Presentation is loading. Please wait.

Presentation is loading. Please wait.

The Balanced Scorecard

Similar presentations

Presentation on theme: "The Balanced Scorecard"— Presentation transcript:

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….

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.

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



 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

Download ppt "The Balanced Scorecard"

Similar presentations

Ads by Google