BY: VARUN GUPTA 73B

What is a Balanced Score Card?

1) A measurement system 2) A strategic management
system

3) A communication tool

BSC as a Measurement System

 Translates mission, vision and strategy through
objectives and measures

 Provides a framework to describe the key  Measures four perspectives

- Customer Relations - Financial - Internal Service Process - Learning, Innovation and Growth

elements in the achievement of the strategy

BSC as a Measurement System

Financial

Customer Relations

Vision and Strategy

Internal Service Process

Learning, Innovation and Growth

Financial Perspective
 What financial steps are necessary to ensure
the execution of our strategy/goals?

 Are the programs/ departments goals,

implementation, and execution contributing to the bottom line? targets?

 Are we meeting operational and financial  Dimensions of Quality:

y Efficiency

Internal Service Process Perspective

 What critical processes must we excel at to
satisfy our customers/stakeholders?

 What must be done internally to meet

patient/customer expectations?

 Dimension of Quality:
y Effectiveness y Appropriateness y Safety

Customer Relations Perspective

 Who are our target customers?  How do our patients/customers see us?  How do patients/customers rate our performance?  Dimension of Quality:
y Accessibility y Acceptability y Continuity

Learning, Innovation and Growth Perspective

 How can we continue to improve?  What capabilities and tools do our employees
need to execute our strategy/goals?

 Dimension of Quality:
y Competence y Participation

BSC as a Strategic Management System

 Translates strategy into:  Objectives  Measures  Targets  Initiatives

Translating with the BSC

Desired state

Differentiating activities

Mission
Vision Strategy/Goals Objectives In each perspective Measures In each perspective

What must be done well to implement strategies

How strategic success is measured

CORPORATE PERFORMANCE MANAGEMENT FRAMEWORK

PERFORMANCE MANAGEMENT COMPONENT

PERFORMANCE MANAGEMENT CYCLE

BALANCE SCORE CARD

y It is the management tool that provides stakeholders with a
comprehensive measure of how the organization is processing towards the achievement of its strategic goals.

y Balances financial and non financial measures. y Balances short and long term measures. y Balances performance drivers(leading indicators) with
outcome measures(lagging indicators).

y Leads to strategic focus and organizational alignment.

PERSPECTIVE IN BALANCE SCORECARD

STRATEGY AND BALANCE SCORECARD

STRATEGY FRAMEWORK MAP

FINANCIAL PERSPECTIVE
y In private companies financial perspective is the main
objective that is the ultimate goal.

y The strategic goal of financial perspective is the long term

shareholder value which is driven by two factors-

y A) Revenue growth y B) Cost efficiency

STRATEGIC OBJECTIVES IN FINANCIAL

CUSTOMER PERSPECTIVE
It covers the following elements

y A) Customer acquisition y B) Customer retention y C) Customer profitability y D) Market share y E) Customer satisfaction

STRATEGIC OBJECTIVES IN CUSTOMER

INTERNAL PROCESS PERSPECTIVE

It has four main components:-

y Operations Management Process. y Customer Management Process. y Innovation Process. y Regulatory and Social Process.

STRATEGIC OBJECTIVES IN INTERNAL PROCESS

LEARNING AND GROWTH PERSPECTIVE

It has three important components:-

y A) Human Capital y B) Organizational Capital y C) Information Capital

STRATEGIC OBJECTIVES IN LEARNING AND GROWTH

LLSG Mission Statement

In the spirit of innovation and collaboration, London Laboratory Services Group (LLSG) provides the health care system with appropriate and comprehensive diagnostic, therapeutic and consultative services of the highest quality.

LLSG Goals/Strategy
The London Laboratory Services Group will:
 be recognized as a center of excellence and leader in
providing diagnostic services

 develop an understanding of the needs of the users of our

services

 be responsive to the needs of other health care providers  communicate openly with users of our services  be a leader in developing and implementing new technologies  provide diagnostic and therapeutic services for the hospital,
the region and beyond

LLSG Goals/Strategy
The London Laboratory Services Group will:
 provide cost effective and efficient services  provide an atmosphere of team work which is responsive to
and supportive of learning

 collaborate with researchers to advance medical science  partner with educational institutions to provide training for
medical professionals

 develop partnerships with industry and other institutions

which will enhance the range and scope of laboratory services

BSC as a Communication Tool

Describes and translates strategy to employees through clear and objective performance measures

Example Goal: Objectives: LLSG will provide cost effective and efficient services Reduce costs Increase productivity Measures: Supply costs Workload

Second

The City of Charlotte Corporate-level Linkage Model Customer Perspective

Reduce Crime Increase Perception of Safety Strengthen Neighborhoods Improve Service Quality Availability of Safe, Convenient Transportation Maintain Competitive Tax Rates Promote Economic Opportunity

Financial Accountability Perspective

Expand Non-City Funding Maximize Benefit/Cost Grow Tax Base Maintain AAA Rating

Internal Process Perspective

Increase Positive Contacts Promote Community Based Problem Solving Secure Funding/ Service Partners Improve Productivity Streamline Customer Interactions Increase Infrastructure Capacity Promote Business Mix

Learning and Growth Perspective

Enhance Knowledge Management Capabilities

Close Skills Gap

Achieve Positive Employee Climate

Why are Companies Adopting a Balanced Scorecard?

Change Formulate and communicate a new strategy for a more competitive environment Growth Increase revenues, not just cut costs and enhance productivity Implement From the 10 to the 10,000. Every employee implements the new growth strategy in their day-to-day operations
The Revenue Gr owth Str ategy I mpr ove st ability customers by b roade ning t he sou rce s of reven ue f ro m cu rr en t The Pr oductivity Str ategy I mpr ove ope rating effici ency by shiftin g cus to mer s to m ore cos t-ef fective channels of distribution Imp rove Returns Broaden Revenue Mix Imp rove Opera ting Efficiency Financial Per spective Increa se Custo me r Confiden ce in Ou r Financial Advice Increase Custo me r Satisfactio n Th rough Supe rio r Execution Custom er Per spective Inter nal Per spective Under stand Custo me r Segments Develop New Products Cross -Sell th e Product Line Shift Approp riate Channel to Mini mize Problems Provide Rapid Response

Increase Employe e Productivity Lear ning Per spective

Develop Strategic Skills

Access Strategic Information

to

Align Pers ona l Goals

Why Do We Need a Balanced Scorecard? To Implement Business Strategy!

Business Strategy is now the single most important issue and will remain so for the next five years Business Week

Less than 10% of strategies effectively formulated are effectively executed Fortune

Research Has Identified Four Barriers to Strategic Implementation

The Vision Barrier Only 5% of the work force understands the strategy The People Barrier Only 25% of managers have incentives linked to strategy The Management Barrier 85% of executive teams spend less than one hour per month discussing strategy

9 of 10 companies fail to execute strategy

60% of organizations dont link budgets to strategy The Resource Barrier

Todays Management Systems Were Designed to Meet The Needs of Stable Industrial Organizations That Were Changing Incrementally You Cant Manage Strategy With a System Designed for Tactics

The BSC Early Adaptors Have Executed Their Strategies Reliably and Rapidly
Beat the Odds 9 of 10 companies fail to execute their strategies Fast 2 to 3 years to achieve breakthrough results

The Solution Was Already There

The BSC helped create focus and alignment to unlock the organizations hidden assets

Question:
How can complex organizations achieve results like this in such short periods of time?

Answer: Alignment!

The Balanced Scorecard process allows an organization to align and focus all its resources on its strategy

BUSINESS UNITS
STRATEGY

EXECUTIVE TEAM

HUMAN RESOURCES

INFORMATION TECHNOLOGY

BUDGETS AND CAPITAL INVESTMENTS

How Do They Do It?

The Seven Ingredients of Highly Successful Balanced Scorecard Programs 1. 2. 3. 4. 5. 6. 7. A Process to Mobilize the Organization and Lead Ongoing Change Scorecards That Describe the Strategy Linking Scorecard to Create an Organization Alignment Continuous Communication to Empower the Workforce Aligning Personal Goals, Incentives, and Competencies With the Strategy Aligning Resources, Budgets and Initiatives With the Strategy A Feedback Process That Encourages Learning and Experience Sharing

The Ingredients of Highly Successful Balanced Scorecard Programs

1. Leadership From the Top y Create the Climate for Change y Create a Common Focus for Change Activities y Rationalize and Align the Organization
Formulate

Communicate

STRATEGY

4. Make Strategy a Continuous Process Strategic Feedback That Encourages Learning Executive Teams Manage Strategic Themes Testing Hypotheses, Adapting, and Learning Navigate

2. Make Strategy Everyones Job Comprehensive Communication to Create Awareness Align Goals and Incentives Integrate Budgeting with Strategic Planning Align Resources and Initiatives

Execute

3. Unlock and Focus Hidden Assets Reengineer Work Processes Create Knowledge Sharing Networks

A Good Balanced Scorecard Tells the Story of our Strategy

y Every measure is part of a chain of

cause and effect linkages

y A balance exists between outcome

measures and the performance drivers or desired outcomes

The Problem: Most of Todays Feedback Systems Are Controls Oriented

Variance Detected

Correction Management Applied

Feedback & Control Loop

Not all Environments are Appropriate for a Balanced Scorecard

Balanced Scorecard must be driven from the top:

y y y y y y y y y y

CEO/COO as sponsor Executive leadership team commitment Drive change Clarify and gain consensus about strategy Build a senior executive team Focus the organization: align programs and investments Integrate cross-functionally Educate and empower the organization

A clear sense of purpose is required to:

The dynamics of the senior executive team will determine whether the Balanced Scorecard becomes a strategic management system

THE BALANCED SCORECARD MANAGEMENT SYSTEM

Significant results can be achieved in relatively short periods of time...

STRATEGY

Implement a framework to align and focus the organization from top to bottom on its strategy Identify the related key change initiatives required to realize the strategy and mobilize the organization

ALIGNMENT

KNOWLEDGE BASE

INSIGHTS

PERFORMANCE PERFORMANCE

LEVERAGE

The Strategy

Teams

Balanced Scorecard
Strategic Objectives
C UST FINA NCIAL

Outcomes

Strategic Measures Q Ret urn on Capital Em ployed Q Myst ery S hopper Rating Q Dealer / P ioneer Gross Profit Split Q Manufacturing Reliabil ity I ndex Q Days A way f rom Work Rate Q Lai d Down Cost vs. B est Com petit ive Ratable S upply Q Environm ental Index Q Quality I ndex Q St rat egic Competency Availabilit y

Q Financi al ly St rong Q Del ight t he Consum er Q Win-Wi n Relationship Q Saf e & Reliable Q Com petit ive Supplier Q Good Neighbor

INTER NAL

Processes
Insights

Q Quality Q Moti vat ed & Prepared

LEARNING

Create feedback processes at all levels to evaluate progress against strategy, monitor and manage issues and priorities, and measure performance and contribution to the business.

L&G

The Balanced Scorecard is a very important strategic management tool which helps an organization to not only measure the performance but also decide the strategies which are needed to be adopted so that the long-term goals are achieved.