Presentation on theme: "Prepared by Group 4: Andrew Molloy Amy Miller Mike Elicker"— Presentation transcript:
1 Prepared by Group 4: Andrew Molloy Amy Miller Mike Elicker The Balanced Scorecard: Customer Perspective, Internal Processes, Learning and GrowthPrepared by Group 4:Andrew MolloyAmy MillerMike Elicker
2 What is the balanced scorecard? Developed in the early 1990’s by Dr. Robert Kaplan and David Norton"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."
3 What is the balanced scorecard? The Balanced scorecard is a management system that enables organizations to clarify their vision and strategy and translate them into action.Provides an organization with feedback of both the internal business processes and external outcomes, which allows for continuous improvement of strategic performance and results.Nerve center of an enterprise
4 What is the balanced scorecard? The balanced scorecard is centered on four performance metrics or perspectives:CustomersInternal processesFinancialLearning and growthWhen implemented properly, each one of these perspectives contains four subparts consisting ofObjectivesMeasuresTargetsInitiatives
5 What is the balanced scorecard? Objectives - what the strategy is to achieve in that perspectiveMeasures - how progress for that particular objective will be measuredTargets - refer to the target value that the company seeks to obtain for each measureInitiatives - what will be done to facilitate the reaching of the target
6 What is the balanced scorecard? The term “scorecard” signifies quantified performance measures and “balanced” signifies the system is balanced between:Short-term and long term objectivesFinancial and non-financial measuresLagging and leading indicatorsInternal and external performance perspectives
8 What is the balanced scorecard? Kaplan and Norton defined a four-step process that has been used across a wide range of organizationsDefining the measurement architectureFor example will the system be used at the strategic business unit level rather than the corporate level.Specify strategy objectives.These should be carefully decided upon and selected as those deemed critical in achieving breakthrough competitive performance and limited in number to 15 to 20, or 3 to 4 in each perspective to avoid information overload.Choose strategic measuresThese measures should be closely related to the actual performance drivers and will later be used for evaluating the progress made toward achieving the objectivesDevelop an implementation plan to integrate the scorecard into management.
9 Customer Needs Who is your customer? What age, gender, group does our product appeal to?What services or products do they expect from you?Do we provide personal services, do your products serve as advertised?How do you listen to and learn from your customers?Do we provide feedback calls or s?How do you retain and acquire new customers?Do we use new advertisement and how do we advertise?How do you meet customers’ needs?Do we provide help lines and how can we provide help to customers?How do you measure customer satisfaction and dis-satisfaction?Do we use surveys to find out how customers feel about us?
10 Customer ConcernsThere are four major categories that managers need to address when concerning their customers.QualityAre there often recalls or problems with defects with our products.TimeDo we save time by limiting defects and do we provide fast on time delivery.Performance and serviceDo we perform up to customers standards and do we provide fast and adequate services.CostDo we try to minimize cost when dealing with ordering, scheduling delivery, and paying for materials in order to lower cost of our products to our consumers.
11 Customer PerspectiveWith customer perspective managers and companies have to be careful and make sure they are setting up their balance scorecard to help customers.Examples of things that don’t concern customers are profit per customer, revenue per customer, and improve profit per customer.These objectives don’t necessarily protean to the customer perspective but rather the companies perspective of the customer.Managers need to take a step back and look at how customers perceive your company and what they want to get out of your company.
12 Examples of Customers Perspective Two main questions that a company should ask itself to protean to their customers are:How should we appear to our customersDo we show a promising futureDo we show a strong sense of concernWhat is our differentiating value proposition to our targeted customersHow are we different from our competitorsWhat makes us better than our competitors
13 Perspectives of Kaplan and Norton There are four broad categories that Kaplan and Norton base the customer perspective around.Best buyCompanies that supply services and products at low prices and fast service.Product leadership and innovationCompanies that focus on customer that buy the newest and most advanced cutting edge technology.Customer complete solutionsCompanies that try to sell things like computers where customers customize them to their liking.Lock inCompanies that will make a product then to buy accessories for that product you have to buy the same brand name because other brands out work with that product.
14 Successful balanced Scorecards When using critical thinking of strategy, objectives, and measures companies can get a feel for who their customers are and what they can offer them.Strategy gurus, like Michael Porter stress the fact that it is more important to accomplish more with less.Don’t try to please everyone when setting up your balanced scorecard because you can’t.
15 Internal ProcessesInternal business process objectives address the question of which processes are the most critical for satisfying customers and shareholdersA firm must concentrate its efforts to excel in these areasMetrics based on this prospective allow the managers to know how well their business is running and whether its products and services conform to customer requirements
16 Internal Process Examples CostThroughputQualityObjectiveSpecific MeasureManufacturing excellenceCycle time, yieldIncrease design productivityEngineering efficiencyReduce product launch delaysActual launch date vs. plan
17 Internal ProcessesIn addition to the strategic management process two kinds of business processes may be identified, these include:Mission-oriented processes - special functions of government offices which often involve many unique problems in their processesSupport processes - more repetitive in nature.
18 Financial Performance The financial performance perspective of the balanced scorecard addresses the question of how shareholders view the firm and which financial goals are desired from the shareholder’s perspective.These financial goals are dependent on the company’s stage in the business life cycle.
19 Financial Performance: Business Life Cycle There are three main stages to this cycle which include:Growth stage -goal of the company is growthAn example of a growth goal would be revenue growth.Sustain stage - the goal of the firm is profitabilityMeasures in this stage may include ROE, ROCE, and EVA.Harvest stage - the goal of the firm is cash flow and reduction in capital requirements.
20 Financial Performance The table below outlines possible financial performance objectives and their metrics.ObjectiveSpecific MeasureGrowthRevenue GrowthProfitabilityReturn on equityCost LeadershipUnit Cost
25 A learning & growth example: Objective: increase internal promotionsMeasure: bigger % of in house promotionsTarget: +10% in 2 yearsAdditional classes and training
26 “A balanced scorecard system provides a basis for executing good strategy well and managing change.” -Howard Rohm
27 Learning & growth must focus on measurable outcomes to move the company forward.
28 Scorecard allows for actionable terms derived from company strategy.
29 Makes it easier for management to carry out strategy. Balanced ScorecardMakes it easier for management to carry out strategy.
30 4 step process Define measurement architecture Specify strategic objectivesChoose strategic measuresDevelop implementation plan
31 Potential Benefits Translation of strategy into measurable parameters Communication of strategyAlignment of individual goals with strategic objectivesFeedback of implementation results
32 Potential Disadvantages Lack of a well defined strategyUse of only lagging measuresUse of generic metrics
33 ConclusionBalanced scorecard is a performance management system that can be used in any size organization.Allows management to measure financial and customer results, operations, and organization potential.