Professional Documents
Culture Documents
business and industry, government, and nonprofit organizations worldwide to align business
activities to the vision and strategy of the organization, improve internal and external
communications, and monitor organization performance against strategic goals. It was originated by
Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement
framework that added strategic non-financial performance measures to traditional financial metrics
to give managers and executives a more 'balanced' view of organizational performance. While the
phrase balanced scorecard was coined in the early 1990s, the roots of the this type of approach are
deep, and include the pioneering work of General Electric on performance measurement reporting in
the 1950’s and the work of French process engineers (who created the Tableau de Bord – literally, a
"dashboard" of performance measures) in the early part of the 20th century.
The balanced scorecard has evolved from its early use as a simple
performance measurement framework to a full strategic planning
and management system. The “new” balanced scorecard
transforms an organization’s 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.
Sustaining New
Directions by Howard Rohm and
Larry Halbach
Sequel to A Balancing Act -- an article.
Read More >>
Perspectives
Want to learn more?
The balanced scorecard suggests that we view the organization Please visit the Institute's Public
Workshop Schedule or contact the
from four perspectives, and to develop metrics, collect data and
Institute about on-site training or
analyze it relative to each of these perspectives:
consulting services. Or schedule a
live, customized webinar with an
The Learning & Growth Perspective Institute consultant, or try the
This perspective includes employee training and corporate cultural Institute's new E-Learning program.
attitudes related to both individual and corporate self-
improvement. 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. Metrics can be put into place to guide managers in focusing
training funds where they can help the most. In any case, learning Other Resources:
and growth constitute the essential foundation for success of any
knowledge-worker organization. Definitions of Balanced
Scorecard Strategic
Kaplan and Norton emphasize that 'learning' is more than
Planning & Management
'training'; it also includes things like mentors and tutors within the
organization, as well as that ease of communication among Terms
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."
Definitions of General
The Business Process Perspective
Management Terms
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 Using the Balanced Scorecard
conform to customer requirements (the mission). These metrics to Align Your Organization
have to be carefully designed by those who know these processes by Howard Rohm
most intimately; with our unique missions these are not Balanced Scorecards, when developed as
strategic planning and management
something that can be developed by outside consultants. systems, can help align an organization
behind a shared vision of success.
Read More >>
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 The Balanced Scorecard -- Not
customers are not satisfied, they will eventually find other Just Another Project
by Paul Arveson
suppliers that will meet their needs. Poor performance from this The balanced scorecard management
perspective is thus a leading indicator of future decline, even system is not just another project. It is
though the current financial picture may look good. fundamentally different from project
management in several respects.
Read More >>
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 Web 2.0 and the Automated Balanced
customer groups. Scorecard
by David Wilsey
Improve Your Performance "News"
The Financial Perspective Read More >>
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 The Balanced Scorecard
financial data. With the implementation of a corporate database, it
and Measurement-Based
is hoped that more of the processing can be centralized and
automated. But the point is that the current emphasis on Managementby Paul Arveson
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. Improve Government
Performance
Strategy Mapping Read More>>
Close Move
Close Move
Mission
A mission statement defines why an organization exists; the organization's purpose
Performance Measures
Performance Measures are metrics used to provide an analytical basis for decision making and to focus attention on
what matters most. Performance Measures answer the question, 'How is the organization doing at the job of meeting
its Strategic Objectives?' Lagging indicators are those that show how successful the organization was in achieving
desired outcomes in the past. Leading indicators are those that are a precursor of future success; performance
drivers.
Perspectives
A Perspective is a view of an organization from a specific vantage point. Four basic perspectives are traditionally
used to encompass an organization's activities. The organization's business model, which encompasses mission,
vision, and strategy, determine the appropriate perspectives.
Strategic Initiatives
Strategic Initiatives are programs or projects that turn strategy into operational terms and actionable items, provide
an analytical underpinning for decisions, and provide a structured way to prioritize projects according to strategic
impact. Strategic Initiatives answer the question, ‘What strategic projects must the organization implement to meet
its Strategic Objectives?’
Strategic Objectives
Objectives are strategy components; continuous improvement activities that must be done to be successful.
Objectives are the building blocks of strategy and define the organization's strategic intent. Good objectives are
action-oriented statements, are easy to understand, represent continuous improvement potential and are usually not
'on-off' projects or activities.
Strategic Result
Strategic results are the desired outcome for the main focus areas of the business. Each Strategic Theme has a
corresponding Strategic Result.
Strategic Theme
Strategic Themes are key areas in which an organization must excel in order to achieve its mission and vision, and
deliver value to customers. Strategic Themes are the organization's "Pillars of Excellence."
Strategy Map
A Strategy Map displays the cause-effect relationships among the objectives that make up a strategy. A good
Strategy Map tells a story of how value is created for the business.
Strategy
How an organization intends to accomplish its vision; an approach, or “game plan”.
Targets
Desired levels of performance for performance measures
Vision
A vision statement is an organization's picture of future success; where it wants to be in the future
©1998-
2010
Balanced
Scorecard
Institute, a
Strategy
Manageme
nt Group
company
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The matrix organization is an attempt to combine the advantages of the pure functional
structure and the product organizational structure. This form is identically suited for
companies, such as construction, that are “project-driven”. The figure below shows a typical
Matrix organization.
In a matrix organization, each project manager reports directly to the vice president and the
general manager. Since each project represents a potential profit centre, the power and
authority used by the project manager come directly from the general manager.
• Conflicts are minimal, and those requiring hierarchical referrals are more easily
resolved
Greetings,
Two control charts used with yes/no type data are the p and np control charts.
We usually collect the data and then calculate the average and the control limits,
either manually or with software. But did you know that the control limit equations
for the p and np control charts are only valid under certain conditions? The
equations are not valid when you have what is called the "small sample case" for
p and np control charts. This newsletter discusses this small sample case and
how the control limits are determined.
Best regards,
Bill
If the subgroup size is the same each time, the np control chart can be used in
place of the p control chart. In this case, the number of defective items (np) is
plotted over time. Again, once enough data is available, you calculate the
average (npbar) and control limits (UCLnp and LCLnp).
Both these charts involve counts. You are counting items. To use a p or np
control chart, the counts must also satisfy the following two conditions:
Control Limits
The control limits for the p control chart are given below.
where pbar is the average fraction defective, n is the subgroup size, UCLp is the
upper control limit and LCLp is the lower control limit.
The control limits for the np control chart are given below.
where npbar is the average number of defective items, UCLnp is the upper
control limit and LCLnp is the lower control limit.
These equations for the control limits are commonly used. However, these
control limits are only valid under certain conditions. The basic probability
distribution for the calculation of control limits for the p and np charts is the
binomial distribution. Under certain conditions, the binomial distribution is
symmetrical and the control limits for the p and np control charts are those given
above.
Suppose you have a process that is in statistical control with an average fraction
defective of pbar. Since the process is in control, any p values obtained should
fall between the control limits in a random fashion. The chance that p will fall
outside the control limits is approximately 3 out of 1,000. These control limits are
good as long as n*pbar is sufficiently large. In these cases, the binomial
distribution is symmetrical and the equations above provide good estimates of
the control limits.
Our SPC for Excel software easily constructs and updates control charts. And it
automatically handles the small sample case for p and np control charts. Click
here.
Binomial Distribution
If n*pbar is not sufficiently large, the binomial distribution is not symmetrical. In
these cases, the control limit equations are no longer valid. n*pbar is not
sufficiently large if n*pbar < 5 or if n*(1-pbar) < 5. This is referred to as small
sample case for p and np charts. The figures below demonstrate how the shape
of the binomial distribution changes as n*pbar changes from 0.5 to 5.0. As can
be seen in the figures, the binomial distribution becomes more symmetrical and
approaches the shape of a normal distribution as n*pbar becomes larger. When
the distribution is symmetrical, the control limit equations are valid.
Small Sample Case
If n*pbar < 5 or if n*(1-pbar) < 5, the above control limit equations cannot be used
to determine the control limits. The control limits must be derived from the
binomial distribution. We have generated a table that gives you the control limits
in this small sample case. The table is available for download from the website at
this link (small sample case p and np charts download).
The table gives the upper and lower control limits for various values of pbar from
0.001 to 0.5 and for values of n from 5 to 50. These control limits are exact
solutions of the equation governing the binomial distribution with the assumption
that the probability (P) of obtaining a point beyond the control limits is less than
or equal to 0.003:
n 8 9 10
pbar LCL UCL LCL UCL LCL UCL
0.01 - 2 - 3 - 3
0.02 - 3 - 3 - 3
0.03 - 3 - 3 - 3
0.04 - 4 - 4 - 4
0.05 - 4 - 4 - 4
0.06 - 4 - 4 - 4
0.07 - 4 - 4 - 5
0.08 - 4 - 5 - 5
0.09 - 5 - 5 - 5
0.10 - 5 - 5 - 5
0.11 - 5 - 5 - 5
0.12 - 5 - 5 - 6
0.13 - 5 - 5 - 6
0.14 - 5 - 6 - 6
0.15 - 5 - 6 - 6
0.16 - 6 - 6 - 6
0.17 - 6 - 6 - 6
0.18 - 6 - 6 - 7
0.19 - 6 - 6 - 7
0.20 - 6 - 7 - 7
The LCLp is actually -0.08 but since it is less than zero, there is no LCLp. Note
the difference between the UCLp calculated using the equations (UCLp = 0.1)
and that obtained from the table (UCLp = 0.3). This difference is simply due to
the fact that, when npbar < 5, the binomial distribution is no longer symmetrical.
The control limit equations no longer provide the same probability as when npbar
> 5.
The control limits in the table were obtained from the equation governing the
binomial distribution. In Microsoft Excel, you can use the function "Binomdist" to
determine this. For this example, the probability of finding 0, 1, 2, and 3 defective
items in the sample size of 10 with npbar = 0.01 can be calculated. The
calculation results are summarized below.
The probability of the sample containing 0 defective items is 904 out of 1,000.
The probability of the sample containing 0 or 1 defective item is 995 out of 1,000.
The probability of the sample containing 0, 1, or 2 defective items is 999 out of
1,000. The control limits in the table are determined so that the probability of
obtaining a point beyond the control limits is less than or equal to 0.003 (or 3 out
of 1,000). For this case, the probability becomes less than 0.003 when the
number of defective items is 3 or more. Thus, the upper control limit for this
example is 3.
The table does go beyond n*pbar < 5. It has values of n to 50 and pbar to 0.5 For
n = 50 and pbar = 0.5, the table gives the following limits for the np chart:
LCLnp = 14
UCLnp = 36
Note that n*pbar = 25 in this case. The control limit equations for the np chart
give the following results:
UCLnp = 35.6
LCLnp = 14.3
When n*pbar is large enough, the control limit equations are valid.
Summary
The p and np chart are used to monitor variation in yes/no type data. The control
limit equations are valid as long as n*pbar > 5 or n*(1-pbar) > 5. If this is not true,
the binomial distribution which governs the p and np control charts is not
symmetrical. This is called the small sample case for the p and np control charts.
In the case when n*pbar < 5 or n*(1-pbar) < 5, the actual binomial distribution
must be used. A table has been provided for pbar = .001 to .5 and n from 4 to 50
that provides these control limits.
Attachment Size
small sample case for p and np charts.xls 68 KB
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Control limits for the NP-Chart are calculated on the basis of the
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