Objective of the Project

Evaluate Balanced Scorecard knowledge and skills within my work environment and general experiences. Effectively Monitor, Measure And Evaluate the Balanced Scorecard For Maximising the Performance Management.

INDEX

1. 2.

Introduction Background of Balanced Scorecard 4 3. What is the Balanced Scorecard? 5

4. 6 5.

Balanced Scorecard Concept

Utilizing The Balanced Scorecard 14 as A Strategic Management Tool

6.

Steps

to 18

create

the

Organizational

Balanced

Scorecard

7.

BSC Implementation in Bilcare 21

Introduction Functional Scorecard in Bilcare Automation MPOWER - COVENARK Vision./ Mission Core objective Implementation of BSC

Feedback

and

Review

system

Performance Management 8. Conclusion 28 9. Annexure

I. Introduction It is found that though in many corporations a defined strategy exists at the corporate level, the deployment of the same at the operational level is not uniform and in many cases absent. This causes misalignment of organizational strategy and hampers achievement of organizational goals due to poor deployment. It is observed that though many organizations have excellent business strategy there are severe lapses in the execution at the operational level. Cascading business strategy as appropriate to Projects becomes a great challenge. The Balanced Scorecard has specific focus on four

perspectives Financial, Customer, Internal and Learning. It also has a focus on balancing long term and short-term goals of an organization. It is observed that organizations, which do not have a robust framework to deploy a Balanced set of goals at the Project level, fail to achieve organizational alignment and integration.

The objective of developing such a framework was the following: Create a sustainable strategic position at the project level Focus on Financial as well as non-financial goals at the Project- level Balance objectives Create a Learning organization short-term and long-term organizational

II. Background of Balanced Scorecard The concept of Balanced Scorecard was first introduced in the journal Harvard Business Review (January-February, 1992) by Robert S. Kaplan and David P. Norton. The basic idea behind the introduction of the Balanced Scorecard was that the traditional financial measures (like ROI, EPS etc.) alone cannot provide a clear and comprehensive performance target or focus attention on all the critical areas of the business that bear significant impact on its long-term survival, growth and development, rather it requires a balanced presentation of financial as well as operational measures. The Balanced Scorecard is an organizational framework for implementing and managing strategy at all levels of an enterprise by linking

objectives, initiatives and measures to an organizations strategy. The Balanced Scorecard is a strategic management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. When fully deployed, the Balanced Scorecard transforms strategic planning from an academic exercise into the nerve centre of an enterprise. The scorecard provides an enterprise view of an organizations overall performance. The scorecard integrates financial measures like ROI, RI, Dividend yield, EPS etc. with other key performance indicators around customer perspectives, internal business processes and organizational growth, learning and innovation.

III. What is the Balanced Scorecard? The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise. Kaplan and Norton describe the innovation of the balanced scorecard as follows:

"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."

IV.Balanced Scorecard Concept The long-term success of any organization is determined by the capabilities and the competencies it has developed. One of the tools for organizational appraisal that is gaining immense popularity is the Balanced Scorecard, developed by Robert S Kaplan and David P Norton in 1992. This innovative tool is unique in two ways compared to the traditional performance measurement tools. They are

1. It considers the financial indices as well the non-financial ones in determining the corporate performance level and 2. It is not just a performance measurement tool but is also a performance management system. In the words of the proponents of this tool the Balanced Scorecard retains traditional measures. But, financial measures tell the story of past events, an adequate story for industrial age companies for which investment in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technologies and innovation. These words give the idea behind the development of this framework. Todays businesses require a better understanding of their customers (both existing and potential) and their needs, better-streamlined processes and highly skilled people for ensuring future survival and sustainable growth. This shows that the focus of action has rightly considered the non-financial aspects apart from the financial indices. This tool is the end result of sustained efforts to find an ideal tool to measure performance and provide a link to strategy and action. The decisions about the future actions form the key to success of any enterprise in this fastchanging business environment. The aim of the Balanced Scorecard is to direct, help manage and change in support of the longer-term strategy in order to manage performance. The scorecard reflects what the

company and the strategies are all about. It acts as a catalyst for bringing in the change element within the organization. This tool is a comprehensive framework, which considers the following perspectives and tries to get answers to the following questions 1. Financial Perspective How do we look at

shareholders? 2. Customer Perspective - How should we appear to our customers? 3. Internal Business Processes Perspective - What must we excel at? 4. Learning and Growth Perspective - Can we continue to improve and create value? Hence, from the above lines we can say that this tool has considered not only the financial results to be important but also those factors, which actually drive an organization towards future successes as mentioned earlier. The tool has given stress on the other areas which are required to balance the financial perspective in order to get a total view about the organizational performance improve the same. The framework tries to bring a balance and linkage between the (A) Financial and the Non-Financial indicators, (b) Tangible and the Intangible measures, (c) Internal and the External aspects and (d) Leading and the Lagging indicators. The Four Perspectives: Cause and Effect Relationship

The

four

perspectives

as

mentioned

above

are

highly

interlinked. There is a logical connection between them. The explanation is as follows: If an organization focuses on the learning and the growth aspect, it is definitely going to lead to better business processes. This in turn would be followed by increased customer value by producing better products which ultimately gives rise to improved financial performance. 1. Learning Growth 2. Business Process 3. Increased customer value 4. Improved financial performance 1. The Learning and Growth Perspective

This perspective 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. Government agencies often find themselves unable to hire new technical workers, and at the same time there is a decline in training of existing employees. This is a leading indicator of 'brain drain' that must be reversed. Metrics can be put into place to guide managers in

focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization. Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems." One of these, the Intranet, will be examined in detail later in this document. 2. The Business Process Perspective

This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants. In addition to the strategic management process, two kinds of business processes may be identified: a) mission-oriented processes, and b) support processes. Mission-oriented

10

processes are the special functions of government offices, and many unique problems are encountered in these processes. The support processes are more repetitive in nature and hence easier to measure and benchmark using generic metrics. 3. 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. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.

11

4. The Financial Perspective

Kaplan and Norton do not disregard the traditional need for financial data. 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. There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

12

The Model An Explanation 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.

13

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. The 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 the readers to understand it better. Some of the Objectives together with a measurement measures are given below.

14

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 0rganization is in. The financial indicators are complemented by the non-financial ones. 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

15

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.

V.

Utilizing

The

Balanced Scorecard As A

Strategic Management Tool

The tool has become a weapon for organizations to identify the pressure points, conflicting interests, objectives setting, prioritization of objectives, planning and budgeting. The four main important steps that need to be taken care of are1. Translating the Vision It is to be remembered that the vision of any organization should be understood by each and every employee of the organization. If it is understood by the top management only, then it is definite that the organization will fail to realize its goals. Hence, before starting with the strategic implementation process, the organizations needs to be clear about the reason for its existence, where it wants to see itself after a certain number of years and properly decide its business definition. The managers should build a consensus around the organisations vision and strategy. The strategies, in fact, emanate from the vision and mission of the company which means that a linkage is formed between the strategies of the different business units and the vision of the organization. The lofty statements must be translated into an integrated set of objectives and measures. Thus, by using this tool, the overall strategic objectives for the company gets clarified which helps to achieve consensus across different

16

business units on the overall strategic objectives for the company. 2. Communicating and Linking Just communicating the vision and the strategies is not an end in itself. The strategic goals and the measures to be set in the different areas have to be decided upon. The long-term strategic goals have to be translated into both departmental and individual goals which should be aligned to each other in order to realize the long-term goals. In fact, each and everyone at different levels in the organizational hierarchy needs to be educated about the action plans and reasons for accepting the same. The tool contains three levels of information : 1. It describes the corporate objectives, measures and the targets 2. It helps in deciding the business unit targets and 3. It helps in framing the departmental and the individual objectives which will help in attaining the objectives of the business unit directly which would lead to the attainment of the corporate goals. The employees are given the freedom to decide their measures, objectives and the targets attainment of which would move the organization in the right strategic direction. Then the compensation level is linked to the performance level which in reality involves a lot of subjectivity. 3. Business Planning

17

This step helps in the resource allocation process. One has to keep in mind that objectives form an important criteria in deciding the quantum of resources that are required to be allocated to the various departments, activities and the processes. No strategy can bring successful results to an organization if the allocation is not in line with what is required to meet the results. This allocation is dependent on the budgeted estimates which are decided on the basis of the said objectives. Hence, through this step the Balanced Scorecard tries to bring about integration between strategic planning and the budgeting exercise. The short-term milestones are also needed to be figured out which in totality brings about a linkage between strategic goals and the budgets. This procedure helps in actualizing what has been set by the organization. Thus, this step brings about a shift from the thinking exercise to the doing stage and the organization tries to achieve the long-term goals through the short-term actions. 4. Feedback and Learning The first three steps as mentioned above help in the strategic implementation process. But, for knowing whether the organization is in a position to achieve the strategic goals and whether it is in the right track, the process of feedback and learning is essential. The strategic learning consists of acquiring knowledge about which way the organization is moving to, testing whether the premises considered before hold true even now and finally making adjustments wherever required. The corrective measures are required so that the necessary rectifications are made which will help an

18

organization pursue the correct path. Another point is that an organization gets to know whether the cause-and effect relationships among the different perspectives really hold true, to what extent they are strongly linked and also whether positive results are being obtained. In case, an organization realizes the existence of a gap in the cause effect relationships, an immediate correction would be required so that a positive relationship can be build among the various factors. Thus, the tool with its specification of the causal relationships between performance drivers and objectives allows corporate and the business unit objectives executives to use their periodic review sessions in order to evaluate the validity of the units strategy and the quality of its execution. Also, this feedback and learning exercise may force an organization to change the measures set in each of the perspectives and adopt those, which if attained would ensure the success of the corporate and the business strategies.

Before creating Strategy map Management should plan a process of continuous improvement called the PlanDo-Check-Act cycle. For our purposes, the PDCA cycle

PLAN: Design or revise business process components to improve results DO: Implement the plan and measure its performance CHECK: Assess the measurements and report the results to decision makers ACT: Decide on changes needed to improve the process

PDCA cycle can be illustrated as follows:

19

This 'wheel within a wheel' describes the relationship between strategic management and business unit management in a large company. There are actually several separate business units, of course, each with its own set of metrics, goals, targets and initiatives. But this figure illustrates the idea that the business activities constitute the DO part of the overall strategic effort.

VI.

Steps

to

create

the

Organizational Balanced Scorecard

Formulate improvement Actions and Assign Data ownership Create Strategy Map Formulate, Performance Measures and Targets, Mission Vision and Mission The Balanced Scorecard process starts with determining or updating the mission and vision, because it is advisable to Develop & Align Strategies, Identify Vision and

20

clarify the shared view of the organisations future direction right values. from The the mission start. contains an The mission and vision should reflect the organisations organizational organizations identity and indicates its reason for existing. The mission involves what is perceived as being a shared view of the organisations underlying principle: why do we exist, what we are doing here together, for whom do we exist, who are our most important stakeholders. The mission statements if effectively articulated can fit the employees of the organization in the right place and steer them towards the common goal. A vision is perceived as the most ambitious image where the organization wants to be in the future. The vision should be challenging, but not impossible. The vision clearly says where are we going, how do we envision the future, where do we want to be. Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion. Develop and Align Strategies : Every organization should pursue a unique strategy, based on its interpretation of the external and internal situation. The strategy should involve a view of future challenges in the operating environment and the sector. This is a longterm view of the objectives and means required to achieve the vision, mission and values.

21

In a Balanced Scorecard process, goals and objectives are set at management group level, after determining analyses and policies, and are then filtered down to operations or processes, teams and, where necessary, all the way down to individual level. The effectiveness of the strategy will ripple through all departments, which can then be used to compare the actual results with expectations. Create Strategy Map Strategy maps and scorecards go hand in hand. A strategy map is a visual representation of an organization's strategy and the processes and systems necessary to implement that strategy. A strategy map will show employees how their jobs are linked to the organization's overall objectives. The strategy map is used to develop the Balanced Scorecard a strategy creates map value that by describes connecting how an organization strategic

objectives in explicit cause and effect relationship with each other in the four BSC objectives (financial, customer, processes, learning and growth). A way to think of this is the organizations vision and mission statement answer the questions, Where do we want to go? and Why are we here? whereas the strategy map and scorecard answer, How are we going to get there? Strategy map is the key to improve the business performance. . Designing strategy map and creating balanced scorecard performance metrics that tightly link critical success factors to strategic goals. With a properly cascaded strategy map,

22

changes in strategy can quickly be mirrored in the measurement system. Formulate performance measures and targets Everyone recognize the saying What you measure is what you get. Scorecards make it a reality. Measures drive behavior! Selecting appropriate performance measures is more art than science. A performance measure is some objective measurement of an aspect of a business that is critical to the success of that business. Such performance measures are a component of the conceptual scorecard for a business and can be associated with a number of different business activities. Through continuous reporting of the actual scores against the KPI targets, an organization is kept on track. The scorecards critical role is that it puts the measures (key performance indicators, or KPIs) in the context of the strategy. To express the strategy in measurable objectives, the management should balance between leading and lagging indicators to progress toward the corporate vision. A leading indicator is a measure that has a causal effect on time-lagging indicators. Leading indicators are valuable to track because merely sanctioning and reporting them serves to drive behaviorwhich is the intent. Think of leading indicators as cumulatively adding power to the alignment and achievement The results of of the each overarching strategic objective.

indicator must be compared to a target. The performance against each measure should be keyed to challenging but attainable targets. Through continuous reporting of the

23

actual scores against the KPI targets, an organization is kept on track.

VII.

BSC IMPLEMENTATION
in BILCARE LIMITED

Bilcare is a unique research-based organisation with a vision to provide state-of-the-art and comprehensive packaging solutions to the pharmaceutical and Healthcare sector. The main focus is scientific designing through path-breaking methodologies and optimization of packaging solutions. By introducing the Balance Score card in the Bilcare organization all the Role and responsibilities are properly defined. No over lapping of the work is done.

Functional Scorecard in Bilcare S & M Sales and Marketing Department Total 16 Leader Scorecard and one Head S &M Scorecard IS Score card Total 4 Score card of IS leader and Global IS Procurement Department Total 4 Score of Procurement Leader and Head Procurement R& D Score card Total 4 Score card of RS leader and Global RS Some are in process

24

Automation Balanced Scorecard The implementation of the strategy depends upon effective execution of the operational details. Use of information technology for this purpose will be a key element for effective use of Balance Scorecard. MPOWER linked provided the automation structure. tool, It COVENARK the top

STRATEGIST, to automate this comprehensive and intricately balanced scorecard helped managers of Bilcare to successfully position their strategy

across the organization and reap the benefits of a seamless strategy deployment and performance measurement solution.

Step 1
Strategy Review Vision Build Research Driven enterprise of the century to service the life sciences globally Mission by 2010 By 2010, Team Bilcare will lead the world in Pharma packaging Core Business objective By 2010 convert from 100% generic supplies to 100% customized solutions and grow at 80% CAGR with 25% EBIDTA and 15% PAT The next step will be to meet the leadership team to confirm strategic direction and priorities. Consequently, the Strategic map will be built.

25

Step 2
The Strategy MAP Development Mapping a strategy through use of Balanced Scorecard is an important step to evaluate organizational perspective, objective in terms of Strategy Map. This process will be to develop and refine objectives to finalize strategic map.

Step 3
Measurements, Targets and Initiatives. The process will be to rank initiatives and the measure or

indicators is selected to best represent the factors that lead to improve customer, operational and financial performance. Once the initiative have been endorsed by all participants in the workshop, a document will be prepared and again

26

discussed in final executive workshop to be attended by top manager for finalization. The out put will be a Balanced Scorecard which now contains all elements, namely strategic map, objective measure, targets with priority order and initiative.

Dependent Measurement Template

27

Initiative Template

28

29

INTIATIVE

MAPPING

(PROJECT

MAPPING)

Step 4 Implementation Plan

The detailed Plan to implement the strategic management system across the organization is developed. The essential components of plan are Education and Communication Strategy Plan for Cascading to lower levels Linkage to Compensation

30

Feedback and Review system (Performance Management system is done by applying BSC)
Improvements in organizational / project performance can only be achieved if performance is reviewed continuously using the balanced scorecards. One of the most effective methodologies is the Dashboard methodologies, where we can set up for the green space, yellow Grey and red space for each of the KPMs at the project level. Where green denotes- KPM on target, yellow denotes- acceptable level of deviation and red denotes- that the performance deviation needs immediate recovery plan. The dashboard methodology helps the executive management to focus on the vital few which needs focus and act on them.. The green, yellow and red spaces are set up based on past benchmarks and comparative data.

Balanced Scorecard

31

VIII. Conclusion
This tool is being used by several organizations throughout the world. Bilcare limited as a Global company also started using it because it gives certain advantages - which are cited below : It translates vision and strategy into action. It defines the strategic linkages to integrate performance across organizations.

32

It communicates the objectives and measures to a business unit. It aligns the strategic initiatives in order to attain the long-term goals. It aligns everyone within an organization so that all employees understand how they support the strategy. It provides a basis for compensation for performance. The scorecard provides a feedback to the senior management if the strategy is working.

A great scorecard is not enough Get the strategy right. Senior management commitment a must. Realize - BSC is a major change process. Involve more & more people. Communicate & educate to create awareness. Ensure Personal alignment KRAs, Compensation. Link strategy & budgeting. Use it Use it !

References Translating Strategy Into Action: The Balanced Scorecard, Robert S Kaplan and David P. Norton, Harvard Business Press Web Site www.balancedscorecard.org
Guidance : Mr. Sanjay Limaye Head Business Excellence
: Dr. Soniya Yadwadkar Head HR. Corporate

33

34