process -work collaboratively, build lasting capabilities into their team, and

help the organization mobilize for change.

2. People passionate about success - define success by results, they enjoy their work and have fun doing it,

and take care deeply about their clients as people.

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Corporate Strategy

Bain & company clients have found new sources of profitable growth, repositioned their businesses for the future, and sharpened

their competitive advantage. Since 1983, their clients have outperformed the stock market by a ratio of four to one.

Business Unit Strategy: driving a specific business to full economic potential, whether it be through an annual planning process,

a transformation effort, or turnaround situation

Corporate Strategy: tapping into the additional value created by the center and addressing the unique challenges of multi-core

organizations

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Corporate Strategy

Fundamentals of growth: our point of view on driving a business to full potential, expanding into profitable adjacent businesses, and

redefining the core business by leveraging a company's "hidden assets" and repeatable business models

Emerging Markets: playing to win in new fast-growing markets, and how to compete against "emerging market champions" expanding

globally

"Both Brain" Innovation: leveraging the creative AND the analytic to revolutionize new product development processes and ensure

efficient allocation of R&D

Sustainability: addressing relevant social, environmental and ethical issues responsibly and profitably

23

Corporate Strategy

Bain helps clients build and refine their mission and vision statements as part of strategy engagements.

Creating a sound mission and vision statement is the first step in building strategies that help clients to reach their full

potential. This work is not done in a vacuum. Bain gathers and tests data from relevant stakeholders to ground a

client's aspirations in statements that are also feasible and practical.

Working with a company's stakeholders, we identify refinements to the mission and vision, and weigh the implications

of any changes necessary in the current business model. As part of this work, we develop a detailed roadmap to

prepare the organization to deliver on the new strategic goals.

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Mission & Vision:

Bain helps clients build and refine their mission and vision statements as part of strategy engagements.

Creating a sound mission and vision statement is the first step in building strategies that help clients to reach their full

potential. This work is not done in a vacuum. Bain gathers and tests data from relevant stakeholders to ground a

client's aspirations in statements that are also feasible and practical.

Working with a company's stakeholders, they identify refinements to the mission and vision, and weigh the

implications of any changes necessary in the current business model. As part of this work, we develop a detailed

roadmap to prepare the organization to deliver on the new strategic goals.

25

Performance Management

To reach its full potential, a company must achieve world class performance across multiple dimensions. Improving

performance may come in the form of:

Revenue enhancement, cost management, supply chain, purchasing, manufacturing, service operations, complexity

management, change management, lean six sigma, capability sourcing, and/or business process redesign. In

combination with a differentiated and well focused strategy, performance improvement is fundamental to a

company's success.

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Performance Management

A survey of major projects in this area shows that, within two to three years, there clients achieve an average of 15 percent

revenue growth and raise margins by 7 percentage points. As part of their commitment to creating value, they often tie own

fees to their clients' results.

The company approach ensures that clients achieve leadership in their core business, expand thoughtfully, and constantly

improve through operational excellence. Typically, they start by using simple diagnostic tools, such as the revenue sieve and

proprietary cost benchmarks, to identify the key levers for improving performance in a given situation. For the key priorities

to improve performance, they define specific goals. Then they pool client and Bain resources and use the most valuable

tools, Bain functional expertise, and change management techniques to deliver results.

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Performance Management