Balance Score Card Final (1)[1]

8/7/2019 Balance Score Card Final (1)[1]

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Sir M Visvesvaraya Institute Of

Management Studies

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Presented byPresented by

Nimit Soni

Monil Visariya

Ajay MalaviRadheshyam Jaiswal

Ravi Chaurasiya

Peran Sukheswala

Bakhtyar Panday

Balanced Score Card

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AboutBalanced ScorecardAboutBalanced Scorecard

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Strategy MapStrategy Map

y Strategy maps are communication tools used to tell a

story ofhow value is created forthe organization.

y They show a logical, step-by-step connection between

strategic objectives (shown as ovals on the map) in the

form of a cause-and-effectchain.

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Cost Efficiency

Long-term Shareholder

Value

Revenue Growth

Price Availability BrandServiceQuality

Operations

ManagementProcesses

Human Capital

Customer

ManagementProcesses

Innovation

Processes

Regulatory

and SocialProcesses

Organization Capital Information Capital

Strategy Map FrameworkStrategy Map Framework

Financial

Customer

Internal Process

Learning & Growth

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Balanced Scorecard (BSC)Balanced Scorecard (BSC)

The Balanced Scorecard translates an organization's

mission & strategy into a comprehensive set of

performance measures that provides the framework for a

strategic measurement and management system.

The Balanced Scorecard translates an organization's

mission & strategy into a comprehensive set of

performance measures that provides the framework for a

strategic measurement and management system.

8 SourceSource -- The Balanced Scorecard Kaplan & Norton


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Balanced Scorecard (BSC)Balanced Scorecard (BSC)

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y BSC was implemented in late 1990s .

y It was developed by David Norton & Robert Kaplan in 1992.

y It is a framework thatfocuses on shareholders,

customers, internal processes, and innovation

requirements of a business in order to create a system of

linked objectives, measures, targets and initiatives

which collectively describe the strategy of an organization

and how that strategy can be achieved.


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4 Perspectives in Balanced Scorecard4 Perspectives in Balanced Scorecard

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Financial PerspectiveFinancial Perspective

Sales growth

Earnings growth

Dividend growth

Bond and credit ratings

Cash flow

Increase in stock price

Customer PerspectiveCustomer Perspective

Market share & growth in it

Customer service

On-time delivery

Customer satisfaction

Brand recognition

Positions in favorable markets

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Internal ProcessInternal Process

PerspectivePerspective

High product quality

Manufacturing innovation

High manufacturing productivity

Cycle time

Yield, reduction in waste

Learning & GrowthLearning & Growth

PerspectivePerspective

Competence and integrity of

managers

Morale and firm-wide culture

Education and training

Innovation

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Key Performance Indicators (KPI)

KPI = Measurement or indicator

that provides information on howfar we have succeeded in achieving

the strategic objectives

KPI = Measurement or indicator

that provides information on howfar we have succeeded in achieving

the strategic objectives

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Key ResultAreas (KRA)

Key Result Areas or KRAs refer to

general areas of outcomes or outputs

for which a role is responsible.

A typical role targets three to five

KRAs.

Key Result Areas or KRAs refer to

general areas of outcomes or outputs

for which a role is responsible.

A typical role targets three to five

KRAs.

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KRAs helps individuals in:KRAs helps individuals in:

y

Clarify their roles

y Align their roles to the organization's business or strategic

plan

y Focus on results rather than activities

y Communicate their roles purposes to others

y Set goals and objectives

y Prioritize their activities, and therefore improve their

time/work management

y Make value-added decisions15


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Objectives for KPIs & KRAsObjectives for KPIs & KRAs

S Specific

M Measurable

A Achievable

R Results

T Timing

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Results ofBalanced Scorecard

y Increase focus on strategy and results.

y Improve organizational performance by measuring what

matters.

y Align organization strategy with the work people do on a

day-to-day basis.

y

Focus on the drivers of future performance.

y Improve communication of the organizations Vision and

Strategy.

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Incentive compensation based on BSCIncentive compensation based on BSC

Category Measure Weighting

Financial(60%) Margin vs. competition

ROCE vs. competition

Cost Reduction vs. Plan

New Market Growth

Existing Market Growth

18.0%

18.0%

18.0%

3.0%

3.0%

Customers(10%) Market Share

Customer Satisfaction Survey

Dealer Satisfaction Survey

Dealer Profitability

2.5%

2.5%

2.5%

2.5%

Internal(10%) Community/ Environmental Index

10.0%

Learning and Growth(20%) Employee Climate Survey

Strategic Skill Rating

Strategic Information Availability

10.0%

7.0%

3.0%


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International CompaniesInternational CompaniesAdopting BSCAdopting BSC

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ABBABB

y ABB - developed a balanced scorecard in 1994 known as

EVITA.

y In this organisation, BSC is a system offinancial and

managementcontrol.

y It chose five perspectives viz customer, process/supplier,

employee, innovation/developmentand financial .

y It also explored the feasibility ofsixth perspective -

environmental factors but finally dropped the idea.

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HalifixHalifix

y Halifix - UK-based companywith business in retail operation,

customer credit, insurance etc. utilized balanced scorecard as

an instrumentofoperational managementsystemrather

than a strategic instrument.

y Itreplaced learning and developmentperspective with the

staffdevelopmentand improvementperspective.

y Presently, ithas 2-5measures in each perspective resulting in

16 measures for its balanced scorecard.

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Othermajor OrganizationsOthermajor Organizations

Few other organizations with BSC as a measurement tool:-

y Skandia

y Electrolux

y Compaq

y Development Dimensions International (DDI)

Some international consultantfirms like SAS, Cedar,

Renaissance Worldwide and Peoplesofthave developed

balanced scorecard for companies in India and abroad.

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India CompaniesIndia CompaniesAdopting BSCAdopting BSC

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PHILIPS India Ltd.PHILIPS India Ltd.

y Used the balanced scorecard to streamline its complex

process and structure.

y Making employees aware ofits strategy and vision and

educating them aboutthe outcome drivers ofthe business

success.

y The focus was on value creation by converting the

relationship between customer satisfaction and product sales

into CSFs.

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y Philips identified the following four critical success factors

(CSFs) :

1) Competence - knowledge, technology, leadership and

teamwork

2) Processes - drivers for performance

3) Customers - value proposition

4) Financial - value and growth.

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PHILIPS India Ltd (cont)PHILIPS India Ltd (cont)


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Balanced scorecard Sample (Phillips)Balanced scorecard Sample (Phillips)

Financial Processes Customers Competence

Economic Profit-

Realized

Percentage

reduction in process

cycle time

Rank in customer

survey

Leadership

competence

Income fromoperations Number ofengineering changes Repeat order rate Percentage of patentprotected turnover

Working capital Capacity utilization Complaints Training days per

employee

Operational cashflows Process capability Brand index Qualityimprovement team

participation

Source : Gumbus Andra and Lyons Bridget (2002)


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GoodlassGoodlass NerolacNerolac

y BSC in this organisation is broadly based on 25objectives

which the company wants to achieve.

y The very purpose ofimplementing the BSC in the Company

is its endeavourto grow its business profitability over the

next few years.

y Cedar Consulting (a global management consulting and

enterprise solutions Company) assisted the Goodlass

Nerolac in building and implementing the BSC framework.

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GoodlassGoodlass NerolacNerolac (cont) (cont)

Observations made by H.M. Bharuka, MD, Goodlass Nerolac are:

y Company needs a performance managementsystemwhich aligns

the entire organisation and allows to measure the delivery of companys

strategy.

y The BSC framework is communicated across the organization and will

become a business review and enterprise performance management

framework.

y The scorecard framework will create a strategy deploymentsystem

which will monitor month-on month achievement against defined

strategic objectives.

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Othermajor OrganizationsOthermajor Organizations

Infosys

Reliance

Godrej

TCS

Castrollndia Ltd.

RPG

Bharti

Dr. Reddy Labs

Tata Group

lCICl Bank Ltd.

Taj Group

India Hotels

Few other organizations with BSC as a measurement tool:-

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ConclusionConclusion

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ConclusionConclusion

y BSC provides feedback around both the internal business

process and external outcomes in order to continuously improve

strategic performance and results.

y It captures both the financial and non-financial aspects of a

company's strategy and discusses cause and effect relationship

that drives business success.

y The organisation can become aligned and focused by using

the BSC to implement the long-term strategy.

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Thank You

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Balance Score Card Final (1)[1]

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