Balance Scorecard(066BCT 529-532)
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BALANCE SCORECARD
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PRESENTED BY
SABIN BHANDARI066/BCT/529
SABINA SHRESTHA066/BCT/530
SANAT MAHARJAN066/BCT/531
SANJANA SHRESTHA066/BCT/532
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Part-IIntroduction To Balanced
Scorecard
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The Balanced Scorecard (BSC) is a strategic performance management framework that allows organizations to manage and measure the delivery of their strategy.
The concept was initially introduced by Robert Kaplan and David Norton in a Harvard Business Review Article in 1992 and has since then been voted one of the most influential business ideas of the past 75 years.
INTRODUCTION
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INTRODUCTION (CONTD.) A Strategic Management System that-
Translates corporate Vision and Strategy into action,
Communicates and ties together strategic objectives and measures,
Helps to establish corporate targets, Increase feedback and learning
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There are 4 ”generally” accepted target areas within the Balanced Scorecard:
TARGET AREAS
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Finance & Stakeholders
Goal Measures
Customers & Markets
Goal Measures
Operations & Productivity
Goal Measures
Growth & Learning
Goal MeasuresVision & Strategy
TARGET AREAS(CONTD.)
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Finance & Stakeholders
Goal Measures TargetReduce overheads by 10% to $250K this year.
Survey score
Time
10% ($250K)
1 year
Reduce purchasing cost by 20% to $1ooK by the year end.
Survey score
Time
20% ($100K)
1 year
How do our financial Shareholders identify financial success?
FINANCIAL MEASURES
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How do we appear to our customers in achieving our vision?
Customers & Markets
Goal Measures TargetIncrease new Customers to 100 per month by year end.
Survey score
Time
100 customers per month
1 year
Increase market share to 35% of total market in UK.
Survey score 35%
CUSTOMER’S MEASURES
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What process you must be exceptional at with customers, & shareholders?
Operations & Productivity
Goal Measures TargetReduce sickness & absence rates by 80% to 5 days per month.
Survey score 80%(5 days per month)
Produce 100 more ‘widgets’ per day by year end.
Survey score
Time
100 widgets
1 year
PRODUCTIVITY MEASURES
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SKILL BASED MEASURE How will we sustain the ability to change
and improve our time?
Growth & Learning
Goal Measures TargetInvest $100K in training this year to create $250K of income.
Survey score
Time
($250K)
1 year
Develop 4 new managers this year to run their own profit centres.
Survey score
Time
4 managers
1 year
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BALANCE SCORECARD DASHBOARD
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BALANCE SCORECARD DASHBOARD (CONTD.)
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BALANCE SCORECARD DASHBOARD (CONTD.)
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PART IIBALANCE
SCORECARD IMPLEMENTATION
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INTRODUCTION Before an organization can start implementing
a Balanced Scorecard it needs a clear understanding of its vision and strategy.
It is the management's responsibility to define a vision, formulate a strategy and set strategic goals regardless of a Balanced Scorecard being implemented.
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COMMON TOOLS Strategy Mapping PEST (Political, Economical, Societal,
Technological) analysis SWOT (Strengths-Weaknesses-
Opportunities-Threats) analysis Porter value chain analysis Porter Five forces of compétition analysis BCG Matrix analysis
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PORTER FIVE FORCES OF COMPÉTITION ANALYSIS Inbound logistics: material handling,
transportation Operations: machine operating, assembling,
packaging, testing & maintenance Outbound logistics: order processing,
warehousing, transportation & distribution Marketing & sales: advertising, promotion,
selling, pricing, channel management Service: installation, servicing, spare part
management
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BCG MATRIX ANALYSIS
High low
High Star Question mark
Low Cash cow Dogs
Market share
Gro
wth
ra
te
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BCG MATRIX ANALYSIS Dogs- Low Market Share, Low Growth Rate,
Neither generate nor consume Cash, not good organization
Question Mark-Market share high, high growth rate, cash consumption is high whereas cash generation is low
Star- High market share, high growth rate, highly consumes cash & generates cash highly as well
Cash cow- generates more cash with little investment, highly profitable organization
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PROJECT PLANNING Installing the Balanced Scorecard within
corporate is a challenge. Because the Balanced Scorecard requires
every action to answer to established corporate goals.
Using the Scorecard can still help promote alignment and eliminate projects that contribute little or no strategic value.
So we have intentionally suggested some dramatic architecture, in an effort to meet the radically implementation of Balance Scorecard.
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CONSIDERATION What is the goal of the BSC project? What current problem does the Balanced
Scorecard solve? What is the goal state? Who leads the project? Who participates in the project?
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IMPLEMENTATION PHASES
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TECHNICAL IMPLEMENTATION Installation of the software, Basic training for the persons building
scorecards Building of the scorecards Setting target and alarm levels Setting calculation formulas to consolidate
the data Defining graphical properties for graphs
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ESTIMATIONThe total costs for a typical Balanced Scorecard project consist of: Time used by customer's own resources
(50%) Outside process consultancy (20%) Outside implementation consultancy (15%) Software licences (15%)
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MAINTAINABILITY “Software change ability” Strict engineering sense usually taken to
mean “Bug fixing” Define maintainability requirements
quantitatively Design to meet those requirements, if
possible and economic Implement the design Quality control and test
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EFFECTIVE RESULTS Improved processes Motivated/educated employees Enhanced information systems Monitored progress Greater customer satisfaction Increased financial usage
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CONCLUSION Balance Scorecard is a strategic planning and
management system used to align business activities to the vision statement of an organization.
Must know:
organizations' mission statement
organizations' strategic plan/vision Then:
financial status of organization
how the organization is structured and operating, level of employees expertise
customers satisfaction level
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CASE STUDYOF
BALANCE SCORECARDON
ARRAN LTD.
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INTRODUCTION Arran Ltd. is a multi-divisional retail financial
services firm based in UK. The Balanced Scorecard concept was first
introduced to Arran Ltd. in the mid 1990’s by the General Manager of the Retail Division (the largest division in the organization).
It was initially developed as a performance measurement system for the Retail Division with the objective of providing core management information on retail branch performance.
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IMPLEMENTATION OF BALANCE SCORECARD ON THEIR COMPANY
If an organization is using Balanced Scorecard as a performance measurement and management tool it is likely that there will be conflict or overlap with existing systems.
In the case of Arran Ltd, Balanced Scorecard was chosen as the preferred performance management tool because it was recognized that the Retail Division of Arran Ltd. needed ‘better sources of management and performance information’ and ‘better ways of rewarding management performance’.
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(CONTD.) They was felt that the Balanced Scorecard
approach offered a more clearly organized methodology to presenting an array of performance measures including the traditional financial elements of control.
It was applied in a similar way in other divisions of the firm as well.
Balanced Scorecard as the dominant management system, adding to and binding together existing systems rather than trying to run two sets of management control systems in parallel.
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BENEFITS BY USING BALANCE SCORECARD The Balanced Scorecard design was supported by
implementation activities that led to complementary changes in the Retail Division’s operating processes.
Successful application of Balanced Scorecard within the Retail Division prompted Arran Ltd. to consider wider use of this approach.
Many elements of the Balanced Scorecards introduced were already regularly reviewed as standard performance indicators by staff. This helped ensure the acceptance of the Balanced Scorecards, and was helped by the continuity of activity being monitored across the whole retail division.
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CONCLUSION FROM CASE STUDY It is clear that, at least initially, the Balanced Scorecard
systems at Arran Ltd. met the firm’s expectations and the initiative was considered as a success; the need for a more organized performance management system drove wider changes in management style and persistently beneficial to the organization.
They wanted ‘a system that examined a number of different factors rather than focusing solely on financial data’.
Arran Ltd. believed that if they used the concept it would help them in the long run.
Modern Balanced Scorecard theory has clarified many of the causes of the issues experienced by Arran Ltd., and best practice design and implementation methods are able to reflect and accommodate these causes.
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REFERENCES Software engineering – Ian Summerville Wikipedia QPR- Guidelines for implementing Balance
Scorecard Maintainability in software engineering- Tom
Gilb
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THANK YOU