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BALANCED SCORECARD. Tom Zalucha – OPERMGT380 (Training Presentation). Balanced Scorecard. BALANCED SCORECARD. What Will Be Covered. Background and Definition How Can This Tool Be Used Nuts and Bolts – How It Works Building A Balanced Scorecard Examples and Exercises

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Presentation Transcript
what will be covered

BALANCED SCORECARD

What Will Be Covered

Background and Definition

How Can This Tool Be Used

Nuts and Bolts – How It Works

Building A Balanced Scorecard

Examples and Exercises

Summary / Reading List

background and definition

BALANCED SCORECARD

Background and Definition

History of Balanced Scorecard

Balanced Scorecard Defined

Financial Perspective

Customer Perspective

Internal Process Perspective

Employee Growth Perspective

how can this tool be used exercise

BALANCED SCORECARD

How Can This Tool Be Used (Exercise)

What Is the Vision of the Future

If Vision Succeeds, How Will We Differ

What Are the Critical Success Factors

What Are the Critical Measurements

how can this tool be used answer

BALANCED SCORECARD

How Can This Tool Be Used (Answer)

Forming vs Executing Strategy

Balanced Scorecard Approach

nuts and bolts how it works strategy focused principles

BALANCED SCORECARD

Nuts and Bolts – How It Works (Strategy Focused Principles)

Translate Strategy

Organization Alignment

Strategy Is Everyone’s Job

Strategy a Continual Process

Executive Leadership

building a balanced scorecard process overview

BALANCED SCORECARD

Building A Balanced Scorecard (Process Overview)

Define Strategic Destination

Build the Strategic Linkages

Select Priority Initiatives

Identify Key Themes Driving the Strategy

Determine Measures and Targets

Plan for Implementing

Strategy

Themes

Objectives

Measures& Targets

Prioritized Initiatives

Implementation Plan

building a balanced scorecard aligning strategy

BALANCED SCORECARD

Building A Balanced Scorecard (Aligning Strategy)

Using the Balance Scorecard at each level in a company helps to align the strategy throughout the organization.

Corporate

Division

Location/Dept.

Strategy Alignment

Individual

building a balanced scorecard scorecard overview

Vision & Strategy

Financial Perspective

EVA

Strategy

Revenue

Strategy

Productivity

Strategy

Customer Perspective

Customer

Solutions

Operational

Excellence

Product

Leadership

Internal Process Perspective

Build the

Brand

Innovation

Operations &

Logistics

Employee Growth Perspective

Technology

Infrastructure

Employee

Competencies

Business

Culture

BALANCED SCORECARD

Building A Balanced Scorecard (Scorecard Overview)

  • Balanced Scorecard Elements
  • Business Vision & Strategy
  • Strategic Themes
  • Four Business Perspectives
  • For each Perspective there are:
    • Objectives
    • Measures
    • Targets
    • Initiatives
building a balanced scorecard strategy to operational terms

BALANCED SCORECARD

Building A Balanced Scorecard (Strategy to Operational Terms)

Strategic Theme:

Measurement

Initiative

Objectives

Target

examples and exercises exercise steps

BALANCED SCORECARD

Examples and Exercises (Exercise Steps)

  • Review business strategy and identify key strategic themes.
  • List all the strategic themes in your business strategy.
  • Select one strategic theme and create a strategy map.
  • Use the selected strategic theme to identify objectives, measures, targets, and initiatives for one key measure.
  • Identify the objectives, measures, targets, and initiatives for the other key measures.
  • If you have time, select another strategic theme and work through steps 1-4 again.
examples and exercises step1 review strategy

BALANCED SCORECARD

Examples and Exercises (Step1 Review Strategy)

Business is a stocking wholesale distributor of a broad line of building materials

and related services to retail lumber yards and national distribution outlets.

Your goal is to improve the company’s long-term EVA.

Your strategy is to:

Maintain or increase market share in existing trade areas by adding new products, improving marketing efforts with existing customers, and by focusing on value-added services

Opportunistically expand into new markets.

Continued emphasis on employee involvement to achieve operational efficiencies, cost reduction, and effective management of working capital in a safe operating environment.

examples and exercises step2 3 create strategy map

BALANCED SCORECARD

Examples and Exercises (Step2-3 Create Strategy Map)

  • Steps for creating a strategy map.
  • Insert your strategic theme at the top.
  • For each of the four key measures in the graphic on the left, identify a specific objective that will help your business support the strategic theme and overall business strategy.
  • After you have objectives identified for each key measure, draw arrows to describe the cause and effect relationships between the objectives.

Strategic Theme:

Financial Performance

Customer Satisfaction

Process Improvement

Employee Satisfaction

examples and exercises step2 3 create strategy map17

Strategic Theme:

Operational Efficiency

Financial

Profitability

Fewer

Trucks

Increase

Revenue

Customer

Reduced Cost

Lower Prices

Delivered on

Date Promised

Process

Efficient Order

Fulfillment

Employee

Sale/Operations

Teamwork

BALANCED SCORECARD

Examples and Exercises (Step2-3 Create Strategy Map)

  • Steps for creating a strategy map.
  • Insert your strategic theme at the top.
  • For each of the four key measures in the graphic on the left, identify a specific objective that will help your business support the strategic theme and overall business strategy.
  • After you have objectives identified for each key measure, draw arrows to describe the cause and effect relationships between the objectives.
examples and exercises step4 identify terms

BALANCED SCORECARD

Examples and Exercises (Step4 Identify Terms)

Statement of what strategy must achieve and what’s critical to its success.

How success in achieving the strategy will be measured and tracked.

The level of performance or rate of improvement needed.

Key action programs required to achieve objectives.

Strategic Theme:

Financial Performance

Objectives

Measurement

Target

Initiative

Customer Satisfaction

Process Improvement

Blank Strategy Map with Objective, Measurement, Target, and Initiative for One Key Measure

Employee Satisfaction

examples and exercises step4 identify terms19

BALANCED SCORECARD

Examples and Exercises (Step4 Identify Terms)

Statement of what strategy must achieve and what’s critical to its success.

How success in achieving the strategy will be measured and tracked.

The level of performance or rate of improvement needed.

Key action programs required to achieve objectives.

Strategic Theme:

Profitability

Financial Performance

Objectives

Measurement

Target

Initiative

Fewer

Trucks

Increase

Revenue

Efficient Staging

and Loading of

Customer Orders

Number of Orders

Pre-staged on

Time for Loading

85% by June

2005

Optimize Order

Pre-staging

Process

Customer Satisfaction

Delivered on

Date Promised

Reduced Cost

Lower Prices

Process Improvement

Efficient Order

Fulfillment

Employee Satisfaction

Sale/Operations

Teamwork

examples and exercises step5 complete scorecard

BALANCED SCORECARD

Examples and Exercises (Step5 Complete Scorecard)

Strategic Theme:

Objectives

Measurement

Target

Initiative

Financial Performance

Customer Satisfaction

Process Improvement

Employee Satisfaction

examples and exercises step5 complete scorecard21

BALANCED SCORECARD

Examples and Exercises (Step5 Complete Scorecard)

Strategic Theme:

Objectives

Measurement

Target

Initiative

Profitability

Financial Performance

Profitability

More Customers

Less Investment

Market Value

Truckload Rev.

EVA Charge

Increase Market

Share by 5%

Increase Truck

Revenue by 10%

Promote Delivery

Service

Fewer

Trucks

Increase

Revenue

Customer Satisfaction

Orders Delivered

On Time

Lowest Prices

Number of Orders

Delivered on

Date Promised

Exceed

Customer

Expectations 95%

Establish Specific

Delivery Routes

by Customer

Delivered on

Date Promised

Reduced Cost

Lower Prices

Process Improvement

Efficient Staging

and Loading of

Customer Orders

Number of Orders

Pre-staged on

Time for Loading

85% by June

2005

Optimize Order

Pre-staging

Process

Efficient Order

Fulfillment

Employee Satisfaction

Improved

Communication

Channels

Percent of Staff

Trained in

Teamwork

90% by June

2005

Teamwork &

Communication

Skills Training

Sale/Operations

Teamwork

summary and reading list conclusion

BALANCED SCORECARD

Summary and Reading List (Conclusion)

Focus on Strategy not Tactics

Define Strategy Implementation

Allow Continuous Monitoring

Emphasize Problem Solving & Growth

A Tool Backed up by Leadership

Alignment Across Entire Organization

summary and reading list reference material

BALANCED SCORECARD

Summary and Reading List (Reference Material)

Kaplan (2001: The Strategy-Focused Organization

Kaplan (1996): The Balanced Scorecard

Kaplan (1993): Putting Balanced Scorecard to work  

summary and reading list definitions

BALANCED SCORECARD

Summary and Reading List (Definitions)

Strategy: Our plan to add value to the corporation

Principles: General guidelines for evaluating conduct

Strategy Map: Diagram of cause-and-effect relationships between strategic objectives

Themes: High-level “thrusts” designed to bring focus on key strategic priorities

Perspectives: Dimensions against which we examine and translate the strategy

Objective: Concise statement of what we are going to do. Note: verb-object structure

Measure: Articulate what will be monitored to achieve objectives and drive performance

Target: Defines amount of improvement required and when ‘success’ will be achieved

Initiative: Discrete action programs with beginning and end designed to close a gap, support an objective, or achieve a specific set of outcomes