2 A Balanced Scorecard Map Balanced scorecard measures a company's performance in: market, operations, learning and growth, and finance.The map can be used relate an operations strategy with the firm's financial and competitive strategy. The balanced scorecard tends to emphasize the learning and growth view and represents earlier innovation lever as a separate view. The financial view specifies how the organization seeks to increase its NPV. The two financial levers are to increase revenues or decrease costs. The growth strategy must define its desired balancing point between emphasizing productivity or revenue growth.
8 Process Perspective Innovation Operations Post-sales Service New productsCycle timeOperationsQualityTimePost-sales ServiceService QualityService Efficiency
9 Learning and Growth Perspective Employee capabilitiesInformation Technology capabilitiesEmployee attitudesMotivationEmpowermentAlignment
10 Linking Measures to Strategy Balanced scorecard is a collection of critical performance measures derived from a company’s vision, strategy, and objective.Performance measures should be integration of outcome and lead measures.Lead measures are performance drivers which makes things happen while outcome measures are indicators of results.Cause and Effect relationship between outcome and lead measures leads all scorecard measures to be linked by same relation.What is measured is done…..10
11 Testable Strategy Financial Customer Increase shareholders valueDecrease Process CostIncrease ProfitsIncrease RevenueFinancialImprove Delivery ReliabilityIncrease Customer RetentionIncrease Market shareCustomerTestable strategy is defined as a set of linked objectives aimed at an overall goal.It is achieved by restating the strategy into set of cause-and-effect hypotheses that are expressed by a sequence of if-then statements.Improve Cycle timeRedesign ProcessProcessLearning & GrowthImprove Employee skills11
12 Strategic FeedbackCause-and –effect structure indicates that viability of strategy is testable.If desired results are not achieved through balanced scorecard it may indicate:- Implementation problem.- Invalid strategy.Double loop feedback – validity of assumptions underlying the strategy and effectiveness of strategy implementation.12
14 Communicating Strategy It must be structured to support the strategy. 1Targets & Incentives2TargetsIncentivesIt must be structured to support the strategy.FinancialE.g.: Increase Profits, RevenuesLearning GrowthE.g.: Improve Employee SkillsCustomerE.g.: On –Time DeliveryInternal ProcessE.g.: Improve Cycle Time14