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BALANCED SCORECARD

Balanced Scorecard
BALANCED SCORECARD
Navigating an organization is as complex as an Aero plane
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They also require instrumentation to guide their organizations


. like pilots have to guide an aeroplane
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Would you be satisfied as manager getting one dimensional
Information about your organization ?
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Perhaps not, therefore

You need instrumentations/ information
to navigate

in this competitive world
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BSC provides managers with the instrumentations
they need to Navigate future competitive success.
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BSC translates an organizational mission and strategy
into comprehensive set of performance measures that
provides the frame work for strategic measurement and
Management system
4 Balanced Perspectives

Financial
Customers
Internal Business Processes
Learning & Growth
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Measures are balanced

Between the outcome measuresthe results
from Past efforts---and the measures that drive
future performance
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4 Perspectives permit a balance between


Short term and long term objectives
Outcomes and performance drivers
Hard objectives measures and
Soft objective measures

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Competing in the Information Age
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Industrial Age
Financial Control
ROCE
Prod Control
Profitability
Physical Capital

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Information Age
Financial Control
ROCE
Prod Control
Profitability
Physical Capital

Made Many
Such
Measures
Obsolete
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Information Age
Develop Customer Relationship
Introduce innovative products/services
Quality products at low cost
Employee development and motivation
Deploy information technology
Required
New
Capabilities
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Information Age
Cross Functional
Links to customers and Suppliers
Customer Segmentation
Global Scale
Innovation
Knowledge Workers
New
Operating
Environment
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Information Age
Total Quality Management
JIT-Production and Distribution
Time based Competition
Lean Production/Lean Enterprise
Building Customer-focused Org
Activity Based Cost Management
Employee Empowerment
Reengineering
Improvement
initiatives
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Capital You dont see on the Balance Sheet

Human Capital

The collective skill, knowledge
attitudes and behavoiur of the
People in the Organization
Information Capital


The resources and processes in
place that ensure effective use of
The human capital
Organizational Capital



The values, working relationship
And cultural norms at work in
The organisation
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balanced scorecard
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Measurement
&
Reporting-1992
Alignment &
Communication
1996
Enterprise
Strategic
Management-2000
Articles in HB Review

The BSC-Measures that
Drive performance---1992

Putting BSC to work-1993

Using BSC as a Strategic
Management System-1996
Acceptance and Acclaim

BSC Translated in 18 languages

Selected by HBR as most
Important management
Practice in 75 years
History

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Financial
Measures are
Inadequate
For Guiding
Information age
Organizations
Must Create future Value
Through
Investment in
Customers
Suppliers
Employees
Processes
Technology &
Innovation
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A balance scorecard translate a organizations
mission and strategy into set of performance
measures that provide the framework for
implementing its strategy
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Strategy specify how an organization matches its
own capabilities with the opportunities in the
marketplace to accomplish its objectives
Strategy
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A strategy is a set of goals and specific
action plans that, if achieved, provide
the desired competitive advantage
Strategic Management involves identifying and
implementing these goals and action plans
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Anticipating changes
Product/service and production designed
to accommodate expected changes
Flexibility
Ability to make quick changes
Speed to market
Agile manufacturing/ service
Driving firm by using windshield not
the rear view mirror
Creative and integrative thinking

strategic thinking
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Do we need to be clear about?




Goal
Objective
Mission
Vision
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A goal or objective consist of a projected state of affairs which
a person or a system plans or intends to achieve or bring about
A personal or organizational desired endpoint in some sort of
assumed development.
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Vision: Defines where the organization wants to be in future.
Vision: Defines where the organization wants to be in future.
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Mission: Defines where the organization is going now, describing
why this organization exists
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Targets: defines goals and objectives
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Goal
2008
Objective
2013
Mission
2028
5000 Cr 12,000 Cr 50,000 Cr
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Goal
2009
Objective
2014
Mission
2029
7000 Cr 15,000 Cr 55,000 Cr
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Balance Scorecard as a Management System
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Balance
Scorecard
Emphasizes
Financial and
Non Financial
measures must be
Part of Information
System
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4
Perspectives
Financial

Perspective Customer

Perspective
Internal
Business
Process
Perspective
Learning &
Growth
Perspective
Develop
Strategic Goals
Mission Vision
Clarify mission &
Vision statement
Strategic Goals
Derive
Sub-Goals
Sub-Goals
Map Sub-Goals to
each quadrant of the
Balanced Score Card

- identify measurement areas
- develop measurement goals
- postulate indicators
- identify data elements
For each BSC Quadrant
Data Elements
Module
T
r
o
u
b
l e

R
e
p
o
r
t
s

Indicators
Balanced Scorecard
Internal Business
Sub-Goals
Learning & Growth
Sub-Goals
Customer
Sub-Goals
Financial
Sub-Goals
Internal Business
Sub-Goals
Learning & Growth
Sub-Goals
Customer
Sub-Goals
Financial
Sub-Goals
Methodology
Overview
A Balanced Scorecard Perspective
on Performance
O
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I
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CUSTOMER
How do our
customers
see us?
O
b
j
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c
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M
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T
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LEARNING and
GROWTH
Can we
continue to
improve and
create value?
O
b
j
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c
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M
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T
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FINANCIAL
How do we
look to
shareholders?
O
b
j
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c
t
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e
M
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a
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u
r
e
s
T
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t
s
I
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s
INTERNAL BUSINESS
PROCESS
What must
we excel at?
Vision
and
Strategy
O
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c
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e
M
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a
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T
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t
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I
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CUSTOMER
How do our
customers
see us?
O
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c
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e
M
e
a
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s
T
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t
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I
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a
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i
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e
s
LEARNING and
GROWTH
Can we
continue to
improve and
create value?
O
b
j
e
c
t
i
v
e
M
e
a
s
u
r
e
s
T
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I
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FINANCIAL
How do we
look to
shareholders?
O
b
j
e
c
t
i
v
e
M
e
a
s
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r
e
s
T
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I
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s
INTERNAL BUSINESS
PROCESS
What must
we excel at?
Vision
and
Strategy
Vision
and
Strategy
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4
Perspectives
Financial

Perspective
Financial Perspective Evaluate
the Profitability of the Strategy
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4
Perspectives
Customer

Perspective
Customer Perspective identifies Targeted
Customer and market Segments and Measures
the Organizations success in these Segments
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4
Perspectives
Internal
Business
Process
Perspective
This perspective focuses on internal operations
that create value for customers that ,in turn,
furthers the financial perspective by increasing
the shareholder value
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4
Perspectives
Internal
Business
Process
Perspective
3 sub
Processes
Innovation Process

Creating Products
Services &Processes
To meet the demand
Of Customers
Operations Process

Producing & delivering
Existing products that
Will meet the needs
Of Customers
Postsales-Service
Process
Providing service and
Support to the customer
After the sale of a
product or service
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4
Perspectives
Learning &
Growth
Perspective
This perspective identifies the capabilities the
organization must excel at to achieve superior
internal processes that create value for
Customers and shareholders
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Target Actual
Objective Measures Initiatives Perform Perform
Financial
Perspective





Increase
Shareholder
value
Operating income
From Productivity
Gain



Operating Income
From Growth


Revenue Growth
Manage Cost
And Unused
Capacity


Build Strong
Customer
Relationship
Rs 20 Cr Rs 20.12Cr





Rs 30 Cr Rs 34.20 Cr


6% 6.48%
FINANCIAL PERSPECTIVE
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Target Actual
Objective Measures Initiatives Perform Perform
Customer
Perspective





Increase
Customer
Satisfaction
Market Share in
Communication
Network Segment


Number of New
Customers

Customer
Satisfaction
Rating
Identify future
Needs of
Customers

Identify new
Target
Customer Seg

Increase Cust
Focus of Sales
6% 7%



1% 2%

90% give 87%Gave
Top two top two
Ratings Rating
Customer Perspective
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Target Actual
Objective Measures Initiatives Perform Perform




Reduce
Delivery Time

Meet Specified
Delivery dates on time delivery


Improve post
Sales Services


Improve
Processes


Improve
Manufacturing
Capability
Reduce Setup time
Automation of Orders

Re-engineer order
Delivery process


Re-engineer order 92% 90%
Delivery process

Improve Customer
Service process
30 days 30 days
Service Response
Time


Number of Impv.
In Business
Processes

% of processes
With Advanced
Controls
Within
4 hrs
Within
3 hrs
Organize teams
from Sales & Manuf


Organize R&D/Mfg
Teams to implement
Adv. control
5 5
75% 75%
INTERNAL BUSINESS PROCESS PERSPECTIVE
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Target Actual
Objective Measures Initiatives Perform Perform




Align Employee
And
Organizational
Goals


Develop
Process
Skill


Empower
Work
Force
Learning and Growth Perspective
Employee Satisfac-
tion Rating




% Employees
Trained in Process
& Quality Mgt


% Workers
Empowered to
Manage
Processes
Employee
Participation to
Build Team Work



Employees
Training
Programme


Supervisors as
Coaches rather
Decision
Makers
80% 88%
Employees
Give top
Two
Ratings


90% 92%




80% 80%
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BSC as Strategic Management System
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Balanced
Scorecard
as a
Strategic
Management
System
1 Clarify and Translate vision & Strategy

2 Communicate and link strategic objectives
and Measures

3 Plan, Set Targets and align Strategic Initiatives

4 Enhance Strategic Feedback and Learning
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Clarifying and
Translating the
Vision & Strategy

Clarifying the Vision
Gaining Consensus
Planning & Target Setting

Setting Targets
Aligning Strategic
Initiatives
Allocating Resources
Establishing Milestones

Communicating
& Linking

Comm and Educating
Setting Goals
Linking Rewards to
Performance
Strategic Feedback &
Learning

Articulating the shared Vision
Supplying Strategic Feedback
Facilitating Strategy review
and Learning
Balance
Scorecard
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Clarifying and
Translating the
Vision & Strategy

Clarifying the Vision
Formulation by Sr Executives
Reaching Consensus
Sorting Out Differences
Joint Accountability

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Communicating
& Linking

Communicating and Educating
Newsletter
Bulletin board
Brochure
Videos
Intranet
meetings
Setting Goals
Linking Rewards to
Performance
Every one Understand
Strategy for achievement
Outcome Measures
Efforts and Initiatives required

On time Delivery

Reduce setup time
Buy new machines
Improve delivery time
Improve packing
Communicating to

Directors
Executives
Employees
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Planning &
Target Setting




Plan to Change
Set target for 3-5 years
Stretch targets
Benchmarking
Alignment of Targets
Alignment of Strategic Planning
with operational Budgets


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Strategic
Feedback &
Learning

Periodic Review and Change
Targets-achieved or not
Past and future Review
Information from all
Double loop learning
Cause and effect Relationship
Validity and Viability
Strategy replacement according
to outcomes/performance drivers
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Features of Balance Score Card
Indicate companys strategy and its link with perspectives

Strategy is communicated to all

Strategy translated into measurable targets

Motivates Managers to achieve targets

BSC limits the measures to only four

Highlights effect of one perspective on another
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Pitfalls in Implementing Balanced Score Card



Difficult to establish Fin-Non financial Linkages

Improvements at all levels may not be possible

Both subjective-objective measures Consideration

Considering Cost & benefits of initiatives

Non-financial Achievements are ignored


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Vision & Strategies not actionable

Strategies not linked to departmental and
Individual Goals

Strategies not linked to Long term/short term
Resource Allocation

Feedback that is tactical not strategic
Barriers to effective Implementation of BSC
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Barriers to effective Implementation of BSC
Strategy &
Vision
Financial Plan
& Capital
Allocation
Personal MBO &
Incentives
Monthly
Review
Budget
1 Vision & Strategy not Actionable
2 Strategy not
Linked to Dept Team
& Individual Goals
3 Strategy not Linked to Resource Allocation
4 feedback that is tactically
not strategic
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Cant be translated into action
Cant be acted Upon
Cant be understood
Fragmentation & Sub optimization
of efforts
Lacking consensus & Clarity
Different Agendas
No integration
Not linked coherently to overall strategy



Barrier No 1: Vision and strategy not Actionable
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Separate Processes for Long term &
Short term Strategic planning
Funding to unrelated priorities
Poor Monthly Reviews
Unfocused New Mgt Techniques
Poor Integration


Barrier No 3: Strategy not Linked to Resource Allocation
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Bulk of feedback is only financial measures
Little time on strategy implementation & success
No priority to periodic review and meetings
Inadequate information
Poor tactical review process



Barrier No 4: Feed back not tactically strategic
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Different Management System for Strategic Implementation
Clarifying & Translating
The Strategy & Vision
Planning &
Target Setting
Communicating
And Linking
Strategic Feedback
&
Learning
Balance
Scorecard
Goal alignments from
top to bottom
Education and open
communication about strategy





Compensation is linked
To Strategy
Stretch targets are established and accepted
Strategic initiatives are clearly identified
Investments are determined by strategy
Annual Budgets are linked to long term planning
The strategy is the reference point for the entire management process
The shared vision is the foundation for strategic planning
Feedback system used to test
The hypothesis on which strategy
Is based






Team problem solving

Strategy development is a
Continuous Process

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Let Us Review
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4
Perspectives
Financial

Perspective Customer

Perspective
Internal
Business
Process
Perspective
Learning &
Growth
Perspective
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Translating the strategy to operational terms

If we succeed, how will
We look to our
Shareholders?
The Strategy
Financial Perspective


To satisfy our customers,
Which processes must
We excel ?
Internal Perspective


To achieve our vision,
How must we look to our
Customers ?
Customers Perspective


To achieve our vision, how must
our organisation team
Improves?
Organizational Learning
Measurement is the
language that gives clarity
To vague concepts
Measurement is used to communicate,
Not to control
Strategy can be described as a series of
Cause and Effect relationship
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Clarifying and
Translating the
Vision & Strategy

Clarifying the Vision
Gaining Consensus
Planning & Target Setting

Setting Targets
Aligning Strategic
Initiatives
Allocating Resources
Establishing Milestones

Communicating
& Linking

Comm and Educating
Setting Goals
Linking Rewards to
Performance
Strategic Feedback &
Learning

Articulating the shared Vision
Supplying Strategic Feedback
Facilitating Strategy review
and Learning
Balance
Scorecard