Building the Balanced Scorecard

 Balanced Scorecards provide a framework for communicating

strategy in operating terms (measurements and targets).

 You must communicate strategy in operating terms if you expect

people to execute on your strategy.

 When people are asked about strategy, they reach for their balanced


 Forces to think about strategic measurement as opposed to tactical or operating type measurements . otherwise you create pockets of under-performance.Why do we need Balanced Scorecard…???  Improves how you communicate strategy  Superimposes a discipline whereby you capture cause- effect.

HOW TO BEGIN….!!  Begin with strategic plan – what things are critical to future success?  Focus on customers – what values will we add to our customers  Define the processes – how will we deliver these services to our customers  Build the organization – what capabilities must we put in place .

 Strategic goals anchor the rest of the process.  Strategic goals establish direction in concrete terms.Strategic Goals  The first components of any strategy are goals.  Strategic goals should fit with the vision and mission of the organization. .

Attributes of a Goal  Should be a very short statement  Directly relates to the mission  Broad in scope  Covers long time period (such as 3 years)  Examples: .Improve Customer Service .Leverage Core Competencies .Develop more innovative products .

 Objectives are critical to future success. in order to grow revenues.Strategic Objectives  Once first anchor (goals) are established.  Strategic objectives define what actions must be taken to reach the strategic goals. For example. . we must introduce new products and expand our market share. develop a set of strategic objectives.

We will expand call center services to include technical support .Objective Attributes  Longer statement than goal statement  More specific than goal statement  Relationship to mission  Covers shorter time period than goal (such as 6 months or 1 year)  Example: .

three to five strategic themes should emerge. o From these themes.Strategic Themes o Based on strategic goals. . o Four common strategic themes are: Operating Efficiencies. develop a strategic map. Product Innovation. Customer Relations. and Growing the Business.

3. 4.Strategic Model Strategic Models can emerge from four principles: 1. Translate strategies into operating terms. Link strategies throughout the entire organization. 2. Commit everyone to implementing strategy. . Make strategizing a continuous process of learning and adjusting to change.

production.4 Perspectives of BSC  Financial: Top layer in the map. etc. . etc.  Learning & Growth: The people. revenues. quality. such as delivery. systems. distribution. enables financial results (service. and organization that enable processes. represents financial outcomes (profits. etc.)  Internal Processes: The values added to customers. image. price.)  Customer: Next layer down.

 Strategic objectives are mapped over the four perspectives.  Maps are constructed over four perspectives.Strategic Mapping  Strategic Maps are the foundation of the Balanced Scorecard. .  You will need one strategic map for each strategic theme. linked together.

 Objectives may cross over more than one perspective.  Start at the top with outcomes and work our way down.Linking BSC to Business Strategy  Strategic objectives should be placed in the Strategic Map according to which perspective fits with the objective. . looking at what drives the outcome.

get approval from executive management.“Does this map accurately tell the story of our strategy?”  If management disagrees with the map. . Ask questions likes….Approval of Maps  After strategic maps are done. go back and redo the maps.

.Measurements  For each strategic objective. you need one measurement.  Measurement provides us with feedback on meeting the strategic objective.

 Measurements should be SMART. providing teeth to our strategy. A good measurement should tell you what your objective is.  Measurements define objectives in specific terms.!! ..Measurement Criteria  Measurements should drive change.

Examples of Good Measurements Customer satisfaction: .No.Response Time to service customer .Cycle time .Customer Satisfaction Survey Scores Process Efficiency: .Downtime (time / ratio) . of Restarts .

 When an organization hits its targets. expressing the specifics of the strategy.Targets Setting  Once measurements are established. you need to set a target for each measurement. then it has successfully implemented its strategy.  Targets put focus on the strategy. .  Targets push the organization to a required level of performance.

Examples of Targets  Total Time to Recruit New Employees: Less than “x” days by 2005  Utilization of rental facilities: Increase to 90% during peak summer months  Growth in top line revenues: 12% increase than 2004  Improve overall customer satisfaction: Total scores on satisfaction exceed 85% .

. you should be able to meet your strategic objectives. you must initiate major projects or programs.Initiatives Takers  In order for things to happen in an organization.  Once you launch appropriate initiatives. This closes the loopholes and everything is linked.

Initiative Attributes  Sponsored by Top Management  Designated project(s) owners  Includes deliverables or milestones  Has some deadlines .

Templates Throughout this process. analyze and document data. use templates to capture. defining measurements. Templates are used for strategic mapping. etc. Strategic Map for Strategic Theme #1: Learning Internal Customer Financial .

!!  Scorecards are built around three teams: Leadership Team (upper level management).  Scorecards are built around frequent group meetings: Kick Off Meeting followed by one meeting for each of the three teams. . Core Team (middle level management) and Measurement Team (lower level functional personnel).Pointers to keep in mind….

Services.  The best place to start building a scorecard is where all components of the value chain are in place: Customer. Production. etc.  Full deployment of scorecards throughout the entire organization can take one year or even more than that. Innovation. .Implementation  The minimum time for developing a balanced scorecard is 3 months. Delivery.

Measurements.  Scorecards rely on a fully integrated approach: Goals. whereby you test your strategies. . Mapping. Targets. refine. and make changes as you get feedback and learn what works. and Initiatives. Objectives.  The building of a balanced scorecard can be experimental.Summary  Balanced Scorecards are the best way of putting organization in its place.


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