BUS499 MODULE 1-4 CASE
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111986188introtobalancedscorecard.pptBalanced Scorecard
Philosophy, Basics, Fundamentals, and Functions
Origins
- One of a number of quality schemes and tools used by organisations to improve their performance
- Created by Kaplan and Norton of Harvard Business School in the early 90’s
- Originally adopted by organisations to improve their performance measurement systems
Other quality schemes include EFQM Business Excellence Model, Charter Mark, Six sigma
Promoted by Scottish Executive for Public Sector organisations to deliver excellent service
Original results achieved were limited due to narrow focus of implementation
The Philosophy
- “As companies around the world transform themselves for competition that is based on information, their ability to exploit intangible assets has become far more decisive than their ability to invest in and manage physical assets.”
Kaplan and Norton Harvard Business Review 1996
Particularly relevant for RGU and where it sits today
– major capital investment completed,
– leadership development programme underway,
– challenging development strategy underway
EG recommends that RGU adopts the Balanced Scorecard to support delivery of our 2010 strategy
Basics
- Moves focus away from purely financial measures of performance
- Balances financial measures with those from three additional perspectives:
- Customers
- Internal business processes
- Learning and growth
Learning and growth replaced in some models with a People dimension
Some scorecards have more than 4 dimensions if this is considered critical to the business model
Fundamentals
- Context of vision and strategy
- Balances performance from a number of different perspectives
- Centres around identifying Critical Success Factors (CSF’s) for the organisation to achieve its objectives
CSF – what do we absolutely need to have achieved in this perspective which will demonstrate that we have achieved our vision and our strategy?
Fundamentals (cont)
- For each CSF, Key Performance Indicators (KPI’s) are identified to measure progress in achieving the objectives
- For each KPI, targets and actions can be aligned and assigned to ensure activity is focused on delivering the objectives
- Initiatives can be identified which will enable the targets to be achieved
Fundamentals - Chart
Objectives - CSF’s
Measures - KPI’s
Targets
Initiatives
All in the context of the vision and strategy
Creating a Balanced Scorecard (Chart)
Evaluation eg Measure - Student Satisfaction; Method – Student Satisfaction survey
Balanced Scorecard Example – General (Chart)
| Client Loyalty | Employer of choice | ||
| CSF: | KPI: | CSF: | KPI: |
| Satisfaction of Service | 1. Client Satisfaction score | Loyalty | 3. Retention |
| 4. Number of referrals | |||
| Perceived value | 2. Perceived value score | Involvement/Participation | 5. Percentage of employees involved (Involvement = Rotations, promotions, community involvement, committee involvement, etc) |
| Operational Excellence | Cost competitive | ||
| CSF: | KPI: | CSF: | KPI: |
| Continuous improvement | 6 Percentage of gold medal suggestions implemented (Gold medal = suggestions mutually agreed to by SSC and clients) | Among industry low-cost providers | 9. Quartile vs similar organisations |
| 7. Number of process related suggestions per associate | |||
| Process delivery | 8. Percentage of Service Level Agreement targets met | Achieving budget | 10. SSC actual costs vs budget |
10 to 15 KPI’s are likely to be the optimum number
Balanced Scorecard as Strategic Management system
- Links an organisation’s long-term strategy with its short-term actions through four processes
- Translating the vision
- Communication and linking
- Business planning
- Feedback and learning
(Kaplan and Norton 1996)
Translating the Vision
- Helps managers build a consensus around the organisation’s vision and strategy
- Translates the vision into operational terms that provide useful guides to action at the local level
- Expresses vision and strategy statements as an integrated set of objectives and measures that will support the delivery of long-term success
Communicating and Linking
- Represents a succinct presentation of what the organisation is trying to achieve for stakeholders, customers and staff
- Facilitates the setting of goals for individuals and departments which are aligned to the strategy
- Can be used to link rewards to performance measures
No prescription on use at lower levels in the organisation but hope that schools and departments will see benefit in implementing a similar approach relevant to their specific areas of operation.
Can also complement OSCR process
Business Planning
- Enables organisations to integrate their business and financial plans
- Can be used as a basis for allocating resources and setting priorities
- Creates a framework for managing an organisation’s various change programs and initiatives
- Encourages the establishment of specific milestones for the measures that mark progress toward achieving the strategic goals
Feedback and Learning
- Assists an organisation to monitor progress from all 4 perspectives and evaluate strategy in light of performance
- Represents an essential strategic feedback system
- Allows the relationship between performance measures and objectives to be tested and evaluated
Cause and Effect Relationship for a Profit Seeking Organisation
- 1. Financial (make a profit)
- 2. Customer (by satisfying customer needs)
- 3. Internal Processes (through being able to deliver value)
- 4. Learning and Growth (by having the necessary knowledge and tools available)
Cause and Effect Relationship for a Public Service Organisation
- Customer (fulfil your value obligation to the public)
- Internal Processes (through being able to deliver)
- Learning and Growth (by having the necessary knowledge and tools available)
- Financial (by securing and prioritising the use of financial resources)
Balanced Scorecard – summary of strategic applications
- Clarify and update strategy
- Communicate strategy throughout the organisation
- Align team and individual goals with the strategy
- Link strategic objectives to long-term targets and annual budgets
- Identify and align strategic initiatives
- Conduct periodic performance reviews to learn about and improve strategy
