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The Balance Scorecard versus Quality Award Models as Strategic Frameworks. Dr. Shuki Dror Head, Department of Industrial Engineering and Management ORT Braude College. Agenda. Paper objectives Strategic frameworks for performance management - PowerPoint PPT Presentation
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The Balance Scorecard versus
Quality Award Models
as Strategic Frameworks
Dr. Shuki Dror
Head, Department of Industrial Engineering and Management
ORT Braude College
Agenda
Paper objectives
Strategic frameworks for performance management
Comparison between organizational performance
management frameworks
QFD Balanced Scorecard Construction Map
Illustrative Example
Conclusions
Paper objectives
This paper extends the comparison presented by
Wongrassamee et al., by using Otley's five points for comparing
three performance management frameworks, i.e. MBNQA,
EFQM, and the Balanced Scorecard.
A structured methodological approach based on the Quality
Function Deployment (QFD) for implementing the Balanced
Scorecard in an individual organization is presented.
Malcolm Baldrige National Quality Award (MBNQA)(1987-2008)
European Foundation for Quality Management (EFQM) (1988-2008)
Balanced Scorecard (BSC) (1992, 1996, 2001)
Strategic frameworks for performance management
MBNQA
Strategic planning
Customer focus
Process management
Business results
Human resources
Leadership
Measurement, analysis, and knowledge management
profile
EFQM
People
management
Partners &resources
impact on society
People satisfaction
leadership policy & strategy
Customer satisfaction
Processes Business results
Enables Results
BSC
Learning Internal
processes Customer Financial
Comparison between organizational performance management frameworks
Otley (1999) suggested several topics that have to be
considered in the development of an organizational
performance management framework:(1) High level objectives
(2) Long term programs
(3) Processes
(4) Targets and performance measures
(5) Feedback
High level objectives
The MBNQA excellence model
Multiple criteria based on TQM principles: - leadership - strategic planning - customer focus (leadership triangle) - human resources - process management - business results (results triangle) - measurement, analysis, and knowledge management
The EFQM excellence model
Multiple criteria based on TQM principles: - leadership - people management - policy and strategy - resources - processes (enables) - people satisfaction - customer satisfaction - impact on society - business results (results)
The Balanced Scorecard
Multiple perspectives
of the strategy: - learning - internal processes - customer - financial sequential objectives
Long term programs
The MBNQA excellence model
No answer, but the relative weights of the criteria and the sub criteria can outline mode of action.
The EFQM excellence model
No answer, but the relative weights of the criteria and the sub criteria can outline mode of action.
The Balanced Scorecard
Utilizing a strategy map
Processes
The MBNQA excellence model
- One of the criteria. - The processes are part of the results triangle.
The EFQM excellence model
- One of the criteria. - The processes are part of the enables.
The Balanced Scorecard
- One of the perspectives.
Targets and performance measures
The MBNQA excellence model
- Not specific. - Acceptable levels could be determined.
The EFQM excellence model
- Not specific. - Acceptable levels could be determined.
The Balanced Scorecard
- It is required to define targets and acceptable levels to the measures. - There is no method for setting targets.
Feedback
The MBNQA excellence model
- The model itself provides feedback as an outcome of the evaluation method. - There is no attitude to the lag time.
The EFQM excellence model
- The model itself provides feedback as an outcome of the evaluation method. - There is no attitude to the lag time.
The Balanced Scorecard
- Two levels of feedback: operational level and strategic level - The financial perspective provides feedback to the customer perspective as well as to the processes. - There is no attitude to the lag time.
The balanced scorecard advantages
Sequential objectives
Capacity to support long-term programs
Potential to select relevant performance
measures based on real data
Two levels of feedback
The balanced scorecard limitations
Focusing on learning as the only source for causality
No basic guidelines for selecting performance measures
No method for setting targets to measures
Complex feedback from the financial perspective to the
customer perspective and to the process perspective
Lack of lag time consideration between causes and its effects
QFD To improve the implementation of the balanced scorecard
The QFD helps to overcome the two of the limitations:
(1) No basic guidelines for selecting performance measures
(2) Complex feedback from the financial perspective to the
customer perspective and to the process perspective
Quality Function Deployment (QFD)
Product quality design methodology.
The QFD technique was developed in 1972 at
Mitsubishi and during the 80's and the 90’s
has been gradually and successfully adopted
by U.S. and Japanese firms.
Quality Function Deployment (QFD)
Extract the customers' needs or desires and
translate them into demands on technical
product characteristics, engineering
parameters and ultimately into production
systems.
QFD Modeling Approach
Balanced Scorecard Construction Map
Learning type/level Induced Operational Conceptual
Relative weightCustomer Perspective
Relative weight Internal Perspective
MATRIX 5
MATRIX 3
Quality and service performances Internal Processes
MATRIX 2
Product and service technical performances
Input from customers Product quality & service
Time/cost performancesInternal Processes
MATRIX 4
Inputfrom team
MATRIX 1
Customer perspectiveCustomer types and benefits
Internal perspective Efficiency
Input from management Revenue Growth Productivity
Relative weightsCustomer Types
Relative weightInternal Perspective
Learning type/level Induced Operational Conceptual
Relative weightCustomer Perspective
Relative weight Internal Perspective
MATRIX 5
MATRIX 3
Quality and service performances Internal Processes
MATRIX 2
Product and service technical performances
Input from customers Product quality & service
Time/cost performancesInternal Processes
MATRIX 4
Inputfrom team
MATRIX 1 MATRIX 1
Customer perspectiveCustomer types and benefits
Internal perspective Efficiency
Input from management Revenue Growth Productivity
Relative weightsCustomer Types
Relative weightInternal Perspective
Learning type/level Induced Operational Conceptual
Relative weightCustomer Perspective
Relative weight Internal Perspective
MATRIX 5
MATRIX 3
Quality and service performances Internal Processes
Product and service technical performances
Input from customers Product quality & service
Time/cost performancesInternal Processes
MATRIX 4
Inputfrom team
MATRIX 1 MATRIX 1
Customer perspectiveCustomer types and benefits
Internal perspective Efficiency
Input from management Revenue Growth Productivity
Relative weightsCustomer Types
Relative weightInternal Perspective
MATRIX 2
Learning type/level Induced Operational Conceptual
Relative weightCustomer Perspective
Relative weight Internal Perspective
MATRIX 5
MATRIX 3
Quality and service performances Internal Processes
Product and service technical performances
Input from customers Product quality & service
Time/cost performancesInternal Processes
MATRIX 4
Inputfrom team
MATRIX 1 MATRIX 1
Customer perspectiveCustomer types and benefits
Internal perspective Efficiency
Input from management Revenue Growth Productivity
Relative weightsCustomer Types
Relative weightInternal Perspective
MATRIX 2 MATRIX 2
Learning type/level Induced Operational Conceptual
Relative weightCustomer Perspective
Relative weight Internal Perspective
MATRIX 5
MATRIX 3 MATRIX 3
Quality and service performances Internal Processes
Product and service technical performances
Input from customers Product quality & service
Time/cost performancesInternal Processes
MATRIX 4
Inputfrom team
MATRIX 1 MATRIX 1
Customer perspectiveCustomer types and benefits
Internal perspective Efficiency
Input from management Revenue Growth Productivity
Relative weightsCustomer Types
Relative weightInternal Perspective
MATRIX 2 MATRIX 2
Learning type/level Induced Operational Conceptual
Relative weightCustomer Perspective
Relative weight Internal Perspective
MATRIX 5
MATRIX 3 MATRIX 3
Quality and service performances Internal Processes
Product and service technical performances
Input from customers Product quality & service
Time/cost performancesInternal Processes
MATRIX 4
Inputfrom team
MATRIX 1 MATRIX 1
Customer perspectiveCustomer types and benefits
Internal perspective Efficiency
Input from management Revenue Growth Productivity
Relative weightsCustomer Types
Relative weightInternal Perspective
MATRIX 2 MATRIX 2
Learning type/level Induced Operational Conceptual
Relative weightCustomer Perspective
Relative weight Internal Perspective
MATRIX 5
MATRIX 3 MATRIX 3
Quality and service performances Internal Processes
Product and service technical performances
Input from customers Product quality & service
Time/cost performancesInternal Processes
MATRIX 4 MATRIX 4
Inputfrom team
MATRIX 1 MATRIX 1
Customer perspectiveCustomer types and benefits
Internal perspective Efficiency
Input from management Revenue Growth Productivity
Relative weightsCustomer Types
Relative weightInternal Perspective
MATRIX 2 MATRIX 2
Learning type/level Induced Operational Conceptual
Relative weightCustomer Perspective
Relative weight Internal Perspective
MATRIX 5
MATRIX 3 MATRIX 3
Quality and service performances Internal Processes
Product and service technical performances
Input from customers Product quality & service
Time/cost performancesInternal Processes
MATRIX 4 MATRIX 4
Inputfrom team
MATRIX 1 MATRIX 1
Customer perspectiveCustomer types and benefits
Internal perspective Efficiency
Input from management Revenue Growth Productivity
Relative weightsCustomer Types
Relative weightInternal Perspective
MATRIX 2 MATRIX 2
Learning type/level Induced Operational Conceptual
Relative weightCustomer Perspective
Relative weight Internal Perspective
MATRIX 5 MATRIX 5
MATRIX 3 MATRIX 3
Quality and service performances Internal Processes
Product and service technical performances
Input from customers Product quality & service
Time/cost performancesInternal Processes
MATRIX 4 MATRIX 4
Inputfrom team
MATRIX 1 MATRIX 1
Customer perspectiveCustomer types and benefits
Internal perspective Efficiency
Input from management Revenue Growth Productivity
Relative weightsCustomer Types
Relative weightInternal Perspective
MATRIX 2 MATRIX 2
Induced Learning
Induced learning is training at the individual
level and developing/enhancing Information
Systems/Technology.
Operational & Conceptual Learning
Operational learning and conceptual learning
are viewed here as combinations of
organizational structures and improvement
tools.
Both operational learning and conceptual
learning involve teams.
Operational Learning
Operational learning as being achieved by
means of local teams using rather basic tools
such as the seven basic graphical tools or
SPC.
Conceptual Learning
Conceptual learning has a wider scope and as
such has to rely on cross functional teams
applying more sophisticated tools such as
enhanced QFD and advanced statistical tools
such as Design of Experiments (DOE).
Illustrative Example Illustrative Example
Cross Functional Team
Finance Market oriented Information systems Human resource members Industrial engineers R&D representatives
Benefits
Customer Perspective
Internal Perspective
Retailers:Service
performance
Users:Product
performance
Managers:Efficiency
Revenue Growth2515
Productivity--53
Importance 10252055
Normalized Importance0.200.450.351
Imp
orta
nce
Matrix 1 - Deployment of the financial perspectiveMatrix 1 - Deployment of the financial perspective
Matrix 2 – The House of Quality in simplified form Matrix 2 – The House of Quality in simplified form
Product and service technical performances
Product characteristics(Quality)
Service characteristics
)Time()Flexibility(
variation of Solids
%
Calciumcontent
Fat %
Additives
Life length
Deliverytime
Packagesize variety
Ordermodific
ation
Nutritious431.21.6
Not fatty5251.53.8
Fresh5210.9
Delectable34541.52.7
Consistency 4151.53.8
HandlingCost
43410.8
Cost of Stock
5451.51.5
LowRisk
1451.51.5
Importance 247302658515120
Normalized Importance 0.200.060.250.220.040.070.040.121
Cu
stom
er P
ersp
ecti
ve
Use
rs (
0.45
)
Pro
du
ct p
erfo
rman
ce
Ret
aile
rs (
0.20
)
S
ervi
ce p
erfo
rman
ce
Imp
orta
nce
Sal
es P
oin
t
Wei
ghte
d I
mp
orta
nce
Matrix 3 – Deployment of product/service technical characteristicsMatrix 3 – Deployment of product/service technical characteristics
Quality/ service performances of Internal Processes
Design Quality
Process QualityProcessTime
Response
Userreviews(rank)
Range of packaging
size
Process capability
(Scrap rate)
Quality assurance
effort
Manufacturing & transfer
FailuresSupplier lead time
Information /Com
Versatility(Human)
Set up
Ordermodification
1115540.12
Packagesize variety
50.04
Deliverytime
5443330.07
Life length3332310.04
Additives5320.22
Fat% 40.25
Calciumcontent
30.06
Variation of % Solids
4530.20
Importance 3.20.201.781.160.550.520.400.810.810.7310.2
Normalized Importance (NI)
0.310.020.180.110.060.050.040.080.080.071
0.65 *NI 0.200.010.120.070.040.030.030.050.050.050.65
Imp
orta
nce
Fle
xib
ilit
yT
ime
Qu
alit
y
Pro
duct
an
d se
rvic
e te
chn
ical
per
form
ance
s
Matrix 4 – Deployment of internal efficiency Matrix 4 – Deployment of internal efficiency
Time/cost performances of Internal Processes
Process CostProcess TimeResponse
Manufacturing & transport
Waste WI P
Manufacturing &
transport
Failures
Supplier lead time
Information /Com
Versatility(Human)
Set up
Flexibility5555
Production (rate)
234334445
Asset utilization
234424444
Cost per unit
5535321223
Importance 51213181410232424143
Normalized Importance (NI)
0.030.080.090.130.100.080.160.170.171
0.35 *NI 0.010.030.030.040.030.030.060.060.060.35
Eff
icie
ncy
(0.
35)
Imp
orta
nce
Learning Induced
KnowledgeOperational Knowledge
(Local Teams)
Conceptual Knowledge
(Cross Functional Teams)
Training Informationcapability
Basicseven tools
SPCQFD(Enhanced)
DOE
Set up 440.11
Versatility (Human)53220.11
Information /Com54230.11
Supplier lead time230.06
Failures
414220.06
Manufacturing & transport20.08
WIP40.03
Waste34330.03
Manufacturing & transport10.01
Quality assurance effort5244430.07
Process capability(Scrap rate)
22550.12
Range of packaging size50.01
User reviews(rank)
550.20
Importance 1.471.152.281.311.882.6810.8
Normalized Importance0.140.110.210.120.170.251
Structure Importance 0.250.330.421
Matrix 5 – Deployment of internal process performances Matrix 5 – Deployment of internal process performances In
tern
al P
roce
sses
R
esp
onse
Pro
cess
T
ime
Pro
cess
C
ost
Pro
cess
Q
ual
ity
Des
ign
Q
ual
ity
Imp
orta
nce
Conclusions
It is shown that among the three frameworks the balanced scorecard has important advantages. Hence, it is selected here as a 'fundamental' strategic framework of an individual organization.
However, the balanced scorecard has some essential limitations.
To improve the implementation of the balanced
scorecard in an individual organization a structured methodological approach based on the Quality Function Deployment (QFD) is presented.
Conclusions
The QFD matrices ensure that every financial performance defined by the enterprise strategy is linked to a set of performance measures in the relevant domains that may eventually influence its future results.
Through QFD, priorities for improving performance measures in each of the three other domains are determined.
Conclusions
The QFD matrices warrant that proposed learning actions are consistent with eventual financial results.
The QFD systematic approach assists in organizing the balanced scorecard thus promoting continuous improvement for achieving strategic goals.
Reference
Dror, S. The Balance Scorecard versus Quality Award Models as Strategic frameworks, Total Quality Management and Business Excellence, 19, 6: 583-593, 2008.
Dror, S. and Barad, M. Utilizing Quality Function Deployment to Construct a Balanced Scorecard Map, In Proceedings of the Performance Measurement and Management Conference, Boston, USA, 165-172, 2002.
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