Balanced Scorecard Eng

BALANCED SCORECARD

December 2009

Ersin EKER ([email protected])

2 / 16SATISFACTION

Outsourcing

Growth Strategy Tools

Supply Chain Management

Benchmarking Strategic Planning

CRM

Scenario & Contingency Planning

Mission and Vision Statements

Lean Six Sigma

Voice of the Customer Innovation

Strategic Alliances

Mergers and Acquisitons Business Process ReengineeringCore Competencies

Balanced Scorecard

TQMDownsizing

Decision Rights Tools

Online Communities

Knowledge ManagementShared Service Centers

Price Optimization ModelsCollaborative Innovation

Loyalty Management Tools

USAGE

Management Tools in 2008Usage and Satisfaction

80%

70%

55%

40%

25%

10%3.50 3.60 3.70 3.80 3.90 4.00 4.10

Source : Management Tools And Trends 2009, Bain & Company 2 / 18

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Management Tools in 2008Largest Satisfaction Changes

1 Balanced Scorecard 3.60 3.83 21 8

2 Lean Six Sigma* 3.66 3.87 18 5

3 Loyalty Management Tools 3.59 3.79 22 17

4Mission and Vision

Statements3.78 3.91 8 3

5 Growth Strategy Tools 3.75 3.87 13 5

2006mean

2008mean

2006 rank

2008rank

Source : Management Tools And Trends 2009, Bain & Company 3 / 18*Called Six Sigma in 2006

Intangible Assets in Industry and Information Ages

1982 1992 2002

38%

62%75%

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Today, the center of value creation has shifted from tangible assets tointangibles such as

Customer relations

Innovative products and services

High quality and responsive business processes

Information technologies and customer databases

Employee capabilities, skills and motivation

One-dimensional financial-based models measure past performance andsacrifice long term to short term results and fail to successfully measure theperformance of today’s firm.

• One of the most widespread multi-dimensional performance measurementmodels is the Balanced Scorecard (BSC), which was invented in 1992 by Drs.David Norton and Robert Kaplan.

One-dimensional to Multi-dimensional Performance Measuring

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World Countries Investing in Intellectual Property

Resource-Poor Countries 1970 GDP per Capita 2007 GDP per Capita

South Korea 1.954 19.751

Taiwan 2.987 16.606

Singapore 4.438 35.163

Hong Kong 5.695 29.660

Israel 8.102 22.475

Denmark 12.685 57.261

Turkey 506 9.629

Resource-Rich Countries 1970 GDP per Capita 2007 GDP per Capita

Indonesia 1.194 1.925

Nigeria 1.233 1.159

Former USSR 5.569 (Russia) 9.075

Saudi Arabia 7.624 15.481

Venezuela 10.672 8.596

Source: A. Maddison, The World Economy: A Millennial Perspective. Numbers are in constant 1990 dollars.

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STRATEGY

CUSTOMERHow do we exceed customer/stakeholder expectations?

LEARNING & GROWTHWhat skills, tools, and culture are required to perform these processes?

FINANCIALWhat do our customers/stakeholders look for in financial results?

INTERNAL PROCESSESWhat process do we need to improve to fulfill these expectations?

Balanced Scorecard Framework

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STRATEGY

•Strategic Awareness•Personal Scorecards•Balanced Paychecks

•Link Budgets & Strategy•S t r a t e g i c L e a r n i n g•Analysis & Inform. System

Build Strategy-Focused Organization

MOBILIZE CHANGETHROUGHEXECUTIVE

LEADERSHIP

MAKE STRATEGY A

CONTINUOUS PROCESS

MAKE STRATEGYEVERYONE’S JOB

ALIGN ORGANIZATION

TO STRATEGY

TRANSLATE STRATEGY

INTO OPERATIONS

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•S t r a t e g y M a p•Balanced Scorecards

•M o b i l i z a t i o n•Governance Process•Strategic Management

•C o r p o r a t e R o l e s•Business Unit Synergies•Support Unit Synergies

BalancedScorecard

Performance measuring - a tool to measure strategic

performance under perspectives financial, customer, internal processesand learning & growth

Strategy communication (strategy maps)- a tool to communicate corporate

strategies from top management down to the floor by means of strategy maps

Strategy implementation - a tool to implement corporate strategies

by aligning distributed day-to-day activities with strategic goals and objectives

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Generic Strategy Map

Customer Management

Processes that enhance customer value

Innovation

Processes that create new products and services

Price Quality Availability Selection Functionality Service Partnership Brand

CUSTOMER VALUE PROPOSITION

PRODUCT / SERVICE ATTRIBUTES RELATIONSHIP IMAGE

Operations Management

Processes that produce and deliver products and services

Regulatory & Social

Processes that improve communities and the environment

Improve

cost structure

Increase

asset utilization

Enhance

customer value

Expand Revenue

Opportunities

Human Capital

Skills

Training

Knowledge

Information Capital Organization Capital

Systems

Databases

Networks

Culture

Leadership

Alignment

Teamwork

Increase Shareholder Value

REVENUE GROWTH STRATEGYPRODUCTIVITY STRATEGY

CREATING

ALIGNMENT

CREATING

READINESS

Processes

Perspective

Customer

Perspective

Financial

Perspective

Learning and

Growth

Strategic Job Families Strategic IO Portfolio Organization Change Agenda

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Alignment throughBalanced ScoreCard

Strategicobjectives

& goals

Plan, processes, actions, initiatives, decisions

All organizational activities support strategic objectives

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Translate, Focus and Align

What are the priorities

What we must improve

What I need to do

BALANCED SCORECARD

STRATEGIC INITIATIVES

TOTAL QUALITY MANAGEMENT

EMPOWERMENT / PERSONAL OBJECTIVES

Why We Exist

What’s important to us

What we want to be

Our game plan

MISSION

VALUES

VISION

STRATEGY

STRATEGIC OUTCOMES

Satisfied

SHAREHOLDERSEfficient and Effective

PROCESSESDelighted

CUSTOMERS

Motivated and Prepared

WORKFORCE

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Business Units

Human ResourcesInformation

Technology

Executive Team

Budgets & Capital

Investments

BSC Aligns & Focuses All Resources on Strategy

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STRATEGY

3rd Generation Balanced Scorecard is an umbrella concept that links together organizational philosophies and management tools

6 Sigma

EVA EFQM

TQM

14 / 18Source : Performance Management & 3rd Generation Balanced Scorecard, http://www.2gc.co.uk

QUALITY ASSESSMENT

BSC

ASSESSM

EN

TBALANCED SCORECARD –

QUALITY (6 SIGMA) COLLABORATION

Improve to Levels of Quality

Excellence

Vit

al

Str

ate

gic

Needs Improvement Excellent

Process Classification

Maintain High Quality Levels

Potential to Cut Back Current Investment

Improve to Minimum

Acceptable Quality Levels

“Quality (6 Sigma) teaches you HOW TOfish.The Balanced Scorecard teaches you WHERE TOfish.”

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-100

-200

-1000

BSC Allows You To Do the Right Things Right

Balanced Scorecard Objectives

Do Things Right Do the Right Things

BusinessExcellence

Strategy-Focused Management

Time (TBM)Quality (TQM)Cost (ABM)

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MOBIL Profitability:Cents per gallon (percent above Industry average)

MOBIL NAM&R’s Relative Profitability, 1990-1998

MOBIL Industry Ranking

199519941993199219911990 1996 1997 19980

+

-

20%

40%

60%

80%

100%

-20%

-40%

-60%

-80%

-100% -92%

-13%-3%

-14%-3%

56%

42%34%

23%

New Strategy and Balanced Scorecard

introduced

#4 #3 #6 #6 #6 #1 #1 #1 #1

MOBIL Profitability:Cents per gallon (percent below Industry average)

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Strategy-Focused Organization, Robert S.

Kaplan, David P. Norton

Balanced Scorecard, Paul Niven,

2nd Edition.1

2 Execution Premium, Robert S.

Kaplan, David P. Norton

3

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