The Balanced ScorecardThe Balanced ScorecardMeasures That Drive Performance

ContentsContents

Concept of BSC1

Example of BSC2

Strategy Map3

The Strategy Focused Organization4

Lesson Learned5

Definition of Balance ScorecardDefinition of Balance Scorecard

A carefully selected balanced set of measures

derived from the drivers of strategiesthat represent a tool for leaders to use in

communicating strategic direction to the organization and motivating change.

BALANCEBALANCE STRATEG

YSTRATEG

Y

Concept of Balanced ScorecardConcept of Balanced Scorecard

Finance

Result

Short-term

External

Non-Finance

Cause

Long-term

Internal

BALANCE

Customer Internal Business

Growth and Learning

How do Customers see us?

% of Customer Satisfaction

Financial

What must we excel at?

Cycle time

Can we continue to improve and create value?

% of sales from new product

How do we look to shareholders?

Revenue, EVA

Concept of Balanced ScorecardConcept of Balanced Scorecard

Vision

Strategy

Financial

Critical Success FactorCritical Success Factor

Key Performance IndexKey Performance Index

Customer

Internal Business

Growth &

Learning

What is our future?

What and howshould we do for vision?

To achieve our strategy,What factors are important?

Which index can be judgedfor achievement?

Example of Balanced ScorecardExample of Balanced Scorecard

Financial Perspective

GOALS MEASURES

SurviveSucceed

Prosper

Cash flowQuarterly sales growth and operating income by divisionIncreased market share and ROE

Customer Perspective

GOALS MEASURES

New products

Responsive supply

Preferred suppliers

Customer partnerships

% of sales from new productsOn-time delivery(defined by customer)Share of key accounts’ purchasesNumber of cooperative engineering efforts

ECI : Electronic Circuits Incorporated. Semiconductor company

Internal business Perspective

GOALS MEASURES

Technology Capability

Manufacturing excellence

Design productivity

New product introduction

Manufacturing geometry versus competitionCycle time, unit cost, yieldSilicon efficiency, engineering efficiencyActual introduction schedule versus plan

Growth and Learning Perspective

GOALS MEASURES

Technology leadership

Manufacturing learningProduct focus

Time to market

Time to develop next generationProcess time to maturity% of products that equal 80% of salesNew product introduction versus competition

Strategic Theme: Operating Efficiency

ProfitabilityFinancial

Learning

Increase Revenue

Ground crew alignment

Lowest prices

Lower Costs

Customer

InternalFast ground turnaround

Flight is on time

- Key tool to implement your strategy

- Give clear line of sight into

● How a company will achieve

its desired outcome ?

● How the jobs are linked to

overall objectives?

● Cause & Effect link

● What’s missing?

- Key tool to implement your strategy

- Give clear line of sight into

● How a company will achieve

its desired outcome ?

● How the jobs are linked to

overall objectives?

● Cause & Effect link

● What’s missing?

Strategy MapStrategy Map

Objectives

• Fast ground turnaround

what strategy must achieve?

& what’s critical to

its success?

Target

• 30 Minutes• 90%

The level of performance or

rate of improvement

needed ? Strategic Theme:

Operating Efficiency

ProfitabilityFinancial

Learning

Morecustomers

Ground crew alignment

Lowest prices

Fewer planes

Customer

Internal

Fast ground turnaround

Diagram of the cause and effect relationships between strategic

objectives (Strategy Map)

Flight Is on time

• Cycle time optimization

Key action programs

required to achieve

objectives ?

InitiativeMeasurement

• On Ground Time• On-Time

Departure

How success in achieving the

strategy will be measured and

tracked ?

Balanced Strategy MapBalanced Strategy Map

“BSC Strategy Map” - Common visual framework to describe any strategy - Standard template to develop own strategy map - Differences with Stakeholder scorecard, KPI scorecard

“BSC Strategy Map” - Common visual framework to describe any strategy - Standard template to develop own strategy map - Differences with Stakeholder scorecard, KPI scorecard

BSC Strategy MapBSC Strategy Map

Employee Competencies

Technology Corporate Culture

Build the franchisethrough

innovation

Increase customer value

Achieve operational excellence

Become good corporate citizen through regulatory & environment processes

Operational Excellence

Price Quality Time Selection

Product/Service attribute

Service C/R

RelationshipSmart

Shopper

Image

Customer acquisition, Retention, satisfaction

Customer acquisition, Retention, satisfaction

InternalProcessPerspective

Learning &GrowthPerspective

CustomerPerspective

FinancialPerspective

Revenue from new source

Customer Profitability

Operating cost per unit

Asset utilization

Improve shareholder value

Revenue Growth Strategy Productivity Strategy

Build franchise

Increase Value Improve cost structure

Improve use of asset

Price

Quality

Time

Selection

Operational Excellence

Service

Customer Intimacy

C/R

Best in class

Product leadership

Product/Service Attribute Relationship Image

Relationship Image

Relationship Image

Trusted Brand

Time

Selection

Smart shopper

General requirement

Differentiators

Product/Service Attribute

Product/Service Attribute

BSC Strategy MapBSC Strategy Map

The Five Principles

1. Translate the strategy to operational terms.

2. Align the organization to the strategy.

3. Make strategy everyone’s job.

4. Make strategy a continual process.

5. Mobilize change through executive leadership

Source: The Strategy Focused Organization, Norton & Kaplan

The Strategy Focused OrganizationThe Strategy Focused Organization

BSC - a tool:BSC - a tool:

●● Dialog and communicationDialog and communication

●● Present a great amount of resultsPresent a great amount of results

●● To get the ”whole picture”To get the ”whole picture”

●● Serve as a basis for a rewarding-systemServe as a basis for a rewarding-system

●● AdjustableAdjustable

●● Keep it simpleKeep it simple

Lessons LearnedLessons Learned

# Case “Mobil NAM&R”# Case “Mobil NAM&R”

• Mobil NAM&R ‘s problem (early 90’s)

- Unfocused strategy

Full range of products & services to all consumers

Low prices of discount station

Poor financial performance

• Mobil NAM&R ‘s research

- 60% of the consumer be willing to pay price premium

(price-sensitive consumers : 20%)

"differentiated value proposition"

• Mobil NAM&R ‘s problem (early 90’s)

- Unfocused strategy

Full range of products & services to all consumers

Low prices of discount station

Poor financial performance

• Mobil NAM&R ‘s research

- 60% of the consumer be willing to pay price premium

(price-sensitive consumers : 20%)

"differentiated value proposition"

# Case “Mobil NAM&R” BSC strategy map

# Case “Mobil NAM&R” BSC strategy map

Strategic theme Strategic Objectives Measurement (KPI)

Increase Return onCapital employedRevenue Growth Understand customer needs & Differentiate Productivity Max the asset use Business integrate

Financial

Return on Capital Employed

New revenue from Nongasoline Premium brand for customer

Become industry leader in supply chain category Maximize the use of asset

Actual Return on Capital (ROE)

Nongasoline revenue Profit margin

Cost per Gallon

Actual cash flow

Delight the customer

Win-Win Dealer relations

Customer(CustomerIntimacy

Proposition)

Speedy purchase Friendly, helpful worker Recognize customer royalty

Offer more consumer products Help dealers develop biz skill

Share of targeted customer segment Mystery shopping rating

Dealer profitability Dealer satisfaction

Build Franchise

Customer value

Operational excellence

Good neighbor

InternalProcess

Innovative product and service

Best-in-class franchise teams

Refinery Performance Inventory management Deliver product on-time Become the industry cost leader

Improve environment health & Safety

New product acceptance rate New product ROI

Share of target market Dealer quality rating

Refinery yield gap, Unplanned downtime

Inventory level Stock out rate .. Activity-based cost

Reduced number of environmental incidents & safety incident

Motivated and preparedworkerLearning &

Growth

• Core competency and view• Access to strategic information• Align business and personal goal

Ratio of strategic skills to job coverage On-time deployment of system Employee feedback Personal BSC

Data

6% ↑ W/I 3y $1B/year

# Case Mobil NAM&R BSC# Case Mobil NAM&R BSC

Financial perspective

Return on Capital employed: 6% 16% Sales Growth: more than 2% annually Cash Expense: 20% decrease Operating cash flow increase: $1billion per year

Customer perspective

Mystery-shopper score, Dealer quality: increased each year Number of consumers using “Speedpass”: one million per year

Internal process perspective

Environmental & Safety accidents: 60~80% down Lost oil-refinery yields due to systems downtime: 70% drop

Learning and growth perspective

Employee awareness & commitment to the strategy: quadrupled

Financial perspective

Return on Capital employed: 6% 16% Sales Growth: more than 2% annually Cash Expense: 20% decrease Operating cash flow increase: $1billion per year

Customer perspective

Mystery-shopper score, Dealer quality: increased each year Number of consumers using “Speedpass”: one million per year

Internal process perspective

Environmental & Safety accidents: 60~80% down Lost oil-refinery yields due to systems downtime: 70% drop

Learning and growth perspective

Employee awareness & commitment to the strategy: quadrupled

# Case “Mobil NAM&R” Achievements

# Case “Mobil NAM&R” Achievements

• Mobil NAM&R ‘s achievements (`2000)• Mobil NAM&R ‘s achievements (`2000)