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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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slide1

MESYUARAT PENGURUS NEGERI 1/2006

BSC/KPI NEGERI

DISEDIAKAN OLEH:

ABD RAHAMAN RASID

PENGURUS KANAN

JABATAN PERANCANGAN KORPORAT/PENGURUS PROJEK EIS

1B FEBRUARI 2006

slide2

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
slide4

CONCEPT BSC

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

slide5

WHY BSC?

  • 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
slide6

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

slide7

BSC: HAS FOUR PERSPECTIVES

  • FINANCIAL
  • CUSTOMER
  • INTERNAL BUSINESS PROCESS
  • LEARNING & GROWTH
slide8

BSC: FOUR PERSPECTIVES

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
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

slide11

FINANCIAL PERSPECTIVE

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
slide13

CUSTOMER PERSPECTIVE

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

slide15

INTERNAL BUSINESS PROCESS

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

slide17

LEARNING AND GROWTH

FINANCIAL PERPECTIVE

CUSTOMER PERPECTIVE

INTERNAL PERPECTIVE

  • Attitude
  • Skill
  • Knowledge

Human

Capital

  • System
  • Database
  • Network

Information

Capital

LEARNING & GROWTH

  • Leadership
  • Culture
  • Teamwork

Organization

Capital

slide18

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?”

slide20

MEASURING BUSINESS STRATEGY

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

MEASURES

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
bsc terminology

Strategy Map: Diagram of the

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 TERMINOLOGY

KEY PERFORMANCE INDICATOR (KPI)

from strategy to action plan loan business
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

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

slide28

CASCADING

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
slide29

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

slide30

Three Ways to Cascade

Cascading is accomplished using one of three approaches

Corporate

Business Unit

Shared

Identical Objectives

Contributory

Translated Objectives

Hybrid

Identical, Translated

and Unit Specific

Objectives

slide31

GLOSSARY

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.

slide32

GLOSSARY

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