Balance Scorecard

Eng. Murhaf Ashi 10 March , 2010 Cascading to Details

Strategic point of view

Do not repeat the tactics which have gained you one victory, but let your methods be regulated by the infinite variety of circumstances
Sun Tzu c. 490 BC, Chinese military strategist

Eng. Murhaf Ashi

Balance Scorecard

Company current situation

BSC

Target Strategy

Eng. Murhaf Ashi

Agenda
Introduction to BSC Measure Performance BSC history Stake Holder analysis S.W.O.T Analysis BSC four perspective Key Performance Indicators (KPI) Initiatives Matrix BSC strategy map examples References
Eng. Murhaf Ashi

Dose it work
By 2004, the balanced scorecard has been at least partially implemented in about 57% of global corporations, according to a survey by Bain. This site contains some examples of companies and government organizations that have reported their use of the balanced scorecard. We have prepared a database of over 130 of these organizations. For details please see our examples of balanced scorecard usage.

Eng. Murhaf Ashi

Success Stories
AMEDD Finds Direction in Strategic Planning The Army Surgeon General and Commander of the US Army Medical Command champion the use of the balanced scorecard as "the principal tool by which they improve operational and fiscal effectiveness and better meet the needs of patients and stakeholders. Award for Excellence The Institute honors Mecklenburg County, NC with an Award for Excellence for successfully transforming the county government and positioning it for tough times.

Scorecard Driving Strategy at Veolia Water North America With a new CEO and ambitious revenue goals, Veolia NA first successfully implemented a balanced scorecard and then integrated the scorecard deeper into its organization using an e-learning tool

Eng. Murhaf Ashi

Agenda
Introduction to BSC Measure Performance BSC history Stake Holder analysis S.W.O.T Analysis BSC four perspective Key Performance Indicators (KPI) Initiatives Matrix BSC strategy map examples References
Eng. Murhaf Ashi

Why We Should Measure Performance ?

Performance measurement improves communications internally among employees, as well as externally between the organization and as customers and stakeholders.

The emphasis on measuring and improving performance (i.e., "results- oriented management") has created a new climate, affecting all government agencies, and most private sector and nonprofit institutions as well.

Eng. Murhaf Ashi

Good Performance Measures

Provide a way to see if our strategy is working Focus employees' attention on what matters most to success Allow measurement of accomplishments, not just of the work that is performed Provide a common language for communication Are explicitly defined in terms of owner, unit of measure, collection frequency, data quality, expected value(targets), and thresholds Are valid, to ensure measurement of the right things Are verifiable, to ensure data collection accuracy

Eng. Murhaf Ashi

Agenda
Introduction to BSC Measure Performance BSC history Stake Holder analysis S.W.O.T Analysis BSC four perspective Key Performance Indicators (KPI) Initiatives Matrix BSC strategy map examples References
Eng. Murhaf Ashi

What is the balanced scorecard?

The balanced scorecard is a strategic planning and management system that is widely applicable to organizations regardless of size or type of business. The system, extensively used in business and industry, government, and nonprofit organizations worldwide, provides a method of aligning business activities to the vision and strategy of the organization, improving internal and external communications, and monitoring organization performance against strategic goals

Eng. Murhaf Ashi

BSC history
It was originated by Robert Kaplan and David Norton of Harvard University in about 1990, but the roots of the balanced scorecard are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950s and the work of French process engineers in the early part of the 20th century in France.

David Norton

Robert Kaplan
Eng. Murhaf Ashi

Basic Concepts
Balanced Scorecard views the organization from 4 distinct perspectives: Learning and Growth Perspective
What do we excel at?

Business Process Perspective

How do we continue to grow and create value?

Customer Perspective
How do our customers see us?

Financial Perspective How do we achieve the lowest cost?

Eng. Murhaf Ashi

Basic Concepts
Balanced Scorecard views the organization from 4 distinct perspectives:

Learning and Growth Perspective

What do we excel at?

Business Process Perspective

How do we continue to grow and create value?

Customer Perspective
How do our customers see us?

Financial Perspective
How do we achieve the lowest cost?
Eng. Murhaf Ashi

Agenda
Introduction to BSC Measure Performance BSC history Stake Holder analysis S.W.O.T Analysis BSC four perspective Key Performance Indicators (KPI) Initiatives Matrix BSC strategy map examples References
Eng. Murhaf Ashi

Stake Holder analysis

This tool should be applied at the early stages of the BSC to identified all stakeholder who will benefit from the BSC strategy.
Identifying the nature of each stakeholder Blocker, Neutral and Supporter will help to understand their demand and to find what the new strategy could promises them
Keep Satisfied
High

Manage Closely Mngr- H.Q Mngr- Vector .S

GM- Peter CEO- John

VP- David. A

Power
Monitor Minimum Effort press Keep Informed contractor

low low

Government sector

Coworker-

Interest

High

Agenda
Introduction to BSC Measure Performance BSC history Stake Holder analysis S.W.O.T Analysis BSC four perspective Key Performance Indicators (KPI) Initiatives Matrix BSC strategy map examples References
Eng. Murhaf Ashi

S.W.O.T Analysis

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning Strengths SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. Weaknesses

Opportunities

Threats

Agenda
Introduction to BSC Measure Performance BSC history Stake Holder analysis S.W.O.T Analysis BSC four perspective Key Performance Indicators (KPI) Initiatives Matrix BSC strategy map examples References
Eng. Murhaf Ashi

BSC four perspective

Product quality & quantity

Customer satisfaction

Branch and leafs strength

Process

Quality of Soil

Employees Skills and education

BSC four perspective

Customer Perspective

Business Process Perspective

Learning and Growth Perspective Financial Perspective

Customer Perspective
Customer focus, orientation, and satisfaction are key components Customer will find other suppliers if they are not satisfied or their requirements are not being met Poor customer satisfaction is a leading indicator of future financial decline. Even if the current financial picture is good Developing metrics in this area requires that customer profiles be done as well as the processes that provide the products and services to them

Business Process Perspective

This refers to internal business processes. Metrics are used in this perspective to determine how well the organizations businesses are running. Determine whether the businesses products and services conform to customer requirements (the Mission). Metrics must be carefully designed by those who know the business processes best. Typically there are 2 types of business processes relative to BSC:
1) Mission Oriented Processes that are special functions of major lines of business. Typically this requires specialized metrics. 2) Support Processes that are the day-to-day processes that support the business and organization. Typically they can be measured and benchmarked with generic metrics.

Learning and Growth Perspective

Employee training. Corporate culture attitudes on individual and corporate selfimprovement. Knowledge worker organization with people as the repository of knowledge. Continuous learning mode of operation driven by rapid technology advancements. Learning is more than training (for example, it includes mentors and tutors, ease of communication, etc.). Utilization of technology tools, high technology work systems (for example, the intranet).

Financial Perspective
Based on financial data that is timely and accurate funding data Implementation of a corporate financial database is key Centralization and processing, accessibility, and automation of financial data is key Special attention must be paid to any possible skewing of the Financial Perspective Risk Assessment and Cost/Benefit Analysis should be included in this perspective

Two type of structures (Depend on organization nature)

Profitable organization
Stakeholder

Non profitable organization

Mission

Financial Perspective

Customer Perspective

Customer Perspective

Business Process Perspective

Business Process Perspective

Learning and Growth Perspective

Learning and Growth Perspective

Financial Perspective
Eng. Murhaf Ashi

BSC objective example

Financial Perspective

Operate in the black with 5% margin by increasing revenues

Customer Perspective

Increase utilization of services

Business Process Perspective Learning and Growth Perspective

Provide high quality services

Motivate, recognize and retain staff

Eng. Murhaf Ashi

Cause & Effect relationship

Increase the annual profit

Financial Perspective

Increase utilization of services

Customer Perspective

Provide high quality services Increase employers computer skills Increase employers Marketing skills

Business Process Perspective

Learning and Growth Perspective

Agenda
Introduction to BSC Measure Performance BSC history Stake Holder analysis S.W.O.T Analysis BSC four perspective Key Performance Indicators (KPI) Initiatives Matrix BSC strategy map examples References
Eng. Murhaf Ashi

Key Performance Indicators (KPI)

Key performance indicators (KPI) are quantifiable measures of progress toward an organizations goals. For example, the timely collection of receivables is a KPI for the goal of maintaining healthy cash flow, and value added per factory payroll hour is a KPI for the goal of maximizing factory productivity. Key performance indicators can be financial or non-financial. But they must be quantifiablemeasurableaccurately and consistently over time. Each objective of the BSC map has a number of KPIs to measure the accomplishment of the objective.
Eng. Murhaf Ashi

Types of KPIs
1
By Format

By what is measured

Forward/Backward Measure

4
By Strategic/Operational

Number Ratio Percentage Ranking Rating Index

Input Process Output Outcome

Lag Lead
Strategic Measures (KPIs) appearing in a BSC

Operational Measures not appearing in a BSC

Eng. Murhaf Ashi

Agenda
Introduction to BSC Measure Performance BSC history Stake Holder analysis S.W.O.T Analysis BSC four perspective Key Performance Indicators (KPI) Initiatives Matrix BSC strategy map examples References
Eng. Murhaf Ashi

Initiatives Matrix
The Initiatives Matrix include all the objectives of the balance scorecard strategy map and all the projects that support each objective. The next slide shows an example of the Initiatives Matrix

Eng. Murhaf Ashi

Example of Initiatives Matrix

Environmental Performance targets for E-government initative public bodies, businesses and the Affordable Housing Markets Programme Area-specific traffic reduction schemes Associated Hajj Institutions located in Jeddah Corniche Projects Creation of a strategic planning team to build capacity City Wide Open Space Provision City-wide Street System Upgrade / Public Realm Enhancement Communication Strategy / Ongoing Public Relations Comprehensive Planning Policy Framework Comprehensive Waste Management Programme Jeddah Cultural Events/Festivals 3 2 1 1 Education & Skills Advancement Designation of Protected Areas

City Energy Efficiency City leisure and entertainment facilities

City Public Transport System

City wide integrated parking

Establishment of a Jeddah Environmental Authority Establishment of an Urban Observatory ?

Ground water management

City Broadband Network

Initiatives Matrix

Project doesn't support objective

C1: Become a Capital of Islamic Culture C2: Attain a High Quality of Life for All C3: Achieve and Maintain Sustainable Development C4: Make Jeddah a Dynamic & Resilient International Commercial & Tourism Centre IP1:Foster Cultural Development IP2: Build Effective Infrastructure IP3:Offer high quality of integrated services IP4 Plan strategically and build future capacity IP5: Advocate Jeddah Vision and Strategy IP6: Ensure Effective Governance and Partnership LG1: Recruit and retain talented and motivated people LG2: Align employee to strategy LG3: Foster innovative and ethical culture LG4: Make effective use of technology F1:Use resources effectively F2: Maximize return of investments

3 3 3 1

-3 -1

2 2

2 1 2 1

2 1 2 2

Objective without projects

3 3 2 2

3 1 2 1 1

1 1 3 2 1 2 3 2 2 1 3 3 3 1 1 1 1

1 1 1 1 2 1 1 1 1

1 1 1 2 3 3 1 1

1 2

Objective with 4 projects

3

1 3 3 3 1 2 1

2 2 2 1 3 1 3

F3:Ensure diversified and sustained sources of income

Jeddah Central Station 2 2

Bahrah Industrial City

City Produce Markets

Eastern Hills Reserve

City Densification

Historic Core

Agenda
Introduction to BSC Measure Performance BSC history Stake Holder analysis S.W.O.T Analysis BSC four perspective Key Performance Indicators (KPI) Initiatives Matrix BSC strategy map examples References
Eng. Murhaf Ashi

BSC strategy map examples

Examples of BSC strategy map of global organization BSC STRATEGY MAP EXAMPLES

Eng. Murhaf Ashi

Agenda
Introduction to BSC Measure Performance BSC history Stake Holder analysis S.W.O.T Analysis BSC four perspective Key Performance Indicators (KPI) Initiatives Matrix BSC strategy map examples References
Eng. Murhaf Ashi

References
Dr. Mohammed Mustafa Mahmoud workshop & material Epstein, Marc, and Jean-Franois Manzoni. "Implementing Corporate Strategy: From Tableaux de Bord to Balanced Scorecards." European Management Journal , April 1998, pp. 190-203. "Harvard Business Review Balanced Scorecard Report." Harvard Business Review, 2002 to present (bimonthly). Kaplan, Robert S., and David P. Norton. Alignment: Using the Balanced Scorecard to Create Corporate Synergies. Harvard Business School Press, 2006. Kaplan, Robert S., and David P. Norton. "The Balanced Scorecard: Measures That Drive Performance." Harvard Business Review, July 2005, pp. 71-79. Kaplan, Robert S., and David P. Norton. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Harvard Business School Press, 2000. Kaplan, Robert S., and David P. Norton. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Harvard Business School Press, 2004. Niven, Paul R. Balanced Scorecard Diagnostics: Maintaining Maximum Performance. John Wiley & Sons, 2005. Niven, Paul R. Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results, 2d ed. John Wiley & Sons, 2006 2005 Oak Ridge Associated Universities RL Information Consulting LLC http://www.balancedscorecard.org http://www.bain.com NAPAL excellence in business management , http://www.napl.org www.gate2quality.com www.kellen.net purestonepartners.com/tag/strategy-management/