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MESYUARAT PENGURUS NEGERI 1/2006. BSC/KPI NEGERI. DISEDIAKAN OLEH: ABD RAHAMAN RASID PENGURUS KANAN JABATAN PERANCANGAN KORPORAT/PENGURUS PROJEK EIS. 1B FEBRUARI 2006. SCOPE & OBJECTIVE OF PRESENTATION. Introduction and Background To explain basic concept on Balanced Scored Card (BSC)
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MESYUARAT PENGURUS NEGERI 1/2006
BSC/KPI NEGERI
DISEDIAKAN OLEH:
ABD RAHAMAN RASID
PENGURUS KANAN
JABATAN PERANCANGAN KORPORAT/PENGURUS PROJEK EIS
1B FEBRUARI 2006
SCOPE & OBJECTIVE OF PRESENTATION
- Introduction and Background
- To explain basic concept on Balanced Scored Card (BSC)
- To highlight BPM Destination Statement
- To elaborate on BPM Corporate Scorecard
- To propose State Scorecard, Branch and Hub
- To get feedback from State Manager
Formal Definition: A tool that translates an organization’s mission and strategy into a comprehensive set of a performance measures that provides the framework for a strategic measurement and management system
MY DEFINITION: A SYSTEMATIC WAY FOR MANAGEMENT TO PLAN AND EXCUTE STRATEGY FOR THE WHOLE ORGANIZATION
- Traditional reliance on financial measures (e.g: ROA)
- The rise rise of intangible assets
- The importance of reputation ( part of intangible asses)
- Organizations face difficulty in executing strategy
Barriers to Strategy Execution
Only 10% organizations execute strategy
Barriers to Strategy Execution
Vision
Barrier
People
Barrier
Management Barrier
Resource
Barrier
Only 25% managers
have incentives linked to strategy
85% executive teams spend less than 1 hour/month discussing strategy
60% of organizations don’t link budgets to strategy
Only 5% workforce understands the strategy
Source: Robert S. Kaplan & David P. Norton
- FINANCIAL
- CUSTOMER
- INTERNAL BUSINESS PROCESS
- LEARNING & GROWTH
FINANCIAL PERSPECTIVE
To succeed financially, how should we appear to our shareholders?
CUSTOMER PERSPECTIVE
To achieve our vision, how should we appear to our customers?
INTERNAL PERSPECTIVE
To satisfy our shareholders & customers, what business processes must we excel at?
LEARNING & GROWTH PERSPECTIVE
To achieve our vision, how will we sustain our ability to change and improve?
BALANCED SCORECARD: AN OVERVIEW
Shareholder
Value
Financial
Perspective
Productivity
Strategy
Growth
Strategy
Product/Service Attributes
Relationship
Image
Customer
Perspective
Partnership
Quality
Time
Function
Brand
Price
Manage
Innovation
Manage Customers
Internal
Perspective
Manage Operations
Learning &
Growth
Perspective
Human
Capital
Information
Capital
Organisation
Capital
Shareholder
Value
Productivity Strategy
Growth Strategy
Improve
Cost
Structure
Increase
Asset
Utilization
Enhance
Customer
Value
Expand
Revenue Opportunities
- Improve profitability from existing customers
- Manage capacity
from existing assets
- New products
- New markets
- New partners
- Reduce expenses
- Improve yields
FINANCIAL PERSPECTIVE
- Customer
Profitability
- Market Share
- Account Share
- Customer
Acquisition
- Customer
Retention
- Customer
Satisfaction
Product/Service Attributes
Relationship
Image
Customer Perspective
Service
Quality
Availability
Price
Brand
Functionality
Partnership
Selection
Customer Value Proposition
FINANCIAL PERPECTIVE
CUSTOMER PERPECTIVE
- Acquire raw materials
- Convert raw materials to finished products
- Distribution
Processes that produce & deliver products & services
Operation
Management
Process
- Select targeted customers
- Acquire targeted customers
- Retain customers
- Grow business with customers
Processes that enhance
customer value
Customer
Management
Process
INTENAL PERSPECTIVE
Processes that create new
products &
services
- Identify new products & services
- Manage research & development
- Develop new products
Innovation
Management
Process
FINANCIAL PERPECTIVE
CUSTOMER PERPECTIVE
INTERNAL PERPECTIVE
- Attitude
- Skill
- Knowledge
Human
Capital
- System
- Database
- Network
Information
Capital
LEARNING & GROWTH
- Leadership
- Culture
- Teamwork
Organization
Capital
BALANCED SCORECARD: OBJECTIVES, MEASURES, TARGETS & INITIATIVES
FINANCIAL
“To succeed financially, how should we appear to our shareholders?”
INTERNAL
BUSINESS PROCESS
CUSTOMER
“To satisfy our shareholders & customers, what business processes must we excel at?”
Objectives
Measures
Targets
Initiatives
“To achieve our vision, how should we appear to our customers?”
Objectives
Measures
Targets
Initiatives
Objectives
Measures
Targets
Initiatives
Vision &
Strategy
LEARNING &
GROWTH
Objectives
Measures
Targets
Initiatives
“To achieve our vision, how will we sustain our ability to change & improve?”
PERSPECTIVES
GENERIC MEASURES
Financial
ROI, ROA, ROE
Satisfaction, retention, acquisition, market share
Customer
Response time, new products, cost, product & service quality
Process
Employee satisfaction, information system, competency, value system
Learning & Growth
Two Types of Strategic Objectives
Outcome (Lag) Measures
Driver (Lead) Measures
- Purpose
- Focus on the performance results at the end of a time period or activity
- Examples
- “year-end-budget expense”
- “client satisfaction”
- “cases per caseworker”
- Strengths
- Usually objective and easily captured
- Issues
- Outcome measures reflect success of past, not current, activities and decisions
- Purpose
- Measure intermediate processes and activities
- Examples
- “hours spent with clients”
- “$ spent on automation”.
- Strengths
- More predictive in nature
- Allows organisations to adjust behaviors for performance
- Issues
- Based on hypotheses of strategic “cause and effect”
- Often difficult to collect supporting data
cause-and-effect relationships
between strategic objectives
Statement of what strategy must achieve and what’s critical to its success
How success in achieving the strategy will be measured and tracked
Strategic Theme: Operating Efficiency
The level of performance or rate of improvement needed
Key action programmes required to achieve objectives
Increase
Shareholder
Value
Financial
Defend
Current
Business
More
customer
Customer
Exceptional
Value Services
One Stop
Solution
Strategic Objectives
Measurement
Target
Initiative
Internal
- # of cross sell business bundles
- 8 new business bundle
- Develop cross-sell business bundles
Create
Product &
Services Offerings
/ Bundles
Create
Product &
Services Offerings
/ Bundles
Learning
Improve
Strategic Skills &
Competencies
BSC TERMINOLOGYKEY PERFORMANCE INDICATOR (KPI)
FROM STRATEGY TO ACTION PLAN: LOAN BUSINESS
STRATEGY MAP
BALANCED SCORECARD
ACTION PLAN
Strategy
Objective
Measurement
Target
Initiative
Budget
- Identify new customers
- Offer new limit to existing customers
ROA
- Profitability
Grow Revenue
- Increase loan
- Loan approval
- RM 2 million
- Attract new
customer
- No. customer
- 700
- Corporate advertisement
Customers
RM10,000
- Days taken to approve loan
- Fast loan approval
- One week
Fast Service
- Review New authority limit
- Day taken to approve loan
- Proposal to Management
Decision making
- One week
- Enhance Knowledge on corporate loan
Knowledge
Number of training/year
- Find suitable courses
2 times
RM4,000
INITIATIVES
Initiatives Are Defined to Help Close the Performance Gap
OBJECTIVE
Increase Customer Satisfaction
Objectives articulate the components of our strategy
MEASURE / TARGET
90%
Measure
Customer Satisfaction Survey Rating
gap
INITIATIVE
Implement automated case management system and train Every Rep in 99
45%
$M
Target
90% favorable overall
Target
Actual
Measures track our progress toward achieving and communicating the intent of the objective
Initiatives help close the gap between our current and desired performance
What does cascading the BSC means?
- The process of developing BSC at each division and business unit levels
- The scorecards must align with organization highest level scorecard by identifying the strategic objectives and measures
- Lower level scorecard will also include additional measures and initiatives that reflecting the specific opportunities and challenges faced at that level
BALANCED SCORECARD: THE CASCADING PROCESS
Mission, Vision & Value
Strategy
CORPORATE
DEPARTMENT
STATE
BRANCH
Team & Personal BSC
Note: O: Objectives M: Measures T: Targets I: Initiatives
Cascading is accomplished using one of three approaches
Corporate
Business Unit
Shared
Identical Objectives
Contributory
Translated Objectives
Hybrid
Identical, Translated
and Unit Specific
Objectives
Balanced Scorecard: A tool that translates an organization’s mission and strategy into a comprehensive set of a performance measures that provides the framework for a strategic measurement and management system
Cause and Effect Relationship: A cause and effect relationship identifies the initiatives, responsibilities or activities (causes) necessary to achieve an objective or target (effect)
Customer Value Proposition: Defines who the customer is and what they want
Initiative: Key action programs to achieve objectives or close gap between measures performance and targets. Initiatives are often known as projects, actions or activities.
Lag Indicator: Measures to determine the outcome of an objective that indicate company performance at the end of a period. These are results-oriented and do not reflect a process. Lag indicators often appear in BSC’s outcome-oriented Financial and Customer perspectives.
Lead Indicator: Measures that indicate progress againts a process or behavior. These measures are helpful in predicting the future outcome of an objective. Lead indicators tend often appear in the Internal and Learning & Growth perspectives.
Measures: Statement of how success in achieving an objective will be measured and tracked. Measures are written statements of WHAT we will track and trend over time, NOT the actual targets such as direction and speed. A measure should include a statement of the unit to be measured (RM, %, rating).
Objective: Concise statement articulating a specific component of what the strategy must achieve/what is critical to its success. Each perspective usually contains 3-6 primary objectives that state a key aspect of the strategy to be achieved over the next 3-5 years. Objectives are best stated as action phrases and may include the means and/or desired results as well as the action. E.g: “ Increase market share through current customers”
Strategy Map: A visual representation of an organization’s strategy and the processes and systems necessary to implement that strategy. A strategy map will show employees how their jobs are linked to the organization’s overall objectives
