Balanced scorecard

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  • 1. 1www.exploreHR.orgBalanced Scorecard :Balanced Scorecard :Creating Strategy MapCreating Strategy Mapto Drive Corporateto Drive CorporatePerformancePerformance

2. 2www.exploreHR.orgContents :Contents :1. Corporate Performance Scorecard2. Strategy Map Framework3. Four Perspectives in Balanced Scorecard4. Identifying Key Performance Indicators5. Strategy Map in Corporate Functions (HR, IT,Finance and Marketing)If you find this presentation useful, please consider tellingothers about our site ( 3. 3www.exploreHR.orgCorporatePerformance Management 4. 4www.exploreHR.orgPerformance Management FrameworkPerformance Management FrameworkIdentifyingDefiningMeasuringMonitoringReportingKeyKeyPerformancePerformanceIndicatorsIndicatorsCompanyCompanystrategystrategyVisionMissionStrategyStrategy MapStrategy Map 5. 5www.exploreHR.orgThree critical components for effective process ofperformance managementPerformanceManagementInfrastructurePerformanceManagementCulturePerformanceManagementProcessPerformance managementcycle is continuous andconsistentCulture that is basedon performanceaccountabilityLogistic support andperformance managementadministrationPerformance Management ComponentPerformance Management Component 6. 6www.exploreHR.orgSTRATEGYPlan and ExecuteMonitor and EvaluateReward and CoachSet Measures and TargetPerformance Management CyclePerformance Management Cycle 7. 7www.exploreHR.orgManaging Performance withManaging Performance withBalanced ScorecardBalanced ScorecardBalanced Scorecard is a management tool thatprovides stakeholders with a comprehensivemeasure of how the organization is progressingtowards the achievement of its strategic goals. 8. Balances financial and non-financial measures Balances short and long-term measures Balances performance drivers (leading indicators)with outcome measures (lagging indicators) Leads to strategic focus and organizationalalignment.Managing Performance withManaging Performance withBalanced ScorecardBalanced Scorecard 9. 9www.exploreHR.org4 Perspectives in Balanced Scorecard4 Perspectives in Balanced ScorecardIf we succeed, how willwe look to ourshareholders?Financial PerspectiveTo achieve our vision,how must we look to ourcustomers?Customer PerspectiveTo satisfy our customers,which processes must weexcel at?Internal PerspectiveTo achieve our vision, howmust our organization learnand improve?Learning & GrowthPerspectiveThe Strategy 10. 10www.exploreHR.orgStrategy and Balanced ScorecardStrategy and Balanced ScorecardMission Why WeExistVision What WeWant to BeValues WhatsImportantto UsStrategy :Our GamePlanStrategyMap :Translate theStrategyBalancedScorecard :Measure andFocusStrategicOutcomesSatisfiedShareholdersDelightedCustomersExcellentProcessesMotivatedWorkforce 11. The strategy map framework is presented in thefollowing slides. This framework describes the types of strategictarget that should be presented in each perspective,namely the financial perspective, customers, internalbusiness process, and learning & growth perspective.Strategy Map FrameworkStrategy Map Framework 12. 12www.exploreHR.orgCost EfficiencyLong-term ShareholderValueRevenue GrowthPrice Availability BrandServiceQualityOperationsManagementProcessesHuman CapitalCustomerManagementProcessesInnovationProcessesRegulatoryand SocialProcessesOrganization Capital Information CapitalStrategy Map FrameworkStrategy Map FrameworkFinancialCustomerInternal ProcessLearning & Growth 13. 13www.exploreHR.orgFinancial PerspectiveFinancial Perspective In private companies, the financial perspective is themain objective (ultimate goal) without having tosacrifice the interests of other relevant stakeholders(community, environment, government, etc.) In the financial perspective, the strategic goal is thelong-term shareholder valuelong-term shareholder value. This goal is driven bytwo factors, namely : revenue growthrevenue growth and costcostefficiency.efficiency. 14. 14www.exploreHR.orgLong-termShareholder ValueRevenue GrowthImprove Cost StructureIncrease Asset UtilizationCost EfficiencyStrategic Objectives in FinancialStrategic Objectives in FinancialExpand RevenueOpportunitiesEnhance Customer Value 15. 15www.exploreHR.orgCustomer PerspectiveCustomer Perspective This perspective is very instrumental, because withoutcustomers, how can a company survive? Customer perspective covers the following elements: Customer acquisition Customer retention Customer profitability Market share Customer satisfaction 16. 16www.exploreHR.orgPrice Availability BrandServiceQualityCustomer AcquisitionCustomer AcquisitionCustomer SatisfactionCustomer SatisfactionCustomer RetentionCustomer Retention Customer ProfitabilityCustomer ProfitabilityMarket ShareMarket ShareStrategic Objectives in CustomerStrategic Objectives in Customer 17. 17www.exploreHR.orgInternal Process PerspectiveInternal Process Perspective This perspective reflects the processes in key businessthat should be optimized in order to meet the needs ofthe customers. There are four main themes in this perspective, namely: Operations Management Process Customer Management Process Innovation Process Regulatory and Social Process 18. 18www.exploreHR.orgOperationsManagementProcessesCustomerManagementProcessesInnovationProcessesRegulatoryand SocialProcessesProcesses thatproduce anddeliver productsand servicesProcesses thatenhance customervalueProcesses thatcreate newproducts andservicesProcesses thatimprovecommunities andthe environment Supply Production Distribution Selection Acquisition Retention Growth New Ideas R&D Portfolio Design/Develop Launch Environment Safety &Health Employment CommunityStrategic Objectives in Internal ProcessStrategic Objectives in Internal Process 19. 19www.exploreHR.orgLearning & Growth PerspectiveLearning & Growth Perspective This perspective reflects the capability that a companyshould have, namely: Human Capital Organization Capital Information Capital This perspective shows us that good human resourcedevelopment system, organizational system andinformation system forms a solid foundation for improvingcompany performance. 20. 20www.exploreHR.orgHuman CapitalOrganizationCapitalInformationCapital Skills Knowledge Attitude Systems Database Networks Culture Leadership OrganizationDevelopmentStrategic Objectives inStrategic Objectives inLearning & GrowthLearning & Growth 21. 21www.exploreHR.orgStrategy Map TemplateStrategy Map Template The following slide displays the strategy map templatecomprising of four perspectives : financial, customer,internal business process, and learning & growth. 22. 22www.exploreHR.orgImproveCost EfficiencyEnhance Long-termShareholder ValueIncrease Revenue GrowthEnhanceBrand ImageBuild HighPerformance ProductsAchieveOperationalExcellenceDevelop StrategicCompetenciesDrive Demandthrough CustomerRelationManagementManage DramaticGrowth throughInnovationImplement GoodEnvironmentalPolicyBuild LearningCultureExpand Capabilities withTechnologyStrategy Map TemplateStrategy Map TemplateFinancialCustomerInternal ProcessLearning & GrowthExpandMarket Share 23. 23www.exploreHR.orgIdentifying Key PerformanceIndicators (KPI) 24. 24www.exploreHR.orgVisionMissionand ValuesStrategyFinanceCustomerInternal BusinessProcessHRDevelopmentKey PerformanceIndicatorsKey PerformanceIndicatorsKey PerformanceIndicatorsStrategic ObjectivesStrategic ObjectivesKPI = Measurement orindicator that providesinformation on how far wehave succeeded inachieving the strategicobjectivesKey Performance Indicators (KPI)Key Performance Indicators (KPI) 25. The measure of success must show clear, specific andmeasurable performance indicators. The measure of success should be declared explicitly and indetail so that it is clear what is being measured. Costs to identify and monitor the measure of success shouldnot exceed the value that will be known from the measurement.Guidelines in Formulating the KPIGuidelines in Formulating the KPIKPI GuidelinesKPI Guidelines 26. 26www.exploreHR.orgRelevant to theStrategic ObjectiveDoes KPI have a linkage with the strategicobjectives?Controllable Are the KPI achievements still under control?Actionable Can any action be taken to improve theperformance?Simple Is the KPI easy to explain?Credible Is the KPI not easy to manipulate?KPI GuidelinesKPI Guidelines 27. 27www.exploreHR.orgKPIKPI Family DimensionFamily DimensionProductivity Measures employee output (units/transactions/ dollars), the uptime levels andhow employees use their time (sales-to-assets ratio, dollar revenue from newcustomers, sales pipeline).Measures the ability to meet and/or exceedthe requirements and expectations of thecustomer (customer complaints, percentreturns, DPMO -- defects per millionopportunities).Quality 28. 28www.exploreHR.orgKPIKPI Family DimensionFamily DimensionProfitability Measures the overall effectiveness of themanagement organization in generatingprofits (profit contribution bysegment/customer, margin spreads).Measures the point in time (day/week/month) when management and employeetasks are completed (on-time delivery,percent of late orders).Timeliness 29. 29www.exploreHR.orgKPIKPI Family DimensionFamily DimensionProcessEfficiencyMeasures how effectively the managementorganization incorporates quality control, SixSigma and best practices to streamlineoperational processes (yield percentage,process uptime, capacity utilization).Measures how effectively the managementorganization leverages existing businessresources such as assets, bricks and mortar,investments (sales per total assets, sales perchannel, win rate).ResourceUtilization 30. 30www.exploreHR.orgKPIKPI Family DimensionFamily DimensionCostSavingsMeasures how successfully the managementorganization achieves economies of scale andscope of work with its people, staff andpractices to control operat


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