1. The Balanced Scorecard
Presented To
Alaoula Board Member
Presented By
Welcome and Introductionsv
Adnan Alshiha

2. Workshop Outline 1-3 Introduction to the Balanced Scorecard
What is it?
Why do it?
1-3
Brayer Break
Balanced Scorecard Fundamentals
The Four Perspectives
Measures, Targets and Initiatives
Roles and Responsibilities
Business Strategy

3. The Balanced Scorecard What is it?
Definition:
The 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.

4. Balanced Scorecard History
Measurement and Reporting
Enterprise-wide Strategic Management
Alignment and Communication
1992
1996
2000
Articles in Harvard Business Review:
“The Balanced Scorecard — Measures that Drive Performance” January - February 1992
“Putting the Balanced Scorecard to Work” September - October 1993
“Using the Balanced Scorecard as a Strategic Management System” January - February 1996
1996
2000
Acceptance and Acclaim:
“The Balanced Scorecard” is translated into 18 languages
Selected by Harvard Business Review as one of the “most important management practices of the past 75 years.“

5. The Strategy-Focused-Organization
The Balanced Scorecard is the main management tool that has been used by successful organizations in various fields
Private and Public Sector
For- Profit and Not For- Profit
Different industries
These successful organizations placed their strategies at the centre of their operations. Their strategies, guided Their day- to- day activities
In this workshop, we will learn more about strategy- focused organizations, and how to develop Balanced Scorecards

6. Organizations Often Have A Gap Between Strategy and Action
Strategy Is a Step In a Continuum
MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan
(11) Does a strategic focus make sense in a tactical business world?
STRATEGIC OUTCOMES
Satisfied SHAREHOLDERS
Delighted CUSTOMERS
Efficient and Effective PROCESSES
Motivated & Prepared WORKFORCE

7. The Balanced Scorecard Is A Bridge To Close That Gap
Strategy Is a Step In a Continuum
MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SCORECARD
Implementation & Focus
STRATEGIC INITIATIVES
What we need to do
STRATEGIC OUTCOMES
Satisfied SHAREHOLDERS
Delighted CUSTOMERS
Efficient and Effective PROCESSES
Motivated & Prepared WORKFORCE
PERSONAL OBJECTIVES
What I need to do
(11) Does a strategic focus make sense in a tactical business world?

8. The Balanced Scorecard What is it?
Balances financial and non-financial measures
Balances short and long-term measures
Balances performance drivers (leading indicators) with outcome measures (lagging indicators)
Should contain just enough data to give a complete picture of organizational performance… and no more!
Leads to strategic focus and organizational alignment.

9. Measurement is the language that gives clarity to vague concepts
The Balanced Scorecard Provides a Four Perspective Framework to Translate Strategy Into Operational Terms
The Vision
Financial Perspective
Profitability
Growth
Shareholder Value
“If we succeed, how will we look to our shareholders?”
Measurement is the language that gives clarity to vague concepts
Measurement is used to communicate, not simply to control
Customer Perspective
“To achieve our vision, what customer needs must we serve?”
Price
Service
Quality
Internal Perspective
“To satisfy our customers and shareholders, at which business processes must we excel?”
Cycle Time
Productivity
Cost
Learning and Growth
New Skills
Continuous Improvement
Intellectual Assets
“To excel in our processes, what must our organization learn?”

10. The Revenue Growth Strategy The Productivity Strategy
A Good Balanced Scorecard Strategy Map Tells the Story of Your Strategy
The Revenue Growth Strategy
The Productivity Strategy
“Improve stability by broadening the sources of revenue from current customers”
“Improve operating efficiency by shifting customers to more cost-effective channels of distribution”
Improve Returns
Financial
Perspective
Improve Operating Efficiency
Broaden Revenue Mix
Increase Customer Confidence in Our Financial Advice
Increase
Customer Satisfaction Through Superior Execution
Customer
Perspective
Internal
Perspective
Understand Customer Segments
Develop New Products
Cross-Sell the Product Line
Shift to Appropriate Channel
Provide Rapid Response
Minimize Problems
Increase
Employee Productivity
Learning Perspective
Develop Strategic Skills
Access to Strategic Information
Align Personal Goals

11. A Good Balanced Scorecard Tells the Story of Your Strategy Through A Set of Linked Cause and Effect Hypotheses
Strategic Objectives
Strategic Measurements
(Lag Indicators)
(Lead Indicators)
F1 - Improve Returns
F2 - Broaden Revenue Mix
F3 - Reduce Cost Structure
Return on Investment
Revenue Growth
Deposit Service Cost Change
Revenue Mix
Financial
C1 - Increase Customer Satisfaction With Our Products & People
C2 - Increase Satisfaction “After the Sale”
Share of Segment
Customer Retention
Depth of Relation
Satisfaction Survey
Customer
I1 - Understand Our Customers
I2 - Create Innovative Products
I3 - Cross-Sell Products
I4 - Shift Customers to Cost-Effective Channels
I5 - Minimize Operational Problems
I6 - Responsive Service
New Product Revenue
Cross-Sell Ratio
Channel Mix Change
Service Error Rate
Request Fulfillment Time
Product Development Cycle
Hours with Customers
Internal
L1 - Develop Strategic Skills
L2 - Provide Strategic Info
L3 - Align Personal Goals
Strategic Job Coverage Ratio
Strategic Info Availability Ratio
Personal Goals Alignment (%)
Employee Satisfaction
Revenue per Employee
Learning

12. Theme Example from Southwest Airlines’ Balanced Scorecard
Strategic Theme: Operating Efficiency
Profitability
Financial
Learning
Increase
Revenue
Ground crew
alignment
Lowest
prices
Lower Costs
Customer
Internal
Fast ground
turnaround
Strategy Map: Diagram of the
cause-and-effect relationships
between strategic objectives
Flight
is on time
Objectives
Fast ground turnaround
Statement of what strategy must achieve and what’s critical to its success
Measurement
On Ground Time
On-Time Departure
How success in achieving the strategy will be measured and tracked
Target
30 Minutes
90%
The level of performance or rate of improvement needed
Cycle time optimization
Key action programs required to achieve objectives
Initiative

13. Longer Term (3-5 year) View Shorter Term (Annual) View
The Balanced Scorecard Supports a Complete Strategic Management System by Linking Long Term Strategy and Measures to More Tactical Planning & Budgeting
Longer Term (3-5 year) View
Shorter Term (Annual) View
Mission
Vision
Themes/ Goals
Objectives
Measures
Targets
Initiatives
Milestones
Accountable
Resource Alloc.
Grow revenue from patient care
% patient care revenue growth
‘02 xx%
‘03 xx%
‘04 xx%
Financial
Meet access expectations
3rd available appointment (% met)
Access project
Meet monthly target
Mkg. Team
$ xxxx
‘02 xx%
‘03 xx%
‘04 xx%
Customer
ABC Hospital System will provide excellent care in our selected specialty areas while maintaining margin and growing share
2. Improve customer satisfaction
3. Assure consistent high quality
4. Provide operational excellence
1. Strengthen innovation
Serve the needs of patients excellently
Assure optimum patient mix
% patient mix
’02 = 39%
’03 = 40%
’04 = 41%
Mix Margins Project
Complete by 2003
Dept. Chairs
$ xxxx
Internal
(11) Does a strategic focus make sense in a tactical business world?
Promote ABC Culture Model
Employee Satisfaction Survey
‘02 xx%
‘03 xx%
‘04 xx%
Evaluate survey response
Deadline met
HR Committee
$ xxxx
Learning
Tactical
Strategic

14. The Balanced Scorecard Why do it?
To achieve strategic objectives.
To provide quality with fewer resources.
To eliminate non-value added efforts.
To align customer priorities and expectations with the customer.
To track progress.
To evaluate process changes.
To continually improve.
To increase accountability.

15. The Balanced Scorecard Why do it?
It works!
In just 90 days, Sandia Labs was able to redirect $190,000 in savings by dropping initiatives that didn’t fit their overall strategy.
“The BSC has forced our management team to focus beyond financial measures… too often in the past we would get sucked into short-term thinking.”
“The BSC dramatically improved our data analysis… we don’t overreact nearly as much as we used to.”

16. Execution of Strategy Has Become the Corporate Challenge of Our Times!
“Strategy has never been more important”
Business Week
“Less than 10% of strategies effectively formulated are effectively executed”
Fortune Magazine
“The problem is that our age’s fascination with strategy and vision feeds the mistaken belief that developing the right strategy will enable a company to rocket past competitors. In reality, strategy is less than half the battle. .. In the majority of cases – we estimate 70% – the real problem isn’t [bad strategy]…. It’s bad execution.”
Why CEO’s Fail Ram Charan and Geoffrey Colvin Fortune (6/21/99)

17. The Results are Widespread
CIGNA Property & Casualty
Chemical Bank
1993 – $275 loss
1998 – Top Quartile
– $3b spin-off
Profits
1993 – X
1998 – 20X
Brown & Root Engineering (Rockwater)
ATT Canada
1993 – Losing money
1996 – # 1 in Niche (growth & profits)
1995 – $300M loss
1998 – Customer base doubles
1999 – $7b spin-off
Saint Mary’s/ Duluth Clinic Health System
Southern Citrus
1995
1998
Measure
Improvement
Shipments on Spec
On Time Delivery
Rework
Absenteeism
Employee Turnover
Cost per Pound (¢)
70%
89% 6%
10%
100
28.8
97%
98% 2% 1% 31
18.9
Operating Margin
$18M since BSC implementation
Days in AR
Decrease 16 days
Overall Hospital Point Satisfaction
15%
Duke Children’s Hospital
Mobil US Marketing & Refining
Measure
% Improvement
Competitive Rank (out of 7,profit)
Operating Margin 25
1993
1995
1996
1997
1998 #6 #1
Family Satisfaction 11
Length of Stay 25
Readmission Rate 63

18. The Strategy Focused Organization
Mission: What we do
Vision: What we aspire to be
Strategies: How we accomplish our goals
Measures: Indicators of our progress

19. ..the question..?
What is our strategy?

20. Mission & Vision Environmental Scan A Model for Strategic Planning
Strengths Weaknesses
A Model for
Strategic
Planning
Opportunities Threats
Values
Mission &
Vision
Strategic Issues
Strategic Priorities
Objectives, Initiatives, and Evaluation

21. Business Strategy

22. Business Strategy

23. Corporate Culture

24. Corporate Culture
The beliefs and values shared by people who work in an organisation
How people behave with each other
How people behave with customers/clients
How people view their relationship with stakeholders
People’s responses to energy use, community involvement, absence, work ethic, etc.
How the organisation behaves to its employees – training, professional development, etc.

25. Corporate Culture May be driven by:
Vision – where the organisation wants to go in the future
Mission Statement – summary of the beliefs of the organisation and where it is now

26. Corporate Culture May be reflected in:
Attitude and behaviour of the leadership
Attitude to the role of individuals in the workplace – open plan offices, team based working, etc.
Logo of the organisation
The image it presents to the outside world
Its attitude to change

27. Corporate Culture
What corporate culture do you think the following businesses have managed to develop?
Nike
Copyright: alexbol
McDonalds
Copyright: alexallied
Virgin Group
Copyright: Joshua2150,
The Body Shop
Copyright: fadaquiqa,

28. Strategic Planning

29. Strategic Planning First Stage of Strategic Planning may involve:
Futures Thinking
Thinking about what the business might need to do 10–20 years ahead
Strategic Intents
Thinking about key strategic themes that will inform decision making
“The thicker the planning document, the more useless it will be”
(Brent Davies: 1999)
Taking time to think and reflect may be more important than many businesses allow time for!
Copyright: Intuitives,

30. Strategic Planning The Vision Aims and Objectives:
Communicating to all staff where the organisation is going and where it intends to be in the future
Allows the firm to set goals
Aims and Objectives:
Aims – long term target
Objectives – the way in which you are going to achieve the aim

31. Strategic Planning Once the direction is identified: Analyse position
Develop and introduce strategy
Evaluate:
Evaluation is constant and the results of the evaluation feed back into the vision

32. Analysis

33. SWOT Strengths – identifying existing organisational strengths
Weaknesses – identifying existing organisational weaknesses
Opportunities – what market opportunities might there be for the organisation to exploit?
Threats – where might the threats to the future success come from?

34. PEST
Political: local, national and international political developments – how will they affect the organisation and in what way/s?
Economic: what are the main economic issues – both nationally and internationally – that might affect the organisation?
Social: what are the developing social trends that may impact on how the organisation operates and what will they mean for future planning?
Technological: changing technology can impact on competitive advantage very quickly!

35. PEST Examples: Growth of China and India as manufacturing centres
Concern over treatment of workers and the environment in less developed countries who may be suppliers
The future direction of the interest rate, consumer spending, etc.
The changing age structure of the population
The popularity of ‘fads’ like the Atkins Diet
The move towards greater political regulation of business
The effect of more bureaucracy in the labour market

36. Five-Forces
Developed by Michael Porter: forces that shape and influence the industry or market the organisation operates in.
Strength of Barriers to Entry - how easy is it for new rivals to enter the industry?
Extent of rivalry between firms – how competitive is the existing market?
Supplier power – the greater the power, the less control the organisation has on the supply of its inputs.
Buyer power – how much power do customers in the industry have?
Threat from substitutes – what alternative products and services are there and what is the extent of the threat they pose?

37. Required Inputs
Changing strategy will impact on the resources needed to carry out the strategy:
Specifically the impact on:
Land – opportunities for acquiring land for development – green belt, brownfield sites, planning regulations, etc.
Labour – ease of obtaining the skilled and unskilled labour required
Capital – the type of capital and the cost of the capital needed to fulfil the strategy

38. Evaluation

39. Evaluation
Data from sales, profit, etc. used to evaluate the progress and success of the strategy and to inform of changes to the strategy in the light of that data
Information from a wide variety of sources can help to measure and inform the impact and direction of the strategy.
Copyright: Mad7986,

40. Types of Strategy

41. Types of Strategy
Competitive Advantage – something which gives the organisation some advantage over its rivals
Cost advantage – A strategy to seek out and secure a cost advantage of some kind - lower average costs, lower labour costs, etc.

42. Types of Strategy Market Dominance:
Achieved through:
Internal growth
Acquisitions – mergers and takeovers
New product development: to keep ahead of rivals and set the pace
Contraction/Expansion – focus on what you are good at (core competencies) or seek to expand into a range of markets?

43. Types of Strategy
Price Leadership – through dominating the industry – others follow your price lead
Global – seeking to expand global operations
Reengineering – thinking outside the box – looking at news ways of doing things to leverage the organisation’s performance

44. Types of Strategy
Internal business level strategies –
Downsizing – selling off unwanted parts of the business – similar to contraction
Delayering – flattening the management structure, removing bureaucracy, speed up decision making
Restructuring – complete re-think of the way the business is organised

45. The Strategy Focused Organization The Five Principles
Translate the strategy to operational terms.
Align the organization to the strategy.
The Balanced Scorecard, when focused on driving strategy, is the recipe for success, bringing together varying departments, all working to accomplish an overall mission. The Balanced scorecard will take your vision and translate that into terms and goals for all levels of the organization.
Use the Balanced Scorecard to assist in breaking down barriers between departments. Use of strategic themes link separate operational units.
Source: The Strategy Focused Organization, Norton & Kaplan

46. The Strategy Focused Organization The Five Principles (cont.)
Make strategy everyone’s job.
Make strategy a continual process.
Mobilize change through executive leadership
It is important to communicate and educate everyone in the organization. Understanding of the strategy is key, as well as how each individual contributes to the achievement of the strategy.
Use regular management meetings to review status of measures and address the need to modify the strategic initiatives if performance is not improving. These meetings should be used as a learning opportunity, focused on team problem solving and adaptation to new situations.
Improvement is the ultimate goal, and cannot be attained without executive leadership. Effective leaders provide an environment that values creativity and accepts “risk taking” as an integral part of change management. Executives also need to use the Balanced Scorecard to communicate successes and opportunities for improvement.
Source: The Strategy Focused Organization, Norton & Kaplan

47. The Balanced Scorecard and The Big Picture
Activity Based Costing
Economic Value Added
Forecasting
Benchmarking
Market Research
Best Practices
Six Sigma
Statistical Process Control
Reengineering
ISO 9000
Total Quality Management
Empowerment
Learning Organization
Self-Directed Work Teams
Change Management

48. Strategic Performance Management System
Strategic Direction
Create Environment
For Change
Communicate Strategies
Define Objectives
Implement BSC
Balanced Scorecard
Measure Performance
Improve Processes
Evaluate and Adjust
Continuous Improvement
Redefine Initiatives
Linking it all together….

49. THE BALANCED SCORECARD
FINANCIAL/REGULATORY
To satisfy our constituents,
what financial & regulatory
objectives must
we accomplish?
CUSTOMER
To achieve our vision,
what customer needs must
we serve?
INTERNAL
To satisfy our customers and
stakeholders, in which business
processes must we excel?
LEARNING & GROWTH
To achieve our goals, how
must we learn, communicate
and grow?

50. Customer Perspective To achieve our vision, what customer needs
must we serve?
Possible Performance Measures
Customer Satisfaction (Average)
Satisfaction Gap Analysis (Satisfaction vs.
Level of Importance)
Satisfaction Distribution (% of each area scored)

51. Financial / Regulatory Perspective
To satisfy our constituents, what financial and
regulatory objectives must we accomplish?
Possible Performance Measures
Cost / Unit
Unfunded Requirements or Projects
Cost of Service
Budget Projections and Targets

52. Internal Perspective To satisfy our customers, in which business
processes must we excel?
Possible Performance Measures
Cycle Time
Completion Rate
Workload and Employee Utilization
Transactions per employee
Errors or Rework

53. Learning and Growth
To achieve our goals and accomplish core activities, how must we learn, communicate and work together?
Possible Performance Measures
Employee Satisfaction
Retention and Turnover
Training Hours and Resources
Technology Investment

54. Why Measure?
To determine how effectively and efficiently the process or service satisfies the customer.
To identify improvement opportunities.
To make decisions based on FACT and DATA

55. Measurements Should: Translate customer expectations into goals.
Evaluate the quality of processes.
Track our improvement.
Focus our efforts on our customers.
Support our strategies.

56. Targets
“If you don’t know where you’re going, you’re probably not gonna get there.”
Forrest Gump

57. Targets Targets need to be set for all measures
Should have a “solid basis”
Give personnel something for which to aim
If achieved will transform the organization

58. Targets Careful not to develop measures/targets in
a fragmented approach:
i.e. Asking people to increase customer satisfaction has to be backed up with the knowledge, tools, and means to achieve that target.

59. Initiatives
Once measures and targets are established, it is the responsibility of management to determine HOW the organization will achieve its goals.
Measures are used to determine the effectiveness of strategic initiatives.

60. The Leadership Team Develops the division’s vision, strategy and goals
Develops organizational objectives and targets
Provides leadership, endorsement and vision for the project
Clears barriers to scorecard progress
Charts the strategic direction of the organization
Good strategic plan looks 3-5 years out
The BSC is strategic vs. operational
Develops organizational objectives and targets
Links objectives to the vision/mission statements
Clears barriers to scorecard progress
Running interference when needed

61. The Core Team Drafts the strategy map and scorecard
Works with employees to develop measures supporting strategic objectives
Works with the Leadership Team to plan and implement the Balanced Scorecard in the FAS Division
The Core Team is ideally a cross-functional, mid-level management team that understands operational issues.
Should include subject matter experts as needed.

62. FY1999 CORPORATE LEVEL BALANCED SCORECARD
Financial
Customer
Operational
People
Technical
Indica-
tor
Tar-
get
FY99
Final
Target
Stat
-us
Stat- us
Adjusted
Discharges
23,890
23,592
Patient
Satis-
faction
Choose key
focus areas
for
improve-
ment C
Arranging
Care
Determine outpatient
phone model,
conduct pilots
Cultural
Develop-
Complete
communi-
cations
strategy
Quality
Improve-
Implement
system-wide
governance
structure
Encounters
912,188
892,243
Employer
survey
develop-
ment in CY
1999 CY
model for
registration &
scheduling
physician
external quality
report in CY
Cost per
Discharge
6,964
7,535
HEDIS
Indicators
Select
indicators
ment plan M
Providing
Determine model for
patient delivery
system for clinical
divisions
employee
Meet or exceed
standards for
SMDC
accreditation
Encounter
215
252
Com-
munity
Service
reporting
process and
inventory
Complete system
strategy for
ambulatory surgery
plan to
maintain
Catholic-
ity
Informa-
tion
Technol-
ogy
Complete IT
strategic plan
in CY 1999
Operating
Margin
2.0
1.3
Commun-
ity Aware-
ness
surve y in
CY 1999
Docu-
menting
and
Tracking
Complete plan for
decentralized coding
and charge entry
Employee
Relations
Strategy
Accom-
plish “pay
equity”
Complete Y2K
compliance by
12/99
Excess
3.8
3.3
Market
Share
baseline
Innova-
tion and
Program
Complete feasibility
study for a women’s
health center
Synchro-
nize
benefits
Medical
Education
& Research
report of
funded grants
publications
Days Cash
on Hand
103.6
108.6
Complete plan for a
geriatrics program
Facilities
Planning
Perkins & Will
plan
Days in
Accounts
Receivable
77.7
82.8
Return on
Investment
3.4
2.9
“C” = task completed; “CY” = Calendar Year 1999 task; “M” = task modified
Finance section :
Target
met ;
Target not met
SMDC was trying to work with a performance measurement tool in advance of crafting a focused business strategy
Balanced Scorecard Collaborative was hired to help get SMDC on the right track with their BSC

63. Finance and Administrative Services
Strategy Map

66. Link it together…. DIVISION CUSTOMER FINANCIAL INTERNAL PROCESS
 LEARNING & GROWTH
DEPT.
Hum. Rscrs.
Univ. Police
Facilities
Police
Parking
FUNCTION
Measure: Satisfaction Index
Current: Target: 4.0

67. The Strategy Map: Cause and Effect Relationships
Financial
Strong Financial Base
What will drive margins?
Managed growth in high margin programs/service lines
How?
Attract targeted patient population through targeted referring physicians who value leading edge technology & expertise
What will the internal focus be?
Ensure clinical excellence through leading edge programs and techniques in focused specialty areas
Align research priorities to support leading programs and stay out front in treatment methods
Will our people be prepared to do that?
Yes, with appropriate technology
Yes, by recruiting critical expertise
Implement Managed
Growth
Maximize High Margin
Opportunities
Customer
Specialty Care Patients
Referring Providers
Leading Edge
Technology
Leading Edge
Expertise
Continually Develop
Clinical Excellence
Internal
Develop Leading
Edge Programs/
Techniques
Align Research
Priorities
Learning & Growth
Implement Technology
to Support Processes
and Programs
Develop Critical Staffing
Resource Plans

68. The Balanced Scorecard as a Management System
BSC reviewed regularly to enhance operational decision-making
Success of initiatives assessed based on DATA… not opinions
Leading indicators evaluated to confirm accuracy of assumptions

69. The Balanced Scorecard as a Management System
The BSC is a “Living Document” that requires regular revision of objectives, measures and initiatives:
How are we doing?
Are we measuring the right things?
What initiatives do we need to get us where we want to go?
Have our organizational goals changed?

70. Rapid Deployment Case Study: Major Federal Organization
Definition of “Corporate” strategy
Rapid roll-out and broad reach
Develop internal capabilities to sustain momentum
Need
Approach
Develop Corporate Balanced Scorecard
Define template for rolling out BSC
Train subordinate units
Streamline project management
Quality checks
Online education
Benefits
Clear guidance from Corporate
Active involvement from client teams
Rapid deployment with minimal resources
Quality control

71. Advantages to this Approach
Simple to Use and Understand
Based on Vision and Strategy
Multidimensional
Quantitative and Qualitative Measures
Current and Future
Provides Measurement of and Method for Improving our Services
Ties QI initiatives together
Serves as a Communication Tool

72. Thank You