Balanced Scorecard : Basic Concepts,1990, Research arm of KPMG - Study in “Measuring Performance in the Organization of the Future”.,BSC History,Relying mainly on financial performance measures was impeding the organizations ability to create future value. Most companies were improving existing processes but were not identifying the ones that were truly strategic.,What is it?,Management process to implement a business strategy. Translates a companys strategy into a coherent set of performance measures. Establishes cause and effect relationships between Key Performance Indicators.,Balanced Scorecard:,What is it?,I Manage into the future not in the past,Balanced Scorecard:,Two underlying factors:,What is it?,Manage into the future not in the past,Balanced Scorecard:,The Financial perspective is critical but it only measures past performance.,The BSC introduces additional perspectives, the drivers of future financial performance.,Building a scorecard can help managers link todays actions with tomorrows goals = Link long-term strategic objectives with short-term actions,Measures organizational performance across four balanced perspectives:,Strategic Perspectives,Strategic Perspectives,Measures organizational performance across four balanced perspectives:,What is it?,I Manage into the future not in the past,Balanced Scorecard:,II Implementing the strategy requires 4 steps,Two underlying factors:,Dynamic BSC,Managing Strategy : Four Processes,Strategic Measures,Strategic Measures,“Balanced” Scorecard,Generic measures Lag Indicators.,Core outcome measures Profitability, market share, customer satisfaction, etc.,Performance drivers Lead indicators,Designed for competitive excellence. Unique to the business strategy,“Balanced” Scorecard,Generic measures,Performance drivers,Long Term Objectives,Financials,Short Term Objectives,Other perspectives,Balanced Scorecard,Establishes cause and effect relationships between Key Performance Indicators (KPI)”:,Every measure in the BSC should be an element in a chain of cause-and-effect relationships that communicates the strategy.,KPIs - Cause & Effect Relationships,Cause and effect relationships between Key Performance Indicators (KPI),KPIs - Cause & Effect Relationships,Fills the void that exists in the lack of a systematic process to implement and obtain feedback about strategy.,It is a communication and learning system not a tool to control behavior and to evaluate past performance.,Balanced Scorecard,Simplicity Manage for the future not the past Focus on Cause and Effect relationships System linked to the strategy Action Oriented Flexibility,BSC Key points:,Balanced Scorecard - Business Drivers,Business Drivers (1),Company is having hard time measuring strategic effectiveness,Many companies go through the process of creating a strategic plan but have no way to measure its effectiveness,Do you know how you are doing against your strategic plan? Does your strategic plan include the perspective of your customer, internal business processes and learning and growth?,Business Drivers (2),Company is having a hard time communicating strategic goals to organization,Companies that have a strategic plan often have no way of disseminating information to their organization with a measurement mechanism,How do you communicate the strategic plan to individuals in your organization? Do you have any idea how effective, organizations, individuals are?,Business Drivers (3),Company has no mechanism to link operations to strategy,It is very difficult for companies to link their day to day operations to their strategy,Are your operations in sync with your strategic plan?,Business Drivers (4),Company is implementing a datawarehouse but are having difficulty deciding what to put in,Companies often decide to create a datawarehouse but do not always know what information is critical to executives,Does your datawarehouse plan include information for executives?,Business Drivers (5),New management team or individual that wants to get a quick understanding of company,When an executive joins a company it is often difficult to get a real understanding of what is going on in the business,Is there a tool that an executive can use to get a quick reading on what is going on in the company?,Business Drivers (6),Company has shifted focus or has entered a new industry,When companies change their focus or enter a new industry it is often difficult to understand what they should focus on.,With your recent change to X, do you know what to focus on to meet your strategic objectives? If something is not working do you know the cause?,Business Drivers (7),Company has just decided on a new strategy,A company may decide to change their strategic direction and need some help knowing what to focus on and why things happen,Have you figured out all the KPIs for your new strategic direction?,Oracle solutions map : Required products,Oracle so