Balanced Scorecard :Basic Concepts1990, Research arm of KPMG - Study in “Measuring Performance in the Organization of the Future”. BSC HistoryRelying 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?4Management process to implement a business strategy. .4Translates a companys strategy into a coherent set of performance measures.4Establishes cause and effect relationships between Key Performance Indicators.Balanced Scorecard:What is it?IManage into the future not in the pastBalanced Scorecard:Two underlyingfactors:What is it?IManage into the future not in the pastBalanced 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:FinancialCustomerLearning andGrowthInternalProcessStrategic PerspectivesFinancialCustomerLearning andGrowthInternalProcessStrategic PerspectivesResults that the businessprovides to its shareholdersIdentifies Customer, market segments and value propositions to be delivered Infrastructure, people, systems and procedures.Key internal processes whichdrive the businessMeasures organizational performance across four balanced perspectives:What is it?IManage into the future not in the pastBalanced Scorecard:II Implementing the strategy requires 4 stepsTwo underlyingfactors:DynamicDynamicDynamicBSCBSCBSCTranslatingtheVision CommunicatingandLinking BusinessPlanningFeedbackandLearning 4Clarifying the vision4Gaining concensus4Communicating and educating4Setting Goals4Linking rewards to performance measures4Setting Targets4Aligning strategic initiatives4Allocating resources4Establishing milestones4Articulating the shared vision4Supplying strategic feedback4Facilitating strategy review and learningManaging Strategy : Four ProcessesPerformanceMeasuresDiagnostic measures.Monitor if the business remains in controlStrategic measures.Define a strategy designed for competitive excellence.BSCStrategic Measures“Balanced?” ScorecardGeneric measures.Lag Indicators. Core outcome measuresProfitability, market share, customer satisfaction, etc.Performance driversLead indicatorsDesigned for competitive excellence.Unique to the business strategyStrategic Measures“Balanced” ScorecardGeneric measuresLag Indicators. Core outcome measuresProfitability, market share, customer satisfaction, etc.Performance driversLead indicatorsDesigned for competitive excellence.Unique to the business strategy“Balanced” ScorecardGeneric measuresPerformance driversLong Term ObjectivesFinancialsShort Term ObjectivesOther perspectives Balanced ScorecardEstablishes cause and effect relationships between Key Performance Indicators (KPI)”:Strategy Strategy = = “Set of hypotheses about “Set of hypotheses about cause and effect” cause and effect”Every measure in the BSC should be an element in a chain of cause-and-effect relationships that communicates the strategy.KPIs - Cause & Effect RelationshipsLearning Learning and Growthand GrowthInternal Business Internal Business ProcessProcessCustomerCustomerFinancialFinancialMaximizeProfitabilityImprove Customer ServiceTechnologyInfrastructureNew Products & Service DevelopmentReduceCreditApprovalTimeMinimizeCustomerTurnoverCrossSellingMaximizeProfitabilityImprove Customer ServiceTechnologyInfrastructureNew Products & Service DevelopmentReduceCreditApprovalTimeMinimizeCustomerTurnoverCrossSellingCause 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/FlexibilityBSC Key points:Balanced Scorecard-Business DriversBusiness Drivers (1)Company is having hard time measuring strategic effectivenessMany companies go through the process of creating a Many companies go through the process of creating a strategic plan but have no way to measure its effectivenessstrategic plan but have no way to measure its effectivenessDo 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 organizationCompanies that have a strategic plan often have no way of Companies that have a strategic plan often have no way of disseminating information to their organization with a disseminating information to their organization with a measurement mechanismmeasurement mechanismHow 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 strategyIt is very difficult for companies to link their day to day It is very difficult for companies to link their day to day operations to their strategyoperations to their strategyAre your operations in sync with your strategic plan?Business Drivers (4)Company is implementing a datawarehouse but are having difficulty deciding what to put inCompanies often decide to create a Companies often decide to create a datawarehousedatawarehouse but do but do not always know what information is critical to executivesnot always know what information is critical to executivesDoes your datawarehouse plan include information for executives?Business Drivers (5)New management team or individual that wants to get a quick understanding of companyWhen an executive joins a company it is often difficult to When an executive joins a company it is often difficult to get a real understanding of what is going on in the businessget a real understanding of what is going on in the businessIs 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 industryWhen companies change their focus or enter a new industry When companies change their focus or enter a new industry it is often difficult to understand what they should focus on. 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 strategyA company may decide to change their strategic direction A company may decide to change their strategic direction and need some help knowing what to focus on and why and need some help knowing what to focus on and why things happenthings happenHave you figured out all the KPIs for your new strategic direction?Oracle solutions map : Required productsOracle solutions map : Optional Products/Enterprise wide deployment : OBSC can be deployed to many desktops./Connected/disconnected capability : remote access and sync up via Oracle Lite version/Set up wizard : very easy to design a unique scorecard/Mature product with customer base : OBSC has been successfully implemented in many companiesOracle Key Strenghts :Companies are using the scorecard to :lclarify and update strategy,lcommunicate strategy throughout the company,lalign unit and individual goals with the strategy,llink strategic objectives to long-term targets and annual budgets,lidentify and align strategic initiatives, andlconduct periodic performance reviews to learn about and improve strategy.Summary