North Delhi Power Limited Balanced Scorecard (BSC) NITIN ROHILLA Head (IT-SAP) NORTH DELHI POWER LIMITED Balanced Scorecard (BSC) by NITIN ROHILLA Head.

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Balanced Scorecard (BSC)Balanced Scorecard (BSC)

by

NITIN ROHILLANITIN ROHILLAHeadHead (IT-SAP) (IT-SAP)

NORTH DELHI POWER LIMITEDNORTH DELHI POWER LIMITED

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Outline of PresentationOutline of Presentation

• Background of BSCBackground of BSC• Origin of BSCOrigin of BSC• What is BSC?What is BSC?• Components of BSC – Components of BSC – Perspectives, Perspectives,

Objectives, Measures, Targets, Initiatives etcObjectives, Measures, Targets, Initiatives etc

• NDPL BSC Scenario – NDPL BSC Scenario – Vision, Strategies, Vision, Strategies,

BSCsBSCs

• An example - IT BSCAn example - IT BSC

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• Organizational Performance MeasurementOrganizational Performance Measurement

• Organizational Strategy Management Organizational Strategy Management

BackgroundBackground

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Shortcomings of Traditional Performance Measurement System

• Financial measures are not relevant to many levels in Financial measures are not relevant to many levels in

the organizationthe organization

• The reports sometimes stimulate actions that have a

positive impact on the short term results, but a

negative effect on the long term

• Sacrifice long term thinkingSacrifice long term thinking

BackgroundBackground

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Barriers to Strategy ExecutionBarriers to Strategy Execution

- Robert S. Kaplan and David P. Norton

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A Balanced ApproachA Balanced Approach

Financial statements will remain an important tool for organizations since they ultimately determine whether

improvements in customer satisfaction, quality, on-time delivery, and innovation are leading to improved

financial performance and wealth creation for shareholders.

What we need is a method of balancing the accuracy What we need is a method of balancing the accuracy and integrity of our financial measures with the and integrity of our financial measures with the

drivers of future financial performance of the drivers of future financial performance of the organization.organization.

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Origin of Balanced ScorecardOrigin of Balanced Scorecard

• Developed in early 1990s by Developed in early 1990s by

– Dr Robert Kaplan (accounting professor at Harvard university)– David Norton (a consultant)

As a result of 1 year research project with 12 companies

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Innovation of BSCInnovation of BSC

"The balanced scorecard retains traditional financial measures. But "The balanced scorecard retains traditional financial measures. But

financial measures tell the story of past events, an adequate story for financial measures tell the story of past events, an adequate story for

industrial age companies for which investments in long-term industrial age companies for which investments in long-term

capabilities and customer relationships were not critical for success. capabilities and customer relationships were not critical for success.

These financial measures are inadequate, however, for guiding and These financial measures are inadequate, however, for guiding and

evaluating the journey that information age companies must make to evaluating the journey that information age companies must make to

create future value through investment in customers, suppliers, create future value through investment in customers, suppliers,

employees, processes, technology, and innovation.“employees, processes, technology, and innovation.“

- Kaplan and Norton

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What is BSC ?What is BSC ?

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BSC BSC

• Strategy = Doing the right things• Operations = Doing things right• Change = Doing things differently

BSC = Strategy + Operations + Change

SUCCESS = Effective, Well Executed Strategy + Efficient Operations + Meaningful Change

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Desired state

Differentiating activities

What must be done well to implement strategies

How strategic success is measured

Mission

Vision

Strategies / Goals

Objectives

Measures

Strategy Management with BSC Strategy Management with BSC

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BSC – Measures four PerspectivesBSC – Measures four Perspectives

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BSC – Financial PerspectivesBSC – Financial Perspectives

• What financial steps are necessary to ensure the What financial steps are necessary to ensure the execution of our strategy/goals?execution of our strategy/goals?

• Are the company’s strategy, implementation and Are the company’s strategy, implementation and execution are contributing to overall improvement ?execution are contributing to overall improvement ?

• Are we meeting operational and financial targets?Are we meeting operational and financial targets?

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• What critical processes must we excel at to satisfy What critical processes must we excel at to satisfy our customers/stakeholders?our customers/stakeholders?

• What must be done internally to meet customer What must be done internally to meet customer expectations?expectations?

• Cluster for internal process perspectives areCluster for internal process perspectives are• Operations management• Customer management• Innovation • Regulatory and social etc.

BSC – Internal Process PerspectiveBSC – Internal Process Perspective

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• Who are our target customersWho are our target customers

• How do our customers see us?How do our customers see us?

• How do customers rate our performance?How do customers rate our performance?

• It measuresIt measures• Value proposition (Time, quality, performance,

service and cost)• Outcome of value proposition (Customer

satisfaction, market share)

BSC – Customer PerspectivesBSC – Customer Perspectives

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• Focus on intangible assets – skills, capabilitiesFocus on intangible assets – skills, capabilities

• How can we continue to improve?How can we continue to improve?

• What capabilities and tools do our employees need to What capabilities and tools do our employees need to execute our strategy/goals?execute our strategy/goals?

• Clusters are Clusters are • Human capital• Information capital• Organization capital

• IncludesIncludes• Employee training• Corporate self improvement

BSC – Learning, Innovation and Growth BSC – Learning, Innovation and Growth PerspectivePerspective

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dBSC - ObjectivesBSC - Objectives

• Derived from strategyDerived from strategy• Describe the activities that we must perform Describe the activities that we must perform

well to successfully implement strategywell to successfully implement strategy• Grouped in four perspectivesGrouped in four perspectives• Start with an action verb: increase, develop, Start with an action verb: increase, develop,

improve, lower, achieve etc.improve, lower, achieve etc.• For example -For example -

Improve Customer Service.Improve Customer Service.

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BSC - MeasuresBSC - Measures

• For each objective, a measure is assigned For each objective, a measure is assigned

• Measurement provides feedback on meeting Measurement provides feedback on meeting the strategic objectivethe strategic objective

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BSC – Measure TargetBSC – Measure Target

• Once measures are established, set a target Once measures are established, set a target for each measurefor each measure

• Targets put focus on the strategy, expressing Targets put focus on the strategy, expressing the specifics of the strategythe specifics of the strategy

• Targets push the organization to a required Targets push the organization to a required level of performancelevel of performance

• When an organization hits its targets, then it When an organization hits its targets, then it has successfully implemented its strategyhas successfully implemented its strategy

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Strategic InitiativesStrategic Initiatives

• Special project initiated in order to achieve the objective

• For example – • improving customer service may require a new

customer management system

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Building the BSCBuilding the BSC

• Begin with strategic plan – what things are critical to future success?

• Focus on customers – what values will we add to our customers

• Define the processes – how will we deliver these services to our customers

• Build the organization – what capabilities must we put in place

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Benefits of using BSCBenefits of using BSC

• Focusing the whole organization on the few key things needed to create breakthrough performance.

• Helping to integrate various corporate programs, such as quality, re-engineering, and customer service initiatives.

• Breaking down strategic measures to local levels so

that unit managers, operators, and employees can see what's required at their level to roll into excellent performance overall.

- Kaplan and Norton

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NDPL BSC SCENARIONDPL BSC SCENARIO

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Corporate Balanced ScorecardCorporate Balanced Scorecard

ITHR Ops. TS&P Finance Admin.Comm.

5 Grp.3 Grps. Dst.,Zn TS&P 5 Grps. 6 Grps.9 Grps.

JD/KRA.JD/KRA. JD/KRA. JD/KRA. JD/KRA. JD/KRA.JD/KRA

Mapping the Objectives thru Funct. ScorecardsMapping the Objectives thru Funct. Scorecards

Mapping the Initiatives thro Perf. Scorecards

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Management by Facts

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NDPL StrategiesNDPL Strategies

• S1 – Maintain and grow core regulated electricity S1 – Maintain and grow core regulated electricity business in NDPL licensed areabusiness in NDPL licensed area

• S2 - Secure low cost power generationS2 - Secure low cost power generation

• S3 – Provide services not envisaged in the power S3 – Provide services not envisaged in the power distribution core business within or outside NDPL areadistribution core business within or outside NDPL area

• S4 – Deploy new electricity distribution elsewhereS4 – Deploy new electricity distribution elsewhere

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NDPL BSCsNDPL BSCs

• Corporate BSCCorporate BSC• Administration BSCAdministration BSC• Commercial BSCCommercial BSC• Finance BSCFinance BSC• HR BSCHR BSC• IT BSCIT BSC• Operations BSCOperations BSC

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BSC Implementation Tool at NDPLBSC Implementation Tool at NDPL

• SAP SEM (Strategic Enterprise Management SAP SEM (Strategic Enterprise Management Module) – development toolModule) – development tool

• SAP Enterprise Portal – user interfaceSAP Enterprise Portal – user interface

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Awards & RecognitionsAwards & Recognitions.. to name a few.. to name a few

NDPL Wins

Balanced Scorecard Hall of Fame Award – 2008

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ThanksThanks