7/31/2019 PM and Balanced Score Card

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Ericsson's

balanced

score card

model

Visualize

ision andtrategies

Drive for

performanceimprovements

Focus on key

performance

Indicators

alance of

business

rspectives

ink action with strategy Drive action

Stay focusedStay balanced

a road map for implementation, workshops wereconducted with each perspective owner and teammembers to collect inputs and see the synergy withthe existing systems and processes, which werecurrently in use.

Finally the balanced scorecard team compiled theinputs, analysed and prepared a draft balancedscorecard for Market Unit India. The draft waspresented to Ericsson management committee (EMC)and with corrections it was approved. Final balanced

scorecard, including reporting schedule, was sharedwithin the company during the fourth quarter of 1999in the Ericsson Management Group Meeting (EMG),which is attended by all managers of Ericsson India.

It took us two full years to implement the BSCthrough all functions and units and now, we are able toharness the full potential of the tool and thesynchronization of individual and unit goals is visiblewith respect to our strategic plan.

The model that we useThe balanced scorecard at Ericsson is used to measure

our present performance and how well we areprepared for the future. It visualises vision andstrategies, supports a balanced view of the businessthrough different perspectives focuses on keyperformance indicators and is a driver forimprovements.

The scorecard is essentially defined in the strategicplanning process (ESP) to reflect the strategic intent.Thus the scorecard focus can change over time andare different for different businesses. Eachmanagement team must define their own scorecardas a part of their strategic planning.

The following perspectives are mainly being used

today within Ericsson:Financial: Indicates whether a company's strategy,

implementation and execution are contributing tobottom-line improvement. It relates to profitabilitymeasurement such as operating income, return oncapital employed and sales growth.

Customer: These are the market and customersegments in which the business unit competes. Theperformance of the business unit will be measured in

these targeted segments. The perspective includes somecore outcome measures such as customer satisfaction,customer retention, new customer acquisition,customer profitability and market and account sharein the targeted segment.

Internal efficiency: It will focus on measures ofthe internal processes that will enable one to deliverthe value propositions that will attract and retaincustomers in targeted market segments, and satisfyshareholder expectations of excellent financial returns.

Employee: This perspective will focus on thecompany's human resource capabilities to handlecurrent and future business needs. Some of themeasures include employee satisfaction, employeeretention, training and skills development.

Innovation: It focuses on the potential needs ofthe customers, and then creates products and servicesthat will meet these needs. The company needs toidentify and nurture new markets, new customers andthe emerging and potential needs of existing customer.Then the company needs to create and developproducts and services to fulfil these needs.

The process that is followedAt Ericsson, strategic planning is the most importantstep towards setting up future directions for theorganisation. An ESP (Ericsson Strategic Planning)Workshop is held around start of the year, each year. Acore group of Ericsson Managers (a cross-functionalteam), trained on balanced scorecard methodologyfacilitate preparation and continuous monitoring ofbalanced scorecard in the organization. EricssonManagement Committee (EMC), business unit coreteam, unit/department heads and invitee membersyearly participate, share inputs, discuss and propose

balanced scorecard outcome measures andperformance drivers.

The preparation work starts during the fourthquarter and the company wide balanced scorecard isfinalized and shared by middle of January. Unit andfunction level balanced scorecards are ready andapproved by end of January each year.

When the balanced scorecards at all levels areprepared and approved, the key performanceindicators are selected on which the regular reportingis done within management group.

At Ericsson, the management system build aroundthe scorecard enables us to become aligned and

focused on implementing the short and long-termstrategy. Balanced Scorecard as a common frameworksecure that we are moving in the same direction at thesame time as we pay full respect to market dynamicsand the nature of individual business. Every measureselected in the balanced scorecard is an element in achain of cause and effect relationships thatcommunicates the meaning of the strategy to theorganization. The scorecard is referred in the strategyimplementation process reflect the strategic intent.Each function and unit defines their own scorecard asa part of their yearly objective planning.

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The company objectives are used bythe functions and units to define theirown objectives. These unit objectives arebroken to departmental objectives andfinally linked to the individual objectives.Individual objectives are then alignedwith the departmental objectives in theirBalanced scorecards, which are alignedto company objectives.

Review and reportingThe balanced scorecard is reviewed attwo levels, one at the company level andthe other at individual unit level on aquarterly basis. The company levelreview is reported at EMC (EricssonManagement Committee) level. The finalreview of yearly achievements is done atthe end of the year.

The unit and department heads areresponsible for implementation andprogress reporting for the respective

balanced scorecard and to ensure thatthis is in line with organization-widebalanced scorecard.

Periodic balanced scorecardreporting keeps the process alive anddelivers professional value addedanalysis and recommendations toenhance strategically decision making forEricsson's long- and short-term strategy.

Organizational benefitsThe balanced scorecard has resulted ina shared mission, vision, goals andobjectives throughout the organization.Every individual employee is well awareof company's goals and objectives. Theycan clearly see the direction which company wants totake. Strategy is communicated and linked to objectiveof managers and employees. All the employees needto align their individual objectives to the BSC of theirunit and department. Therefore each employee'scontribution is directed towards a common agreedgoal. Everyday actions and initiatives are related tostrategic objectives. With clear and well-defined

objectives, all efforts are directed towards achievingcompany's strategic objectives. With balancedscorecard in place along with KPIs for each objective,one gets a balanced view on actions and results i.e.what impacts what and how. With regular tracking andupdate, the shortcomings are easily identified, attendedto well in time and with required priority and efforts.The measurement data outputs helps decision makingon facts and figures, thereby making decision-making

sound and effective. Regular updates on theperformance measures provide opportunities toidentify the performance gaps and continuouslyimprove performance. All this is key to contributingtowards customer satisfaction both internal andexternal.

And all these lead to overall organisational success,which can be, measured through financial growth,operating margins, income, customer satisfaction,market share and employee motivation. HC

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Training and education of

top management and securing their buy-in

Preparing beta version of project plan and

review and sharing it with management

Established a cross functional balanced

scorecard team with a project manager

Preparing assignment and project

specifications, establish mile-stones

Review of balanced scorecard model

and feedback from managers

Identification of perspective owners

within the team

Balanced scorecard introduced in annual

kick-off meeting attended by all managers

Formulation of a vision and mission

statement for the initiative

THE STEP BY STEP PROCESS