Assignment On

Balance Score Card

Submitted To:Prof. Ganesh Singh

Submitted By:Sandeep Yadav (Section-A)

ACKNOWLEDGEMENT
We take this opportunity to convey our sincere thanks and gratitude to all those who have directly or indirectly helped and contributed towards the completion of this case study.

First and foremost, we would like to thank Prof. Ganesh Singh for his constant guidance and support throughout this project. During the project, we realized that the degree of relevance of the learning being imparted in the class is very high. The learning enabled us to get a better understanding of the nitty-gritty of the subject which we studied.

We would also like to thank our batch mates for the discussions that we had with them. All these have resulted in the enrichment of our knowledge and their inputs have helped us to incorporate relevant issues into our project.

Sandeep Yadav

Balance Score Card

The balanced scorecard is a strategic planning and management tool. It is a system which is widely applicable to organizations regardless of size or type of business. This system, extensively used in business and industry, government, and non-profit 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. It is a semi-standard structured report supported by proven design methods and automation tools that can be used by managers to keep track of the execution of activities by staff within their control and monitor the consequences arising from these actions. It is perhaps the best known of several such frameworks, and was widely adopted in English speaking western countries and Scandinavia It was originated by Robert Kaplan and David Norton of Harvard University in about 1990.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. The balanced scorecard has evolved from its early use as a simple performance measurement framework for non-financial performance measures to a full strategic planning and management system. The new balanced scorecard transforms an organizations strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.

Characteristics
1. The core characteristic of the Balanced Scorecard and its derivatives is the presentation of a mixture of financial and non-financial measures each compared to a 'target' value within a single concise report. 2. The report is not meant to be a replacement for traditional financial or operational reports but a succinct summary that captures the information most relevant to those reading it. 3. It is the methods by which this 'most relevant' information is determined (i.e. the design processes used to select the content) that most differentiates the various versions of the tool in circulation. 4. Initial designs were encouraged to measure three categories of non-financial measure in addition to financial outputs - those of "Customer," "Internal Business Processes" and "Learning and Growth." 5. Clearly these categories were not so relevant to non-profits or units within complex organizations (which might have high degrees of internal specialization), and much of the early literature on Balanced Scorecard focused on suggestions of alternative 'perspectives' that might have more relevance to these groups. 6. The modern performance management tools including Balanced Scorecard are significantly improved - being more flexible (to suit a wider range of organizational types) and more effective (as design methods have evolved to make them easier to design, and use).

Perspectives
The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives: 1. 2. 3. 4. The Learning & Growth Perspective The Business Process Perspective The Customer Perspective The Financial Perspective

The Leaning & Growth Perspective It includes employee training and corporate cultural attitudes related to both individual and corporate selfimprovement. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. The Business Process Perspective This perspective refers to internal business processes. The Customer Perspective Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good. The Financial Perspective Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.

Relation among perspective

THE BSC MODEL

Adapted from Robert S. Kaplan and David P. Norton, Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review (January-February 1996): 76. Explanation of a Model Hence, from the aforesaid model, it is clear that the following are to be done so as to utilize the Balanced Scorecard as a strategic management tool: 1. The major objectives are to be set for each of the perspectives. 2. Measures of performance are required to be identified under each of the objectives which would help the organization to realize the goals set under each of the perspectives. These would act as parameters to measure the progress towards the objectives. 3. The next important step is the setting of specific targets around each of the identified key areas which would
act as a benchmark for performance appraisal.

Hence, a performance measurement system is build around these critical factors. Any deviation in attaining the results should raise a red signal to the management which would investigate the reasons for the deviation and rectify the same.
4. Appropriate strategies and the action plans that are to be taken in the various activities should be decided so that it is clear as to how the organization has decided to pursue the pre-decided goals. Because of this reason, the Balanced Scorecard is often referred to as a blueprint of the company strategies.

An example will help to understand it better. Some of the objectives together with a measurement measures are given below. Hence, the above paragraphs show that all the four areas have been given equal importance in measuring performance level. The measures and the objectives, however, depend upon the type of business the organization is in. The financial indicators are complemented by the nonfinancial. Since, objectives and goals are set for each of the critical success factors under each of the heads; it brings about a focus on the strategic vision. Thus, all activities would be directed towards achievement of the long-term goals which have been set by the top management. The identification of the key result areas (KRAs) help an organization in moving towards the right strategic direction. This tool creates a link between objectives, measures, targets and initiatives. It is, therefore, absolutely clear that the Balanced Scorecard acts as a focal point for the organisations efforts, designing and communicating priorities to the managers, employees, investors and the customers.

Implementation of BSC

It is a nine step process i.e. 1. Organizational Assessment 2. Strategy Development 3. Strategic Objectives 4. Strategy Mapping 5. Performance Measures and Targets 6. Strategic Initiatives 7. Automation 8. Cascading the BSC throughout the Organization 9. Evaluation In Step One of the scorecard building process starts with an assessment of the organizations Mission and Vision, challenges (pains), enablers, and values. Step One also includes preparing a change management plan for the organization, and conducting a focused communications workshop to identify key messages, media outlets, timing, and messengers.

In Step Two, elements of the organizations strategy, including Strategic Results, Strategic Themes, and Perspectives, are developed by workshop participants to focus attention on customer needs and the organizations value proposition. In Step Three, the strategic elements developed in Steps One and two are decomposed into Strategic Objectives, which are the basic building 18 blocks of strategy and define the organization's strategic intent. Objectives are first initiated and categorized on the Strategic Theme level, categorized by Perspective, linked in cause-effect linkages (Strategy Maps) for each Strategic Theme, and then later merged together to produce one set of Strategic Objectives for the entire organization. In Step Four, the cause and effect linkages between the enterprise-wide Strategic Objectives are formalized in an enterprise-wide Strategy Map. The previously constructed theme Strategy Maps are merged into an overall enterprise-wide Strategy Map that shows how the organization creates value for its customers and stakeholders. In Step Five, Performance Measures are developed for each of the enterprise-wide Strategic Objectives. Leading and lagging measures are identified, expected targets and thresholds are established, and baseline and benchmarking data is developed. In Step Six, Strategic Initiatives are developed that support the Strategic Objectives. To build accountability throughout the organization, ownership of Performance Measures and Strategic Initiatives is assigned to the appropriate staff and documented in data definition tables. In Step Seven, the implementation process begins by applying performance measurement software to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information. In short, automation helps people make better decisions because it offers quick access to actual performance data. In Step Eight, the enterprise-level scorecard is cascaded down into business and support unit scorecards, meaning the organizational level scorecard (the first Tier) is translated into business unit or support unit scorecards (the second Tier) and then later to team and individual scorecards (the third Tier). Cascading translates high-level strategy into lower-level objectives, measures, and operational details. Cascading is the key to organization alignment around strategy. Team and individual scorecards link day-to-day work with department goals and corporate vision. Cascading is the key to organization alignment around strategy. Performance measures are developed for all objectives at all organization levels. As the scorecard management system is cascaded down through the organization, objectives become more operational and tactical, as do the performance measures. Accountability follows the objectives and measures, as ownership is defined at each level. An emphasis on results and the strategies needed to produce results is communicated throughout the organization. In Step Nine, an Evaluation of the completed scorecard is done. During this evaluation, the organization tries to answer questions such as, Are our strategies working?, Are we measuring the right things?, Has our environment changed? and Are we budgeting our money strategically?

Advantages of BSC
The advantages of the balanced scorecard have been identified by many organizations: Improved organization alignment Improved communications, both internally and externally Linked strategy and operations More emphasis on strategy and organizational results Integrated strategic planning and management

Challenges while implementing it

There are several major challenges to developing and sustaining the balanced scorecard: Engaged leadership Maintaining momentum Measuring what matters Not using a disciplined framework to build the system Mistakenly thinking a scorecard system is a short-term project (its not.its a journey) Not involving a cross-section of the organization in developing the system Not thinking strategically enough Not incentivizing desired behaviour changes

Balanced Scorecard Examples

Below is the some examples of various types of organization where BSC is being used: Non-profit Organizations: Oak Knoll Academy - A primer on development of a management strategy for a fictitious private school, by Balanced Scorecard Institute Associate Dr. Lawrence Grayson. A strategy map for the school is also available. Vinfen Corporation - A private, non-profit human services organization based in Cambridge, MA. They recently published a scorecard and a newsletter that provides details about their strategic plan and performance measures. Government Organizations: Defence Financial Accounting Service (DFAS) - Example of a balanced scorecard-based strategic plan for this world-class financial organization, and some additional information about how it was developed (Nov. 2001). Federal Aviation Administration Logistics Centre - A highly customer-focused organization with a balanced scorecard-based strategic plan. Their original plan is a rather large (37 MB) file, so we have removed the graphics and here we provide the text content only, in order to reduce the file size. Department of Energy Federal Procurement System- One of the early Federal Government adopters of the balanced scorecard. Continues to lead by example with this FY2003 Performance Assessment. Department of Energy Federal Personal Property Management Program - Example of a balanced scorecard for a major government program. Government Strategy Map Example - Example of a generic strategy map for a government organization on the Federal, State or local level. Commercial Organizations: Regional Airline - A strategy map, with objectives, performance measures and initiatives in the balanced scorecard framework. Credit Card Company - A generic example of a possible strategy map for an innovative credit card company.