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Building The Balanced Scorecard

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Building

the

Balanced
Scorecard
Introduction
 Balanced Scorecards provide a framework for
communicating strategy in operating terms (measurements
and targets).

 You must communicate strategy in operating terms if you


expect people to execute on your strategy.

 When people are asked about strategy, they reach for their
balanced scorecard.
Why do we need Balanced
Scorecard…???
 Improves how you communicate strategy

 Superimposes a discipline whereby you capture


cause-effect; otherwise you create pockets of
under-performance.

 Forces to think about strategic measurement as


opposed to tactical or operating type measurements
HOW TO BEGIN….!!
 Begin with strategic plan – what things
are critical to future success?

 Focus on customers – what values will we


add to our customers

 Define the processes – how will we


deliver these services to our customers

 Build the organization – what capabilities


must we put in place
Strategic Goals
 The first components of any strategy are goals.

 Strategic goals establish direction in concrete terms.

 Strategic goals anchor the rest of the process.

 Strategic goals should fit with the vision and mission of


the organization.
Attributes of a Goal
 Should be a very short statement

 Directly relates to the mission

 Broad in scope

 Covers long time period (such as 3 years)

 Examples:
- Improve Customer Service
- Leverage Core Competencies
- Develop more innovative products
Strategic Objectives

 Once first anchor (goals) are established, develop a


set of strategic objectives.

 Strategic objectives define what actions must be


taken to reach the strategic goals.

 Objectives are critical to future success. For


example, in order to grow revenues, we must
introduce new products and expand our market
share.
Objective Attributes

 Longer statement than goal statement

 More specific than goal statement

 Relationship to mission

 Covers shorter time period than goal (such as 6 months or 1


year)

 Example:
- We will expand call center services to include technical
support
Strategic Themes

o Based on strategic goals, three to five


strategic themes should emerge.

o From these themes, develop a strategic map.

o Four common strategic themes are: Operating


Efficiencies, Customer Relations, Product
Innovation, and Growing the Business.
Strategic Model

Strategic Models can emerge from four principles:

1. Translate strategies into operating terms.

2. Link strategies throughout the entire organization.

3. Commit everyone to implementing strategy.

4. Make strategizing a continuous process of learning


and adjusting to change.
4 Perspectives of BSC
 Financial: Top layer in the map, represents financial
outcomes (profits, revenues, etc.)

 Customer: Next layer down, 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.
Strategic Mapping
 Strategic Maps are the foundation of the Balanced
Scorecard.

 You will need one strategic map for each strategic


theme.

 Maps are constructed over four perspectives.

 Strategic objectives are mapped over the four


perspectives, linked together.
Linking BSC to Business Strategy

 Strategic objectives should be placed in the


Strategic Map according to which perspective fits
with the objective.

 Objectives may cross over more than one


perspective.

 Start at the top with outcomes and work our way


down, looking at what drives the outcome.
Approval of Maps

 After strategic maps are done, get approval from


executive management. Ask questions
likes….“Does this map accurately tell the story
of our strategy?”

 If management disagrees with the map, go back


and redo the maps.
Measurements

 For each strategic objective, you need one


measurement.

 Measurement provides us with feedback on meeting


the strategic objective.
Measurement Criteria

 Measurements should drive change, providing


teeth to our strategy.

 Measurements define objectives in specific terms.


A good measurement should tell you what your
objective is.

 Measurements should be SMART..!!


Examples of Good Measurements

Customer satisfaction:
- Response Time to service customer
- Customer Satisfaction Survey Scores

Process Efficiency:
- Cycle time
- Downtime (time / ratio)
- No. of Restarts
Targets Setting
 Once measurements are established, you need to
set a target for each measurement.

 Targets push the organization to a required level


of performance.

 Targets put focus on the strategy, expressing the


specifics of the strategy.

 When an organization hits its targets, then it has


successfully implemented its strategy.
Examples of Targets
 Total Time to Recruit New Employees: Less than
“x” days by 2005

 Utilization of rental facilities: Increase to 90%


during peak summer months

 Growth in top line revenues: 12% increase than 2004

 Improve overall customer satisfaction: Total scores


on satisfaction exceed 85%
Initiatives Takers

 In order for things to happen in an


organization, you must initiate major
projects or programs.

 Once you launch appropriate initiatives, you


should be able to meet your strategic
objectives. This closes the loopholes and
everything is linked.
Initiative Attributes

 Sponsored by Top Management

 Designated project(s) owners

 Includes deliverables or milestones

 Has some deadlines


Templates
Strategic Map for Strategic Theme #1:

Throughout this

Financial
process, use
templates to capture,
analyze and

Customer
document data.
Templates are used
Internal
for strategic
mapping, defining
Learning

measurements, etc.
Pointers to keep in mind….!!
 Scorecards are built around three teams:
Leadership Team (upper level management), Core
Team (middle level management) and
Measurement Team (lower level functional
personnel).

 Scorecards are built around frequent group


meetings: Kick Off Meeting followed by one
meeting for each of the three teams.
Implementation

 The minimum time for developing a balanced


scorecard is 3 months.

 Full deployment of scorecards throughout the entire


organization can take one year or even more than that.

 The best place to start building a scorecard is where all


components of the value chain are in place: Customer,
Innovation, Production, Delivery, Services, etc.
Summary
 Balanced Scorecards are the best way of putting
organization in its place.

 Scorecards rely on a fully integrated approach: Goals,


Objectives, Mapping, Measurements, Targets, and
Initiatives.

 The building of a balanced scorecard can be


experimental, whereby you test your strategies, refine,
and make changes as you get feedback and learn what
works.
THANK YOU

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