Balance Score Card

 

Agenda: What is mean by Vision? What is mean by strategy? Why is it difficult to implement strategy? A new approach to strategy implementation Foundation of the Balanced Scorecard BSC as a Performance Performance Management System BSC as a Business Management Management System How does BSC benefit organisations? Success stories Conclusions

 



“The Day you don’t face any problem/Challenges, Think and

 You will realize that ur walking on the wrong path.” 

By: Swami Vivekanand

 

VISION, MISSION AND VALUES



Vision: Defines the desired or intended future state of  a specific organization or enterprise in terms of its fundamental objective and/or strategic direction.



Mission: Defines the fundamental purpose of an organization or an enterprise, basically describing why it exists.



Values: Beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities.

 

What is mean by strategy?  “Developing and communicating the company’s unique position, making trade offs and forging fit among activities” -----Michael E Porter “A unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved” ----William F Glueck

 

Why is it difficult to implement strategy? Strategy implementation becomes difficult as organizations face one or more of these challenges…

Findings of a Survey of 200 major companies, by a consultancy firm Renaissance Worldwide and CFO Magazine  

Why is it difficult to implement strategy? •Thus organization gets in to a trap where ……… •Visions Are Not Actionable • Goals and Rewards Are Not Linked to Strategy  •Resource Allocation Is Not Linked to Strategy  •Feedback Is Tactical, Not Strategic 

Conclusion –  You cannot manage strategy with a system designed for  tactics.

Findings of a Survey of 200 major companies, by a consultancy firm Renaissance Worldwide and CFO Magazine  

Because of “Thought – Action” Gap

Balanced Scorecard

Strategic Initiative – What do we need to do? GAP between STRATEGY and ACTION PLAN Personal Objectives – What do I need to do?

Strategic Outcome Satisfied Shareholder 

Delighted Customer 

Effective Processes

?????????

Motivated & Prepared Workforce

 

A new approach to strategy implementation - BSC What is the Balanced Scorecard?  The Balanced Scorecard (BSC) is a comprehensive management performance control tool with a strong focus on vision visi on and strategy. The strategy is translated into specific tactical performance-driving activities. Measures are established for each activity.

 

USE Implementing Balanced Scorecards typically includes four processes:  Translating the vision into operational goals;  Communicating the vision and link it to individual performance;  Business planning;  Feedback and learning, and adjusting the strategy accordingly.

 

WHY NEED A BALANCED SCORECARD? The Source of Value Has Shifted From Tangible to Intangible Assets  percentage of market value related to…

Intangible Assets

38%

62%

Tangible Assets

62%

38%

85%

15% 1982

1. Brookings Institute 2. Baruch Baruch Lev analysis analysis of S&P500 companies

19921

20002

 

VALUE CREA INTANGIBLE ANGIBLE CREATION: INT ASSETS Training Service Quality

Customer Confidence

Customer Retention

Revenue

Information Technology



Intangible Assets Do Not Have A Direct Impact on Financial Results — They Have Second- or Third-Order Impacts



Conventional approach to managing financial & operational indicators



insufficient Balanced Approach to Strategy Implementation should includes focus on customer/stakeholder & learning, growth & innovation



Understanding & managing/leveraging inter-relationships between the above areas necessary for value creation

 

BALANCED SCORECARD

Balanced Scorecard’s key theme is not about Measurement as the term would outwardly convey Its about “Value creation -Execution of Strategy”

Year 1992, Robert S. Kaplan and David P. Norton.

 

Balanced Scorecard

Company’s dashboard

 

 The Balanced Scorecard provides a four perspective framework to formulate strategy and translate it into operational terms

 

BSC as a Performance Measurement Tool

The VISION Balanced Scorecard STRATEGY

 

Performance Measures

 

 THE BALANCED SCORECARD INDICATORS 1. The Learning and Innovation  This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvemen self-improvementt. 2. The Internal Business Process  This perspective allow the managers to know how well their business is to running, is there any scope improve

anyfurther  

 THE BALANCED SCORECARD INDICATORS 3. The Customer Perspective   This perspective emphasises customer focus and customer satisfaction.

4. The Financial Perspective  Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate data  will alwaysfinancial be a priority  priority

 

EVERY MEASURE IN BS CULMINATES IN TO FINANCIAL FINANCIAL OUTCOME OUTCOME -

FINANCIAL STRENGTH Product Profitability, EBIT CUSTOMER SATISFACTION Market Share, Survey Scores, Complaints BUSINESS PROCESS IMPROVEMENT Cycle Time, Defects, Activity Costs ORGANIZATIONAL LEARNING Training Time, Turnover, Staff Satisfaction Score

 

BALANCED SCORECARD – CAUSE EFFECT RELATIONSHIP AMONG INDICATORS Indicators Innovative and Learning

Internal Business Process

Customer

Financial

Employee training

Productivity

Cost effective product

Growth in revenue.

Test marketing

Better production planning

Assured acceptance

Growth in market

Customer retention (gets hooked to

Assured market share

Examples- 

R& D Achieveme nt

New product line

the Co).  

How does BSC benefit organizations? BSC a BSC act cts sa as s a St Stra rate tegi gic cM Man anag agem emen ent/ t/ Im Impl plem emen enta tati tion on To Tool ol Which Helps in …… Validation/Enhancement of Strategy Getting clear consensus on the same Articulation and Communication of Vision & Mission into key strategic objectives Creation of Strategic Maps at corporate and SBU level Alignment of the entire organization to the strategy Brings in Clarity and Transparency – enhanced understanding of strategic objectives down to operating level Make customer focused organization Provides unambiguous measures for performance control Consensus on ownership of objectives at all levels of  management Prioritization of strategic action plans Makes strategic planning a continuous process

 

How does BSC benefit organizations? Provides a “BALANCED” Performance Management Tool –  Adequate balanceremain between lead and lag measures/indicators Help organization pro-active Provides macro perspective to senior management –  no more longer working in “silos” Clear linkage and alignment of individual and enterprise performance Flexible KRA’s depending on the business needs of the organization Helps achieve financial results by managing simultaneously s imultaneously non financial measures

 

STRATEGY MAPS TO INDIVIDUAL SCORECARD

 

SCORECARD DESIGN &  ROLLOUT  Mobilize change through executive leadership Translate the strategy to operational terms

BALANCED

Integrate  improvement programmes with scorecard

STRATEGY SCORECARD

 Align the organization to create

Change people, make strategy everyone’s

synergies

everyday job

 

SCORECARD DESIGN &  ROLLOUT

Translate the strategy to operational terms

BALANCED

STRATEGY SCORECARD

 

  COMPONENTS Vision and Strategy

What are the financial objectives for growth and productivity? 

Financial Perspective

What are the major sources of growth? 

Who are the target customers that will generate the revenue growth?  What are the objectives and how do we measure success with them? 

Customer Perspective

Brand / product development, sales, service, operations, logistics..  Activities needed to create the required customer value proposition and differentiation and the desired financial outcomes

Organization infrastructure, skills, capabilities, knowledge of employees, working climate.. The ability to execute internal business b usiness processes in new 

Internal Perspective

Learning and growth Perspective

differentiated ways  

SCORECARD DESIGN &  ROLLOUT

BALANCED

STRATEGY SCORECARD

 Align the organization to create synergies

 

ALIGN: USE STRATEGY MAP TO BUILD CAUSE & EFFECT RELATIONSHIPS Improve ROCE Financial  Perspective 

Revenue Growth Strategy

Increase Customer Value

Build the Franchise 



New Revenue Sources 



Productivity Strategy

Improve Cost Structure 

Customer  Profitability  

Customer Acquisition 

Customer Retention 

Cost per Unit 



Improve Asset Utilization 

Asset Utilization 

Market Share 

Product Leadership 

Customer Value Proposition Operational Excellence 

Customer  Perspective  Price

Learning & Growth  Perspectiv  e 

Time

Quality 

Internal  Perspectiv  e 

Relationship

Product/Service Attributes  Functio n

Service

Image  

Relations

Brand

Customer Satisfaction 

“Build the Franchise”

“Increase Customer Value”

“Achieve Operational Excellence”

(Innovation  Processes) 

(Customer  Management  Processes) 

(Operations & Logistics Processes) 

A Motivated and Prepared Workforce Strategic Competencies

Strategic Technologies

Climate for Action

 

ALIGN : FLOW OF THE SCORECARD ALONG THE ORGANIZATION Plant Head :Weekly Value Loss Scorecard & Analysis

Department Weekly Scorecard

Maintenance Weekly Scorecard Review

Production Daily Scorecard Review

Production Shift Scorecard Review

Packing Daily Scorecard

Review

Packing Shift Scorecard

Review

Review

Maintenance Daily Scorecard

Review

PC/QC Weekly Scorecard

Review

PC/QC Daily Scorecard

Review

 

SCORECARD DESIGN & ROLLOUT ROLLOUT

BALANCED

STRATEGY SCORECARD

Change people, make strategy everyone’s everyday job

 

CHANGE : MINDS PATH MATRIX …No shortcuts possible... The Four States of Mind! Incompetent      s       u       o         i      c       s       n      o         C 

     s       u       o  i      c       s       n      o       c       n        U 

Support

Direct

Minds Path Matrix Incompetent

Competent

Coach

Delegate

     s       u       o         i      c       s       n      o         C 

     s       u       o  i      c       s       n      o       c       n        U 

Competent

Understanding

Usage

Compliance

Culture

 

CHANGE : MINDS PATH MATRIX

Understanding

Usage

Compliance

Culture

People why the data recorded in the bebecome of use toa them Peoplestart understand they are “being told” dosystem something new. •••Recording thisrealising new orthat extra data and working into a new way might has now fact of  and the business in the future. Process transformation begin to inspire co confidence nfidence high don’t see the use of it !! •life. GodProcess knows compliance why becauseisthey • •They start using (read :extra analyzing) the scorecards. Thisnow isis normally viewed as non-value r esponsibility. • There some light at the end of the tunnel.added responsibility. • •Meetings arechecking, hel held d to revi review ew will the stop data data.. The wheel starts starts turning! If you they • You stillstop need to keep them on close trying. track however.

 

CHANGE: MINDS PATH MATRIX

Understanding

Usage

Compliance

Culture

• People don’t think about the new system& process processes es anymore. It is THEIR system Peoplestart understand they areand “being told”inin tothe something •• • Recording this new orthat extra data working adonew waymight hasnew. now become fact and of  People realising why the data recorded sys system tem be of use to athem now. Process is Process high the business in thebecause future. transformation begin • life. God knowscompliance why they don’t see the use of it !! to inspire confidence • They fully optimize the usage of data gathered at all levels. •• • They start light using (read ead : extra analyzing) the scorecards. There is normally some at(r the end of the tunnel. Thisnow is viewed as non-value added responsibility. They use thechecking, S Scorecards towill drive improvements in business performance. •••• Meetings are held to review the data. The however. wheel starts turning! turning! You still need tocorecards keep them on close track If you stop they stop trying. • They improve details of the systems as a s per the requirements.

 

CHANGE MANAGEMENT The Mind’s Path To Success

  Success Hope  

Problem Definition

Pain

Solution Development

Solution Implementation

Culture Change

 

SCORECARD DESIGN & ROLLOUT ROLLOUT

BALANCED

STRATEGY SCORECARD

Integrate  improvement programmes with scorecard

 

SCORECARD’S ROLE IN  TRANSFORMATION 

Scorecard is an indispensable Scorecard i ndispensable tool to manage & monitor a transformation/business transformation/business performance improvement programme

Scorecard Implementation needs to be supported by functional/departmental functional/departmental initiatives  Scorecard supported by a Transformation Initiative drives Business Results 

 

INTEGRATE : GOALS, MEASUREMENT &  IMPROVEMENT INITIATIVES

 

INTEGRATE :GOING FROM OUTPUT TO OUTCOME When you first launch your Initiative, you Outcome probably want to use an Initiative Output Measurement Output Measurement. Once the Initiative is up and running, integrate Measurement your measurement to an Outcome to see if the Initiative is really  having strategic impact.

Lean Process / Six Sigma

Number of Projects Overall reductions in Defined by Region errors, reworks, and cycle times

Employee Competency Models

% ofhave Employees who a Competency Model in place

Higher skillusing levelsthe of  employees models

 

SCORECARD DESIGN & ROLLOUT ROLLOUT  Mobilize change through executive leadership BALANCED

STRATEGY SCORECARD

 

MOBILIZE : TOP MANAGEMENT COMMITMENT 1.Creating the Climate for Change Unfreeze the organization Show the need for change

2. Creat Creating ing the the Lead Leaders ership hip Team Team Breaking down functional bias

3. Creat Creating ing the the Visi Vision on and and Stra Strateg tegy y BSC as a “visioning process” BSC to clarify the strategy

4. Creat Creating ing Team Team Accou Accounta ntabil bility ity Accountability for cross-functional strategic themes at Executive Team level

 A successful Balanced Scorecard program starts with a recognition that it is not a “metrics” project, it’s a “change” process.

 

MOBILIZE :TIGHT FOCUS & EXTENSIVE REVIEW STRATEGY 60% of organizations don’t link strategy & budgets

update the strategy 

test the hypotheses Strategic Learning Loop

85% of  management teams spend less than one hour per month on strategy issues

BALANCED SCORECARD

BUDGET 78% of organizations lock budgets to an annual cycle

 funding

 Management Control Loop

reporting 92% of organizations do not report on lead indicators

20% of organizations take more than 16 weeks to  prepare a budget

PERFORMANCE

Input (Resources)

Initiatives & Programs

Output (Results)

 

MOBILIZE : RED BUTTONS TO AVOID



Middle Management Team: Lack of Senior Management Commitment



Done by One or Two Individua I ndividuals ls



Held at the Top: For Senior Management Only



 Too Long a Development  Too De velopment Process: “Best Becomes the Enemy of the Good”



 Treating the Balanced Scorecard as a Systems Project



Done Only for Compensation



Not Treated as a Change Management Project

 

CONTEXT 

Focus on Top ICICI Bank perceived to be very aggressive online. sales , very poor on service.  For bottom-line bottom-line to improves it was impor important tant for the bank to be a service leader.  Improved Service   



Leads to impr improved oved productivity & profit Generates a positive positive word of mouth. Attracts new customers Provides a competitive advantage.  More difficult and slower for a competitor to respond to service improvement than to price change. Help us retain customers.  Cheaper to retain customers than to acquire new ones

 

 TERMINATOR : ZERO UNHAPPINESS Mission To ensure that the all causes of Unhappiness for Customer Customer are fully  Terminated in order for the bank to vie for Service Leadership

Customer

Financial

•Customer Complaints

•Cost of Complaints

• Feedback Scores •Customer Repeat Contacts •Request Closure beyond 24 Hours

• of Business through Cross Selling •% Average Revenue Per Customer

Internal Processes •Performance within TATs •Quality •Productivity •% Complaints to Transactions •Branch Contacts with Customers, Delivery Success Rate %

Research, Education & Teaching •Patent Score for Process Improvements •SWIFT Training to Branches, Terminator Workshops

 

ZERO UNHAPPINESS SCORECARD BRANCHESSAMPLE Zero Unhappiness Scorecard -Deposits - Branches

Top Branch CRs#

Feb Feb Varian Budget Actual ce  J an ''05 05 De Dec c ''04 04 Nov '04 '04

Ikit not activated

125

50

75

169

245

422

Instruction for A //c c closure not executed

120

80

40

242

139

182

Cash Deposited A t Branch Not Credited

90

86

4

121

209

188

140

137

3

183

187

189

A ddress change not done

65

55

10

88

169 169

168 168

A /c Not Opened

20

4

16

37

131

101

Outstation Outstat ion collection - Dispute in Amt

20

2

18

50

64

66

FD Renewal not done - deposits

10

9

1

8

32

23

5

5

0

11

13

10

 Transfer Of A ccounts related issues

T   DS A mount Deducted Disputed Fixed deposit not linked to account

5

0

5

6

10 10

6

Form 15 H Not Entered

0

0

0

0

0

1

Cash Deposit In Atm Not Crdited Fixed Deposit Interest Chq Not Received

12 2

4

8 2

21

35

56

0

3

3

8

5

3

2

11

17

24

619

435

Loc Loca al Outwrd Outwrd chq chq retur returned ned physic physica al ch chq q not re recd cd

TOTA L Total Quality

950

Budget Feb 1-1 ar arian ianc c

 

Ja an n

1254



1444

Dec

Nov

Quality Qualit y -North

90%

90%

0% 45%

55%

58%

Quality -East

90%

83%

-7% 69%

58%

70%

Quality -West

90%

95%

5% 65%

59%

59%

Quality -South

90%

79%

-11% 60%

58%

58%

90% 87% -3% 60% Budget Feb 1-1 ar arian ianc c  J an

58%

61%

Overall Branch Banking Total TA T Total CR beyond 24 hours

51

Sample Scorecard  Scorecard presented & reviewed in fortnightly reviews  All variances are linked to RCA  Comparison of Monthly Performance Perfor mance Vs. Budget  Focus on Top Service Failures Key On : Indicators Number ofFocused Service Failures, Quality, Service Request Closed Clo sed w within ithin TAT

 Total CR beyond 24 hours

0

51

51

82

 

ZeroUnhappinessScorecard-Deposits - Branches

TopBranch CRs#

Feb Budget

Feb Actual

Varia ian ce

 J an'05

Dec'04

Nov'04

Ikitnotactivated

125

50

75

169

245

422

InstructionforA/cclosurenotexecuted

120

80

40

242

139

182

CashDepositedAtBranchNotCredited

90

86

4

121

209

188

140

137

3

183

187

189

TransferOf Accountsrelatedissues

65

55

10

88

169

168

A/cNotOpened

20

4

16

37

131

101

Outstatiio oncolle lectio ion- DisputeinAmt

20

2

18

50

64

66

FDRenewal notdone- deposits

10

9

1

8

32

23

TDSAmountDeductedDisputed

5

5

0

11

13

10

Fixeddepositnotlinkedtoaccount

5

0

5

6

10

6

Form15HNotEntered

0

0

0

0

0

1

12

4

8

21

35

56

FixedDepositInterestChqNotReceived

2

0

2

3

3

8

Local Outwrdchqreturned physical chqnotrecd

5

3

2

11

17

24

1254

1444

Addresschangenotdone

CashDeposit itIIn nAtmNotCrdit te ed

TOTAL Total Quality

619 Budget

950

435 Feb1-15

ariance

 

J an

Dec

Quality-North

90%

90%

0%

45%

55%

58%

Quality -East

90%

83%

-7%

69%

58%

70%

Quality-West

90%

95%

5%

65%

59%

59%

Quality-South

90%

79%

60%

58%

58%

-11%

N

Overal BranchBankiin ng Total TAT

90% Budget

TotalCRbeyond24hours

0

3%

87% Feb1-15

ariance

51

-51

60%

58%

 J an 82

 

SCORECARD RELATED RCA : DELIVERABLES NOT RECEIVED

Apart from wrong creation, dispatch/delivery related issues needed focus

61%

 

RCA: DELIVERABLES NOT RECEIVED Issue: RTO •Key Issue: returns would sit at the branches, waiting for customer to collect them   •Solution Solution:: Outbound Calling •Every deliverable cleared resulted in a happy customer, lesser rework &  cost savings •Average Contact Ratio:65%

Data :Nov04-Jun 05  

RCA : DELIVERABLES NOT RECEIVED 

Issue :E-search Update  E-search information for certain deliverables not updated/ available resulting in inadequate /incomplete information to customers &  Service Request creation errors



Initiative :E-Search Update (CTD Initiative)  Identified mandatory uploads for First Contact Resolution related to RPC/ CPC processes  Designed and finalized the file formats for all mandatory uploads easy reading for front end  National Co-ordinator appointed to tracking e-search open cases and timely uploads 

I-KIT AOF Rejections,Modification Request Rejections,Nomination Rejection Letters Nomination Registration Request Rejections,Non I-Kit SB/FD-RD AOF Rejections,Transfer of AccountRejections,Transfer Cheque Returns, ATM Retained Cards,TDS Form 15G Rejections etc.

 

 TERMINATOR RESULTS- COST SAVING  THROUGH  THROU GH FAIL FAILURE URE REDUCTIO REDUCTION N 37593205

29187237

21799520

14793313

9037555

4307529

Oct-04

Nov-04

Dec-04

J an an-05

Feb-05

Mar-05

 

RESULTS - SERVICE FAILURES AS % OF TRANSACTIONS 120000

0.30% 0.27% 0.26%

100000

0.25%

  s    t

0.20%

  s80000   e   u   q   e    R    l  60000   a   c    i    t    i   r 40000

   C    f   o    #

0.20%

0.21%

0.18%

0.17% 0.17%

108124

0.20%

0.15%

102705

0.12%

0.11%

0.09%

0.15% 84805

85096

86549

47211 71624 79463 80410

62926 0.10%

76392 55161

20000

0.05%

0

0.00%

Ap Apr-04 r-04 May-04 ay-04 Jun-04 Jun-04 Jul-04 Jul-04 Au Aug-04 g-04 Sep Sep-04 -04 Oct-04 O ct-04 Nov-04 Nov-04 Dec-04 Ja Jan-05 n-05 Feb-05 Mar-05 ar-05

  s   n   o    i    t   c   a   s   n   a   r    T    l   a    t   o    T   o    t   e

  a      %

Months # of Cri tica l Re que sts

% Age to Tota l Tra nsa ctions (RHS)

 

RESULTS – QUALITY OF REQUEST HANDLING

88%

87%

Dec- Ja Jan-0 n-05 5 Fe Febb04 05

Mar05

90%

68%

70% 62%

62%

Apr-0 pr-04 4 May ay-04

Jun04

64%

69%

77%

72% 68%

64%

55%

50%

30% Jul-0 Ju l-04 4 Aug ug-04

Sep- Oc Oct-04 t-04 No Novv04 04

 

RESULTS-CUSTOMER FEEDBACK SCORES

85%

80%

88%

87

81%

83 8

80%

77

85% 80%

78% 75%

80% 75%

74% 70%

65%

76%

72% 67%

64%

63% 62% 56%

55% Q-I '04

Q-II '04

Q-III '04

J an ' 0 5

Fe b ' 0 5

M ar '05

Phone banking

Liability Branches

Asset Branches- Home Loan

Asset Br anches- Consumer Loan

 

Some Other Success stories through BSC….

 

Conclusion BSC is highly effective management system to align company’s vision & mission to strategy and activities BSC provides management with a comprehensive picture of company’s operations BSC to be used as an integral part of a company’s planning process in order to realize its fullest potential

 

Conclusion Gives the complete picture of the employee as well as the organizational performance.  It guides users in determining the critical success 

factors and performance indicators. Strategic review or analysis of the organizational capabilities and performance.  Focusing the whole organization on the few key things needed to create breakthrough performance.  Integrating and directing the performance and efforts from the lowest levels in the organization to achieve excellent excell ent overall performance. 

 

“YOU SEE, ALL THE RIGHT THINGS ARE WRITTEN IN  BOOKS AND RESEARCH PAPERS. THE TRICK IS TO ENSURE THAT THERE IS NO GAP  BETWEEN WHAT IS WRITTEN IN THE BOOKS AND YOUR VISION; FROM WHAT IS HAPPENING ON THE  SHOP-FLOOR AND WHAT IS GOING ON IN THE  MARKETPLACE. THAT IS EXECUTION. THAT IS WHAT MAKES THE  DIFFERENCE” 

MUKESH AMBANI