scorecard Due today 10/21/18
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BalancedScoreCard.pptBalanced Scorecard
Like Dashboard Instruments, We Need Several Indicators of Strategy Success:
- Financial
- Customer
- Employee / Learning and Growth
- Internal Business Process
Balanced Score Card Features
Emphasizes what is important
Focuses on Business Drivers
Stresses Cause & Effect Relationships
Unites the Company
Uses Leading & Lagging Indicators
Implements Business Strategy
Uses metrics for Targets & Performance Evaluation
Financial Perspective
Link to Strategy
Time Horizon: Short, Medium and Long
Can Include:
Cash Flow
Reported Earnings
Risk Management
Cost Control and Revenue Growth
Pricing: Discounts vs. Value / Convenience
Financial Perspective
Find drivers for revenues, costs, cash flows & net income
Can tie to an incentive system
Can use any type of incentive
Problem: valuable, but focuses on the past rather than the future – it is a lagging indicator.
Leading Indicators
In order to predict financial results the BSC uses 3 leading indicators. These are:
- The Customer Perspective
- The Employee / Learning and Growth Perspective
- The Internal Business Process Perspective
Customer Perspective
- Value to Customers
- Customer Satisfaction is not enough.
- Not all customers are keepers:
- 80 / 20 “rule”
- Retain Old vs. Attract new Customers
- Growth, Market Share, Segmentation
More on Customer
- Time
- Convenience
- Ease of Use
- Quality
- After Sale Service
- Cost
- Performance
The Box
Unprofitable Customers
Attracted to products
Unprofitable Customers
Not Attracted to products
Profitable Customers
Attracted to products
Profitable Customers
Not Attracted to products
Employee / Internal Business
- Ease of tasks
- Innovation
- Productivity
- Where must we be EXCELLENT?
- Where can we be good enough?
- The Operations Process
- Customer Life Cycle
More Internal Processes
- Cycle Time
- Quality
- Employee Training and Skills
- Productivity
- Customer Perspective
Innovation and Learning
- Pace of Industry Change
- Continuous Improvement
- Percent of income from New Products
- Dot Com Bomb
- Think outside the Box vs. inside
- Think Critically
- LISTEN
Listen and Learn
- No one of us is as smart as all of us.
- Welcome diverse views and people.
- Get honest feedback from present customers, potential customers, employees, suppliers, others
- Use benchmarking
- Get connected with industry information
Balance for the Score Card
- Financial
- Customer
- Learning and Growth
- Internal Business Processes
Balanced Scorecard
- Most organizations devise good strategies
- But the real problem is successful implementation of strategy
- Experts will say a B strategy with A implementation easily beats an A strategy with B implementation
- The BSC is the most successful method for dependable implementation of strategy
- But success will only be achieved with careful and thorough attention to installation of BSC
Balanced Scorecard
- Why is the BSC so effective in strategy implementation?
- Because it involves every organization unit in the design and implementation of strategy
- It does so by finding the right drivers of performance for each organization unit
- Then it determines the right metrics for the right drivers
- Next it selects the right target values for the right metrics
- Finally it links everyday activities of each unit with the metrics representing the drivers of performance
Balanced Scorecard
- Performance of each organization unit is regularly measured by comparing actual metrics with target metrics
- Deviations from target metrics are early warnings to get strategy back on track
- That requires correct metrics for the right drivers of performance
Balanced Scorecard
- Making sure that metrics are right means that leading indicators are valid predictors of the lagging finance measure
- So regular testing of the predictive power of leading indicators is required
- So the BSC is effective, but only to the extent that it is kept tuned and accurate
Balanced Score Card Summary
- Emphasizes what is important
- Focuses on Business Drivers
- Stresses Cause & Effect Relationships
- Unites the Company
- Uses Leading & Lagging Indicators
- Implements Business Strategy
- Uses valid metrics for Targets & Performance Evaluation
The Balanced Scorecard
for Successful Strategy Implementation
