Slide1 l.jpg
This presentation is the property of its rightful owner.
Sponsored Links
1 / 21

Balanced Scorecard Model PowerPoint PPT Presentation


  • 132 Views
  • Uploaded on
  • Presentation posted in: General

Balanced Scorecard Model. Financial Perspective. Learning & Growth Perspective. Customer Perspective. Internal Business Process Perspective. Balanced Scorecard Components. Financial Perspective Customer Perspective Internal Business Process Perspective Learning and Growth Perspective.

Download Presentation

Balanced Scorecard Model

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Slide1 l.jpg

Balanced Scorecard Model

Financial Perspective

Learning & Growth

Perspective

Customer

Perspective

Internal Business

Process Perspective

STRATEGIC COST MANAGEMENT - SPRING 2009


Balanced scorecard components l.jpg

Balanced Scorecard Components

  • Financial Perspective

  • Customer Perspective

  • Internal Business Process Perspective

  • Learning and Growth Perspective

STRATEGIC COST MANAGEMENT - SPRING 2009


The measures l.jpg

The Measures

  • Approximately 5-7 per section

  • Link the measures…cause & effect

  • Include outcomes and drivers

  • Strategic measures become part of the bal. scorecard; control system measures become “critical success factors” (or everyday measures)

STRATEGIC COST MANAGEMENT - SPRING 2009


Balanced scorecard success l.jpg

Balanced Scorecard Success

  • Employee level

  • Link with Compensation

  • Include leading and lagging indicators

STRATEGIC COST MANAGEMENT - SPRING 2009


Features of a good balanced scorecard l.jpg

Features of a Good Balanced Scorecard

  • It tells a story.

  • It helps communicate a strategy.

  • It preserves a financial focus.

  • It provides for metric focus.

  • It highlights sub-optimal tradeoffs.

STRATEGIC COST MANAGEMENT - SPRING 2009


Balanced scorecard pitfalls l.jpg

Balanced Scorecard Pitfalls

  • Failure to allow the scorecard to evolve.

  • Emphasizing across the board improvement.

  • Focus on only objective measures.

  • Failure to focus on both costs and benefits.

  • Failure to include non-financial measures in evaluating employees.

STRATEGIC COST MANAGEMENT - SPRING 2009


Economic value added analysis eva l.jpg

Economic Value-added AnalysisEVA®

  • Measurement Alternative for Shareholder Value

  • Elements

STRATEGIC COST MANAGEMENT - SPRING 2009


A little bit of history l.jpg

A Little Bit of History

  • Residual income measures have been around for over 100 years in academic literature.

  • Stern Stewart & Co. introduced the formal concept of EVA® about 10 years ago.

  • Fortune Magazine put EVA® on the map in a September 1993 article.

  • A whole slew of offspring have followed.

    • SVA from Andersen Consulting

    • Other variations of Economic Value Added

STRATEGIC COST MANAGEMENT - SPRING 2009


Eva testimonials l.jpg

EVA™ Testimonials

  • “Only EVA® gives a real picture of value creation. Accounting benchmarks just don’t do the job.” Robert Boldt, Calpers.

  • EVA® correlates better with stock performance than EPS. Fortune Magazine study.

STRATEGIC COST MANAGEMENT - SPRING 2009


Eva benefits l.jpg

EVA® Benefits

  • Objective evaluation

  • Easy tool for strategic decision support

  • Common shareholder & management focus

  • Consistent measurement tool

  • Improves on-going operating decisions

  • Provides basis for common incentive-pay

STRATEGIC COST MANAGEMENT - SPRING 2009


Eva risks l.jpg

EVA® Risks

  • May be subjective in implementation.

  • Singular reliance on EVA® may be misleading.

STRATEGIC COST MANAGEMENT - SPRING 2009


Let s define eva l.jpg

Sources of Capital

-Debt

-Equity

Capital Buys “Stuff”

“Stuff” Generates Income

Let’s Define EVA®

When the Cost of Capital is less than

the Operating Income from that Capital, you create EVA®!!!

STRATEGIC COST MANAGEMENT - SPRING 2009


Eva elements l.jpg

EVA® Elements

  • Cost of Debt Financing

  • Cost of Equity Financing

  • Components of Capital

  • Adjusted Net Operating Income

STRATEGIC COST MANAGEMENT - SPRING 2009


Cost of debt financing l.jpg

Cost of Debt Financing

  • Interest Expense

  • After-tax Impact

  • Consider all Debt, Excluding A/P

STRATEGIC COST MANAGEMENT - SPRING 2009


Cost of equity financing l.jpg

Cost of Equity Financing

  • Shareholder Hurdle Rate

  • Price Appreciation

  • Dividend Rate

  • “Six Percentage Point” Rule

STRATEGIC COST MANAGEMENT - SPRING 2009


Components of capital l.jpg

Components of Capital

  • Net Working Capital

  • Net Long-lived Tangible Assets

  • R & D Spending

  • Employee Development Spending

STRATEGIC COST MANAGEMENT - SPRING 2009


Adjusted net operating income l.jpg

Adjusted Net Operating Income

  • Substitute R&D and Employee Development Costs with Annual Amort.

  • Use Net Income from Continuing Operations

  • Adj. Net Op. Income Minus Cost of Financing Equals Economic Value Added

STRATEGIC COST MANAGEMENT - SPRING 2009


Eva uses l.jpg

EVA® Uses

  • Planning Tool

  • Business Unit Evaluation

  • Incentive Compensation Base

  • Merger and Acquisition Analysis

  • Capital Asset Analysis

STRATEGIC COST MANAGEMENT - SPRING 2009


Corporate examples l.jpg

Corporate Examples

  • CSX

  • Quaker Oats

STRATEGIC COST MANAGEMENT - SPRING 2009


Ways to raise eva l.jpg

Ways to Raise EVA®

  • Increase Profits

  • Reduce Capital Spending

  • Reduce Investment in Working Capital

  • Increase High-margin Capital Investments

STRATEGIC COST MANAGEMENT - SPRING 2009


Eva implementation l.jpg

EVA® Implementation

  • Top management buy-in

  • Make it a way of life

  • Implement Gradually

  • Keep it Simple

  • Train the users

STRATEGIC COST MANAGEMENT - SPRING 2009


  • Login