Balanced Scorecards

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Balanced Scorecards
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Why Balanced Scorecards

• Encourages a Rigorous Strategic Review or
  Analysis
• Consideration of Organisational Capability
• Guiding Users in Determining Critical Success
  Factors and Performance Indicators
• Establishes a More Rigorous Basis for Key People
  Measures

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Balanced Scorecards Quadrants

• Financial - How Will We Appear to Our
  Shareholders?
• Customer - How Will We Appear to Our Customers?
• Internal - What Processes Must I Excell at?
• Learning and Growth - How Must the Organisation
  Learn and Improve?

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Dynamics of the BS Four Processes
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Types of BS

• Organisational
• Functional
• Supplier
• Individual
• Etc

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What is a Balanced Scorecard
Financial
To succeed financially, how we should appear
to our shareholders
Objectives
Measures
Targets
Initiatives
Customer
Internal Bus Processes
To achieve our vision, how should we appear to
our customers
To satisfy our shareholders and customers what
business processes are needed
Vision and Strategy
Objectives
Measures
Targets
Initiatives
Objectives
Measures
Targets
Initiatives
Learning and Growth
To achieve our vision how will we sustain our
ability to change and improve
Objectives
Measures
Targets
Initiatives
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Example

• Objective To Reduce Time to Market for a New
  Product
• Measures Cycle Time, Process Time
• Targets 60 Days for Cycle Time and 40 Days for
  Process Time
• Initiatives Form a Total Quality Improvement Team

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The BS Provides a Framework to...

• Translate a Strategy Into Operational Terms
• Ensure Clarity of the Strategy Across the
  Organisation
• Communicate Through Measurement
• Create Consensus and Teamwork Through the Process
  of Developing a Scorecard

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Balanced Scorecard- Driver of Performance -

• Supports the planning process allowing Corporate
  objectives to be translated into performance
  goals
• (eg EPS linked to productivity)
• Promotes an understanding of methods for
  achieving goals and objectives
• Brings breadth to the planning discussion via
  scope of scorecard measures
• Provides the basis for linking business planning
  and individual performance
• (eg it may not be possible to issue business
  plans at all levels within a business but it is
  possible to disseminate the scorecard)

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Balanced Scorecard- Organisational Fit -

• Enables
• Linkage of Corporate Strategy to business units
• Communication of Corporate/Business Unit Strategy
  and Objectives
• Provides framework for
• Prioritisation of Improvement initiatives
• Staff Development
• Performance Reporting
• Provides Support for
• EFQM
• IIP

Initiatives
PPR
Initiatives
PPR
Staff Development
Staff Development
Balanced Scorecard
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Balanced Scorecard- Business Performance Cycle -
Strategy
Business Planning Process
Company Business Unit Individual
Balanced Scorecard
Performance Review
VISION
Change Initiatives
PPRs Staff Development
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Balanced Scorecard- Development -
Co-ordination/Focus/Direction
Initiation
Definition

• Sponsorship

• Link with EFQM,
• Values etc
• Format/Structure
• Concept acceptance

• Corporate Balanced
• Scorecard

• General Manager
• Balanced Scorecards

Operations Director Executive Team
Executive Team Executive Team


General Managers
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Balanced Scorecard- Financial -
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Balanced Scorecard- Some Pitfalls -

• Unrealistic implementation timescales
• Insufficient time/effort given to defining the
  objectives
• Measures cannot be applied without excess expense
  and timescales - hence nothing done
• Continuous word refinement
• Measures cannot be turned into regular
  monthly/quarterly reports
• Link between Balanced Scorecards, Business
  Planning Process and Personal Performance not
  fully understood and communicated
• Seen as another initiative, not a way of life

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Balanced Scorecard- Useful Tips -

• Nominate an Executive sponsor
• Clearly understand how the concept fits with
  other company values, policy, etc (eg EFQM)
• Look for Champions within the management
  structure who will lead by example - not everyone
  will buy in first time around
• Apply the 80/20 rule
• Introduce the concept in stages - use a
  structured approach
• Apply the concept to a clearly defined business
  unit structure
• Introduce the principle of internal customer
• Create a link between Scorecard and Personal
  Performance
• Keep it simple, practical and flexible