Simply Brilliant – How Great Organizations Do Ordinary Things In

Extraordinary Ways! 1

Introduction
to Balanced
Scorecard

6th July 2018 1

 Agenda
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About Upohan

Genesis of the Balanced Scorecard

Structure of the BSC

Developing the BSC

BSC as a Strategy Management System

Benefits of the BSC

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 Agenda
3

About Upohan

Genesis of the Balanced Scorecard

Structure of the BSC

Developing the BSC

BSC as a Strategy Management System

Benefits of the BSC

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 ENABLE CLIENT PERFORANCE

HOLISTIC PROBLEM SOLVING

Who are we?

LONG TERM ENGAGEMENT

REAL MEASURABLE IMPACT

Insights coupled with Implementation

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 What do we do?
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unearth unlock
your strategy your processes

unlearn unite
capabilities human capital

uplift
decision making
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Our niche area of expertise lies in Balanced Scorecard development
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15 countries and counting…Work has taken us far and near
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a year
a year
India Nigeria United Arab Emirates

South Africa Qatar Saudi Arabia

KM

Hong Kong Mauritius Egypt

10,000
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Kuwait Singapore Indonesia

Germany United Kingdom United States 7

We have worked across 17 cities in India
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Our consulting work has taken across multiple industries and sectors too
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Manufacturing Automotive Consumer Goods & Services Education

Technology Telecommunication Real Estate Insurance

Media Banking Financial Services Trading 9

From SMEs to large conglomerates, we have worked with them all
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We have been invited to speak at a number of business schools and
national & international conferences 11

Singapore Sri Lanka Dubai India Malaysia Thailand

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 Agenda
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About Upohan

Genesis of the Balanced Scorecard

Structure of the BSC

Developing the BSC

BSC as a Strategy Management System

Benefits of the BSC

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What happens when execution fails….
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What happens when execution fails….
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What happens when execution fails….
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 Researchers cite a 70% failure rate among companies trying to execute
their strategies 16

72% of the respondents rate communication

highest in strategy execution imperatives

48% of the respondents believe their

organization is good at formulating strategy

57% of the respondents are completely

aware of their organization’s strategy

Source: Derived from an HBR Survey of 1,000 respondents 16

Strategy is a term widely used in boardrooms yet understood by few
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During the time of Industrial Revolution, the sole focus was on revenues
(finance) 18

Companies started making whatever product was possible for them as there was
huge demand and low supply
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Post that, the companies realised that there is someone known as
customer who actually uses their products (customer) 19

Companies began investing time and money to understand the customer needs.
Customer was the King!
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While catering to the customer needs, it was realised that there is a
need to improve the processes (internal processes) 20

Till few years back, certifications like ISO, Lean Six Sigma, TUV SUD were highly
sought after, now they are considered as hygiene
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Finally the focus turned to employees who will actually help companies
deliver everything (learning & growth) 21

The companies are focusing on employees like never before; employee first
customer second is the motto!
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The Balanced Scorecard holistically captures all these 4 perspectives into
the framework 22

Finance Customer

Internal Learning &

Processes Growth
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Balanced Scorecard, as a concept, emerged out of the Harvard Business
School 23

Robert Kaplan David Norton

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 Robert Kaplan & David Norton researched several Fortune 500
companies and came up with an article on Strategy Management 24

The 1992 article remains one of the most popular and widely read articles’ of
Harvard Business Review magazine till date
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They have chronicled their experiences in strategy management using
the Balanced Scorecard 25

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Balanced Scorecard is an Enterprise Performance Management (EPM)
tool that aids execution of strategy 26

It converts
thoughts into Strategy Map
action
Objective Measures
Owners

Projects
Provides a performance
measurement tool and
aligns individuals to the Strategic KPIs
strategy
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 Agenda
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About Upohan

Genesis of the Balanced Scorecard

Structure of the BSC

Developing the BSC

BSC as a Strategy Management System

Benefits of the BSC

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 The reason why it is called “Balanced” is…
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Financial Internal Process

Perspective Perspective
“How should we operate
“What are the financial
internally to deliver on
results that we are chasing”
stakeholder expectations?”

Outcomes Drivers

Learning & Growth

Customer Perspective
Perspective
“How will we sustain our ability
“What is our positioning to our to change and improve in terms
customers” of people and technology?”

➢ Immediate term and ➢ Lagging and leading

medium term objectives “Balance” indicators
➢ Financial and Non- between ➢ External and internal
financial measures performance perspectives
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 … and why it is called a “Scorecard”
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Objectives Measures Targets Initiatives

What the How success or The level of Key action

strategy is failure performance or programs
trying to (performance) rate of required to
achieve against improvement achieve
objectives is needed targets
monitored
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 BSC is the “dashboard” view of an organization's strategy
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Financial

Customer

Internal Processes

Learning & Growth

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 The Thought – Action Gap
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VISION
Where we want to go

MISSION
How will it impact stakeholders

VALUES
Our core guiding principles

STRATEGY MAP AND BALANCED SCORECARD

THE GAP
Implementing Strategy

TARGETS & INITIATIVES

What are we doing on the ground

PERSONAL TARGETS
What does it mean for me

SATISFIED DELIGHTED STRATEGIC EFFECTIVE ENGAGED

SHAREHOLDERS CUSTOMERS OUTCOMES PROCESSES WORKFORCE

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 Use of BSC is not limited to corporates, it is an easy fit for NGOs and
Government enterprises as well 32

For Profit Organizations For Governments/ NGOs

Financial Financial Management

Create value for shareholders and Obtain funding according to
achieve Financial objective the budget and allocate
appropriations

Customers Citizens/ Beneficiaries

Provide maximum customer Create and deliver value to
satisfaction and increase market the stakeholders
share

Internal Process Internal Process

Develop standardized Processes Develop skills to make
standardized Processes

Learning & Growth Learning & Growth

Improvement in quality, skills, Adopt the change and
productivity of the Manpower become sustainable

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Balanced Scorecard can be used effectively to manage Strategy across
verticals and SBUs 33

Corporate/
Vision Group
How
What Corporate BSC
Objective
Measure SBU/ Department/
Initial Balanced Cascade &
Scorecard Targets Function
How Linkage
Development
Initiatives Departmental BSC
What Objective
Team/
Measures
Targets Individual
How
Team / Individual KPIs
Initiatives Objective
What (Specific)
Measures (Specific)

Targets
Performance Management System

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 Agenda
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About Upohan

Genesis of the Balanced Scorecard

Structure of the BSC

Developing the BSC

BSC as a Strategy Management System

Benefits of the BSC

34
 A generic strategy map will have objectives articulated across all the
four perspectives 35

Productivity Strategy Long-term Growth Strategy

Finance Shareholder Value

Improve Cost Increase Asset Expand Revenue Enhance Customer

Structure Utilization Opportunities Value

Customer Value Proposition

Customer
Price Quality Availability Selection Functionality Service Partnership Brand

Product/Service Attributes Relationship Image

Process Innovation Operation Management Regulatory & Social
Customer Management
Management Processes Processes
Processes
Processes Processes that produce & Processes that improve
Processes that enhance
Processes that create new deliver products & communities and the
customer value
products and services services environment

L&G
Strategic Strategic Organization
Job Families IT Portfolio Change Agenda

Human Capital Information Capital Organization Capital

Skills, Training, Systems, Databases, Culture, Alignment,
Knowledge Networks Leadership, Teamwork

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The BSC facilitates strategy execution because it maps intent (objectives)
against action (initiatives) 36

Obj. IP1

Obj. IP2

Obj. IP3

Obj. IP4
Obj. C1

Obj. C2
Obj. F1

Obj. F2

Obj. F3

Obj. F4

Obj. L1

Obj. L2

Obj. L3
i1

i2

i3

i4

i5

i6

i7

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 The progress of strategy implementation can be reviewed after
assigning measures and targets against each strategic objective 37

Obj Objective
Objective Measure Target Actual Initiatives
# Owner
1
F1
2
1
FINANCIAL

F2
2

F3 1
1
F4
2
INTERNAL PROCESSES CUSTOMER

C1 1

C2 1

1
IP1
2
IP2 1
IP3 1

IP4 1
L1 1
LEARNING &
GROWTH

1
L2
2
L3 1
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BSC measures should reflect the intended outcome for the chosen
objectives 38

RELEVANCE HOLISTIC
Mix of input measures
Identify something to be (lead) and output measures
counted or measured (lag)

RELIABILITY
Record of occurrence or
non-occurrence has to be
maintained

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There are mainly five commonly used categories of measures for
assessing achievement of business objectives 39

➢ Activity Counts

➢ Ratios

➢ Percentage

➢ Monetary Values

➢ Index

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 Examples of Measures
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➢ Attrition rate
➢ Lot processing time ➢ Year-on-year
➢ Cash-to-cash cycle growth
➢ Turnaround time ➢ Profitability
➢ Audit NCs ➢ Market share
➢ Learning mandays ➢ Asset utilization
➢ Inventory days ➢ Return on rate
➢ Days outstanding investment ➢ Growth in
➢ Manufacturing customers
ACTIVITY COUNTS efficiency ➢ Capacity utilization
➢ Parts per million
➢ Earnings per share PERCENTAGE
➢ Operating income ➢ Labour productivity ➢ Employee
➢ Gross profit ➢ Inventory turn Satisfaction Index
➢ Unit cost of RATIOS ➢ Customer
production Satisfaction Index
➢ Revenue ➢ On Time In Full On
➢ Manpower cost Spec
➢ Cost of borrowings ➢ Net Promoter Score
MONETARY VALUES INDEX 40
BSC measures should reflect the intended outcome for the chosen
objectives 41

Based on historical
data and/or Set through policy
external decisions
benchmarking

Derived out of Done through gut

the business feeling or
plan/budgets experience

The right method of target setting

depends on striking a balance between
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What qualifies as an action plan?
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➢ Non-routine activity
➢ Not an operational task/responsibility
➢ Specific start date and end date
➢ Identified tasks / steps for completion
➢ Dedicated people / financial resources
➢ Key milestones
➢ Agreed measures of success

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 Agenda
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About Upohan

Genesis of the Balanced Scorecard

Structure of the BSC

Developing the BSC

BSC as a Strategy Management System

Benefits of the BSC

50
To begin with, Balanced Scorecard will help answer existential questions
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Have we heard this before?
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 Agenda
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About Upohan

Genesis of the Balanced Scorecard

Structure of the BSC

Developing the BSC

BSC as a Strategy Management System

Benefits of the BSC

58
The most recent edition of an annual global survey on BSC usage and
adoption experience throws up some interesting insights 59

Balanced Scorecard’s
primary reported role is
implementation of
strategy

Source: 2 GC Balanced Scorecard Usage Survey 2017 59

77% of organizations reported that their BSC was extremely or very
useful 60

The BSC adds value

only if it is actively used
in letter and spirit

Source: 2 GC Balanced Scorecard Usage Survey 2017 60

Balanced Scorecard is used as an active management tool for strategic
as well as operational purposes 61

Organizations use their

BSCs to influence
business actions and
behaviours

Source: 2 GC Balanced Scorecard Usage Survey 2017 61

BSC reporting and review frequency has increased compared to
previous surveys 62

Periodic BSC reviews

facilitate informed
decision making

Source: 2 GC Balanced Scorecard Usage Survey 2017 62

Most organizations formally link their BSCs to several other processes
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BSC has to be the

starting point for
planning and
budgeting activities

Source: 2 GC Balanced Scorecard Usage Survey 2017 63

Balanced Scorecard delivers benefits among several areas across the
organization 65

Gives structure to Improved Strategy

strategy Communication &
Execution

Aligns departments Strategy in centre of

and divisions reporting process

Linking individual goals Better alignment

to the organizational of Processes &
strategy Action Plans
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No wonder BSC is used across the world for managing the strategy
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And in India as well
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Any questions?
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Thank You 69

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