Project Copy 682

8/8/2019 Project Copy 682

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Objective of the Project

Evaluate Balanced Scorecardknowledge and skills within my workenvironment and generalexperiences.

Effectively Monitor, Measure And

Evaluate the Balanced Scorecard ForMaximising the PerformanceManagement.

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INDEX

1. Introduction 3

2. Background of Balanced Scorecard

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3. What is the Balanced Scorecard?

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4. Balanced Scorecard – Concept

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5. Utilizing The Balanced Scorecard

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as A Strategic Management Tool

6. Steps to create the Organizational Balanced

Scorecard 18

7. BSC Implementation in Bilcare

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Introduction

Functional Scorecard in Bilcare

Automation – MPOWER - COVENARK™

Vision./ Mission

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Core objective

Implementation of BSC

Feedback and Review system –

Performance Management

8. Conclusion

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9. Annexure

I. Introduction

It is found that though in many corporations a defined strategy

exists at the corporate level, the deployment of the same at

the operational level is not uniform and in many cases absent.

This causes misalignment of organizational strategy and

hampers achievement of organizational goals due to poor

deployment.

It is observed that though many organizations have excellent

business strategy there are severe lapses in the execution at

the operational level. Cascading business strategy as

appropriate to Projects becomes a great challenge.

The Balanced Scorecard has specific focus on four

perspectives – Financial, Customer, Internal and Learning. It

also has a focus on balancing long term and short-term goals

of an organization. It is observed that organizations, which do

not have a robust framework to deploy a “Balanced” set of

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goals at the Project level, fail to achieve organizational

alignment and integration.

The objective of developing such a framework was the

following:

• Create a sustainable strategic position at the project

level

• Focus on Financial as well as non-financial goals at the

Project- level

• Balance short-term and long-term organizational

objectives

• Create a Learning organization

II. Background of Balanced Scorecard

The concept of ‘Balanced Scorecard’ was first introduced in

the journal “Harvard Business Review” (January-February,

1992) by Robert S. Kaplan and David P. Norton. The basic idea

behind the introduction of the Balanced Scorecard was that

the traditional financial measures (like ROI, EPS etc.) alone

cannot provide a clear and comprehensive performance targetor focus attention on all the critical areas of the business that

bear significant impact on its long-term survival, growth and

development, rather it requires a balanced presentation of

financial as well as operational measures. The Balanced

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Scorecard is an organizational framework for implementing

and managing strategy at all levels of an enterprise by linking

objectives, initiatives and measures to an organization’s

strategy.

The Balanced Scorecard is a strategic management system

(not only a measurement system) that enables organizations

to clarify their vision and strategy and translate them into

action. When fully deployed, the Balanced Scorecard

transforms strategic planning from an academic exercise into

the nerve centre of an enterprise. The scorecard provides an

enterprise view of an organization’s overall performance. The

scorecard integrates financial measures like ROI, RI, Dividend

yield, EPS etc. with other key performance indicators around

customer perspectives, internal business processes and

organizational growth, learning and innovation.

III. What is the Balanced Scorecard?

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.

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Kaplan and Norton 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 journey that information age companies must make to

create future value through investment in customers,

suppliers, employees, processes, technology, and innovation."

IV.Balanced Scorecard – Concept

The long-term success of any organization is determined by

the capabilities and the competencies it has developed. One of

the tools for organizational appraisal that is gaining immense

popularity is the Balanced Scorecard, developed by Robert S

Kaplan and David P Norton in 1992. This innovative tool is

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unique in two ways compared to the traditional performance

measurement tools.

They are–

1. It considers the financial indices as well the non-financial

ones in determining the corporate performance level and

2. It is not just a performance measurement tool but is also

a performance management system.

In the words of the proponents of this tool “the Balanced

Scorecard” retains traditional measures. But, financial

measures tell the story of past events, an adequate story for

industrial age companies for which investment in long-term

capabilities and customer relationships were not critical for

success. These financial measures are inadequate however,

for guiding and evaluating the journey that information age

companies must make to create future value through

investment in customers, suppliers, employees, processes,

technologies and innovation.” These words give the idea

behind the development of this framework. Today’s businesses

require a better understanding of their customers (both

existing and potential) and their needs, better-streamlined

processes and highly skilled people for ensuring future survival

and sustainable growth. This shows that the focus of action

has rightly considered the non-financial aspects apart from the

financial indices. This tool is the end result of sustained efforts

to find an ideal tool to measure performance and provide a

link to strategy and action. The decisions about the future

actions form the key to success of any enterprise in this fast-

changing business environment.

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The aim of the Balanced Scorecard is to direct, help manage

and change in support of the longer-term strategy in order to

manage performance. The scorecard reflects what the

company and the strategies are all about. It acts as a catalyst

for bringing in the ‘change’ element within the organization.

This tool is a comprehensive framework, which considers the

following perspectives and tries to get answers to the following

questions –

1. Financial Perspective - How do we look at

shareholders?

2. Customer Perspective - How should we appear to our

customers?

3. Internal Business Processes Perspective - What

must we excel at?

4. Learning and Growth Perspective - Can we continue

to improve and create value?

Hence, from the above lines we can say that this tool has

considered not only the financial results to be important but

also those factors, which actually drive an organization

towards future successes as mentioned earlier. The tool has

given stress on the other areas which are required to ‘balance’

the financial perspective in order to get a total view about the

organizational performance improve the same. The framework

tries to bring a balance and linkage between the –

(A) Financial and the Non-Financial indicators,

(b) Tangible and the Intangible measures,

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themselves unable to hire new technical workers, and at the

same time there is a decline in training of existing employees.

This is a leading indicator of 'brain drain' that must be

reversed. Metrics can be put into place to guide managers in

focusing training funds where they can help the most. In any

case, learning and growth constitute the essential foundation

for success of any knowledge-worker organization.

Kaplan and Norton emphasize that 'learning' is more than

'training'; it also includes things like mentors and tutors within

the organization, as well as that ease of communication

among workers that allows them to readily get help on aproblem when it is needed. It also includes technological tools;

what the Baldrige criteria call "high performance work

systems." One of these, the Intranet, will be examined in detail

later in this document.

2. The Business Process Perspective

This perspective refers to internal business processes. Metrics

based on this perspective allow the managers to know how

well their business is running, and whether its products and

services conform to customer requirements (the mission).

These metrics have to be carefully designed by those who

know these processes most intimately; with our unique

missions these are not something that can be developed by

outside consultants.

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In addition to the strategic management process, two kinds of

business processes may be identified: a) mission-oriented

processes, and b) support processes. Mission-oriented

processes are the special functions of government offices, and

many unique problems are encountered in these processes.

The support processes are more repetitive in nature and hence

easier to measure and benchmark using generic metrics.

3. The Customer Perspective

Recent management philosophy has shown an increasing

realization of the importance of customer focus and customer

satisfaction in any business. These are leading indicators: if

customers are not satisfied, they will eventually find other

suppliers that will meet their needs. Poor performance from

this perspective is thus a leading indicator of future decline,

even though the current financial picture may look good.

In developing 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.

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4. The Financial Perspective

Kaplan and Norton do not disregard the traditional need for

financial data. Timely and accurate funding data will always be

a priority, and managers will do whatever necessary to provide

it. In fact, often there is more than enough handling andprocessing of financial data. With the implementation of a

corporate database, it is hoped that more of the processing

can be centralized and automated. But the point is that the

current emphasis on financials leads 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.

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The Model – An Explanation

Hence, from the aforesaid model, it is clear that the following

are to be done so as to utilize the Balanced Scorecard as a

strategic management tool:

1. The major objectives are to be set for each of the

perspectives.

2. Measures of performance are required to be identified under

each of the objectives which would help the organization to

realize the goals set under each of the perspectives. These

would act as parameters to measure the progress towards the

objectives.

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3. The next important step is the setting of specific targets

around each of the identified key areas which would act as a

benchmark for performance appraisal.

Hence, a performance measurement system is build around

these critical factors. Any deviation in attaining the results

should raise a red signal to the management which would

investigate the reasons for the deviation and rectify the same.

4. The appropriate strategies and the action plans that are to

be taken in the various activities should be decided so that it is

clear as to how the organization has decided to pursue the

pre-decided goals. Because of this reason, the Balanced

Scorecard is often referred to as a blueprint of the company

strategies.

An example will help the readers to understand it better. Some

of the

Objectives together with a measurement measures are given

below.

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Hence, the above paragraphs show that all the four areas have

been given equal importance in measuring performance level.

The measures and the objectives, however, depend upon the

type of business the 0rganization is in. The financial indicatorsare complemented by the non-financial ones. Since, objectives

and goals are set for each of the critical success factors under

each of the heads, it brings about a focus on the strategic

vision.

Thus, all activities would be directed towards achievement of

the long-term goals which have been set by the top

management. The identification of the key result areas (KRAs)

help an organization in moving towards the right strategic

direction. This tool creates a link between objectives,

measures, targets and initiatives. It is, therefore, absolutely

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clear that the Balanced Scorecard acts as a focal point for the

organisation’s efforts, designing and communicating priorities

to the managers, employees, investors and the customers.

V. Utilizing The Balanced Scorecard As A

Strategic Management Tool

The tool has become a weapon for organizations to identify the

pressure points, conflicting interests, objectives setting,

prioritization of objectives, planning and budgeting. The four

main important steps that need to be taken care of are-

1. Translating the Vision

It is to be remembered that the vision of any organization

should be understood by each and every employee of the

organization. If it is understood by the top management only,

then it is definite that the organization will fail to realize its

goals. Hence, before starting with the strategic

implementation process, the organizations needs to be clear

about the reason for its existence, where it wants to see itself

after a certain number of years and properly decide its

business definition. The managers should build a consensus

around the organisation’s vision and strategy. The strategies,

in fact, emanate from the vision and mission of the company

which means that a linkage is formed between the strategies

of the different business units and the vision of the

organization. The lofty statements must be translated into an

integrated set of objectives and measures. Thus, by using this

tool, the overall strategic objectives for the company gets

clarified which helps to achieve consensus across different

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business units on the overall strategic objectives for the

company.

2. Communicating and Linking

Just communicating the vision and the strategies is not an end

in itself. The strategic goals and the measures to be set in the

different areas have to be decided upon. The long-term

strategic goals have to be translated into both departmental

and individual goals which should be aligned to each other in

order to realize the long-term goals. In fact, each and

everyone at different levels in the organizational hierarchy

needs to be educated about the action plans and reasons for

accepting the same. The tool contains three levels of

information :

1. It describes the corporate objectives, measures and the

targets

2. It helps in deciding the business unit targets and

3. It helps in framing the departmental and the individual

objectives which will help in attaining the objectives of

the business unit directly which would lead to the

attainment of the corporate goals. The employees are

given the freedom to decide their measures, objectives

and the targets attainment of which would move the

organization in the right strategic direction. Then the

compensation level is linked to the performance level

which in reality involves a lot of subjectivity.

3. Business Planning

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This step helps in the resource allocation process. One has to

keep in mind that objectives form an important criteria in

deciding the quantum of resources that are required to be

allocated to the various departments, activities and the

processes. No strategy can bring successful results to an

organization if the allocation is not in line with what is required

to meet the results. This allocation is dependent on the

budgeted estimates which are decided on the basis of the said

objectives. Hence, through this step the Balanced Scorecard

tries to bring about integration between strategic planning and

the budgeting exercise. The short-term milestones are also

needed to be figured out which in totality brings about a

linkage between strategic goals and the budgets. This

procedure helps in actualizing what has been set by the

organization. Thus, this step brings about a shift from the

‘thinking’ exercise to the ‘doing’ stage and the organization

tries to achieve the long-term goals through the short-term

actions.

4. Feedback and Learning

The first three steps as mentioned above help in the strategic

implementation process. But, for knowing whether the

organization is in a position to achieve the strategic goals and

whether it is in the right track, the process of feedback and

learning is essential. The strategic learning consists of

acquiring knowledge about which way the organization is

moving to, testing whether the premises considered before

hold true even now and finally making adjustments wherever

required. The corrective measures are required so that the

necessary rectifications are made which will help an

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organization pursue the correct path. Another point is that an

organization gets to know whether the cause-and effect

relationships among the different perspectives really hold true,

to what extent they are strongly linked and also whether

positive results are being obtained. In case, an organization

realizes the existence of a gap in the cause effect

relationships, an immediate correction would be required so

that a positive relationship can be build among the various

factors. Thus, the tool with its specification of the causal

relationships between performance drivers and objectives

allows corporate and the business unit objectives executives

to use their periodic review sessions in order to evaluate the

validity of the unit’s strategy and the quality of its execution.

Also, this feedback and learning exercise may force an

organization to change the measures set in each of the

perspectives and adopt those, which if attained would ensure

the success of the corporate and the business strategies.

Before creating Strategy map Management should plan

a process of continuous improvement called the Plan-

Do-Check-Act cycle. For our purposes, the PDCA cycle

• PLAN: Design or revise business process components to

improve results

• DO: Implement the plan and measure its performance

• CHECK : Assess the measurements and report the

results to decision makers

• ACT: Decide on changes needed to improve the process

PDCA cycle can be illustrated as follows:

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This 'wheel within a wheel' describes the relationship between

strategic management and business unit management in a

large company. There are actually several separate business

units, of course, each with its own set of metrics, goals, targets

and initiatives. But this figure illustrates the idea that the

business activities constitute the DO part of the overall

strategic effort.

VI. Steps to create theOrganizational Balanced Scorecard

Formulate improvement Actions and Assign Data ownership

Create Strategy Map Formulate, Performance Measures and

Targets, Develop & Align Strategies, Identify Vision and

Mission

Vision and Mission

The Balanced Scorecard process starts with determining or

updating the mission and vision, because it is advisable to

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clarify the shared view of the organisation’s future direction

right from the start.

The mission and vision should reflect the organisation’s

values. The organizational mission contains an

organization’s identity and indicates its reason for existing.

The mission involves what is perceived as being a shared

view of the organisation’s underlying principle: why do we

exist, what we are doing here together, for whom do we

exist, who are our most important stakeholders. The

‘mission statements’ if effectively articulated can fit the

employees of the organization in the right place and steer

them towards the common goal.

A vision is perceived as the most ambitious image where

the organization wants to be in the future. The vision

should be challenging, but not impossible. The vision

clearly says where are we going, how do we envision the

future, where do we want to be.

Good business leaders create a vision, articulate the vision,

passionately own the vision, and relentlessly drive it to

completion.”

Develop and Align Strategies :

Every organization should pursue a unique strategy, based

on its interpretation of the external and internal situation.

The strategy should involve a view of future challenges in

the operating environment and the sector. This is a long-

term view of the objectives and means required to achieve

the vision, mission and values.

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In a Balanced Scorecard process, goals and objectives are

set at management group level, after determining analyses

and policies, and are then filtered down to operations or

processes, teams and, where necessary, all the way down

to individual level. The effectiveness of the strategy will

ripple through all departments, which can then be used to

compare the actual results with expectations.

Create Strategy Map

Strategy maps and scorecards go hand in hand. A strategy

map is a visual representation of an organization's strategy

and the processes and systems necessary to implement

that strategy. A strategy map will show employees how

their jobs are linked to the organization's overall objectives.

The strategy map is used to develop the Balanced

Scorecard a strategy map that describes how an

organization creates value by connecting strategic

objectives in explicit cause and effect relationship with

each other in the four BSC objectives (financial, customer,

processes, learning and growth). A way to think of this is

the organization’s vision and mission statement answer the

questions, “Where do we want to go?” and “Why are

we here?” whereas the strategy map and scorecard

answer, “How are we going to get there?” Strategy

map is the key to improve the business performance. .

Designing strategy map and creating balanced scorecard

performance metrics that tightly link critical success factors

to strategic goals. With a properly cascaded strategy map,

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changes in strategy can quickly be mirrored in the

measurement system.

Formulate performance measures and targets

Everyone recognize the saying “What you measure is what

you get.” Scorecards make it a reality. Measures drive

behavior! Selecting appropriate performance measures is

more art than science. A performance measure is some

objective measurement of an aspect of a business that is

critical to the success of that business. Such performance

measures are a component of the conceptual scorecard for

a business and can be associated with a number of

different business activities. Through continuous reporting

of the actual scores against the KPI targets, an organization

is kept on track. The scorecard’s critical role is that it puts

the measures (key performance indicators, or KPIs) in the

context of the strategy. To express the strategy in

measurable objectives, the management should balance

between leading and lagging indicators to progress toward

the corporate vision. A leading indicator is a measure that

has a causal effect on time-lagging indicators. Leading

indicators are valuable to track because merely sanctioning

and reporting them serves to drive behavior—which is the

intent. Think of leading indicators as cumulatively adding

power to the alignment and achievement of the

overarching strategic objective. The results of each

indicator must be compared to a target. The performance

against each measure should be keyed to challenging but

attainable targets. Through continuous reporting of the

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Automation Balanced Scorecard

The implementation of the strategy depends upon effective

execution of the operational details. Use of information

technology for this purpose will be a key element for effective

use of Balance Scorecard.

MPOWER provided the automation tool, COVENARK™

STRATEGIST, to automate this comprehensive and intricately

linked balanced scorecard structure. It helped the top

managers of Bilcare to successfully position their strategy

across the organization and reap the benefits of a seamless

strategy deployment and performance measurement solution.

Step 1

Strategy Review

Vision –

• Build Research Driven enterprise of the century to service the life

sciences globally

Mission by 2010-

• By 2010, Team Bilcare will lead the world in Pharma packaging

Core Business objective

• By 2010 convert from 100% generic supplies to 100% customized

solutions and grow at 80% CAGR with 25% EBIDTA and 15% PAT

The next step will be to meet the leadership team to confirm strategic direction

and priorities. Consequently, the Strategic map will be built.

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Step 2

The Strategy MAP Development

Mapping a strategy through use of Balanced Scorecard is animportant step to evaluate organizational perspective,

objective in terms of Strategy Map. This process will be to

develop and refine objectives to finalize strategic map.

Step 3Measurements, Targets and Initiatives.

The process will be to rank initiatives and the measure or

indicators is selected to best represent the factors that lead to

improve customer, operational and financial performance.

Once the initiative have been endorsed by all participants in

the workshop, a document will be prepared and again

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discussed in final executive workshop to be attended by top

manager for finalization.

The out put will be a Balanced Scorecard which now contains

all elements, namely strategic map, objective measure,

targets with priority order and initiative.

Dependent Measurement Template

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Initiative Template

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INTIATIVE MAPPING (PROJECT MAPPING)

Step 4

Implementation Plan

The detailed Plan to implement the strategic management

system across the organization is developed. The essential

components of plan are

• Education and Communication Strategy

• Plan for Cascading to lower levels

• Linkage to Compensation

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Feedback and Review system (Performance Managementsystem is done by applying BSC)

Improvements in organizational / project performance can only be

achieved if performance is reviewed continuously using the balancedscorecards.

One of the most effective methodologies is the “Dashboard”methodologies, where we can set up for the “green” space, “yellow”“Grey” and “red” space for each of the KPMs at the project level.

Where green denotes- KPM on target, yellow denotes- acceptable level of deviation and red denotes- that the performance deviation needsimmediate recovery plan. The dashboard methodology helps the executivemanagement to focus on the vital few which needs focus and act on them..

The green, yellow and red spaces are set up based on past benchmarksand comparative data.

Balanced Scorecard

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VIII. Conclusion –

This tool is being used by several organizations throughout the

world. Bilcare limited as a Global company also started using it

because it gives certain advantages - which are cited below :

• It translates vision and strategy into action.

• It defines the strategic linkages to integrate performance

across organizations.

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• It communicates the objectives and measures to a

business unit.

• It aligns the strategic initiatives in order to attain the

long-term goals.

• It aligns everyone within an organization so that all

employees understand how they support the strategy.

• It provides a basis for compensation for performance.

• The scorecard provides a feedback to the senior

management if the strategy is working.

A great scorecard is not enough

Get the strategy right.

Senior management commitment – a must.

Realize - BSC is a major change process.

Involve more & more people.

Communicate & educate – to create awareness.

Ensure Personal alignment – KRAs, Compensation.

Link strategy & budgeting. Use it

Use it !

References

Translating Strategy Into Action: The Balanced Scorecard, Robert SKaplan and

David P. Norton, Harvard Business PressWeb Site

www.balancedscorecard.org

Guidance : Mr. Sanjay Limaye – Head Business Excellence: Dr. Soniya Yadwadkar – Head HR. Corporate

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http://opt/scribd/conversion/tmp/scratch16302/www.balancedscorecard.org

http://opt/scribd/conversion/tmp/scratch16302/www.balancedscorecard.org



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