Brief on Balanced Scorecard Concept

Brief Presentation On
“Balanced Score Card for Strategic PMS”
Ainapur Institute of Management, Hyderabad
(Training and Consultancy Services)
Phone :09440826763
e-mail: ajaygupta@ainapur.com
Regd. No. 1133/ 2002

 Balanced Score Card for Strategy Deployment
 CII-EXIM Award(EFQM Model),
 Tata Business Excellence Model (MBNQA Model),
 Dubai Quality Award
 QMS - ISO9000,EMS - ISO14000, OH&SMS - OHSAS18000,
 TQM, Quality Circles, 5’S’,Kaizen
 Performance/ Continuous Improvement Projects ,
 Six Sigma Green Belt Training and Facilitating Projects
 Designing and Conducting Stakeholders perception surveys
(Employees, Society, Customers and Vendors satisfaction surveys)
 Comprehensive HR Audit
 Mines Safety Audits & Risk Management
 Mine Planning and Cost Analysis
Training & Consultancy Services for

We have extended our Training & consultancy services to
 NTPC Ltd. (Power Plants at Visakapatnam, Vindhyachal,
Unchahar, Auraiya, Talcher Kaniha, Kahalgaon, Korba,
Badarpur and Power Management Institute)
 NSPCL Rorkela & Durgapur
 LANCO Kondapalli Power
 BOSCH Nashik
 Tecumseh Products India Pvt. Ltd,
 Tata Projects Ltd.
 GULF Oil Corporation (Explosives, Chemicals and IDL
Consult),
 Sama Dubai, A Dubai Holding Company
 JK Group
 Ispat Industries
 Sandvik Smith Asia,
 ITC ILTD Anaparthy,
 Hospet Steels (JV of Kalyani Steels and Mukand),
 L&T AP Cement Works,
 MSPL Iron Ore Mines,
 Singareni Collieries , etc
Our Key Customers

 Earlier organizations used to think- “Today's performance
will ensure future success”.
 TQM approach says- “Today's excellence is tomorrows
mediocrity”
 So, we have to benchmark ourselves with “best in the
world” (now it is more true after globalization / open
market) and
 Continuously improve (at the rate higher than our
competitors/potential competitors).
Why Continuous Improvement

Performance Measurement For
A General rule :
“You get what you measure”
 What does not get measured cannot be Recorded.
 What does not get recorded cannot be Monitored.
 What cannot get monitored cannot be Controlled
 What cannot get controlled cannot be Improved.
Continual Improvement

 Therefore , an organization must measure the critical few parameters
that represent its strategy for long-term value creation.
 Many times measures are to measure workload rather than results
 Measures focused in one area may yield unintended consequences in
other areas
 Measurement is a powerful motivator, so “Be careful what you wish for
(measure), you might get it”
Performance Management For
Continual Improvement

According to Balanced Scorecard Collaborative
 95% of typical workforce does not understand its organizations' strategy
 90% of organizations fail to execute their strategies successfully
 86% of executive teams spend less than one hour per month discussing strategy
 70% of organizations do not link middle management incentives to strategy
 60% of organizations do not link strategy to budgeting
According to Balanced Scorecard Forum
 80% of organizations using balanced scorecard reported
improvements in operating performance
 66% of these organizations reported an increase in profits
Facts about Balanced Scorecard

Why do companies need to implement BSC?
Because:
90% of companies
that formulate
Strategy can not
implement it.
BSC helps to
deploy strategy
successfully
Helps to
clarify the
Vision/
Mission of
the company
It is an Enterprise
Performance
Management System:
Managers are working
hard to be sure things
are done right.
They hardly have time to
decide if they are doing
right things. It helps in
doing the right things
It improves
“Communica
tion of the
strategy”
across the
organization

Example: Which Aircraft you will board?
Pilot monitors only air speed
Pilot says that he had
worked on altitude for
the last few flights and
Intends to concentrate on
fuel consumption in the next
set of flights
Pilot 1 Pilot 2
Pilot monitors all the performance
parameters and control parameters
Pilot tries to balance all the things in
order to reach the destination
Obviously no one likes to board an aircraft
where only airspeed meter is there. Pilot
needs to monitor a battery of meters/
instruments to guide the plane.

Managers like pilots need instrumentation about
many aspects of their business environment and
performance to monitor the journey towards
excellent future.

Can there be an ‘unbalance’ in companies?
Oil companies tend
to be dominated by
the technical and
cost focus of the
refineries at the
expense of
marketing
Consumer goods
companies is
dominated by a
marketing and
sales focus at the
expense of
technology and
innovation
High tech
companies have a
strong engineering
and technology
culture with
manufacturing
often being a
stepchild

Harvard Business School Professor, Robert Kaplan and Management
Consultant, David Norton conceived the concept of Balanced Score
Card (BSC) in 1991.
“The Balanced Score Card is one of the most important management
practices of the past 75 years”-Harvard Business Review.
TRANSLATING STRATEGY INTO ACTION
Concept of Balanced Scorecard

What is a “Balanced” Score Card
Balanced Score Card is a multi-dimensional framework that gives
top managers a fast but comprehensive view of the business.

The Scorecard is
developed by a group
of senior executives
as a team project. The
scorecard creates a
shared model of the
entire business to
which everyone
contributes.

The Scorecard becomes a joint accountability of all concerned and
creates consensus and teamwork among all senior executives
regardless of previous experience or functional expertise.

The scorecard provides a framework to communicate mission and
strategy.
It uses measurement to inform employees about the drivers of current
and future success.
By Controlling the outcomes the organization desires and drivers of
those outcomes, senior executives would be able to mobilize their
energies, abilities and the specific knowledge of people throughout
the organization towards achieving the long term goals

Financial
Perspective :
To satisfy
shareholders
what financial
objectives
must we
accomplish?
Customer
Perspective :
To achieve
Financial
objectives,
what customer
needs must
we serve?
Internal
Process
Perspective :
To satisfy
shareholders
and customers
in which internal
processes must
we excel?
Innovation
and learning
perspective :
To achieve our
goals, how
must our
organization
learn and
innovate?
Logistics of a Balanced Score Card

Some Companies have a fifth perspective :
• Social Accountability : TISCO, NTPC
• Safety : Hong Kong Railway Network
Some companies have three perspectives ; Subordinate Courts,
Singapore have combined Financial and Internal Process and called it a
Business Process
Perspectives % of organizations
3 3%
4 66%
5 25%
6 6 %
Logistics of a Balanced Score Card

Financial Perspective:
 Financial performance measures indicate whether
the company’s strategy implementation is
contributing to bottom-line improvement or not
 It focuses on the strategy for growth, profitability
and risk viewed from the perspective of the
shareholder.
 Financial performance, a lag indicator, provides
the ultimate definition how an organization intends
to create sustainable growth in shareholder value

 Traditional financial accounting measures like
ROI, EPS can give misleading signals for
continuous improvement and innovation
which are demanded by present day’s
competitive environment.
 Financial results are post mortem of past
performance. They can not indicate about
organizations future.

Financial Measures are not helpful to guide the creation of
future value through investments in
Customers Suppliers Employees
Technology InnovationProcesses

Typical measures are
 Return on investment (ROI)
 Turnover
 Earning Per Share (EPS)
 Economic Value Addition (EVA)
 Profit Before Depreciation, Interest and Tax (PBIT)
 Profit After Tax (PAT)

The balanced score card demands that the
managers translate their general mission statement
on customer service into specific measures that
reflect the factors that really matter to customers
like :
Customer Perspective:
 Lead time measures
 Quality measures
 Performance and service measures

Some typical measures are
• Customer Satisfaction Index
• Lead-Time to bring new product
• On-time delivery,
• No. of defects
• Time for attending complaints
Customer Perspective:

Customer based measures must be translated
into measures of what the company must do
internally to meet its customer’s expectations
Internal Process Perspective:

Managers need to
focus on those critical
internal operations that
enable them to satisfy
customer needs

The internal measures for BSC should stem from business processes
that have the greatest impact on customer satisfaction
Internal processes create and deliver the value proposition for
customers. The performance of internal processes is a leading
indicator of subsequent improvements in customer and financial
outcomes.

The Internal-Business-Process Perspective
Innovation
Process
Operations
Process
Post sale service
process
The Generic Value-Chain Model
Identify
new
markets
Create
Product
service
offering
Build
Product /
services
Deliver
Product /
services
Service to
the
customer
Customer Need
Satisfied
Customer
Need
Identified

 Operation Management: Producing and delivering products and
services to customers
 Customer Management :Establishing and leveraging relationships
with customers.
 Innovation: Developing new products, services and relationships
 Regulatory and social: Conforming to regulations and societal
expectations and building stronger communities.

Typical measures are
 Average cycle time to design new product
 Percentage of on time deliveries
 No. of defects / rejection level
 Productivity
 Overhead cost
 Production cost

The customer perspective and internal processes perspective identify
the measures that the company considers most important for
competitive success.
Learning and Growth Perspective:

Intense global competition requires that
companies make continual improvements to
their existing products, processes and have
the ability to introduce entirely new products
with expanded capabilities.

Intangible assets are the ultimate source of sustainable value creation.
Learning and growth objectives describe how the people, technology
and organization climate combine to support the strategy.

Improvements in Learning and growth measures are lead indicators
for internal process, customer and financial performance.

This perspective focuses on the strategic priorities to create a
climate that supports organisational change, innovation and growth.
Typical measures are:
 Employees involved in improvement teams
 Training man days on new technology
 Employees satisfaction level
 Amount spent on R&D etc

For this companies have to manage Three Intangible assets
Human capital: Employees skills, talent and knowledge
Information capital: Databases, information systems,
networks and technology infrastructure.
Organization capital: Culture, leadership, employee alignment,
teamwork, and knowledge management.

• Strategy Map is a Logical and Comprehensive
Architecture for describing strategy.
• It provides the visual framework for integrating
the organization’s objectives in the four
perspectives of a Balanced Scorecard.
• It provides a single-page view of the strategy.
• A properly constructed BSC should tell the story
of the business units strategy.
• It should identify and make explicit the
sequence of hypothesis about the cause-and-
effect relationships between outcome
measures and the performance drivers of those
outcomes.
Strategy Maps:

ROCE
Customer
Loyalty
On-time
Delivery
Process
Quality
Process Cycle
Time
Employe
e Skills
Financial
Customer
Internal/
Business
Process
Learning and
Growth
Cause – & – Effect Relationship

Achieve profitable Growth to be
one of top 5 Global CompaniesFinancial
Customer
Acquire Customers Through
Existing Offerings
Acquire Customers Through New
Offerings & Reach
Business ProcessesAcquire/Enhance
Capacity
Product
Rationalization
Product Development
Learning & Growth
Enhance Strategic Skills
Knowledge Mgmt Enhance Employee
Satisfaction
Attain World Class
Cost Competitiveness
Improve Market Share of
Niche products
Retain Profitable Customers
Improve Customer Satisfaction
Increase Loyalty Through
Customer Relationship Mgmt
Improve Order
Management process
Improve Process Capability
Improve Supplier Management
Create culture of high Performance &
Team Based Working
Leadership
Development

Improve ROCE/ Improve
profitabilityIncrease Turnover
Attain cost
competitiveness
Improve customer
satisfaction
Financial
Customer
Operate at high reliability
Improve safety
standards
Improve
efficiency
Achieve ISO 9001:2000
Certification
Reduce O&M
costs
Optimise MAN/
MW ratio
Conserve Energy
Adopt benchmarking concept/
Increase BM projects
Increase employee
Satisfaction level
Provide an environment to encourage
creativity & innovation among all
the employees
Enhance employee skills and
Develop multi-skilled employees
Achieve Community
Development targets
Achieve ISO 14001
Certification
Afforestation of barren
Areas in and around
Simhadri Project
Improve ash
utilisation
Internal Process
Learning &
Growth
Corporate social
responsibility
STRATEGY MAP
Improve Health and
hygiene all around
Project
Completion

Alignment of all the Scorecards with Group Strategy
ABC GROUP PURPOSE AND GROUP STRATEGY
ABC STEEL’S MISSION,VISION ,VALUES
ABC STEEL’S STRATEGIC GOALS
MD’s BALANCED SCORE CARD
QUALITY COUNCIL’S OBJECTIVES &
SCORECARD / KEY PERFORMANCE MEASURES (KPMS)
SUB COUNCIL’S OBJECTIVES & SCORECARD / KEY
PERFORMANCE MEASURES (KPMS)
DEPARTMENTAL OBJECTIVES
(GOALS) & SCORECARD / KEY
PERFORMANCE MEASURES (KPMS)
DEVELOP AQUIP,PRIORITIZE
IMPROVEMENT ACTIVITIES/PROJECTS
ALIGNED TO STRATEGIC GOALS/KMP’s
PERSONAL KRA’s ALIGNED
TO GOALS/KPM’s

Deployment of the Balanced Scorecard
Auxilliary & Losses:0.58
Other Units;0.709
(Boiler House:0.695+Power House:0.0014
Rolling Mills:0.55
(WRM:0.059+HSM:0.422+MLSM:0.033+M
M:0.036+others:0.0004
Steel making 0.313
(weighted average LDI:0.265:LD2:0.36)
Iron making:5.3
(coke 0.954+Sinter:0.603+Iron:3.743)
Vision
To be the most cost
competitive steel
plant in the World
Strategic goals
Cost
competitiveness
MDs Balanced
Scorecard target
Cost of HR coil<$160
Other cost
elements
Cost of
consumable
s
Specific
energy
consumption
Sub Councils
Scorecards
Specific Energy
Consumption
targets
Council (ED-
Opns)
Scorecard
Specific Energy
Consumption
target:7.45

Vision 2007
To seize the opportunities of tomorrow and create a
future that will make us an EVA Positive Company.
To continue to improve that quality of life our employees
and the communities we serve.
Revitalize the core business for a sustainable future.
Venture into new business that will own share of our
future.
Uphold the spirit and values of Tata’s towards
nation building.
Case Study – Tata Steel

BSC
Perspective
Corporate
Objectives
Strategic
Measures
Unit of
Measure
Type
of
Meas
ure
Actu
al
01-02
Targets Bench
mark/
Comp
arativ
es
Strategic
Initiatives
02-
03
03-
04
04-
05
Financial 1.EVA positive
core business
2.Sustainable
Growth
3. Invest in
attractive new
business
4. Divest,
merge, acquire
5. Move from
commodities to
brand
EVA steel business
EVA new business
Market
capitalisation
Retain credit rating
at AA+
Investment in new
business
Profit from new
business
Shareholder
satisfaction index
ROIC-
WACC
Rs Crores
Rating
Rs Cr.
Rs Cr
Index
(5Point
Scale)
La, R
Le, R
Le, R
Le, C
La, C
La, R
7,Posc
o
Fig.
awaite
d
Best in
Class
Investmen
t to be
globally
competitiv
e
Unique
•Reduce WACC
•Retire Costly
debts
•Improve
Reserves
• Find Superior
investment
opportunities
•Set up overseas
FeCr plant
•Obtain Mining
leases for
Titanium
•One acquisition
to be completed
MD’s Balanced Score Card for 2002-2003
La-Lagging; Le-Leading; R-Run the business; C-Cchange
the business

BSC
Perspective
Corporate
Objectives
Strategic
Measures
Unit of
Measure
Type
of
Meas
ure
Actu
al
01-
02
Targets Bench
mark/
Comp
arativ
es
Strategic
Initiatives
02-
03
03-
04
04-
05
Customer 6.Value creating
partnerships
with customers
CSI-steel Avg. Top
Box Score
Index % La,R 89,Tubes
SBU 36%
Baldrgie
winners
•Implement TOP
Box
•Implement
CVM
Long term
partnership with
customer-steel
Numbers LA,R Unique Create customer
Champions
Internal 7.Value creating
partnerships
with suppliers
Supplier
satisfaction index
Index (4
point scale)
La,R Only
TATA
Steel has
got a
survey
done in
•Set up help
desk for
suppliers and
SAP
8.Continue to be
the lowest cost
producer of steel
Employee cost Rs./T of
crude steel
Le,R
India
2,750
(Nippon
Steel)
•Optimize wage
bill
•Improve HR
skill
9.Outsource
strategically
Cost reduction thru
new initiates
Rupees
Crores
Le,C Tata Steel
is
benchmar
k
•AQUIP and
new initiates

BSC
Perspective
Corporate
Objectives
Strategic
Measures
Unit of
Measur
e
Typ
e of
Mea
sure
Act
ual
01-
02
Targets Benc
hmar
k/
Com
parat
ives
Strategic
Initiatives
02-
03
03-
04
04-
05
Internal
cont..
10.Encourage
innovation and
allow the freedom
to fail
11. Ensure safety
and environment
sustainability
Rightsizin
g
MOR Le,R •Set targets thru
the new ABP
process
•Outsource non-
core activities
12.Excel at
TBEM
JRD Qv
Score
Points La,C •Implement
OFI’s given by
JRD QV and
Baldrige
assessors
Learning 13.Manage
knowledge
14.Enthused and
happy employees
KM Index Index La,C •Share knowledge
throughout the
organization
•Set up KM
communities

BSC
Perspective
Corporate
Objectives
Strategic
Measures
Unit of
Measure
Type
of
Meas
ure
Actu
al
01-
02
Targets Benchma
rk/
Compara
tives
Strategic
Initiatives
02-
03
03-
04
04
-
05
Learning
cont.
15.Improve the
quality of life of
the employees
16. Unleash
people’s
potential and
create leaders
who will build
the future.
ESI Index
(5point
Scale)
La,C 3.6 (HP) •Do Top Box
analysis and
identify strategy
for improving
ESI
Community 17. Improve the
quality of life of
the communities
we serve.
Corporate
citizenship Index
Compose CCI at
Noamundi, Joda,
WB and Jharia
Index (10
point scale)
Index (10
point scale)
La,r
La,C
Tata Steel
is a bench
mark.
Tata Steel
is a bench
mark.
•Serve society.
•Improve water,
electricity and
other services.
•Install one
flyover.
•Introduce the
measure at out
locations on the
same basis as
Jamshedpur.

Mission & Vision
Mission
We contribute to our nation building, by producing
and exporting best quality Ferro Alloys in safe
working conditions and adding value to customers
in steel industry.
Vision - 2015
To emerge as a leading Global player in Ferro alloy
industry with profitable growth and taking care of
Environment & all stake holders.
Case Study – AFL Vizag

Increase Turnover & Profits
Cost & Inventory
Reduction
Develop new
customers and increase
market share
Financial
Customer
Improve Customer
Satisfaction
Backward Integration
Process Improvement
Implementing
Risk Management
Impl. Good QEHS &
5S Prog
Cost Rationalisation Measures
Foster high performance work culture
through multi skilling
Developing competency based Talent Mangt.Suggestion , Reward –
Recognition System Implementation
Enhancing Empl. Engagement
Internal Process
Learning &
Growth
STRATEGY MAP
Effective asset
Utilization
Realization from by product,
Scrap etc.
Improving Industrial
Relations.
Increasing Revenue generation
though trading
Penetration into
Niche Market
Developing Processes &
People for Trading

Translating Organisational Strategy Map into Balanced
Scorecard of CEO

Customer
C1
Development of
new customer and
increase Market
Share
C1.1 Sales to New Customers MT & Nos
C1.2 Total Sales Volume MT
Penetration into
Niche Market C2.1 Sales to New Markets
C2
Improve Customer
Satisfaction
C3.1 Customer's Complaints Nos.
Internal
Perspective
P1
Process
Improvement
P1.1 Manganese Recovery (SiMn) %
P1.2 Manganese Recovery (Fe. Mn) %
P1.3 Specific Power Consumption - SIMn KWH/MT
P1.4 Specific Power Consumption - FeMn KWH/MT
P1.5 Fixed Carbon Consumption [Fe Mn] Kgs/ MT
P1.6 Fixed Carbon Consumption Si Mn] Kgs/ MT
P2
Backward
Integration
P2.1
Compliance to Sinter Plant Project
Schedule
Days
behind
Schedule
P2.2 Compliance to Mines Acquisition Plan %
P3
Developing
Processes &
People for Trading
P3.1 Manpower in Trading
P3.2 Processes developed for Trading
Scorecard of CEO

Internal
Perspective
P4
Effective asset
Utilization
P4.1 Furnace Availablity %
P4.2 Production MT
P4.3 Capacity Utilization %
P4.4 Power Availability [Million Units] Kvah
P5 Good QHSE & 5S
P5.1 Mandays Lost due to Accidents Nos.
P5.2 Compliance to Env. Norms %
P5.2
Compliance to EMS & OHSAS
Implementation Plan
P5.3
Compliance to NABL
Implementation Plan
P5.4
NCRs Raised in ISO9001:2008
Audits (external & Internal)
Nos
P6
Realization
from/by
Product/scrap
etc.,
P6.1 Disposal Slag MT
P6.2 Scrap Sale MT
P7
Implementing
Risk
Management
P7.1 Compliance to Risk Mitigation Plan
P8
Cost
Rationalisation
Measures
P8.1 Savings through PIPs
Rs
Lakhs
P8.2 PIPs Implemented Nos
Scorecard of CEO

HR KPIs with UoMHR Strategy
Organisational
Strategy
Enter New
Markets
Develop
Marketing
Team
Marketing Executives
Recruited
Nos
Training on Marketing Skill
Enhancement
Man Days
New Policy
for Marketing
Team
Design Incentive Scheme
for Marketing Team
Target Date
Develop HR Policy for
International Marketing
Target Date
Aligning HR to Organisational Strategy (Sample)

Customer Perspective Deployment in HR

Internal Processes Perspective Deployment in HR

L & G Perspective Deployment in HR

One Financial Strategic Objective
Deployment – Unit Head to all HODs

Brief on Balanced Scorecard Concept

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