Balance scorecard

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<ul><li> 1. 11th EditionChapter 10McGraw-Hill/Irwin Copyright 2006, The McGraw-Hill Companies, Inc.</li></ul> <p> 2. The Balanced ScorecardManagement translates its strategy intoperformance measures that employees understand and accept.FinancialCustomers Performancemeasures Internal Learningbusiness and growthprocessesMcGraw-Hill/Irwin Copyright 2006, The McGraw-Hill Companies, Inc. 3. The Balanced Scorecard: From Exh. 10-11 Strategy to Performance MeasuresPerformance MeasuresFinancialWhat are ourHas our financialfinancial goals? performance improved?What customers doVisionCustomer we want to serve and Do customers recognize that how are we going toand we are delivering more value? win and retain them? StrategyInternal Business Processes What internal busi- Have we improved key business ness processes are processes so that we can deliver critical to providingmore value to customers? value to customers? Learning and GrowthAre we maintaining our abilityto change and improve?McGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. 4. The Balanced Scorecard: Non-financial MeasuresThe balanced scorecard relies on non-financial measures in addition to financial measures for two reasons: Financial measures are lag indicators that summarizethe results of past actions. Non-financial measures areleading indicators of future financial performance. Top managers are ordinarily responsible for financialperformance measures not lower level managers.Non-financial measures are more likely to beunderstood and controlled by lower level managers.McGraw-Hill/Irwin Copyright 2006, The McGraw-Hill Companies, Inc. 5. The Balanced Scorecard for IndividualsThe entire organizationEach individual shouldshould have an overallhave a personal balanced scorecard.balanced scorecard. A personal scorecard should contain measures that can beinfluenced by the individual being evaluated and thatsupport the measures in the overall balanced scorecard.McGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. 6. The Balanced Scorecard A balanced scorecard should have measuresthat are linked together on a cause-and-effect basis.If we improve Another desired Then one performance performance measure measure . . .will improve.The balanced scorecard lays out concrete actions to attain desired outcomes.McGraw-Hill/Irwin Copyright 2006, The McGraw-Hill Companies, Inc. 7. The Balanced Scorecardand CompensationIncentive compensation should be linked to balanced scorecard performance measures.McGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. 8. The Balanced ScorecardExh.10-13 Jaguar ExampleProfitFinancial Contribution per car Number of cars sold CustomerCustomer satisfactionwith optionsInternal BusinessNumber ofTime tooptions availableinstall option ProcessesLearningEmployee skills in and Growth installing optionsMcGraw-Hill/Irwin Copyright 2006, The McGraw-Hill Companies, Inc. 9. The Balanced Scorecard Jaguar ExampleProfit Contribution per car Number of cars soldCustomer satisfaction Resultswith optionsSatisfaction IncreasesStrategiesIncrease Number ofTime to Optionsoptions availableinstall option TimeDecreasesIncreaseEmployee skills inSkillsinstalling optionsMcGraw-Hill/Irwin Copyright 2006, The McGraw-Hill Companies, Inc. 10. The Balanced Scorecard Jaguar ExampleProfit Contribution per car ResultsCars sold Number of cars soldIncreaseCustomer satisfactionwith optionsSatisfaction IncreasesStrategiesIncrease Number ofTime to Optionsoptions availableinstall optionEmployee skills ininstalling optionsMcGraw-Hill/Irwin Copyright 2006, The McGraw-Hill Companies, Inc. 11. The Balanced Scorecard Jaguar Example ResultsProfit Contribution per car Contribution Increases Number of cars soldCustomer satisfactionwith options Number ofTime tooptions availableinstall option TimeDecreasesStrategiesIncreaseEmployee skills inSkillsinstalling optionsMcGraw-Hill/Irwin Copyright 2006, The McGraw-Hill Companies, Inc. 12. The Balanced Scorecard Jaguar Example ResultsProfit ProfitsIncrease If number Contribution per car Contribution of cars soldIncreases and contribution per car increase, Number of cars soldprofitsincrease. Customer satisfactionwith optionsSatisfaction IncreasesStrategiesIncrease Number ofTime to Optionsoptions availableinstall option TimeDecreasesIncreaseEmployee skills inSkillsinstalling optionsMcGraw-Hill/Irwin Copyright 2006, The McGraw-Hill Companies, Inc. 13. Delivery Performance Measures OrderProductionGoodsReceived Started Shipped Process Time + Inspection Time Wait Time + Move Time + Queue TimeThroughput Time Delivery Cycle TimeProcess time is the only value-added time.McGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. 14. Delivery Performance Measures OrderProductionGoodsReceived Started Shipped Process Time + Inspection Time Wait Time + Move Time + Queue TimeThroughput Time Delivery Cycle TimeManufacturing Value-added time Cycle= Efficiency Manufacturing cycle timeMcGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. 15. Quick Check A TQM team at Narton Corp has recorded the following average times for production:Wait 3.0 days Move 0.5 daysInspection 0.4 days Queue 9.3 daysProcess 0.2 days What is the throughput time? a. 10.4 days b. 0.2 days c. 4.1 days d. 13.4 daysMcGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. 16. Quick Check A TQM team at Narton Corp has recorded the following average times for production:Wait 3.0 daysMove 0.5 daysInspection 0.4 daysQueue 9.3 daysProcess 0.2 days What is the throughput time?a. 10.4 days Throughput days= Process + Inspection + Move + Queueb. 0.2 timec. 4.1 days = 0.2 days + 0.4 days + 0.5 days + 9.3 days = 10.4 daysd. 13.4 daysMcGraw-Hill/Irwin Copyright 2006, The McGraw-Hill Companies, Inc. 17. Quick Check A TQM team at Narton Corp has recorded the following average times for production:Wait 3.0 days Move 0.5 daysInspection 0.4 days Queue 9.3 daysProcess 0.2 days What is the MCE? a. 50.0% b. 1.9% c. 52.0% d. 5.1%McGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. 18. Quick Check A TQM team at Narton Corp has recorded the following average times for production:Wait 3.0 days Move 0.5 daysInspection 0.4 days Queue 9.3 daysProcess 0.2 days What is the MCE? a. 50.0% MCE = Value-added time Throughput time b. 1.9% = Process time Throughput time c. 52.0%= 0.2 days 10.4 days d. 5.1% = 1.9%McGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. 19. Quick Check A TQM team at Narton Corp has recorded the following average times for production:Wait 3.0 days Move 0.5 daysInspection 0.4 days Queue 9.3 daysProcess 0.2 days What is the delivery cycle time? a. 0.5 days b. 0.7 days c. 13.4 days d. 10.4 daysMcGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. 20. Delivery cycleQuick Check time = Wait time + Throughput time= 3.0 days + 10.4 days= 13.4 days A TQM team at Narton Corp has recorded the following average times for production:Wait 3.0 days Move 0.5 daysInspection 0.4 days Queue 9.3 daysProcess 0.2 days What is the delivery cycle time? a. 0.5 days b. 0.7 days c. 13.4 days d. 10.4 daysMcGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. 21. End of Chapter 10McGraw-Hill/IrwinCopyright 2006, The McGraw-Hill Companies, Inc. </p>