Management Control System Session 4

Prof. R.C.M.Pendyala

The Balanced Scorecard.

Strategy to Measures BSC is not a : Dashboard of Financial & non financial indicators. New/re-hashed measurement system.

BSC is a tool to convert a strategy into action

WHAT IS A BALANCED SCORECARD?

It is a set of measures that are directly linked to the companys strategy . It directs a company to link its own long term strategy with tangible goals & actions.

BSC & STRATEGY

A strategy is a set of hypotheses about cause & effect. Any system such as BSC should tell the story of the BUs Strategy. It should make explicit the sequence of hypotheses about the cause & effect relationships between various action the BU proposes to take. Every element selected for a BSC should be an element in a chain of cause & effect relationship that communicates the meaning of the BUs strategy.

Benefits of Balance Scorecard

Balanced Scorecard Concept
Financial Perspective
To succeed financially , how should we appear to our shareholders (Corporate Management)?

Customer Perspective
To achieve our mission, how should we appear to our customers ?

Business Process Perspective

To satisfy our shareholders & customers , what business process must we excel at ?

Renewal , Learning Growth Perspective

To achieve our mission , how will we sustain our ability to change & improve?

Implementation Steps of BSC

Strategy Strategy mapping Performance measures Implementation

Strategy
VISION

MISSION

OBJECTIVES

GOALS STRATEGIES & TACTICS

Strategy Mapping
FINANCIAL Return on investment Customer Loyalty On-time Delivery INTERNAL PROCESSES ORGANISATIONAL LEARNING Process Quality Process Cycle Time

CUSTOMER

Employee Skills

Performance Measures
It should help Us Decide
Are We Doing Things Right? (HOW)? Are We Doing Things Right? (WHAT)?

INPUT

PROCESS

OUTPUT

OUTCOME

Input: Resources , including cost & workforce Process: Activities , efforts, workflow Output: Products & Services Produced Outcome: Results, Accomplishments, impacts.

Performance Measures
It should help Us Decide
Are We Doing Things Right? (HOW)? Are We Doing Things Right? (WHAT)?

INPUT

PROCESS

OUTPUT

OUTCOME

Input: Resources , including cost & workforce Process: Activities , efforts, workflow Output: Products & Services Produced Outcome: Results, Accomplishments, impacts.

Performance Measures

BSC PERFORMANCE MEASURES

Measurement Categories
Customer/ Stakeholder

Achievement Of Strategic Results Business Impacts

Internal Business Processes

Changes In Process Efficiency

Financial Budget

Return On Investment (Program/ Service Effectiveness) Input Measures

Changes In Employee Knowledge , Skills , Attitudes , Behavior & Abilities Service Efficiency/ Effectiveness Measures Organization Infrastructure Capacity Gain Measures Capacity