Balanced scorecard presentation rev 0

1. Jennifer Allen
Vincent Wedelich

2.  Balanced Scorecard overview
 Construction of BSC
◦ Financial
◦ Customer
◦ Internal-Business Process
◦ Learning and Growth
 Linking BCS Measures to Your Strategy
 Structure and Strategy

3. • Managers, like pilots, require instrumentation to
monitor the journey toward future success
• Balanced Scorecard provides the instrumentation

4. • Balanced Scorecard - translates mission and strategy
into a comprehensive set of performance measures that
provides the framework for a strategic measurement and
management system.
• Typically organized into four different perspectives
• Financial
• Customer
• Internal Business Processes
• Learning and Growth

5. ObjectivesMeasures
Targets
Initiatives
Vision and
Strategy
Financial
Internal Business Processes
Learning and Growth
Customer
“To succeed financially,
how should we appear
to our shareholders?”
“To satisfy our shareholders
and customers, what business
processes must we excel at?”
“To achieve our vision, how
will sustain our ability to
change and improve?”
“To achieve our vision, how
should we appear to our
customers?”
ObjectivesMeasuresTargets
Initiatives
ObjectivesMeasures
Targets
Initiatives
ObjectivesMeasuresTargets
Initiatives

6.  BSC is for strategy implementation, not strategy
formulation
 Four perspectives are not concrete
 BSC is best implemented at SBU level
 BCS is built on cause-and-effect relationships

7. ROCE
On-time
Delivery
Customer
Loyalty
Process
Cycle Time
Process
Quality
Employee
Skills
FinancialFinancial
CustomerCustomer
InternalInternal
Business ProcessBusiness Process
Learning and GrowthLearning and Growth
ROCE: Return-on-Capital-Employed

8.  Is it necessary to have a financial perspective?
 Why have any others?

9.  Scorecard should start by CEO and CFO
establishing long-run financial objectives
 Financial objectives may change due to
technology, market, or regulations
 Financial objectives for all business units should
be reviewed periodically

10.  Financial perspectives may differ at each stage of
business’s life cycle
◦ Growth
 Sales growth
◦ Sustain
 ROCE, operating income, gross margin
◦ Harvest
 Cash flow

11. Strategic Themes for Financial Perspective
– Revenue growth and mix
– Cost reduction/productivity improvement
– Asset utilization/investment strategy

12. Typical Cash-to-Cash Cycle
Purchase Raw
Materials from Supplier
Sell Product
Pay Supplier for
Materials
Collect Cash from
Customer
Days Inventory Days Receivable
Days Payable Cash to Cash Cycle

13. Sell Product
Pay Supplier for
Materials
Collect Cash from
Customer
Negative
Cash to Cash Cycle
Purchase Raw
Materials from Supplier
Dell Cash-to-Cash Cycle

15. Internal Business Process
Perspective
 Identifies specific internal processes that the firm
should focus on
 Goal: attract & keep customers (customer
satisfaction), also satisfy shareholders (meet
financial goals)
 This approach helps identify new processes the
firm may not have implemented or thought to put
into place
Slide Developed by Dr. Papadopoulos.

16. Internal Business Process
Perspective
 The internal business process perspective model
encompasses three principal business process:
 Innovation process
 Operations process
 Postsale service Process

17. Customer Needs Identified
 Innovation cycle:
◦ identify the market
◦ Create the product/Service Offering
 Operations cycle:
◦ Build the Product/Services
◦ Deliver the Products/Services
 Postsale service cycle
◦ Service the Customer
Customer Needs Satisfied

18. Internal Business Process
Perspective

19. Learning and Growth
Perspective
 Three principal categories for the learning and
growth perspective.
◦ Employee capabilities
◦ Information systems capabilities
◦ Motivation, empowerment, and alignment

20. Learning and Growth
Perspective
 Helps to build and maintain the needed
infrastructure a firm must have to grow and
improve
 3 sources:
◦ People (skills and training)
◦ Systems (technology)
◦ Organizational procedures (aligns employee incentives
with the firm’s goals)
Slide Developed by Dr. Papadopoulos.

21. Learning and Growth
Perspective
 Core employee measurement group
◦ Employee satisfaction
◦ Employee retention
◦ Employee productivity
Put the graph on page 129 here.

22. Learning and Growth
Perspective
 Employee Satisfaction
◦ Involvement with decision.
◦ Recognition for doing a good job.
◦ Access to sufficient information to do the job well.
◦ Active encouragement to be creative and use initiative
◦ Support level from staff functions
◦ Overall satisfaction with company

23. Learning and Growth
Perspective
 Employee retention captures an objective to retain those
employees in whom the organization has a long term
interest.
 Employee productivity is an outcome measure of the
aggregate impact from enhancing:
◦ Employee skills
◦ Morale
◦ Innovation
◦ Improving processes
◦ Satisfying customers

24. Learning and Growth
Perspective
 Add pictures from book
 Page 133
 Page 134
 Page 135
 Page 140

25. Linking Balanced Scorecard
Measures to Your Strategy
 The scorecard describes the organizations vision
of the future to the entire organization.
 The scorecard creates a holistic model enabling
everyone in the organization to contribute to the
success of the company.
 The scorecard focuses change efforts. If the right
objectives and measures are identified, successful
implementation will likely occur.

26. Linking Balanced Scorecard
Measures to Your Strategy
 The BSC should be linked to the strategy.
1) Cause and Effect Relationships.
2) Performance drivers.
3) Linkage to financials.

27. Linking Balanced Scorecard
Measures to Your Strategy
 Cause and Effect
 A strategy is a set of hypothesis about cause and
effect. Cause and effect relationships can be
expressed by a sequence of if-then statements.

28. Linking Balanced Scorecard
Measures to Your Strategy
 Outcomes and Performance Drivers
 The generic outcome measures tend to be lag
indicators.
◦ Profitability
◦ Market-Share
◦ Customer satisfaction
◦ Customer retention
◦ Employee Skills

29. Linking Balanced Scorecard
Measures to Your Strategy
 Outcomes and Performance Drivers
 The performance drivers tend to be lead indicators, these
are unique for each business.
◦ Financial drivers of profitability
◦ The market segment in which the unit chooses to compete
◦ The particular internal processes and learning and growth
objectives that will deliver the value propositions to target
customers and market segments.

30. Linking Balanced Scorecard
Measures to Your Strategy
 A good balanced Scorecard should have an
appropriate mix of outcomes (lagging indicators)
and performance drivers (leading indicators) that
have been customized to the business unit’s
strategy.

31. Linking Balanced Scorecard
Measures to Your Strategy
 Page 154
 Page 155
 Page 157
 Page 160

32. Structure and Strategy
 This chapter illustrates the development of
scorecards for organizations that are structurally
different than business units:
◦ Corporations that consist of a collection of strategic
business units.
◦ Joint Ventures
◦ Support departments in corporations and business units
◦ Not-for-profit and governmental enterprises

33. Structure and Strategy
 A corporate scorecard requires an explicit
corporate level strategy that articulates the theory
of how the corporation adds value to its collection
of strategic business units.

34. Structure and Strategy
 A balanced scorecard can also provide substantial focus,
motivation, and accountability in government and not-for-
profit organizations.
 The scorecard provides rationale for their existence
(serving customers and constituents, not simply containing
spending to within budgetary constraints), and
communicating to external constituents and internal
employees the outcomes and performance drivers by
which the organization will achieve its mission and
strategic objectives.

35. Structure and Strategy
 Page 171
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 Page 182