Professional Documents
Culture Documents
STAKEHOLDERS EXPECTATIONS
Delivering stakeholder value is a key driver for corporate success Stakeholders are: -Investors Capital Investment -Customers Profitability,loyalty -Employees Productivity,loyalty -Suppliers -part of virtual corpn -upstream integration -Fin Inst Financial health long and short term
BALANCED SCORECARD
Provides method for organisation to systematically develop a comprehensive system of planning and control Performance measurement system that translates organisation strategy into objective measures, targets and initiatives
BALANCED SCORECARD
Approach to performance measurement that combines financial measures with non-financial to provide a total corporate health Used for management and strategic control Four standard dimensions as defined by Kaplan & Norton but could be adapted to organisational needs
CURRENT PROBLEMS
Lack of integration between enterprise strategies and operational business processes shows following problems: -Strategy not translated into operational schema nor broken down into elements -90% of top management spends less than 1 hour per month on strategy discussions -60% of employees do not relate directly to strategy -Focus on financial figures is high and past oriented and stress laid on reactive measures
CURRENT PROBLEMS
Lack of identification of potential opportunities and risks in terms of long term potential opportunities and risks in terms of of capital investments Inability of Operations planning and performance management to focus on current periods and their purpose within bounds of strategy in order to ensure profitability and liquidity
VISION
Picture of organization future Details where organization sees itself few years down the line Vision translated into objectives and strategies
MISSION
Identifies a reason for existing A set of tangible statements of tangible statement of organizational purpose Declares joint purpose between Company and stakeholders
VALUES
Foundation on which company is built Vision and values are mirror of business and should stand the test of time Values should support vision and reflect in the daily operations of the company Value system may be influenced by external factors Vision charts future direction while values provide motor to get there
VALUES
Develop supporting practices for values Values provide a guidance system for change management Values translated into measurable practices Examples are Customer Service:Average purchase and Market share;Employee care:Employee turnover and 360 degree appraisal
VALUES AT INFOSYS
Integrity and transparency Fairness in dealings with stakeholders Pursuit of excellence
STRATEGIC FOCUS
THREE BUSINESS FOCUSSES -COST FOCUS -PRODUCT FOCUS -CUSTOMER FOCUS
MANAGING STRATEGY
Four Processes -Translating Vision .Clarifying vision .Gaining consensus -Communicating and Linking .Communicating .Educating .Setting goals .Linking rewards to performance measures
MANAGING STRATEGY
Four Processes -Business planning .Setting targets .Aligning strategic indicators .Establishing milestones -Feedback and learning .Articulating vision .Supplying strategic feedback .Strategic review
STRATEGIC GOALS
Establishing strategic goals is the first step in building the balanced scorecard Strategic Goals establish direction in concrete terms. For Example: by the year 2005, we will grow revenues by 45% Strategic goals anchor the rest of the process Strategic goals should fit with the vision and mission of the organization
OBJECTIVES
Objectives are desired outcomes Progress towards achievement of objective translated into measures Causal relationship between objectives
STRATEGIC OBJECTIVES
IMPROVE RETURNS REDUCE COSTS INCREASE CUSTOMER SATISFACTN CREATE NEW PRODUCTS MAXIMIZE OPERATIONAL EFFCNCY RESPONSIVE SERVICE ALIGN PERSONAL GOALS
STRATEGIC MEASURES
RETURN ON CAPITAL EMPLOYED MYSTERY SHOPPING RATING DEALER PROFITABILITY MFG RELIABILITY INDEX COST EFFECTIVENESS COMPETENCE AVAILABILITY
MEASURES(METRICS)
Metrics are meaningful quantified measures Metric should present data that enables action Metrics should be tied to strategy and should indicate how well organization objectives and goals are being met through core processes Metrics should motivate indivisuals to improve processes
MEASURES(METRICS)
No one right set of metrics Balanced scorecard to be tailored to each specific company Resultant scorecard of indicators to be driven by firms strategy Typical reasons for misalignment of metrics are: outdated strategy;wrong management policies;over matured process
WHY MEASURE
Track current actual performance against targets and predictions Track performance deficiencies and monitor improvements Motivate managers and employees to achieve performance objectives Predict future trends Stimulate creation of new initiatives,objectives,targets
MEASUREMENT TYPES
Planning Are we achieving long term objectives like ROI, P/E RATIO etc Screening Are functional areas performing as per organizational strategic goals Controlling Short to intermediate range performance measured periodically Control Are processes performing in alignment with the functional goals.Measures expressed in non monetary terms and focus is on immediate performance issues
COST MEASURES
COST CYCLE TIME CONFORMANCE TO STANDARDS CONFORMANCE TO QUALITY
PRODUCT MEASURES
NEW PRODUCTS IN PIPELINE R&D BUDGET TIME TO MARKET FIELD SERVICE MEASURES EMPLOYEE SATISFACTION
CUSTOMER FOCUSSED
COMPLAINT HANDLING RESPONSIVENESS PRICE PERFORMANCE
INITIATIVES
Change process or activity designed to achieve one or more objectives Initiative helps move a measure towards target value
STRATEGIES
OBJECTIVES (Goals)
BSC PERSPECTIVES
MEASURES (KPI)
ALARMS
CURRENT VALUE
TARGET
Operational planning
INTIATIVES
FEEDBACK CONTROL
SCORECARD
54
Financials
Business Processes
A question of balance?
Customer perspective Corrective activity Developmental activity Balancing compliance with added value Financial Measures Key performance ratios Financial health Balancing leading with trailing indicators
Balanced Scorecard
Learning and growth People measures Knowledge measures Balancing soft and hard indicators
Business Processes Drumbeat Time, cost, quality Balancing inputs and outputs
FINANCE
How to manage stakeholders to be financially successful
CUSTOMERS
internal and external Customers *Define levels of Requirement service to match expectation
Vision Strategy
INTERNAL
*Metrics compared with
*Who are
LEARNING/VISION
VERTICAL SCORECARD
(LINKAGES OF PERSPECTIVES) FINANCIAL PERSPECTIVE CUSTOMER PERSPECTIVE INTERNAL PERSPECTIVE LEARNING PERSPECTIVE
PERSPECTIVE FINANCE
OBJECTIVE IMPROVE FA UTIL MEASURE - % CAP UTIL -EQPT UPTIME -EQPT THRUPT -DYS INV -INV TURNOVER -%STKOUT -BAD DEBT% -%UNCOLLECT ACR -INV OBSOLESC%
EFF W.C.
FIN RISK
PERSPECTIVE FINANCE
OBJECTIVE OPER RISK MEASURE -DEBT/EQUITY -ORDER BACKLOG -%ORDER CANCEL INCR REV/CUST -WALLET SHARE INCR CUST PROF -CUST PROFITABILITY -%UNPROFITABLE CUST SALES PRODVITY SALES EXP/TOTAL REV (COST OF SALES)
PERSPECTIVE FINANCE
OBJECTIVE MEASURE BECOME IND COST LDR COST/UNIT ASSET UTILIZATION -SALES/ASSET
PERSPECTIVE CUSTOMER
OBJECTIVES SEGMENTATION MEASURES -PROF CONTR -MKT SHARE SEG NONPROF CUST -%NON PROF CST HIGH VALUE CUST -STATEGIC ACCT BRAND MGT -BRAND AWARE% NEW CUST ACQ -%LEADS CONV -COST/NEW CUST ACQ -CUST LIFETIME VAL -%NEW CUST ACQ
PERSPECTIVE CUSTOMER
OBJECTIVES MEASURES CUST LOYALTY -%CUST ATTRITION -NO REFERRALS CUST SATISF -%SATISF CUST CUST RETAINED -%CUST RETAINED LOW CUST COST -COST OF OWNERSHIP ZERO DEFECT -PPM DEFECT COMPLAINTS -NO CUST COMPLAINTS
OBJECTIVE
MEASURE
TARGET
INTIATIVE
FINANCIAL
Revenue
Sales Promotions
CUSTOMER
Customer Retention
95%
Loyalty Programs
INTERNAL
5% 5%
-TQM
-Agile Process
BALANCED SCORECARD
Factors to consider Performance measures Measures of process efficiency
Time to execute process cost of process
levels of wastage, process agility& flexibility - Outcomes vs. Outputs . Identify measures of process effectiveness (output ,outcome)
PERFORMANCE MEASURES
Design to track whether processes are moving in direction of strategy Perspectives performance Financial capability & performance Internal capability & performance Learning capability & performance Customer demand & satisfaction
Financial Results
Customer Satisfaction
Business Processes
SCORECARD HIERARCHIES
BSC to be applied at all levels Set up hierarchy to communicate strategic objectives to all operating levels Cascading Score Card makes strategy transparent to all levels Score card broken down to level of individual employee
CEO COO S1 L1 PL-1 PR-1 S2 L2 PL-2 PR-2 S3 L3 PL-3 PR-3 S4 HR L4 PL-4 PR-4
PERSONAL SCORECARD
Performance model provides for cascading and aligning personal goals Personal scorecard focuses indivisuals on the part of the performance model they can impact Personal metrics drilled down as shown in next slide
PERSONAL SCORECARD
VP OPERATIONS -Operating Financials PLANT MGR -Prodn/Inv/Cost metrics SHIFT SUPRVSR -O.E.E.,Scrap
TAILORED SCORECARD
. HR Score Card 6 Sigma Score Card Malcolm Baldrige Score Card Project Management Score Card Distributor Score Card Vendor Score Card Outsourced Score Card Environment mgmt score card Safety mgmt score card
Inventory turnover ratio Average inventory in months % inventory unmoved > 12 mths Number of stock outs % items failed before lifetime Year to date cost of failure
MEASUREOF EXCELLENCE
Manufacturing - amount of scrap and rework; equipment uptime and throughput; -cost of non conformity Quality assurance - Quality %;-cost of quality Accounting - % late payments; -billing errors;incorrect account entries;payroll errors Marketing - incorrect order entries;overstocked field supplies;contract errors
VERTICAL INTEGRATION
Cascading of senior management strategy down the organization so that at each succeeding level(as activities become more operational and detailed) they are aligned and derived from higher goals Vertical integration includes everyone from CEO to the receptionist Everybody understands his role in achievement of organizational objectives
HORIZONTAL INTEGRATION
It is critical to link various targets together Requirement for multiple functions to work in unison to achieve objectives Metrics will measure cross functional performances
Evaluate
Identify measures
Translating vision -vision and strategy need to be expressed in terms that can provide practical guidance for action at local level -definition of standard measures as translation of vision and strategy for middle management
Communicating and linking -executives link strategy with department and indivisual goals and objectives -framework of standard operational measures acting as leading indicators of financial results gives a starting point for aligning strategy with action points
Business planning -connection between strategy and financial planning w.r.t budgets -BSC outlines a logical process for integrating business plans with financial budgeting
Feedback and learning -Process allows managers to monitor short term results from non financial perspectives -By tracking events strategy evaluated and fine tuned -Cause and effect relationship between business strategy and financial performance selected to monitor results
Choosing correct strategies Choosing correct leading and lagging indicators Concentration on key indicators Balancing financial & non- financial indicators Applying measures consistently across business units Using appropriate number of measures Applying measures consistently across regions
STRATEGY MAPS
STRATEGY MAP
Tool for translating strategy into specific objectives in operational terms Strategy maps along with BSC provide a new framework for describing and implementing strategy Strategy map helps establish the cause effect relationship for measures across perspectives as well as linkages to tangible/intangible assets
STRATEGY MAP
Provides framework to illustrate how strategy links intangible assets to value creating processes Financial perspective describes tangible outcomes of strategy in financial terms and are lag indicators showing whether strategy is successful Customer perspective defines value proposition for targetted customers
STRATEGY MAP
Internal perspective identifies critical processes which impact strategy Learning and growth perspective identifies intangible assets that are vital to strategy Possible to define multiple strategies and map for each strategy Common strategy maps: -Improved shareholder value -Maximized operational efficiency
STRATEGY MAP
What is Strategy Map
Graphical translation of business plan into action Diagram depicting operational functions and strategy Map has financial objective as final goal Strategic objectives from each perspective connected by arrows Provides overall strategy overview of business units Defines relation between objectives Balanced scorecards constructed from strategy maps by development of cause effect relationship Makes vision a reality
BALANCED SCORECARD
INTERNAL
ONTIME DELY
QUALITY
CONTRATED QUANTITY
SERVICE
EMPLOYEE SATISFACTION
FINANCIAL PERSPECTIVE
ASSET TURNS
OVERHEARDS AS % OF NSV
CUSTOMER PERSPECTIVE
EFFECTIVE BUSINESS CONDUCT
INTERNAL PERSPECTIVE
FINANCIAL
LOWER COST AND SHORTER LEAD TIMES ACHIEVE CUST QUALITY EXPECTATION
CUSTOMER
EXCEL IN CRM
INTERNAL
LEARNING GROWTH
HR STRATEGY MAP
2. Profits
3.COGS CUSTOMER
Max. Customer Satisfaction Min warranty costs Min customer returns
4.WALLET SHARE
6.RETURNS
5.WARRANTY COSTS
INTERNAL
Max. operational profitability Maximize quality % Maximize productivity/head count
L & Q
Max. Employee retention Maximize suggestions/empl Maximize decisions taken
11.INVOLVEMENT 12.EMPOWERED
10.LOYALTY
13.TRAINING
Financial
Happy financial health Minimum COGS Maximum profitability
Maximum SVA
Customer
Delight the customer
Repeat orders
Internal
Quality excellence
Maximized quality
Minimised rejects
Minimise rework
L & G
Motivated workforce
Promote autonomous
maintenance
Continuous training