the balanced scorecard n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
The Balanced Scorecard PowerPoint Presentation
Download Presentation
The Balanced Scorecard

Loading in 2 Seconds...

play fullscreen
1 / 43

The Balanced Scorecard - PowerPoint PPT Presentation


  • 271 Views
  • Uploaded on

The Balanced Scorecard. ASQ Vermont Section 16 April 2009 presented by Jim Whitney, Champlain College. What is the Balanced Scorecard (BSC)?. Developed in early 90s Robert Kaplan (Renaissance Group) David Norton (Harvard Business School) “Translating Strategy Into Action”

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'The Balanced Scorecard' - elina


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
the balanced scorecard

The Balanced Scorecard

ASQ Vermont Section

16 April 2009

presented by

Jim Whitney, Champlain College

what is the balanced scorecard bsc
What is the Balanced Scorecard (BSC)?
  • Developed in early 90s
    • Robert Kaplan (Renaissance Group)
    • David Norton (Harvard Business School)
  • “Translating Strategy Into Action”
  • Traditional financial measures were
    • Too narrow – no connection to strategy
    • Too focused on the past – not predictive
    • Encouraged tendency to manage qtr to qtr
  • Too much “what” – Too little “why”

ASQ Vermont Section

balanced scorecard library
Balanced Scorecard Library
  • The Balanced Scorecard (1996)
  • Strategy-Focused Organization (2001)
  • Strategy Maps (2004)
  • Alignment (2006)
  • Execution Premium (2008)

ASQ Vermont Section

bsc four perspectives
BSC: Four Perspectives
  • Financial perspective
  • Customer perspective
  • Internal Business perspective
  • Learning & Growth perspective

ASQ Vermont Section

bsc strategic focus
BSC strategic focus

Sanger, Mark, Supporting the Balanced Scorecard. Work Study, V 47, No 6

ASQ Vermont Section

financial perspective
Financial perspective
  • Uses traditional tools and reports
  • Considers EVA© and ROCE
    • Economic Value Added
      • NOPAT- (capital x cost-of-capital)
    • Return on Capital Employed
  • Emphasizes growth and improvement
  • Links financial performance to strategy

ASQ Vermont Section

bsc encourages use of abc
Traditional accounting

Salaries $375,000

Benefits 92,000

Supplies 47,000

Phone 8,500

Travel 13,000

Total $535,000

Activity Based Costing

Select suppliers $82,000

Procure mat’ls 175,000

Certify vendors 92,000

Resolve problems 103,500

Expedite shortages 83,000

Total $535,000

BSC encourages use of ABC

Johnson, Christian C., Introduction to the Balanced Scorecard and Performance Measurement Systems,

ASQ Vermont Section

linking finance to strategy
Linking Finance to Strategy

ASQ Vermont Section

customer satisfaction
Customer Satisfaction

Market

Share

Customer

Profitability

Customer

Retention

Customer

Acquisition

Customer

Satisfaction

ASQ Vermont Section

customer perspective
Customer perspective
  • Market share (various criteria)
  • Customer retention (absolute or relative)
  • Customer acquisition (absolute or relative)
  • Customer satisfaction
    • Specific performance criteria
    • Defined value proposition
  • Customer profitability
    • Profitability by account
    • Net of any special account-specific expenses

ASQ Vermont Section

customer perspective1
Customer perspective
  • Value proposition typically includes elements of
    • Time
    • Quality
    • Price

ASQ Vermont Section

internal business perspective
Internal Business perspective
  • Focus on process improvement
  • Chose processes aligned with strategy
  • Identify customer need
    • Identify the market
    • Create the product/service offering
    • Build the products/services
    • Deliver the products/services
    • After-sale customer service
  • Customer need satisfied

ASQ Vermont Section

learning growth perspective
Learning & Growth perspective
  • Core measurements
    • Employee productivity
    • Employee satisfaction
    • Employee retention
  • Enablers
    • Staff competencies
    • Technology infrastructure
    • Climate for action/change

ASQ Vermont Section

what to measure
What to measure?
  • 20-25 measures usually sufficient
  • ~ 20% of measures usually lack data
    • No data
    • No measurement
    • No management control
    • No improvement

ASQ Vermont Section

balancing the bsc
Balancing the BSC

Heaviest emphasis is on business processes

ASQ Vermont Section

bsc and quality
BSC and Quality

“…the process of self-assessment does not, of itself, improve the organisation… a key step in the process is to identify the ‘ vital few’ [areas of improvement relating to the organization’s strategy]…

EFQM Brussels Representative Office, Assessing for Excellence: A Practical Guide for Self –Assessment, 1999

“When this does not happen, the excellence model type quality tools become internally preoccupied, rigid and generally unhelpful.

Harari, O., “The eleventh reason why TQM doesn’t work,” Management Review, V 82 No 5

ASQ Vermont Section

quality improvement horizons
Quality Improvement Horizons

Andersen, H and G Lawrie, “Effective quality management

through third-generation balanced scorecard,” International

Journal of Productivity and Performance Management

V 53 No 7, 2004

ASQ Vermont Section

strategy linked continuous improvement
Strategy-linked Continuous Improvement
  • Strategy maps ID critical processes
  • Top-down implementation is typical
  • Use rate-of-change to estimate horizon
  • Horizon s/b in synch with strategic goals
  • If not, consider process re-engineering

ASQ Vermont Section

bsc and quality programs
BSC and Quality Programs
  • Symbiotic relationship: “BSC enhances quality programs – it gives focus and clear linkages to improvements in strategic customer and financial outcomes”
  • Establishes and tests linkages between quality of process and performance

ASQ Vermont Section

bsc and baldridge
BSC and Baldridge
  • Baldrige subcategories mirror BSC:
    • Customer-focused results
    • Financial and market results
    • Human resource results
    • Organizational effectiveness
  • Curt Riemann, first Director of Baldrige National Quality Program,attended BSC presentations in early 90s. Changes in Baldrige followed soon after.

ASQ Vermont Section

bsc baldrige and efqm
EFQM criteria:

Leadership (10%)

People (9%)

Policy & strategy (8%)

Partnerships & resources (9%)

Processes (14%)

People results (9%)

Customer results (20%)

Society results (6%)

Key perf. results (15%)

Baldrige categories

Leadership (12%)

Human resource focus (8.5%)

Strategic planning (8.5%)

Process management (8.5%)

Customer & market focus (9%)

Information & analysis (8.5%)

Business results (45%)

BSC, Baldrige and EFQM

ASQ Vermont Section

linkages to strategy
Linkages to Strategy
  • EFQM and Baldrige: implicit
  • BSC (via strategy maps): explicit
    • Objectives
    • Measurements
    • Targets
    • Initiatives

ASQ Vermont Section

what bsc adds to quality programs
What BSC adds to quality programs
  • Explicit causal linkages through strategy maps and cascaded objectives
  • Establishes targets for breakthrough performance (not merely best practices)
  • Often identifies entirely new processes critical for achieving strategic objectives
  • Sets strategic priorities for process enhancements
  • Integrates budgeting, resource allocation, target setting, reporting, and performance feedback into ongoing management processes

ASQ Vermont Section

generic strategy map
Generic Strategy Map

Johnson, Christian C., Introduction to the Balanced Scorecard and Performance Measurement Systems,

ASQ Vermont Section

building strategy maps
Building strategy maps

Requiresconsensus, clarity and commitment to strategy at the executive level

Produces

  • testable hypothesis in strategy
  • cascading objectives

Note implicit application of Theory of Constraints in use of cascading objectives...prevents discontinuous process optimization and optimizes organizational productivity

ASQ Vermont Section

strategy maps
Strategy Maps

Emphasis on best practices, w/o link to strategy, produces optimal local business processes, but suboptimal support for critical capabilities and strategic initiatives.

“BSC starts with strategic priorities and then identifies the process improvements needed to support them.”

Quality models may be ad hoc and tactical, producing good local results but lacking a coherent, SBU- and enterprise-level framework

ASQ Vermont Section

strategy linked to operations
Strategy linked to operations
  • Organizations with no systematic process for linking strategy to ops: only 27% as good or better than average of industry peer group
  • With systematic linking (e.g. BSC): 70% as good or better than industry peers

Source: Pateman, Andrew, Business Performance Management, December 2008

ASQ Vermont Section

strategy linked to operations1
Strategy linked to operations

Kaplan, Robert S and David P Norton, The Strategy Focused Organization, HBSP 2001

ASQ Vermont Section

alignment
Alignment

Five key principles:

  • Mobilize change through executive leadership
  • Translate strategy into operational terms
  • Align the organization to the strategy
  • Motivate to make strategy everyone’s job
  • Govern to make strategy a continual process

Four archetypal value propositions

  • Best total cost (consistent, timely and low cost)
  • Product leadership (expand performance boundaries)
  • Customer solutions (custom products/services, know-how)
  • System platform (platform defines the industry standard)

ASQ Vermont Section

two faces of alignment
Two Faces of Alignment
  • “Social” side
    • Communication and teamwork
    • Understand and support changes needed to pursue agreed-upon strategy
  • “Technical” side
    • Integration of diverse operations
    • Apply six sigma, TQM etc.
    • Cascade strategy to align processes

ASQ Vermont Section

bsc in execution
BSC in execution

Pateman, Andrew, Business Performance Management, December 2008

ASQ Vermont Section

10 golden rules for implementing a bsc
10 Golden Rules for Implementing a BSC
  • There are no standard solutions: all business differ
  • Top management support is essential
  • Strategy is the starting point
  • Limited and balanced number of objectives and measures
  • No in-depth analyses up front, but refine and learn by doing
  • Take a bottom-up and top-down approach
  • It is not a systems issue, but systems are an issue
  • Consider delivery systems at the start
  • Consider the effect of performance indicators on behavior
  • Not all measures can be quantified

Roest, Pim, Information Management and Computer Security, V 5No 5, 1997

ASQ Vermont Section

building a bsc with swot
Building a BSC with SWOT

BSC measures strategic alignment and success, but does not decide or design strategy

BSC defines “whats” for QFD in a strategic planning exercise, but does not provide guidance on the “hows” required for strategic management.

ASQ Vermont Section

slide36

Example of SWOT

Incorporating BSC

perspectives

Source: Lee, SF and Andrew Sai On Ko, Managerial Auditing Journal, 15/1/2 2000

ASQ Vermont Section

analysis techniques compared
Analysis Techniques Compared

Tan, B L Development of an e-Business Selection Framework for Manufacturing

SMEs: A Study of the Printing Industry. PhD thesis, Aston University, 2005

using vca bsc to develop qfd hows
Using VCA & BSC to develop QFD “hows”

Tan, B and D Bennet, “Development and Application of

an Electronic-Manufacturing Selection Framework for SMEs”

International Journal of innovation and Technology Management

V 4 No 3 2007

ASQ Vermont Section

slide39

Source: Lee, SF and Andrew Sai On Ko, Managerial Auditing Journal, 15/1/2 2000

ASQ Vermont Section

bsc success stories
BSC Success Stories
  • Cigna Property and Casualty
    • Losing $1m/day in 1992; BSC introduced in 1993. Became profitable in two years, sold division for $3bn five years later.
  • Mobil’s US Marketing and Refining Division
    • Last in industry profitability in 1993, introduced BSC to communicate strategy to newly formed SBUs. Moved from last to first place in industry in two years.
  • Brown and Root
    • Introduced BSC in 1992 to assist in post-merger OD. Moved to first place in their industry within three years.

ASQ Vermont Section

the balanced scorecard1

The Balanced Scorecard

ASQ Vermont Section

16 April 2009

Questions?

the balanced scorecard2

The Balanced Scorecard

ASQ Vermont Section

16 April 2009

Thank you!