Welcome to the workshop on

Balanced Scorecard
Understand – Practice - Guide

STEEL AUTHORITY OF INDIA LIMITED

BSC - Fundamentals
What is this tool?
Why do we need?
Where it all started?
 Strategy – Key to Organizational Success
Resources
Resources Motivation
Motivation = Organization
Vision
Vision Values
Values Strategy
Strategy &
& Capability
Capability &
& Money
Money
Processes
Processes Feedback
Feedback Success

LACK OF
= Confusion
Vision

NO
= Corruption
Values

LACK OF
= Diffusion
Strategy

LACK OF = Frustration
Process

LACK OF = Fatigue
Capability

LACK OF = Crawl
Motivation

LACK OF = Loss
Money

CEO/Sep 2010 3
Strategies help to enhance stakeholder
values

Customer
Customer Value
ValueShareholder
Shareholder Value
Value Employee
Employee Value
Value

How
How Can
Can We
We Enhance
Enhance Stakeholder
Stakeholder Value?
Value?

Partner
Partner Value
Value Societal
Societal Value
Value

CEO/Sep 2010 4
Changing shareholders views

35% of Shareholder Valuation

Decision Is Based on Non-
Financial Data

1.
1. Strategy
Strategy Execution
Execution
2.
2. Management
Management Credibility
Credibility
3.
3. Quality
Quality of
of Strategy
Strategy
4.
4. Innovation
Innovation (New
(New Products
Products // Services)
Services)
5.
5. Attract
Attract Talented
Talented People
People
“Measures That Matter” Ernst & Young LLP, 1998

CEO/Sep 2010 5
The source of value has shifted

38%
38%
In-Tangible
62%
62%
85%
85%

62%
62%
Tangible
38%
38%
15%
15%
The 80s The 90s Now

Brookings Institute & Baruch Lev Analysis of S&P 500

Source: The Balanced Scorecard Collaborative Inc.

CEO/Sep 2010 7
Unlocking Intangible Assets

Operating
Operating Value creation in indirect:
Processes
Processes Improvements in intangible assets
affect financial outcomes through
Trained chains of cause and effect
Trained&&
Motivated
Motivated relationships.
Staff
Staff
Product
Product/ / Customer
Customer Customer
Customer
Service Revenues
Revenues
Service Confidence Retention
Quality Confidence Retention
Quality
Contemporary
Contemporary
Technology
Technology
including
includingIT
IT

Raw
RawMaterial
Material
Quality
Quality

CEO/Sep 2010 8
The Value Creation Continuum
Courtesy: BSC Collaborative
Mission
Why We Exist
The Balanced
Values
Scorecard is a What’s Important to Us
step in a Vision
continuum that What We Want to Be

Strategy
describes what Our Game Plan
value is and
Strategy Map
how it is Translate the Strategy

created. Balanced Scorecard

Measure and Focus

Targets & Initiatives

What We Need to Do

Personal Objectives
What I Need to Do

Strategic Outcomes

Satisfied Delighted Efficient & Motivated &

SHAREHOLDERS CUSTOMERS Effective Prepared
/ COMMUNITY PROCESSES WORKFORCE
CEO/Sep 2010 9
 Balanced Scorecard in Strategic Planning
Process
Where we are Where we want to be How we will do it How are we doing

Baseline Down to
Assessmen Component Specifics
Evaluate
t s

•Situation –
•Environmen •Mission & •Construct •Performanc
Past, Present
tal Scan Vision BSC e
and Future Manageme
(3 Ring nt
•Background •Approach)
Significant •Values / •Targets / •Review
Information Issues Guiding Standards of Progress –
Principles Performance Balanced
Scorecard
•Situational •Align / Fit •Major Goals •Initiatives •Take
Analysis with and Corrective
Capabilities Projects Actions
•Gaps •Specific •Action •Feedback
•SWOT
Objectives Plans upstream –
revise plans

CEO/Sep 2010 10
Balanced Score Card
 A strategic communication and performance management
tool.

 It is designed to help management teams articulate and

communicate their strategy in the form of strategic
objectives, measures and initiatives as part of an ongoing
strategy dialogue.

 It helps to translate the vision of the company into

actionable operating plans, which can be measured over
time.

CEO/Sep 2010 11
 Why Balanced Score Card
– Connecting Strategic Planning & Management Control

STRATEGY
60% of 85% of management
organizations don’t update the Strategic test the teams spend less
link strategy & strategy hypotheses than one hour per
Planning Loop
budgets month on strategy
issues
BALANCED
SCORECARD

BUDGET
78% of organizations
lock budgets to an Management Control 92% of
funding reporting
annual cycle Loop organizations do
20% of organizations not report on lead
PERFORMANCE
take more than 16 weeks indicators
to prepare a budget
Input Initiatives & Output
Programs
(Resources) (Results)

Courtesy: BSC Collaborative

CEO/Sep 2010 12
Where it started . . .

Introduced in 1992, by Robert Kaplan and David Norton,

the Balanced Scorecard is the most commonly used
framework for ensuring that organizations execute their
strategies.

Balanced Scorecards are used as the roadmap for creating

the “Strategic Management System”.

Multi-company research from

1990’s undertaken by R.Kaplan &
D.Norton aimed at developing
alternatives to purely financially
based performance management
CEO/Sep 2010 tools (e.g. budgets). 13
This is how the author defines…

Balanced Scorecards tell you

the knowledge, skills and systems that your employees

will need (learning and growth) to

innovate and build the right strategic capabilities and

efficiencies (internal processes) that

deliver specific value to the market (customer) which will

eventually

lead to higher shareholder value (financial).

– “Having Trouble with Your Strategy? Then Map It” by Robert S. Kaplan and David P. Norton -
Harvard Business Review

CEO/Sep 2010 14
The overriding benefits of BSC over PMS
 Connect to organization strategy.

 Focus on strategic objectives and not tasks.

 Balanced focus on tangible and in-tangible values.

 Balanced focus on lead and lag indicators.

CEO/Sep 2010 15
 Understand
BSC Framework Measurement Metrics
Perspectives Targets
Strategy Map Initiatives
Balanced Score Card

Balanced Score Card is an approach to Strategic Management

developed in the early 1990’s by Robert Kaplan and David Norton
The Balanced Score Card approach provides a clear prescription as
to what companies should measure in order to ‘balance’ the
financial perspective.
The Balanced Score Card is a Management System ( not only a
measurement system) that enables organisations to clarify their
vision and strategy and translate them into action. It provides
feedback around both the internal business processes and external
outcomes in order to continuously improve strategic performance
and results. When fully deployed, the balanced score card
transforms strategic planning from an academic exercise into the
nerve center of an enterprise.
Balanced Score Card

Balanced Scorecard retains traditional financial

measures. These financial measures are inadequate,
however, for guiding and evaluating the journey,
information age companies must create future value
through investment in customers, suppliers, employees,
processes, technology and innovation.
Balanced Score Card

Balanced Scorecard suggests that we view the

organisation from four perspectives, and to develop
metrics, collect data and analyse it relative to each of
these perspectives
• Learning & Growth Perspective
• Internal Process Perspective
• Customer Perspective
• Financial Perspective
The Balanced Scorecard Framework

CEO/Sep 2010 20
In the context of SAIL ..
 Vision: To be a respected world class corporation and the leader
in Indian steel business in quality, productivity, profitability and
customer satisfaction.

 Strategy / Thrust Areas: Becoming a global player, Becoming

cost competitive etc. (7 thrust areas).

 Themes : Wealth maximization, cost optimization, innovation,

benchmarking, technological advancement etc.

Strategy is about selecting the set of activities in which an

organization will excel to create a sustainable difference in
the market place.

- Michael Porter, Founder & Outstanding Leader in the Strategy

CEO/Sep 2010 21
 The Perspectives
The
TheVision
Vision &
& Strategy
Strategy
Effect

1. Return on Investment Financial

2. Profitability To satisfy our shareholders, what
3. Revenue / Sales financial objectives must we
4. Cost per Unit accomplish?

1. Market Share Customer

2. Service Quality Rating Results
To achieve our financial goals, what
3. Customer Satisfaction
customer needs must we satisfy?

Internal Process 1. Product Re-Engineering

Cause 2. Technology Collaboration
To satisfy our customers, in which
internal business processes must we 3. Enterprise Resource
excel? Planning

Learning & Growth 1. Capability / Skill Level

To achieve and maintain a competitive 2. Knowledge Management Actions
position, how must the organization 3. Organization Climate
learn and improve?
Score
CEO/Sep 2010 22
Strategy Map: Visual framework that captures
cause & effect relationship from the bottom-up

CEO/Sep 2010 23
 Extend the Map into Measurements,
Targets and Initiatives
Stakeholder

Strategy Map
Detailed How success in The level of Key action
Faster Service Access statement of achieving the performance programs
what is critical to strategy will be or rate of required to
successfully measured and improvement achieve
achieving the tracked needed objectives
Self Service strategy
Internal Process

Applications

Objective
Measure Target Initiative
Lean Processes Description
Eliminate waste, Number of 2 per setup per Lean / Six
reworks, and Reworks month each Sigma
Process and Value other errors in Outlet Office
Map Analysis our processes
L&G

Web Enable
Technologies
Investments

Invest in IT

CEO/Sep 2010 24
Measurement Metrics
Lagging measurements are
usually final outcomes that look
back, such as customer
satisfaction or return on
investment
Leading measurements are
drivers behind performance and
provide some predictability
(forward looking)

Outcome (Lagging) Driver (Leading)

Measurements
Percent Growth in Revenues
Return on Capital
Customer Satisfaction Rating
Product Contribution Margin
Measurements
Revenue Mix
Competitive pricing variance
Training hours completed
No.of Kaizen initiatives

Balanced scorecards should include both leading and lagging type

measurements

CEO/Sep 2010 25
Types of Measurements

Measure Definition Example

Type
Intermediate outcomes that
Leading Employee turnover rate
predicts or drive bottom-
line performance results
Bottom-line performance
Lagging Employee satisfaction
results resulting from
rating
actions taken
Amount of Investments,
Input Number of cashiers
assets, equipment, labor
hours, or budget dollars used
Units of a product or
Output Number of Value Meal
service rendered - a
orders fulfilled
measure of yield
Resulting effect (benefit)
Outcome Customer satisfaction
of the use or application
rating
of an output
Objective / Empirical indicators of Wait time
Quantitative performance
Subjective / Perceptions and Customer complaints
Qualitative evaluations of major received as a % of total
customers and customers served
stakeholders
CEO/Sep 2010 26
Measurement Form & its Advantages
M easurem ent
Advantage Disadvantage
Form
Num bers Sim ple and easy to understand O nly as good as the strategic objective

Index Allows com bining several m easurem entsHard to understand what is happening

Percentages G ood m easure for tim e span M ay be not be used correctly

Ratings G ood m easure for qualitative inform ationCan be subjective on how it was derived
M ay require additional analysis to reach
Ratios M easures critical relationships
conclusion
Rankings C lose gaps for top ranked com panies Not appropriate for lower ranked com panies

M easurem ent
Advantage Disadvantage
Type
O utcom es O bjective and easy to capture Focused on past, not current

Drivers Predictive and leading the organization D ifficult to derive and support

CEO/Sep 2010 27
 Alignment of Scorecard Components

Make sure the components of your scorecard fit together. Create a tight
model for driving execution of strategy.

Goal Objective Measurement Target Initiative

Achieve Reduce Operational Cost per Outlet 5% - Year 1 Activity Based

organization Service Costs by Office, Cost per 10% - Year 2 Costing /
operational 50% over the next 5 Region, Cost per Management
15% - Year 3
efficiencies with years FTE (ABC/M)
best practices in
the private
sector
Reduce identified re- Waste Volume, Waste stream Lean / Six Sigma
activities within Rework, Cycle Time reductions of 5%
primary processes End to End in S-LX each year, Reworks
by 80% over the (5 of 7 Regions) cut in half for next
next 3 years 3 years, cycle time
cut by 75%

CEO/Sep 2010 28
Initiatives should enable achieve strategic
objectives
Initiatives
Value Mapping Project
Employee Rotation Program
Web Self Service Portal
Common Knowledge Center
Objectives
Improve identification and delivery of all
organization services across the full stakeholder
spectrum
Improve the employee turnover and satisfaction
scores
Reduce organization costs and streamline our
services for more direct service delivery
Expand the overall knowledge base so that inter-
functions can learn from one another

Customer Survey and Analysis Develop a more systematic process across the
Tool Program entire organization to better connect to
customers
Shared Service Center Tracking Reduce reworks and overlaps between seven
System shared service centers

CEO/Sep 2010 29
Going from Output to Outcome
When you first launch your Initiative, you probably want to use an Output
Measurement. Once the Initiative is up and running, change your measurement to
an Outcome to see if the Initiative is really having strategic impact.

Initiative Output Measurement Outcome Measurement

Lean Process / Six Number of Projects – Overall reductions in errors,

Sigma Region wise reworks, and cycle times

Activity Based % of Service Center Reductions in identified re-

Costing / Outlets with ABC Models activities per process study
Management in place for Allocation
(ABC/M) Costs
Employee % of Employees who Higher skill levels of
Competency Models have a Competency employees using the models
Model in place

CEO/Sep 2010 30
Scorecard

CEO/Sep 2010 31
 Balanced Score Card
Financial:
“To succeed financially, how should
we appear to our shareholders?”
•Objectives
•Measures
•Targets
•Initiatives

Customer: Internal Business Process:

“To achieve our vision, how should “To satisfy our shareholders and
we appear to our customers” customers, what business processes
•Objectives Vision must we excel at?”
•Measures and •Objectives
•Targets Strategy •Measures
•Initiatives •Targets
•Initiatives

Learning and Growth:

“To achieve our vision, how will we
sustain our ability to change and
improve?”
•Objectives
•Measures
•Targets
•Initiatives

Balanced Score Card: A Farmework toTranslate a Strategy into Operational Terms

Source: Balanced Score Card by Kaplan & Norton
 Financial Perspective
Return on
Investment

Revenue Strategy Cost Strategy

Asset Management
Strategy

Sources of Growth Sources of Productivity

Early Stage Company (High Sustainable Stage Company Mature Stage Company (Slow
Growth) (Modest Growth) Growth)

Revenue Growth Operating Income Cash Flows

Positive Earnings Return on Capital Economic Value Added

Sales Growth Rate Gross Margins Cash Value Added

CEO/Sep 2010 33
Financial Perspective
Strategy 1 – Growth Focus
 Amazon.com - now sells CDs and electronic equipments in addition to
books.
 Mobil - encourages its customers to buy from its stations’ convenience
stores in addition to filling their cars with gasoline.
 Staples - now sells to small businesses as well as to retail customers.

Strategy 2 – Productivity Focus

 Reduce cost by lowering direct & indirect expenses.
 Utilize financial & physical assets more efficiently to reduce working and
fixed capital needs.
 Introduce just-in-time approach to lower the inventory levels.
 Reduce unscheduled downtime to produce more without investment in
P&M.
CEO/Sep 2010 34
 Customer Perspective
Robust & Profitable Revenue Growth

Success at Market Place

Brand Image Most Popular Brand

Long Term Customer & Most preferred Business

Dealer Relationship Partner

Product & Service Best Quality Product & Best

Attributes Service Provider
CEO/Sep 2010 35
 Defining customer objectives
Customer Perspective
Value Proposition
Functionality Quality Price Time Image Relationship

Steps:
1. Identify target customer segments
2. Identify segment needs
3. Define value proposition
4. Assess organization's competitive position for each segment

Generic Customer Framework:

Value = (Product/Service Attributes) + Image + Relationship

Functionality Quality Price Time

CEO/Sep 2010 36
 Customer Perspective
How can I grow my market share? What's my competition doing
Market Share
w hich is better than me?

Customer What makes a customer come to me? What is it that w e need to do

Acquisition tomake us his first choice?

Having experienced us, w hat makes him come back to me / refer me

Customer
to another customer? Can I give him / her something unique that my
Retention
competitors are not giving?

How satisfied are my customers? Do I know the reasons for

Customer
satisfaction /dissatisfaction? Can I make them more happy? In short
Satisfaction
can I delight them?

How profitable is the customer to me? Would it make sense to

Customer
continue dealing w ith him? Can I make him do more business w ith
Profitability
me?

CEO/Sep 2010 37
Customer Perspective
Strategy 1 – Best Buy or Lowest Total Cost
 Attractive prices, excellent and consistent quality, short lead times, ease of
purchase, and good selection.
E.g – Southwest Airlines, Dell, Wal-Mart, McDonald’s, and Toyota.

Strategy 2 – Product Innovation & Leadership

 Command high prices, offer products with superior functionality (cutting
edge), and first to market.
E.g – Sony, Mercedes, and Intel.

Strategy 3 – Complete Customer Solutions

 Understand and capable of providing customized products and services
tailored to the customer needs.
E.g – IBM, and Goldman Sachs.
CEO/Sep 2010 38
Customer Perspective
Strategy 4 – Lock In
 Create high switching cost for the customers. Ideally, a proprietary
product.
E.g – E-bay, and Yellow Pages.

CEO/Sep 2010 39
 Internal Process Perspective
Generic Value Chain Model

Customer Identify
Develop, Deliver Service
the Market & Customer
need produce Products/ the
Market/ Sell the Need
identified Service
Products/
Products/
Services Customer
Service satisfied
offering Services

“Innovation” “ Operational “ Service

Excellence” Quality”

Strategies
Innovation Process Operating Process Service Process

- New products and services
- New features existing
products
- Unique solutions
- Fast turnaround to market
CEO/Sep 2010
- Efficient production - Service after the sale
- Timely delivery - Resolve problems first time
- Proactive & Timely
- Quality products
Followup
- Cost management - Flexibility / Personal Touch
40
 Learning & Growth Perspective
Results

Employee Employee
Retention Productivity

Employee
Satisfaction

Enablers

Staff Technology Climate for

Competencies Infrastructure Action

CEO/Sep 2010 41
Learning & Growth Perspective
Human Capital Information Capital Organization Capital

Employee CompetenciesKnow ledge & Technology Company Culture

- Improve employee
- Leverage technologies - Empower the workforce
satisfaction
- Set accountability
- Retain key personnel - Implement best practices
standards
- Align employees to
- High employee productivity
- Protect critical assets
objectives
- Continuous training - Easy access to information
- High morale & motivation
- Leverage core
- Cross functional teams
competencies

CEO/Sep 2010 42
 Strategy Maps –
A Better Way to Communicate Strategy

Executive consensus and Educate and Communicate:

accountability:
Build awareness and
Building the map eliminates understanding of organization
ambiguity and clarifies strategy across the
responsibility. workforce.

Promote Transparency:
Ensure Alignment:
Communicate with and
Each sub-unit and individual employees, partners,
link their objectives and the
to the map. share holders.

Source: "Using Balanced Scorecard Technology to Create Strategy-Focused Public Sector Organizations", Robert S.
Kaplan.
CEO/Sep 2010 43
Two Techniques
for Building Strategy Maps
General Thumb Rule to ensure strategy map
is developed both vertically and horizontally
Weak Strong
The 4 to
5 Rule

Way of pulling out both drivers and outcomes

that match up against the core competencies
Splitting of the business
Customer Perspective model
the Customer Growth Retention Rate Customer Satisfaction Outcomes
Perspecti Timely Delivery Pricing Quality Service Reputation Drivers
ve

CEO/Sep 2010 44
Strategy Map - Sample

CEO/Sep 2010 45
Strategy Map - Sample

CEO/Sep 2010 46
 Strategy Map - Sample
F1 Aggressively
F4
increase volume
Drive Revenue Growth ` Optimising Improve cost efficiency
growth for higher F3
F2 through value added capacity with specific focus on
Financial

` revenues & better

products for existing utilisation
` for power & `fuel, RMC,
capacity utilisation
industry segments new products & inventory, rework &
new markets payroll & reduce
from select throughput time
machines

We are C4 We use modern

C1 We will delight the
Customer

C2 We will understand C3 transparent & technology to

customer`by ontime customer` needs & ` `
customer friendly deliver reliable
delivery & providing deliver products to
company which products with
value for money meet them
is easy to do consistent quality
business with

Raw material Define &

I3 procurement / I4 implement a I5
I2 Process to evolve
Processes

Implement Streamline &

Internal

I1 storing & more scientific a long term

systematic
` project / improve` ontime ` `
consumption manufacturing `
delivery process strategy for
process planning processes to process with product
structure improve strict compliance development &
pricing

L6
Recognise & reward
L1 L2 Cross function teamsL4 L5
L3 Effective
key talents & / process
& Growth

A planned
Learning

Need based performance Implement

provide growth improvement teams exit for
management ` poor
opportunity
`
attitudes` & skills to implement
` key ` simplified
`
system with KRAs performers
including training - including projects through MIS
process knowledge defined from
opportunity for self employee
business goals
learning & job involvement
rotation
CEO/Sep 2010 47
 Strategy Map - Sample
F1
To Improve
F3 Top line and
Financial

F2 F4
Bottom line
Timely Improve
Cost and Tamashi
payables
expense Business
reduction
Customer

C1 C2 C3 C4 C5
To strengthen To improve Focus on Govt / Undisputed Leverage
CAC / Art Cool dealer / distributorCorporate Sectors
leader in Service Service to Sales
Product network
Positioning

I1
Processes

I2 I3 I4 I5 Obtain SGS
Internal

I6 Prepare
Improve Process to Clearance
Improve flow Comprehensive
I5
control ensure no Reduce clearing Approval for
of MIS from Plan for
on branch stock outs times Ref Kits
branches Tamashi
operations

L1 L2 L3 L4
Adopt best
Learnin

Growth

Empower and train Involve employees Evolve

Practices followed
g&

Locals for key For all round comprehensive

By industry
positions development Training policy
48
CEO/Sep 2010 48
Roll out of a BSC initiative
 We have already set the foundation
Where we are Where we want to be How we will do it How are we doing

Assessmen Baseline Component Down to Evaluate

t s Specifics

• Environment • Situation – Past, • Mission & • Construct • Performance

al Scan Present and Vision BSC Management
• Background • Future
Significant • Values / • Targets / • Review
Information Issues Guiding Standards of Progress –
• Situational • Align / Fit • Principles
Major Goals • Performance
Initiatives Balanced
• Take
Analysis with and Projects Scorecard
Corrective
• SWOT Capabilities
• Gaps • Specific • Action Plans • Actions
Feedback
• Systems Objectives upstream –
thinking revise plans
approach

We need to start from here

CEO/Sep 2010 50
Macro Plan : Corporate wide Implementation
Phase I Phase 2 Phase 3 Phase 4
Strategize Plan Integrate Implement
Strategic Plan, Vision, etc.
provide guidelines to build Corporate Strategic Plan Major programs, initiatives,
Scorecard (Objectives, interfaces with lower levels projects, lead change, etc.
Corporate < >
Map, Measurements, - integration
Scorecard Programs, etc.)

Continuous Review & Change

Corporate Targets
Establish budgets, allocate
Business Unit B U Scorecard resources, manage < >
programs, etc.
Scorecard
Revise & Approve

Dept Scorecard Establish budgets, allocate

Shared Service / resources, manage < >
programs, etc.
Dept Scorecard Revise & Approve

Indvidual Scorecard Establish priorities, focus

Team / Individual on critical issues, etc. < >
Scorecard Revise & Approve

CEO/Sep 2010 51
 The Importance of Alignment

Complete Framework

Strategy Objectives Measures

organizati

on
Department

Team/
Individual

CEO/Sep 2010 52
You are the differentiator- and the
Benefits you can reap if your

Source : Robert Kaplan, BSC Collaborative 2002

CEO/Sep 2010
Mail inputs for improvement s to deen@exploreceo.com 53
 FAQ’S ON BSC
What are the benefits of the balanced scorecard approach?

The benefits of the balanced scorecard have been identified by many

organizations:

 Improved organization alignment Improved

communications, both internally and externally
 Linked strategy and operations
 More emphasis on strategy and organizational results
 Integrated strategic planning and management

CEO/Sep 2010 54
 FAQ’S ON BSC
What challenges will I encounter trying to develop and deploy
a balanced scorecard system?

There are several major challenges to developing and sustaining the

balanced scorecard:
 Engaged leadership
 Maintaining momentum
 Measuring what matters
 Not using a disciplined framework to build the system
 Mistakenly thinking a scorecard system is a short-term
project (it’s not….it’s a journey)
 Not involving a cross-section of the organization in
developing the system
 Not thinking strategically enough
 Not incentivizing desired behavior changes
CEO/Sep 2010 55
 FAQ’S ON BSC
Isn't the balanced scorecard just the latest management fad
that will soon pass away?

The "buzz word" may change, but not the underlying concepts, which
are here to stay for a long time -- thinking strategically, measuring
performance, evaluating results, feedback -- these are fundamental
concepts in management that have been around a long time and will
be here in the future.

So managers who learn the methods of the balanced scorecard will

be in a better position to lead in the future. They will have the right
skills to think, plan and assess the success of their organizations --
these skills will be valuable for the foreseeable future.

CEO/Sep 2010 56
 FAQ’S ON BSC
I am a program manager. What's in it for me?

The balanced scorecard is intended as a strategic system for planning

and managing a whole portfolio of programs within an organization.
However, as a manager of one or more such programs, the balanced
scorecard can help you.

It raises the visibility of program performance -- not only in traditional

on-time, on-budget terms, but also in terms of its strategic significance
to the desired outcomes of the whole organization. The balanced
scorecard and its measurements can help you to defend your program.

Also, since strategy is everyone's job, you can use the balanced
scorecard's strategic map to guide the direction of your program to
maximize outcome performance. You have the right to define what
metrics will be used to measure your program's performance -- You
also have the authority and responsibility to measure your own
program's performance.
CEO/Sep 2010 57
 FAQ’S ON BSC
What organizations are using the balanced scorecard?

By 2004, the balanced scorecard has been at least partially

implemented in about 57% of global corporations, according to a
survey by Bain. This site contains some examples of companies and
government organizations that have reported their use of the
balanced scorecard.

But in India, it is still in Hodge podgy stage. Very few companies are
successfully driving it - Sterlite (Vedanta) is a good case study.
BHEL IS another

CEO/Sep 2010 58
 FAQ’S ON BSC
How long does a balanced scorecard system take to develop
and implement?

Typically, building and implementing the enterprise-level

1. (Tier 1) balanced scorecard takes two to three months.
2.Developing aligned scorecards for business and support units
(Tier 2), and teams and individuals
3. (Tier 3) takes an additional three to six months.

These estimates are for a complete strategic planning and

management system and includes, the change management,
leadership development, and communications strategy and
planning activities that make the scorecard system
sustainable. The development process needs to be undertaken
by a cross-functional team guided by an experienced balanced
scorecard facilitator.
CEO/Sep 2010 59
 FAQ’S ON BSC
How does the balanced scorecard compare to the Six Sigma
management approach?

While the balanced scorecard is almost always described as a

strategic management system, Six Sigma is usually defined in terms
of quality improvement related to internal business processes. Six
Sigma is defined in Quality America as: "… a Quality Improvement
methodology structured to reduce product or service failure rates to a
negligible level (six sigma is equivalent to approximately 3.4 failures
per million events).

To achieve these levels of quality, Six Sigma encompasses all aspects

of a business, including management, service delivery, design,
production and customer satisfaction." Six Sigma was developed at
Motorola, GE and Allied Signal, and is widely used in many
businesses.

CEO/Sep 2010 60
 FAQ’S ON BSC
How does the balanced scorecard compare to the Six Sigma
management approach? ( continued)

While the original concept has expanded over the years to become
more strategic, most balanced scorecard organizations will use Six
Sigma as project initiatives to improve the efficiency of internal
business processes.

Both Six Sigma and balanced scorecard practitioners use similar best
practices in management to design and deploy these systems. They
both require dedicated top-level management support, a dedicated
team of change agents, strategic alignment, implementation of
improvement initiatives as projects, cultural change management, and
a combination of top-down and bottom-up development. Also, Six
Sigma practitioners often adopt the balanced scorecard as a way of
deriving appropriate performance metrics.

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 FAQ’S ON BSC
How does the balanced scorecard compare to the Baldrige
Award?

The Baldrige Award, are examples of organizational assessment tools.

Usually, these assessment frameworks are used as “snapshots” of the
current organizational situation at a particular point in time.

The assessment uses a point scale to compare the actual situation

against a 1000 points (perfect score) scale. Annual awards are given
to a few organizations each year that demonstrate exemplary
performance against the 1000 point scale.

The balanced scorecard uses assessment data to determine what

improvements and breakthroughs in performance are most needed,
so that strategies can be crafted to meet these needs.

The balanced scorecard includes much more than assessment, and

CEO/Sep 2010 62
is
 FAQ’S ON BSC
Can you please give a list of metrics or KPI's (key
performance indicators) for my balanced scorecard?

No. The balanced scorecard is not a cookbook of performance

measures.

It requires creative strategic thinking and decisions by various people

throughout an organization to develop an effective balanced
scorecard system.

No two organizations are alike. "Some assembly is required."

CEO/Sep 2010 63
 FAQ’S ON BSC
What are the implications of balanced scorecard on
A) budgetary systems? B) And what happens to our PMS?

A) The balanced scorecard, being a strategic management system,

can serve as the "front end" for a performance-based budget. Its
performance measures and strategic plans can provide rational
guidance for budget formulation and resource allocation. In fact,
some organizations have gone so far as to develop flexible strategic
organizations and financial management systems that allow
continuous reallocation of funds, without the need for major cyclical
efforts in budgeting.

B) PMS is definitely a good system that dives depth on the

functionality. BSC enhances the integration and connects to the
Bigger picture – and facilitates flexibility, integration and
compliments and enhances the robustness of PMS as well as
ownership
CEO/Sep 2010 64