Post on 16-Nov-2014
What is mean by Vision? What is mean by strategy? Why is it difficult to implement
strategy? A new approach to strategy
implementation Foundation of the Balanced Scorecard BSC as a Performance Management
System BSC as a Business Management
System How does BSC benefit organisations? Success stories Conclusions
What is mean by Vision? What is mean by strategy? Why is it difficult to implement
strategy? A new approach to strategy
implementation Foundation of the Balanced Scorecard BSC as a Performance Management
System BSC as a Business Management
System How does BSC benefit organisations? Success stories Conclusions
Agenda: Agenda:
“The Day you don’t face any problem/Challenges, Think and You will realize that ur walking on the wrong path.”
By: Swami Vivekanand
VISION, MISSION AND VALUESVISION, MISSION AND VALUES
Vision: Defines the desired or intended future state of a specific organization or enterprise in terms of its fundamental objective and/or strategic direction.
Mission: Defines the fundamental purpose of an organization or an enterprise, basically describing why it exists.
Values: Beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities.
“Developing and communicating the company’s unique position, making trade offs and forging fit among activities” -----Michael E Porter
“A unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved”----William F Glueck
What is mean by strategy? What is mean by strategy?
Why is it difficult to implement strategy?Why is it difficult to implement strategy?
Strategy implementation becomes difficult as organizations faceone or more of these challenges…
Findings of a Survey of 200 major companies, by a consultancy firm Renaissance Worldwide and CFO Magazine
Why is it difficult to implement strategy?
Findings of a Survey of 200 major companies, by a consultancy firm Renaissance Worldwide and CFO Magazine
•Thus organization gets in to a trap where ……… •Visions Are Not Actionable• Goals and Rewards Are Not Linked to
Strategy•Resource Allocation Is Not Linked to
Strategy•Feedback Is Tactical, Not Strategic
Conclusion – You cannot manage strategy with a system designed for tactics.
Because of “Thought – Action” GapBecause of “Thought – Action” Gap
GAP between STRATEGY and ACTION PLAN Strategic Initiative – What do we need to do?
Personal Objectives – What do I need to do?
Satisfied Shareholder
Delighted Customer
Effective Processes
Motivated &Prepared
Workforce
Strategic Outcome
?????????
Balanced ScorecardBalanced Scorecard
A new approach to strategy implementation - BSC
What is the Balanced Scorecard?
The The BalancedBalanced Scorecard (BSC) is a Scorecard (BSC) is a comprehensive management performance control tool comprehensive management performance control tool with a strong focus on vision and strategy. with a strong focus on vision and strategy.
The strategy is translated into specific tactical The strategy is translated into specific tactical performance-driving activities. performance-driving activities.
Measures are established for each activity. Measures are established for each activity.
USE
Implementing Balanced Scorecards typically includes four processes:
Translating the vision into operational goals; Communicating the vision and link it to individual
performance; Business planning; Feedback and learning, and adjusting the strategy
accordingly.
WHY NEED A BALANCED SCORECARD?
WHY NEED A BALANCED SCORECARD?
The Source of Value Has Shifted From Tangible to Intangible Assets
Intangible Assets
Tangible Assets
38% 62% 85%
38%
15%
62%
1982 19921 20002
percentage of market value related to…
1. Brookings Institute2. Baruch Lev analysis of
S&P500 companies
VALUE CREATION: INTANGIBLE ASSETSVALUE CREATION: INTANGIBLE ASSETS
Intangible Assets Do Not Have A Direct Impact on Financial Results — They Have Second- or Third-Order Impacts
Conventional approach to managing financial & operational indicators insufficient
Balanced Approach to Strategy Implementation should includes focus on customer/stakeholder & learning, growth & innovation
Understanding & managing/leveraging inter-relationships between the above areas necessary for value creation
Service Quality
Customer Confidence Revenue
Customer Retention
Training
InformationTechnology
BALANCED SCORECARDBALANCED SCORECARD
Balanced Scorecard’s key theme is not about Measurement as the term would outwardly convey
Its about
“Value creation -Execution of Strategy”
Year 1992, Robert S. Kaplan and David P. Norton.
Balanced Scorecard
Company’s dashboard
The Balanced Scorecard provides a four perspective frameworkto formulate strategy and translate it into operational terms
BSC as a Performance Measurement Tool
The The
Balanced ScorecardBalanced Scorecard
VISION VISION STRATEGYSTRATEGY
Performance Measures
THE BALANCED SCORECARD - INDICATORS
1. The Learning and Innovation
This perspective includes employee training and
corporate cultural attitudes related to both individual and corporate self-improvement. 2. The Internal Business
Process
This perspective allow the managers to know how well their business is running, is there any scope to improve
anyfurther
THE BALANCED SCORECARD - INDICATORS
4. The Financial Perspective
Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate financial data will
always be a priority
3. The Customer Perspective
This perspective emphasises customer focus and customer
satisfaction.
EVERY MEASURE IN BS CULMINATES IN TO FINANCIAL OUTCOME -
ORGANIZATIONAL LEARNINGTraining Time, Turnover, Staff Satisfaction Score
BUSINESS PROCESS IMPROVEMENTCycle Time, Defects, Activity Costs
CUSTOMER SATISFACTIONMarket Share, Survey Scores, Complaints
FINANCIALSTRENGTH
Product Profitability,EBIT
Financial Innovative and Learning
Internal Business Process
Customer
Assured market share
R& D Achievement
New product line
Customer retention (gets hooked to the Co).
Growth in revenue.
Employee training
Productivity Cost effective product
Growth in market
Test marketing
Better production planning
Assured acceptance
BALANCED SCORECARD – CAUSE EFFECT RELATIONSHIP AMONG INDICATORS
BALANCED SCORECARD – CAUSE EFFECT RELATIONSHIP AMONG INDICATORS
Examples-
Indicators -
BSC acts as a Strategic Management/ Implementation Tool Which Helps in ……
Validation/Enhancement of Strategy Validation/Enhancement of Strategy Getting clear consensus on the sameGetting clear consensus on the sameArticulation and Communication of Vision & Mission into key Articulation and Communication of Vision & Mission into key strategic objectivesstrategic objectivesCreation of Strategic Maps at corporate and SBU levelCreation of Strategic Maps at corporate and SBU level Alignment of the entire organization to the strategyAlignment of the entire organization to the strategyBrings in Clarity and Transparency – enhanced Brings in Clarity and Transparency – enhanced understanding of strategic objectives down to operating understanding of strategic objectives down to operating levellevelMake customer focused organizationMake customer focused organizationProvides unambiguous measures for performance controlProvides unambiguous measures for performance controlConsensus on ownership of objectives at all levels of Consensus on ownership of objectives at all levels of managementmanagementPrioritization of strategic action plans Prioritization of strategic action plans Makes strategic planning a continuous process Makes strategic planning a continuous process
How does BSC benefit organizations?
How does BSC benefit organizations?
Provides a “BALANCED” Performance Management Tool –
Adequate balance between lead and lag measures/indicatorsAdequate balance between lead and lag measures/indicatorsHelp organization remain pro-activeHelp organization remain pro-activeProvides macro perspective to senior management – Provides macro perspective to senior management –
no more longer working in “silos” no more longer working in “silos” Clear linkage and alignment of individual and enterprise Clear linkage and alignment of individual and enterprise performanceperformanceFlexible KRA’s depending on the business needs of the organizationFlexible KRA’s depending on the business needs of the organizationHelps achieve financial results by managing simultaneously non Helps achieve financial results by managing simultaneously non financial measuresfinancial measures
STRATEGY MAPS TO INDIVIDUAL SCORECARD
SCORECARD DESIGN & ROLLOUTSCORECARD DESIGN & ROLLOUT
BALANCED
SCORECARD
S T R A T E G Y
Mobilize change through
executive leadership
Change people, make
strategy everyone’s
everyday job
Align the organizati
on to create
synergies
Translate the
strategy to operational
terms
Integrate improvement programmes
with scorecard
BALANCED
SCORECARD
S T R A T E G Y
Translate the
strategy to operational
terms
SCORECARD DESIGN & ROLLOUTSCORECARD DESIGN & ROLLOUT
Brand / product development, sales, service, operations, logistics..
Activities needed to create the required customer value propositionand differentiation and the desired financial outcomes
Organization infrastructure, skills, capabilities, knowledge of employees, working climate..
The ability to execute internal business processes in newdifferentiated ways
Who are the target customers that will generate the revenue growth?
What are the objectives and how do we measure success with them?
What are the financial objectives for growth and productivity?
What are the major sources of growth?
TRANSLATE : STRATEGY INTO 4 COMPONENTSTRANSLATE : STRATEGY INTO 4 COMPONENTS
Vision and Strategy
Financial Perspective
Customer Perspective
Internal Perspective
Learning and growth
Perspective
BALANCED
SCORECARD
S T R A T E G Y
Align the organizati
on to create
synergies
SCORECARD DESIGN & ROLLOUTSCORECARD DESIGN & ROLLOUT
ALIGN: USE STRATEGY MAP TO BUILD CAUSE & EFFECT RELATIONSHIPSALIGN: USE STRATEGY MAP TO BUILD CAUSE & EFFECT RELATIONSHIPS
Improve ROCE
Revenue Growth Strategy Productivity Strategy
Build the Franchise Increase Customer Value
Improve Cost Structure
Improve Asset Utilization
A Motivated and Prepared Workforce
New Revenue Sources Customer Profitability
Cost per Unit Asset Utilization
Price
Financial Perspective
Customer Perspective
Internal Perspective
Learning & Growth Perspective
Product/Service Attributes
Strategic Competencies
Strategic Technologies
Climate for Action
“Build the Franchise” “Increase Customer Value”
“Achieve Operational Excellence”
(Innovation Processes)
(Customer Management Processes)
(Operations & Logistics Processes)
Customer Value Proposition
Quality
Operational Excellence
Product Leadership
Customer Satisfaction
Customer Acquisition Customer Retention
Time Function Service Relations Brand
Relationship Image
Market Share
Review
Review
Review
ReviewReview
Review Review
Review
Review
ALIGN : FLOW OF THE SCORECARD ALONGTHE ORGANIZATIONALIGN : FLOW OF THE SCORECARD ALONGTHE ORGANIZATION
Production Shift
Scorecard
Packing Shift
Scorecard
Production Daily
Scorecard
Maintenance Daily
Scorecard
Department Weekly
Scorecard
Packing Daily
Scorecard
PC/QC Daily Scorecard
Maintenance Weekly
Scorecard
PC/QC Weekly
Scorecard
Plant Head :Weekly Value Loss Scorecard & Analysis
SCORECARD DESIGN & ROLLOUT
BALANCED
SCORECARD
S T R A T E G Y
Change people, make
strategy everyone’s
everyday job
Con
scio
us
Un
con
scio
us
Incompetent Competent
Direct Delegate
Support Coach
The Four States of Mind!
Con
scio
us
Un
con
scio
us
Incompetent Competent
Compliance Culture
Understanding Usage
Minds Path Matrix
……No shortcuts No shortcuts possible...possible...
CHANGE : MINDS PATH MATRIX
CHANGE : MINDS PATH MATRIXCHANGE : MINDS PATH MATRIX
Compliance Culture
Understanding Usage
• People understand that they are “being told” to do something new.
• God knows why because they don’t see the use of it !!
• This is normally viewed as extra non-value added responsibility.
• If you stop checking, they will stop trying.
• People start realising why the data recorded in the system might be of use to them and the business in the future. Process transformation begin to inspire confidence
• There is some light at the end of the tunnel.
• You still need to keep them on close track however.
• Recording this new or extra data and working in a new way has now become a fact of life. Process compliance is high
• They now start using (read : analyzing) the scorecards.
• Meetings are held to review the data. The wheel starts turning!
CHANGE: MINDS PATH MATRIX
Compliance Culture
Understanding Usage
• People understand that they are “being told” to do something new.
• God knows why because they don’t see the use of it !!
• This is normally viewed as extra non-value added responsibility.
• If you stop checking, they will stop trying.
• People start realising why the data recorded in the system might be of use to them and the business in the future. Process transformation begin to inspire confidence
• There is some light at the end of the tunnel.
• You still need to keep them on close track however.
• Recording this new or extra data and working in a new way has now become a fact of life. Process compliance is high
• They now start using (read : analyzing) the scorecards.
• Meetings are held to review the data. The wheel starts turning!
• People don’t think about the new system& processes anymore. It is THEIR system now.
• They fully optimize the usage of data gathered at all levels.
• They use the Scorecards to drive improvements in business performance.
• They improve details of the systems as per the requirements.
Success
Hope
ProblemDefinition
Solution Development
Solution Implementatio
n
Culture Change
Pain
The Mind’s Path To SuccessCHANGE MANAGEMENT
SCORECARD DESIGN & ROLLOUT
BALANCED
SCORECARD
S T R A T E G Y
Integrate improvement programmes
with scorecard
SCORECARD’S ROLE IN TRANSFORMATION
Scorecard is an indispensable tool to manage & monitor a transformation/business performance improvement programme
Scorecard Implementation needs to be supported by functional/departmental initiatives
Scorecard supported by a Transformation Initiative drives Business Results
INTEGRATE : GOALS, MEASUREMENT & IMPROVEMENT INITIATIVES
When you first launch your Initiative, you probably want to use an Output Measurement. Once the Initiative is up and running, integrate your measurement to an Outcome to see if the Initiative is really having strategic impact.
InitiativeInitiative Output Output MeasurementMeasurement
Outcome Outcome MeasurementMeasurement
Lean Process / Lean Process / Six SigmaSix Sigma
Number of Number of Projects Defined Projects Defined by Regionby Region
Overall reductions in Overall reductions in errors, reworks, and errors, reworks, and cycle timescycle times
Employee Employee Competency Competency ModelsModels
% of Employees % of Employees who have a who have a Competency Competency Model in placeModel in place
Higher skill levels of Higher skill levels of employees using the employees using the modelsmodels
INTEGRATE :GOING FROM OUTPUT TO OUTCOME
SCORECARD DESIGN & ROLLOUT
BALANCED
SCORECARD
S T R A T E G Y
Mobilize change through
executive leadership
MOBILIZE : TOP MANAGEMENT COMMITMENT
1.Creating the Climate for Change
Unfreeze the organization
Show the need for change
2. Creating the Leadership Team
Breaking down functional bias
3. Creating the Vision and Strategy
BSC as a “visioning process”
BSC to clarify the strategy
4. Creating Team Accountability
Accountability for cross-functional strategic themes at Executive Team level
A successful Balanced Scorecard program starts with a recognition that it is not a “metrics” project, it’s a “change” process.
Strategic Learning Loop
Initiatives & Programs
test the hypotheses
Output(Results
)
reporting
Management Control Loopfunding
Input(Resource
s)
update the strategy
PERFORMANCE
85% of management
teams spend less than one hour per month on
strategy issues
92% of organizations do not report on lead
indicators
60% of organizations don’t link strategy & budgets
78% of organizations lock budgets to an annual cycle
20% of organizations take more than 16 weeks to
prepare a budget
STRATEGY
BALANCED SCORECARD
BUDGET
MOBILIZE :TIGHT FOCUS & EXTENSIVE REVIEW
MOBILIZE : RED BUTTONS TO AVOID
Middle Management Team: Lack of Senior Management Commitment
Done by One or Two Individuals
Held at the Top: For Senior Management Only
Too Long a Development Process: “Best Becomes the Enemy of the Good”
Treating the Balanced Scorecard as a Systems Project
Done Only for Compensation
Not Treated as a Change Management Project
CONTEXT
Focus on Top line. ICICI Bank perceived to be very aggressive on sales , very poor on service.
For bottom-line to improves it was important for the bank to be a service leader.
Improved Service Leads to improved productivity & profit Generates a positive word of mouth. Attracts new customers Provides a competitive advantage.
More difficult and slower for a competitor to respond to service improvement than to price change.
Help us retain customers. Cheaper to retain customers than to acquire new ones
•Patent Score for Process Improvements•SWIFT Training to Branches, Terminator Workshops
•Performance within TATs•Quality•Productivity•% Complaints to Transactions•Branch Contacts with Customers, Delivery Success Rate %
Research, Education & Teaching
TERMINATOR : ZERO UNHAPPINESS
Internal Processes
Mission
To ensure that the all causes of Unhappiness for Customer are fully
Terminated in order for the bank to vie for Service Leadership
•Customer Complaints•Customer Feedback Scores•Repeat Contacts•Request Closure beyond 24 Hours
Customer
•Cost of Complaints•% of Business through Cross Selling•Average Revenue Per Customer
Financial
ZERO UNHAPPINESS SCORECARD BRANCHES-SAMPLE
Sample Scorecard Scorecard presented &
reviewed in fortnightly reviews
All variances are linked to RCA
Comparison of Monthly Performance Vs. Budget
Focus on Top Service Failures
Key Indicators Focused On : Number of Service Failures, Quality, Service Request Closed within TAT
Top Branch CRs# Feb
Budget Feb Actual
Variance J an '05 Dec '04 Nov '04
Ikit not activated 125 50 75 169 245 422
Instruction for A/c closure not executed 120 80 40 242 139 182
Cash Deposited At Branch Not Credited 90 86 4 121 209 188
Address change not done 140 137 3 183 187 189
Transfer Of Accounts related issues 65 55 10 88 169 168
A/c Not Opened 20 4 16 37 131 101
Outstation collection - Dispute in Amt 20 2 18 50 64 66
FD Renewal not done - deposits 10 9 1 8 32 23
TDS Amount Deducted Disputed 5 5 0 11 13 10
Fixed deposit not linked to account 5 0 5 6 10 6
Form 15 H Not Entered 0 0 0 0 0 1
Cash Deposit In Atm Not Crdited 12 4 8 21 35 56
Fixed Deposit Interest Chq Not Received 2 0 2 3 3 8
Local Outwrd chq returned physical chq not recd 5 3 2 11 17 24
TOTAL 619 435 950 1254 1444
Total Quality Budget Feb 1-15Variance J an Dec Nov
Quality -North 90% 90% 0% 45% 55% 58%
Quality -East 90% 83% -7% 69% 58% 70%
Quality -West 90% 95% 5% 65% 59% 59%
Quality -South 90% 79% -11% 60% 58% 58%
Overall Branch Banking 90% 87% -3% 60% 58% 61%
Total TAT Budget Feb 1-15Variance J an
Total CR beyond 24 hours 0 51 -51 82
Zero Unhappiness Scorecard -Deposits - Branches
Top Branch CRs# Feb
Budget Feb Actual
Variance J an '05 Dec '04 Nov '04
Ikit not activated 125 50 75 169 245 422
Instruction for A/c closure not executed 120 80 40 242 139 182
Cash Deposited At Branch Not Credited 90 86 4 121 209 188
Address change not done 140 137 3 183 187 189
Transfer Of Accounts related issues 65 55 10 88 169 168
A/c Not Opened 20 4 16 37 131 101
Outstation collection - Dispute in Amt 20 2 18 50 64 66
FD Renewal not done - deposits 10 9 1 8 32 23
TDS Amount Deducted Disputed 5 5 0 11 13 10
Fixed deposit not linked to account 5 0 5 6 10 6
Form 15 H Not Entered 0 0 0 0 0 1
Cash Deposit In Atm Not Crdited 12 4 8 21 35 56
Fixed Deposit Interest Chq Not Received 2 0 2 3 3 8
Local Outwrd chq returned physical chq not recd 5 3 2 11 17 24
TOTAL 619 435 950 1254 1444
Total Quality Budget Feb 1-15Variance J an Dec Nov
Quality -North 90% 90% 0% 45% 55% 58%
Quality -East 90% 83% -7% 69% 58% 70%
Quality -West 90% 95% 5% 65% 59% 59%
Quality -South 90% 79% -11% 60% 58% 58%
Overall Branch Banking 90% 87% -3% 60% 58% 61%
Total TAT Budget Feb 1-15Variance J an
Total CR beyond 24 hours 0 51 -51 82
Zero Unhappiness Scorecard -Deposits - Branches
SCORECARD RELATED RCA : DELIVERABLES NOT RECEIVED
Apart from wrong creation, dispatch/delivery related issues needed focus
•Key Issue: RTO returns would sit at the branches, waiting for customer to collect them •Solution: Outbound Calling
•Every deliverable cleared resulted in a happy customer, lesser rework & cost savings•Average Contact Ratio:65%
Data :Nov04-Jun 05
RCA: DELIVERABLES NOT RECEIVED
RCA : DELIVERABLES NOT RECEIVED Issue :E-search Update
E-search information for certain deliverables not updated/ available resulting in inadequate /incomplete information to customers & Service Request creation errors
Initiative :E-Search Update (CTD Initiative) Identified mandatory uploads for First Contact Resolution related to
RPC/ CPC processes Designed and finalized the file formats for all mandatory uploads -
easy reading for front end National Co-ordinator appointed to tracking e-search open cases and
timely uploads I-KIT AOF Rejections,Modification Request Rejections,Nomination
Rejection Letters Nomination Registration Request Rejections,Non I-Kit SB/FD-RD AOF Rejections,Transfer of Account- Rejections,Transfer Cheque Returns, ATM Retained Cards,TDS - Form 15G Rejections etc.
4307529
9037555
14793313
21799520
29187237
37593205
Oct-04 Nov-04 Dec-04 J an-05 Feb-05 Mar-05
TERMINATOR RESULTS- COST SAVING THROUGH FAILURE REDUCTION
RESULTS - SERVICE FAILURES AS % OF TRANSACTIONS
47211
629267162476392
102705108124
8480585096
86549
79463 80410
55161
0.09%
0.17%
0.26%0.27%
0.20% 0.20% 0.21% 0.18% 0.17%
0.11%0.12%
0.15%
0
20000
40000
60000
80000
100000
120000
Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05
Months
# of
Crit
ical
Req
uest
s
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
0.30%
% a
ge
to T
ota
l T
ran
sact
ion
s
# of Critical Requests % Age to Total Transactions (RHS)
RESULTS – QUALITY OF REQUEST HANDLING
55%
62% 62%64% 64%
68% 69%72%
68%
77%
88% 87%
30%
50%
70%
90%
Apr-04 May-04
Jun-04
Jul-04 Aug-04
Sep-04
Oct-04 Nov-04
Dec-04
Jan-05 Feb-05
Mar-05
RESULTS-CUSTOMER FEEDBACK SCORES
74%
78%80%
64%
70%
85%88% 87%
63%
67%
75%
83%
56%
62%
77%80%80%
82%80% 81%
76%
72%
55%
65%
75%
85%
Q-I '04 Q-II '04 Q-III '04 Jan'05 Feb'05 Mar'05
Phone banking Liability Branches
Asset Branches- Home Loan Asset Branches- Consumer Loan
Some Other Success stories through BSC….
BSC is highly effective management system to align company’s vision & mission to strategy and activities
BSC provides management with a comprehensive picture of company’s operations
BSC to be used as an integral part of a company’s planning process in order to realize its fullest potential
Conclusion
Gives the complete picture of the employee as well as the organizational performance.
It guides users in determining the critical success factors and performance indicators.
Strategic review or analysis of the organizational capabilities and performance.
Focusing the whole organization on the few key things needed to create breakthrough performance.
Integrating and directing the performance and efforts from the lowest levels in the organization to achieve excellent overall performance.
Conclusion
“YOU SEE, ALL THE RIGHT THINGS ARE WRITTEN IN BOOKS AND RESEARCH PAPERS.
THE TRICK IS TO ENSURE THAT THERE IS NO GAP BETWEEN WHAT IS WRITTEN IN THE BOOKS AND YOUR VISION; FROM WHAT IS HAPPENING ON THE SHOP-FLOOR AND WHAT IS GOING ON IN THE MARKETPLACE.
THAT IS EXECUTION. THAT IS WHAT MAKES THE DIFFERENCE”
MUKESH AMBANI