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Objective
To understand the essence of balanced scorecard.
Values Vision
Strategy
Our Game Plan
Strategic Outcomes
Satisfied Shareholders Delighted Customers Efficient & Effective Motivated & Prepared Processes Workforce
Strategy Execution
Successful execution of strategy requires three components
{Breakthrough Results} = {Describe the strategy} + {Manage the Strategy}
Philosophy of the three components is:
We cant manage what we cant measure. We cant measure what we cant describe.
Performance Measurement xW xY xM xI xW xY xG
WHAT YOU MEASURE IS WHAT YOU GET
How We Manage
Drawbacks of Using Only Financial Measures: Always looking backwards Neither guarantee or predict future performance Tend to drive short term decisions
Drawbacks of Using Only Financial Measures: Using Only Financial Measures is like steering a Boat by Looking Backwards but thats exactly what organizations do when they rely on financial measures alone
Results of Research!
72% of CEOs believe that executing their chosen strategy is more difficult than developing a good strategy
Malcolm Baldrige CEO Survey, 2002
STRATEGY
85% of management teams spend less than one hour per month on strategy issues
BALANCED SCORECARD
BUDGET
78% of organizations lock budgets to an annual cycle 20% of organizations take more than 16 weeks to prepare a budget
funding
reporting
Input (Resources)
Output (Results)
Sound
Strategy Formulation
Missed Opportunity
Flawed
At Risk
Sound
The Balanced Scorecard is the vehicle that fills the Strategy Management Gap
Financial measures
[Adapted from The Balanced Scorecard, by Robert Kaplan and David Norton]
Balanced Scorecard
The balanced scorecard provides executives with a comprehensive framework that translates a companys vision and strategy into a coherent set of performance measures.
Financial Results
Customer Benefits
Internal Capabilities
Balanced Scorecard
FINANCIAL Financial Health
how should we appear to our shareholder - to succeed financially?
EXTERNAL MEASURES
INTERNAL MEASURES
LAG INDICATORS
PERFORMANCE DRIVERS
Welding on time delivery Customized solution Good quality Service Good infrastructure Pricing Test certificates Design and Development Short time delivery Payment terms Adapting to their wants and requirements at a short notice Maintaining relationship Pricing reduction Quick response Technical support Concept to commissioning of solutions
Training Product demonstrations Assurance Product range Durability Warranty Management Structural integrity Product Features Performance Financial stability
Customized Solution Market Leader Following International Safety Standards Customer base Serviceability Training Experience in line of activity Allow customers to visit Site visits from the team International tie ups Branding Continuous follow up Strong HR team
Finance
Grow Business
Manage Costs
Customer
Internal Process
Increase Productivity
Develop Employees
Promote Creativity
BSC Terminology
Strategy Map: Diagram of the cause-and-effect relationships between strategic objectives Strategic Theme: Operating Efficiency
Financial Profitability Fewer planes Customer Flight Is on time Lowest prices More customers
Statement of what strategy must achieve and whats critical to its success
Objectives
Internal Fast ground turnaround
Measurement
Target
Initiative
Fast ground
turnaround
30 Minutes 90%
Cycle time
optimization
Measurement Definition/Formula: Provides a detailed formula for the calculation of a numerical value for the measure Notes/Assumptions: Clarifies terms in the formula as necessary Highlights key assumptions underlying the formula Measurement Information Is: ___ Currently Available ___ Available With Minor Changes Next Steps: Describes the plan to overcome any deficiencies in getting the required data
Data Elements and Sources: The data elements required to calculate this measure and the source systems, databases, documents, etc. of those data elements
Source For and Approach to Setting Targets: Identifies the report, document, system or individual from which the information will be obtained
Target Setting Responsibility: Person Accountability for Meeting Target: Person Tracking / Reporting Responsibility: Person Measure Availability: date Target: date
2005
Target
Lists numerical targets by year for the various component of the formula where relevant.
2003 Actual
1Q 2Q 3Q 4Q Full Year
2003 Proj.
2004
Learning and then not acting on what you learn is like plowing and then never planting. - unknown Albert W. Daw Collection