Post on 05-Jan-2016
The Balanced Scorecard
A Performance Measurement Tool
The Balanced ScorecardWhat is it?
• The Balanced Scorecard • Provides stakeholders with a
comprehensive measure of how the organization is progressing towards the achievement of its strategic goals
• Provides a framework for communicating strategy in operating terms (measurements and targets)
• Balances financial and non-financial measures
• Balances short and long-term measures
The Balanced ScorecardWhat is it?
• The Balanced Scorecard• Balances performance drivers (leading
indicators) with outcome measures (lagging indicators)
• Should contain just enough data to give a complete picture of organizational performance… and no more
• Leads to strategic focus and organizational alignment
The Balanced Scorecard
Why do it?• To achieve strategic objectives• To provide quality with fewer resources• To eliminate non-value added efforts• To align customer priorities and
expectations with the customer• To track progress• To evaluate process changes• To continually improve• To increase accountability
Mission – What the company does
Vision – What it aspires to be
Strategies – How it accomplishesgoals
Measures – Indicators of progress
The Strategy Focused Organization
The Balanced Scorecard and The Big Picture
•Activity Based Costing•Economic Value Added•Forecasting•Benchmarking•Market Research•Best Practices•Six Sigma•Statistical Process Control•Reengineering•ISO 9000•Total Quality Management•Empowerment•Learning Organization•Self-Directed Work Teams•Change Management
Missionand
Vision
BalancedScorecard
StrategicPlanning
FINANCIAL/REGULATORYTo satisfy our constituents, what financial & regulatory
objectives must we accomplish?
CUSTOMERTo achieve our vision,
what customer needs must we serve?
LEARNING & GROWTHTo achieve our goals, how
must we learn, communicate and grow?
INTERNALTo satisfy our customers and
stakeholders, in which business processes must we excel?
The Four PerspectivesThe Four Perspectives
The Four Perspectives
Financial: Represents financial outcomes (profits, revenues, etc.)
Customer: Enables financial results (service, image, price, quality, etc.)
Internal Processes: The values added to customers, such as delivery, production, distribution, etc.
Learning & Growth: The people, systems, and organization that enable processes
Measurements
For each strategic objective, there is one measurement
Measurement provides feedback on meeting the strategic objective
Most organizations will use many of their existing measurements
Organizations requiring major change should include driver type measurements
Measurement Criteria
Measurements should drive change, providing teeth to the strategy
Measurements define objectives in specific terms – A good measurement should link to the
objective
– Measurements should be repeatable, quantifiable, and verifiable
Customer Perspective
o Customer satisfaction survey scores
o Response time to customer service
o Market share
Possible Performance MeasuresPossible Performance Measures
To achieve our vision, what customer needs must we serve?
Financial / Regulatory Perspective
o Cost per unit
o ROE / ROA
o Percentage increase in revenues
o Budget projections
Possible Performance MeasuresPossible Performance Measures
To satisfy our constituents, what financial and regulatory objectives must we accomplish?
Internal Perspective
o Cycle time
o Down time
o Testing time
o Completion rate
o Government approval
o Transactions per employee
o Errors or rework
Possible Performance MeasuresPossible Performance Measures
To satisfy our customers, in which business processes must we excel?
Learning and Growth
To achieve our goals and accomplish core activities, how must we learn, communicate and work together?
Possible Performance MeasuresPossible Performance Measures
o Employee satisfaction
o Retention and turnover
o Training hours and resources
o Technology investment
Why Measure?
• To determine how effectively and efficiently the process or service satisfies the customer
• To identify improvement opportunities
• To make decisions based on FACTS and DATA
Measurements Should:
• Translate customer expectations into goals
• Evaluate the quality of processes
• Track improvement
• Focus efforts on customers
• Support strategies
Targets
“If you don’t know where you’re going, you may go somewhere else.”
Yogi Berra
Targets
Targets need to be set for all measures
Should have a “solid basis”
Give personnel something for which to aim
If achieved will transform the organization
Must be achievable; be careful not to develop measures/targets in a fragmented approach:– e.g., Asking people to increase customer
satisfaction has to be backed up with the knowledge, tools, and means to achieve that target
Expanded ScorecardExpanded Scorecard
The Balanced Scorecard as a Management System
The BSC is a “Living Document” that requires regular revision of objectives and measures
Assessment of success is based on DATA… not opinions or gut feelings
Benefits of the BSC
Simple to Use and Understand Based on Vision and Strategy Multidimensional
•Quantitative and Qualitative Measures•Current and Future
Provides Measurement of and Method for Improving Products/ServicesServes as a Communication Tool
The Balanced Scorecard
A Performance Measurement Tool