Balanced Scorecard

Slideshow Transcript

1. Slide 1: Balanced Scorecard Creating Strategy Map to Drive Corporate Performance 1 www.exploreHR.org
2. Slide 2: Contents : 1. Corporate Performance Scorecard 2. Strategy Map Framework 3. Four Perspectives in Balanced Scorecard 4. Identifying Key Performance Indicators 5. Strategy Map in Corporate Functions (HR, IT, Finance and Marketing) 2 www.exploreHR.org
3. Slide 3: You can download this presentation at: www.exploreHR.org Please visit www.exploreHR.org for more presentations on leadership, personal development, and HR management. 3 www.exploreHR.org
4. Slide 4: Corporate Performance Management 4 www.exploreHR.org
5. Slide 5: Performance Management Framework Strategy Map Vision Mission Strategy Key Performance Indicators Company strategy Identifying Defining Measuring Monitoring Reporting 5 www.exploreHR.org
6. Slide 6: Performance Management Component Three critical components for effective process of performance management Performance management cycle is continuous and consistent Performance Management Process Performance Performance Management Management Infrastructure Culture Logistic support and Culture that is based performance management on performance administration accountability 6 www.exploreHR.org
7. Slide 7: Performance Management Cycle STRATEGY Set Measures and Target Reward and Coach Plan and Execute Monitor and Evaluate 7 www.exploreHR.org
8. Slide 8: Managing Performance with Balanced Scorecard Balanced Scorecard is a management tool that provides stakeholders with a comprehensive measure of how the organization is progressing towards the achievement of its strategic goals. 8 www.exploreHR.org
9. Slide 9: Managing Performance with Balanced Scorecard • Balances financial and non-financial measures • Balances short and long-term measures • Balances performance drivers (leading indicators) with outcome measures (lagging indicators) • Leads to strategic focus and organizational alignment. 9 www.exploreHR.org
10. Slide 10: 4 Perspectives in Balanced Scorecard Financial Perspective The Strategy If we succeed, how will we look to our shareholders? Customer Perspective To achieve our vision, how must we look to our customers? Internal Perspective To satisfy our customers, which processes must we excel at? Learning & Growth Perspective To achieve our vision, how must our organization learn and improve? 10 www.exploreHR.org
11. Slide 11: Strategy and Balanced Scorecard Mission – Why We Exist Strategic Strategy Outcomes Map : Satisfied Translate the Shareholders Vision – Strategy Strategy : What We Delighted Our Game Want to Be Customers Plan Excellent Balanced Processes Values – Scorecard : Motivated What’s Measure and Workforce Important Focus to Us 11 www.exploreHR.org
12. Slide 12: Strategy Map Framework • The strategy map framework is presented in the following slides. • This framework describes the types of strategic target that should be presented in each perspective, namely the financial perspective, customers, internal business process, and learning & growth perspective. 12 www.exploreHR.org
13. Slide 13: Strategy Map Framework Long-term Shareholder Value Cost Efficiency Revenue Growth Financial Price Quality Service Availability Brand Customer Regulatory Operations Customer Innovation and Social Management Management Processes Processes Processes Processes Internal Process Learning & Growth Human Capital Organization Capital Information Capital 13 www.exploreHR.org
14. Slide 14: Financial Perspective • In private companies, the financial perspective is the main objective (ultimate goal) – without having to sacrifice the interests of other relevant stakeholders (community, environment, government, etc.) • In the financial perspective, the strategic goal is the long-term shareholder value. This goal is driven by two value factors, namely : revenue growth and cost efficiency. 14 www.exploreHR.org
15. Slide 15: Strategic Objectives in Financial Long-term Shareholder Value Cost Efficiency Revenue Growth Expand Revenue Improve Cost Structure Opportunities Increase Asset Utilization Enhance Customer Value 15 www.exploreHR.org
16. Slide 16: Customer Perspective • This perspective is very instrumental, because without customers, how can a company survive? • Customer perspective covers the following elements: • Customer acquisition • Customer retention • Customer profitability • Market share • Customer satisfaction 16 www.exploreHR.org
17. Slide 17: Strategic Objectives in Customer Customer Retention Customer Profitability Customer Satisfaction Market Share Customer Acquisition Price Quality Service Availability Brand 17 www.exploreHR.org
18. Slide 18: Internal Process Perspective • This perspective reflects the processes in key business that should be optimized in order to meet the needs of the customers. • There are four main themes in this perspective, namely: • Operations Management Process • Customer Management Process • Innovation Process • Regulatory and Social Process 18 www.exploreHR.org
19. Slide 19: Strategic Objectives in Internal Process Operations Customer Regulatory Innovation Management Management and Social Processes Processes Processes Processes Processes that Processes that Processes that Processes that produce and enhance customer create new improve deliver products value products and communities and and services services the environment • Supply • Selection • New Ideas • Environment • Production • Acquisition • R&D Portfolio • Safety & Health • Distribution • Retention • Design/ • Employment Develop • Growth • Launch • Community 19 www.exploreHR.org
20. Slide 20: Learning & Growth Perspective • This perspective reflects the capability that a company should have, namely: • Human Capital • Organization Capital • Information Capital • This perspective shows us that good human resource development system, organizational system and information system forms a solid foundation for improving company performance. 20 www.exploreHR.org
21. Slide 21: Strategic Objectives in Learning & Growth Organization Information Human Capital Capital Capital • Skills • Culture • Systems • Knowledge • Leadership • Database • Attitude • Organization • Networks Development 21 www.exploreHR.org
22. Slide 22: Strategy Map Template • The following slide displays the strategy map template comprising of four perspectives : financial, customer, internal business process, and learning & growth. 22 www.exploreHR.org
23. Slide 23: Strategy Map Template Enhance Long-term Shareholder Value Improve Increase Revenue Growth Cost Efficiency Financial Build High Expand Enhance Performance Products Market Share Brand Image Customer Drive Demand Achieve Implement Good Manage Dramatic through Customer Operational Environmental Growth through Relation Excellence Policy Innovation Management Internal Process Learning & Growth Develop Strategic Build Learning Expand Capabilities with Competencies Culture Technology 23 www.exploreHR.org
24. Slide 24: Identifying Key Performance Indicators (KPI) 24 www.exploreHR.org
25. Slide 25: Key Performance Indicators (KPI) KPI = Measurement or indicator that provides Vision information on how far we Mission Strategy have succeeded in and Values achieving the strategic objectives Strategic Objectives Key Performance Indicators Finance Key Performance Customer Indicators Internal Business Process Key Performance Indicators HR Development 25 www.exploreHR.org
26. Slide 26: KPI Guidelines Guidelines in Formulating the KPI • The measure of success must show clear, specific and measurable performance indicators. • The measure of success should be declared explicitly and in detail so that it is clear what is being measured. • Costs to identify and monitor the measure of success should not exceed the value that will be known from the measurement. 26 www.exploreHR.org
27. Slide 27: KPI Guidelines Relevant to the Does KPI have a linkage with the strategic Strategic Objective objectives? Are the KPI achievements still under control? Controllable Can any action be taken to improve the Actionable performance? Simple Is the KPI easy to explain? Credible Is the KPI not easy to manipulate? 27 www.exploreHR.org
28. Slide 28: KPI Family Dimension Measures employee output (units/ Productivity transactions/ dollars), the uptime levels and how employees use their time (sales-to- assets ratio, dollar revenue from new customers, sales pipeline). Measures the ability to meet and/or exceed Quality the requirements and expectations of the customer (customer complaints, percent returns, DPMO -- defects per million opportunities). 28 www.exploreHR.org
29. Slide 29: KPI Family Dimension Measures the overall effectiveness of the Profitability management organization in generating profits (profit contribution by segment/customer, margin spreads). Measures the point in time (day/week/ month) Timeliness when management and employee tasks are completed (on-time delivery, percent of late orders). 29 www.exploreHR.org
30. Slide 30: KPI Family Dimension Measures how effectively the management Process organization incorporates quality control, Six Efficiency Sigma and best practices to streamline operational processes (yield percentage, process uptime, capacity utilization). Measures how effectively the management Resource Utilization organization leverages existing business resources such as assets, bricks and mortar, investments (sales per total assets, sales per channel, win rate). 30 www.exploreHR.org
31. Slide 31: KPI Family Dimension Measures how successfully the management Cost organization achieves economies of scale and Savings scope of work with its people, staff and practices to control operational and overhead costs (cost per unit, inventory turns, cost of goods). Measures the ability of the management Growth organization to maintain competitive economic position in the growth of the economy and industry (market share, customer acquisition/retention, account penetration). 31 www.exploreHR.org
32. Slide 32: KPI Category Dimension The actual raw data value as measured (e.g., Direct sales volume). The comparison of the changes in Percent performance of one value relative to the same value at a different time, geography, etc. (e.g., percentage change in sales vs. last year). 32 www.exploreHR.org
33. Slide 33: KPI Category Dimension The comparison of one value relative to another to Simple provide a benchmark for comparison of Ratio performance (e.g., average sales per day). A combination of several separate measures Index added together that result in an overall indicator of performance (e.g., (company sales growth)/(industry sales growth) for a specific geography). 33 www.exploreHR.org
34. Slide 34: KPI Category Dimension The addition of the weighted averages of several Composite similar measures that result in an overall composite Average indicator of performance (e.g., customer satisfaction composite is mixture of results from surveys, focus groups and product returns). Multiple measures such as mean, variance, Statistics standard deviation and variance that capture the spread and distribution of the performance measures (e.g., sales distribution by demographics, geography, channel). 34 www.exploreHR.org
35. Slide 35: Strategy Map for Corporate Functions (HR, IT, Finance and Marketing) 35 www.exploreHR.org
36. Slide 36: Integration between Corporate and Division/Department Vision Mission Strategy Corporate Scorecard The Division Scorecard is built by referring to the Division corporate scorecard Scorecard 36 www.exploreHR.org
37. Slide 37: Corporate and Division Scorecard Corporate Finance Financial Corporate Marketing Customer Production Supply Chain R&D Internal Process Learning & Growth Corporate HR Info Technology 37 www.exploreHR.org
38. Slide 38: Corporate and Division Scorecard • Division Scorecard is formulated by looking at the four perspectives in Corporate Scorecard. • As shown in the previous slides, the learning & growth perspective provides guidelines for developing scorecard at the Human Resource and IT divisions, while the internal process perspective provides guidelines for developing scorecard at the supply chain division or R&D. 38 www.exploreHR.org
39. Slide 39: Corporate and Division Scorecard Sample from GE Lighting Business Group Level of Organization Financial Customer Internal Process Learning & Growth Corporate Scorecard Increase profit margin Improve customer Increase inventory turns Increase level of satisfaction level Improve internal process employee competency Division Scorecard Optimize cost of production Improve customer Increase inventory turns Increase level of Reduce inventory levels satisfaction level Improve internal process employee competency Plant Scorecard Optimize cost of production Increase percent of Increase inventory turns Number of \"on the Increase yields ratio on time delivery Reduce number of defects job training\" delivered Increase labor productivity Reduce customer per million Number of performance Reduce inventory levels complaints per million Improve quality incoming coaching session materials Maintain optimum equipment speed Frontline Employee Reduce waste Reduce equipment downtime Number of \"on the Scorecard Reduce overtime Reduce number of poor job training\" attended Increase production rates solders Number of performance