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A PROJECT REPORT Submitted to the
CRESCENT BUSINESS SCHOOL in partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION APRIL 2011
Certified that the project report titled “Balanced Scorecard as Performance Management Tool” is the bonafide work of Velusamy.NP who carried out the research under my supervision. Certified further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on earlier occasion on this or any other candidate.
L.ARAVIND KUMARAN Associate professor, CBS Internal Guide
Dr. MIRZA S. SAIYADAIN Dean, CBS
VIJAY SAMPATH External Guide
I express my profound thanks to our respected Vice-Chancellor Dr. P. KANNIAPPAN, M.Sc. Ph.D., and our Registrar Dr. V.M. PERIASAMY, B.E., M.E., Ph.D., for their enthusiastic support and help in providing all resources behind the scenes. I wish to regard my sincere thanks to Dr. MIRZA S. SAIYADAIN, M.A., Ph.D., Professor and Dean, Crescent Business School, B.S. Abdur Rahman University, Vandalur, Chennai – 600048. I would like to thank to my guide L.ARAVIND KUMARAN, Assistant Professor, Crescent Business School, for her full involvement in every part of my project. My sincere thanks to SUVANDHU MAHAPATRA, Assistant vice President, Operational Excellence, Zenta Knowledge Service for permitting me to pursue my summer project at Company name. I would like to thank my external guide VIJAY SAMPATH, Senior Manager, Operational Excellence, Zenta Knowledge Service. For his morale support and encouragement, which helped me in carrying out the project successfully. I sincerely thank all the staff members of the Crescent Business School for their valuable advice and kind cooperation, without which the project would not have emerged as a successful one. It is once again a pleasure to acknowledge to my parents, friends and family members for their constructive and valuable suggestions towards improvement of this project.
VELUSAMY.NP ABSTRACT The Balanced Scorecard is the strategic planning and management system. It helps to align business activities to the vision and strategy of the organization; it improves internal and external communication, and monitor organization performance against strategic goals. Zenta follows various metric to measure the overall performance of the organization this project I am trying to fit all of the Zenta metric to a balanced scorecard framework. This helps to measure and control and to align all business activities into vision and strategy of the organization. In balanced scorecard all the four perspectives of Kaplan and Norton is considered and analysis is preceded according to these perspectives. In Zenta all measured metrics are considered as strategic objective. And according to these strategic objectives strategic measurement is done with the help Lagging and Leading indicator As the balanced scorecard is the performance management tool it will consider the Cause and Effect relationship for all the metric along with this performance drivers and outcomes for each and every strategy which is formulated are measured, which will show the performance of the strategy after it is implemented. So it makes mangers to make right decision which results in organizational growth and development. Normally balanced scorecard follows Top to Bottom approach of management all the decisions are made at higher level and it is communicated to the lower level. Goals framed according to the vision and it is classified and personal goals are aligned and communicated to the employees. So in single scorecard all the aspects are considered and performance of each and every strategy are measured this made to call balanced scorecard as effective performance management tool. This entire project this is taken as base line project is proceeded.
TABLE OF CONTENTS
CH NO 1 CONTENTS INTRODUCTION 1.1 company profile 1.1.1 Quality certification 1.1.2 Corporate philosophy 1.2 Introduction to balanced scorecard 1.2.1 History 1.3 Need of study 1.4 Objectives of balanced scorecard 1.5 Scope of balanced scorecard as performance Management tool 2 LITERATURE 2.1 Review of literature 2.1.1 Kaplan and Norton Approach of Balanced scorecard 22.214.171.124 Perspectives of Kaplan and Norton 11 126.96.36.199 Linking the Balanced Scorecard Measures to Strategic Metric 188.8.131.52 Benefits of balanced scorecard 2.1.2 Performance Management system 184.108.40.206 Benefits of performance management system 13 15 16 17 9 9 1 2 2 4 4 6 7 8 PAGE NO
MEASURING BUSINESS STRATEGIES 3.1 designs of balanced scorecard 3.1.1 Improved design method of Kaplan and Norton 3.2 Key measures of balanced scorecard 19 20 21
CONTENTS 3.3 Data collection method 3.4 Zenta business measurement System 3.4.1 Goal Flow
PAGE NO 25 26 26 28 29 29 29 30 31 33 34 34 35 38 38 40 43 45 46 47
3.4.2 Translating Vision and Mission to Balanced scorecard 3.4.3 Metric analysis in Zenta 220.127.116.11 Seat Utilization 18.104.22.168 Transportation Cost 22.214.171.124 Employees Skill Effectiveness 126.96.36.199 Competency per FTE 188.8.131.52 Customer Satisfaction 184.108.40.206 Asset utilization 220.127.116.11 Employee Productivity 4 FORMULATING STRATEGIES 4.1 Zenta’s Approach on Balanced Scorecard 4.2 Balanced Scorecard to Zenta 4.2.1 Strategic Objective 4.2.2 Strategic Measurement 4.3 Achieving Strategic Alignment from Top to Bottom 5 CONCLUSION 5.1 Summary: Findings 5.2 Conclusion 6 APPENDIX Bibliography
LIST OF FIGURES
Figure No 2.1 2.2 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4.1 4.2 4.3 TITLE PAGE NO
Balanced scorecard Approach by Kaplan and 11 Norton Cause and Effect Relationship Goal Flow in Zenta 13 27
Translating Vision and Mission to Balanced 28 Scorecard Seat Utilization Transportation Cost Employee skill Effectiveness Competency Per FTE Employee Satisfaction Asset Utilization Employee Productivity Zenta’s Approach On Balanced Scorecard Employee Development relationship 29 30 31 32 33 34 34 37 with 38 42
Balanced Scorecard Top to Bottom Balanced Scorecard Approach
LIST OF TABLE:
Table no 1 Content Balanced scorecard for Zenta Page no 41
LIST OF ABBERIVATIONS
BSC – balanced scorecard FTE – Full Time Employee CU – capacity utilization SU – seat utilization CRM- customer relationship management TQM – Total Quality Control BG – Business Group SBG - Sub Business group RMS – Residential mortgage service CSG – commercial servicing group DD – Due Diligence LA – Lease Administration TAT – Turn Around Time CSAT – Customer Satisfaction FPY – First Pass Yield
CHAPTER – 1 1.1INDUSTRY PROFILE: US Real Estate Industry:
Real estate in United States is one of the largest markets in the world. In fact, it is so significant to world economic activity that the availability of easy money and the subsequent Housing Bubble triggered the Sub-Prime Crisis and eventually the global Financial Crisis of 2008 - 2009 that brought the world's economy to its knees. The US real estate market is divided into 2 sectors: commercial real estate and residential real estate. Most discussion tends to focus on residential real estate (i.e. houses), but commercial real estate is also a critical sector of the economy, and is made up of offices, shopping malls, factories, warehouses and other commercial buildings. In order to be successful in real estate investment, an investor needs to understand house price trends, assess the condition and value of the investment property, and secure a suitable mortgage or other form of real estate finance. The US real estate industry has been experiencing wonderful growth due to the relatively steady good economy. In 2006, some markets had major gains in occupied space, others saw record sales transactions. The market has begun to tighten, developers remained cautious possibly eye toward the future, particularly predictions of escalating rental rates. Major Participants in the Real Estate Industry Developers Development is an idea that comes to fruition when consumers – tenants or owner- occupants acquire and use the space put in place by the development team. Land, labor, capital management and entrepreneurship are needed to transform an idea into reality. Developers balance the needs of diverse providers and consumers of the real estate product. The developers have to demonstrate the project's feasibility to the capital markets and pay interest or assign Equity positions in return for funding.
Appraisers Appraisers can be a part of every stage of the property development process. Appraisers are primarily responsible for valuation of the project. They estimate the market value of the property and typically prepare a formal document called appraisal. Appraisal may be necessary when a developer transfers ownership, seeks financing and credit, resolves tax matters, and establishes just compensation in condemnation proceedings. Appraisers can also evaluate a project as input to market studies and feasibility studies. Some of the familiar names in the US Real Estate markets include CB Richard Ellis, Cushman and Wakefield and Grubb and Ellis. Property managers Property managers focus on the day operation of the asset. Property managers carry responsibility for all respects of the physical space in accordance with the asset manager's plan. The responsibilities of a property manager include:
• • • • • • •
Marketing and leasing Maintenance and repair Tenant relations including rent collection Insurance Accounting Human resource management Providing timely information to the asset manager about events affecting the property.
Some of the major property managers include Trammel Crow Company and Grubb and Ellis Company. Brokers/ Leasing Agents Real Estate brokers and leasing agents are hired to act in the name of the developer or asset manager in leasing and selling space to prospective tenants or buyers. Their function, particularly in leasing large industrial and commercial spaces is to carry out one of the most complex financial negotiations in the development process. Leasing agents must balance all the various uses' individual needs against the developer's financial model.
Lenders A) Construction Lenders are usually commercial banks, which are responsible for financial during project construction and for seeing that the developer completes the project within the budget and according to the specifications. B) Permanent lenders seek to originate safe loans generating the maximum possible return. The market value of the completed project is very critical in that it serves as the primary collateral for the loan.
1.2 COMPANY PROFILE Zenta Knowledge Services Pvt. Ltd.,
Zenta was founded in 2001, Zenta is a world-class knowledge process outsourcing (KPO) and business process outsourcing (BPO) and Company, offering a full range of back-office, voice and on-site support solutions such as Credit Card Servicing, Consumer Lending Servicing, Accounts Receivable Management, Mortgage Servicing and Real Estate Capital Market Analytics. The Company serves the following verticals: Consumer Credit, Insurance and Financial Services, and Commercial and Residential Real estate With 4,500+ employees worldwide, Zenta has operations in six locations across three continents. Zenta is a preferred employer in India. SOLUTIONS PROVIDED BY ZENTA From origination and throughout the customer lifecycle, Zenta delivers deep, endto-end servicing solutions. Zenta's specialized focus on the financial services industry and our management expertise and experience, are the reasons we have been chosen to provide high-end business processing for some of the world's most prestigious banks and financial institutions. Instead of coordinating multiple vendors, Zenta's complete solution set makes it possible for clients to work with one company only - providing a single source for all their business processing needs. Zenta's end-to-end solutions include:
Credit card servicing Commercial Realty Services
• • • •
Residential Realty Services Account Receivables management , and Healthcare Revenue Cycle Management Residential Mortgage Services
1.1.1 Quality Certification: ISO 9001:2008 certified: ISO 9001 is a quality management standard. It applies to all types of organizations. It doesn't matter what size they are or what they do. It can help both product and service organizations achieve standards of quality that are recognized and respected throughout the world. SAS 70 Type II Assessed Statement on Auditing Standards (SAS) No. 70, Service Organizations, is a widely recognized auditing standard developed by the American Institute of Certified Public Accountants (AICPA). SAS 70 Type II is for operating effectively
1.1.2 Corporate Philosophy Client Focused: We're passionate about our clients and are easy to do business with. We sell our clients what they want to buy, how they want to buy it. We are flexible and responsive, tailoring our solutions to our clients' unique needs. And we honor our commitments. Employee Centric: We provide our employees with rewarding and satisfying career opportunities based on their personal performance and contribution.
Cultural Compatibility: Our clients are primarily in North America and Europe. Our operations are primarily in India. We must be adept at managing and leading in multiple cultures. We have assembled a diverse management team that understands the Western business environment and the needs, aspirations and motivations of our global work force. Ethics: The line between right and wrong is not gray or blurred. It is a bright line and we will not cross it, nor will we tolerate anyone who does Operational Excellence: We are committed to operational excellence. We employ a global work force. We capture work anywhere in the world, move it to wherever in the world we can find the right blend of cost and quality to work and deliver it back to our clients, wherever in the world they may be Accountability: We hold ourselves accountable for results. We push decision-making to the lowest possible level. When approvals are required, they are given as rapidly as possible. Our business leaders are experienced outsourcing industry professionals from global companies. We have an exceptional track record of attracting and retaining senior talent with both global exposure and domain expertise to meet our clients' unique business n? ends.
1.3 NEED FOR STUDY 1. Creating a winning strategy is only the first part of your Balanced Scorecard implementation. The next part is measuring the success (or "failure") of your strategy. 2. Besides the Balanced Scorecard, performance measurement systems have mainly focused on lagging financial indicators. Although non-financial measures have existed for long, their link to strategy and financial results has been vague at best. On the contrary, the Balanced Scorecard provides predictive, forward-looking views of the overall business that go beyond a focus on short-term bottom-line results 3. Measuring your strategy enables you to confirm or set aside the assumed causes and effects you have based your strategy on. This is vital information. Your strategy is based on what you believe influences the perspectives the most. Keeping track of the right measures and communicating the success or failure to achieve the target values of such measures help everyone focus on the issues that matters most. 4. If this doesn't happen, then the assumption on which our strategy is based may be wrong and we may have to rewrite our strategy. Getting this kind of information to your desk fast may save you from total embarrassment. Confirm or disprove your ability to achieve what you have planned to achieve. Had the desired effect on your ability to deliver internal processes end objectives
1.4 OBJECTIVES OF THE STUDY Balanced scorecard was the one the key control tool to manage the organization effectively according to the strategy which is implemented. Objectives are diversified into primary and secondary PRIMARY OBJECTIVE 1. To improves the bottom line by reducing process cost and improving productivity and mission effectiveness. 2. It helps in measurement of process efficiency provides a rational basis for selecting what business process improvements to make first. 3. It allows managers to identify best practices in an organization and expand their usage elsewhere. 4. The visibility provided by a measurement system supports better and faster budget decisions and control of processes in the organization. This means it can reduce risk. 5. Visibility provides accountability and incentives based on real data, not anecdotes and subjective judgments. This serves for reinforcement and the motivation that comes from competition. SECONDARY OBJECTIVE 1. It permits benchmarking of process performance against outside
organizations. 2. It can raise you agency's Baldrige score, which can serve to increase its longterm chances of survival.
1.5 SCOPE OF THE STUDY “BALANCED SCORECARD AS PERFORMANCE MANAGEMENT TOOL” 1. The Balanced Scorecard enables organizations to bridge the gap between strategy and actions, engage a broader range of users in organizational planning, reflect the most important aspects of the business, and respond immediately to progress, feedback and changing business conditions. The Balanced Scorecard can be a great help used as a strategic tool, a management methodology or / and a measurement system. 2. The Balanced Scorecard provides organizations with the ability to clarify vision and strategy and translate them into action. By focusing on future potential success it becomes a dynamic management system that is able to reinforce, implement and drive corporate strategy forward. 3. The Balanced Scorecard is based on performance measurement and derives its objectives from vision and strategy. It enables shared understanding of the links between strategy, critical success factors and actions while establishing accountability 4. The concept of the Balanced Scorecard has achieved increasing popularity in the business world. Many businesses had previously built their objectives around financial targets and goals of little relevance to a long-term strategic vision, thus typically leaving a gap between strategy development and implementation. 5. The Balanced Scorecard is based on performance measurement and derives its objectives from vision and strategy. It enables shared understanding of the links between strategy, critical success factors and actions while establishing accountability 6. The Balanced Scorecard focuses on creating and communicating a total comprehensive picture to all members of the organization from the top down, taking a long-term view of what the company's strategic objectives really are, making good use of knowledge gained through experience and maintaining the required flexibility of such a system to cope with the fast-changing business environment.
1.6 STUDY METHOD A qualitative study was chosen because metric to be analyzed was vast. The study is focused on how Zenta’s internal metrics can be fitted to the balanced scorecard concept. 1.7 DATA COLLECTION METHOD Kaplan and Norton’s book “balanced scorecard” is taken as base and collected data for this project • • • A “General Observation Study” was made to know about the measurement method followed in the company. Got help from my senior colleagues in the office to get some data’s about the process Internal metrics measured in Zenta is used for further analysis.
CHAPTER 2 LITERATURE REVIEW 2.1 INTRODUCTION TO BALANCED SCORECARD HISTORY
Throughout the history of contemporary management theories starting from the ones that were introduced between the intrusion of the mass production in the beginning of the 20th century and until today, all the gurus of management have been trying to find uniform solutions on more efficient allocation and use of very limited resources available to businesses. In the down of the century, Frederick W. Taylor established the very concepts of resource allocation in his Principles of Scientific Management. In 1920 it went around assembly line and motion studies as the first experience from systematic mass production had given theorists quite a lot of materials to be analyzed from the point of view of using traditional by blue-collar employees more efficiently. In the 1930, the main topic was motivation of employees, as it turned out that human nature does not enable to work long hours on a repetitive tasks without frustration level getting so high enough to diminish productivity. In the 1940 and 1950, the first statistical and linear methods were introduced in trying to measure logistics of the operations management and its implications to overall company success in financial-analysis side. In the beginning of 1980, partly because of introduction of electronic data processing equipment and quick development of computers, the whole array of management techniques were initiated. The particular reasons for the vast development of the new theories were catalyzed mainly by ever growing competition generated through more systematic use of computers, and of course also by rapid growth of the importance of human capital. During the industrial age, the financial control systems were developed in major companies to facilitate and monitor efficient allocations of financial and physical capital.
A summary financial measure such as return-on-capital-employed (ROCE) could both direct a company’s internal capital to its most productive use and monitor the efficiency by which operating divisions used financial and physical capital to create value for shareholders. The emergence of the information era, however, in the last decades of the 20th century, has made obsolete many of the fundamental assumptions of the industrial age competition. The information age environment for both manufacturing and service organizations requires new capabilities for competitive success. The ability of any company to mobilize and exploit its intangible assets has become far more decisive that investing and managing tangible, physical assets. Today automation and productivity have increased the number of people performing analytic functions: engineering, marketing, management and administration. Therefore, these people are more viewed as problem solvers, not as variable costs. In other words, information age ahs brought about the concept of knowledge management. The shift to successful knowledge management has introduced a variety of improvement initiatives such as; JIT, TQM, Lean enterprise, Time-based competition, Customerfocused organizations etc. Some of those programmers have meant in practice real breakthrough and improvement, others have proven to be in the best case just a shorttime disturbance, but in the worst cases total failures resulting in disarray or even bankruptcy of a particular company. The main reason for that lies in five main implementation problems: 1. Current performance measurement systems are based on the traditional financial accounting model, which does not enable to objectively analyze information-age companies; 2. If some non-financial performance measurement even is made, it is solely based on employees’ tactical performance, not on strategic performance, 3. Majority of management and employee salary-based motivation schemes are only short-run profit oriented, that does not enable to align towards long-run profit oriented, that does not enable to align towards long-run goals; 4. Overall company strategy is not closely linked to organizational and personal improvement programmers; and
5. Strategy is not generally linked to resource allocation, which results in under financing some of the crucial parts of organization’s development. As for today, superior financial performance and efficiency in production are just not enough to gain sufficient competitive advantage but more and more attention needs to be paid to intangible sides of business. 2.2 KAPLAN AND NORTAN APPORACH OF BALANCED SCORECARD The balanced scorecard is a strategic planning and management system that is used extensively in 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. This new approach to strategic management was first detailed in a series of articles and books by Drs. Kaplan and Norton. Recognizing some of the weaknesses and
vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective. 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's first book, The Balanced Scorecard, remains their most popular. The book reflects the earliest incarnations of Balanced Scorecard - effectively restating the concept as described in the second Harvard Business Review article. Their second book, The Strategy Focused Organization, echoed work by others (particularly in Scandinavia) on the value of visually documenting the links between measures by proposing the "Strategic Linkage Model" or “strategy map”. Since then Balanced Scorecard books have become more common - in early 2010 Amazon was listing several hundred titles in English which had Balanced Scorecard in the title. 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."
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.
Figure 2.1 2.3 PERSPECTIVES OF KALPAN AND NORTAN 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: The Learning & Growth Perspective: This perspective includes employee training and corporate cultural 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 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." 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. 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.
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. 2.4 LINKING THE BALANCED SCORECARD MEARSURES TO STRATEGIC METRIC There are three principles which will enable the organization’s balanced scorecard to be linked to its strategy • • • Cause and effect relationship Performance drivers Linkage to financials
CAUSE AND EFFECT RELATIONSHIP A properly constructed scorecard should tell the story of the business unit’s strategy through such a sequence of cause and effect relationships. The measurement system should make the relationships (hypotheses) among objectives (and measures) in the various perspectives explicit the sequence of hypotheses about the cause and effect relationships between outcome measures and the performance drivers of those outcomes. Every measure selected for a balanced scorecard should be an element of a chain of cause and effect relationships that communications the meaning of the business unit’s strategy to the organization In simple terms “every action has a reaction”
Then Cause and effect relationship for training Employee training (Cause) Figure 2.2 PERFORMANCE DRIVERS AND OUTCOMES All balanced scorecards use certain generic measures. These generic measures tend to be core outcome measures, which reflect the common goals of many strategies as well as similar structures across industries and companies. These generic outcome measures tend to be lag indicators, such as profitability, market share, customer satisfaction, customer retention, and employee skills. The performance drivers, the lead indicators are the ones that tend to be unique for a particular business unit. The performance driver reflect the uniqueness of the business unit strategy; for example, the financial drivers of profitability, the market segments in which the unit chooses to complete, and the particular internal processes and learning and growth objectives that will deliver the value propositions to targeted customers and market segments. A good balanced scorecard should have a mix of outcome measures and performance drivers. Outcome measures without performance drivers do not communicate how the outcomes are achieved. They also do not provide an earlier indication about whether the strategy is being implemented successfully. Conversely, the performance drivers – such as cycle time and part-per million defect rated – without outcome measures enable the business unit to achieve short operational improvements, but will fail to reveal whether the operational improvements have been translated into expanded business with existing and new customers, and eventually, to enhance the financial performance. A good balanced scorecard should have an appropriate mix of outcome (lagging indicators) and performance drivers (leading indicators) that have been customized to the business unit strategy. LINKAGE TO FINANCIALS Improvement in process (Effect)
With the proliferation of change programs under way in most organization today it is easy to become preoccupied with such goals as quality, customer satisfaction, innovation, and employee empowerment for their own sake. Will those goals can lead to improved business unit performance, they may not if these goals are taken as ends in themselves. The financial problems of some recent Baldrige award winners give testimony to the need to link operational improvements to economical results. A good balanced scorecard must retain a strong emphasis on outcomes, especially financial ones like return–on–capital-employed or economic value added. Many managers fail to link programs, quality management, cycle time reduction, reengineering, and employee empowerment, to outcomes the directly influence customers and that deliver future financial performance in such organizations the improvement programs have incorrectly been taken as the ultimate objective they have not been linked to specific targets and eventually financial performance. The inevitable result in that such organization eventually become disillusioned about the lack of tangible payoffs from their change programs. Ultimately, casual paths from all the measures on a scorecard should be linked to financial objectives. 2.5 PERFORMANCE MANAGEMENT SYSTEM Performance Management involves the entire gamut of processes in identifying critical dimensions of performance - setting work plans against laid down objectives, reviewing the work done against indicators of performance and developing and enhancing competencies for improved performance. An effective Performance Management System should be based on:• • • • Setting up KRAs for the Region/Theme/Unit/Department Clarity of Individual Roles and Responsibilities Laying down Plans and Performance Indicators for each position Periodic assessment of performance of the individual against such Plans/ Performance Indicators
Identifying factors facilitating and hindering achievement of Plans - development of action plans for overcoming hindering factors and strengthening facilitating factors
• • •
Periodic review of role incumbents' behavior, which contributes to effective functioning and working out action plans for developing such behavior. Identification of role incumbents' developmental needs and preparing plans for staff development through training and related activities. Implementation and review.
2.6 DESIGNS OF BALANCED SCORECARD Design of a Balanced Scorecard ultimately is about the identification of a small number of financial and non-financial measures and attaching targets to them, so that when they are reviewed it is possible to determine whether current performance 'meets expectations'. The idea behind this is that by alerting managers to areas where performance deviates from expectations, they can be encouraged to focus their attention on these areas, and hopefully as a result trigger improved performance within the part of the organization they lead. The original thinking behind Balanced Scorecard was for it to be focused on information relating to the implementation of a strategy, and perhaps unsurprisingly over time there has been a blurring of the boundaries between conventional strategic planning and control activities and those required to design a Balanced Scorecard. This is illustrated well by the four steps required to design a Balanced Scorecard included in Kaplan & Norton's writing on the subject in the late 1990s, where they assert four steps as being part of the Balanced Scorecard design process: 1. Translating the vision into operational goals; 2. Communicating the vision and link it to individual performance; 3. Business planning; index setting 4. Feedback and learning, and adjusting the strategy accordingly.
These steps go far beyond the simple task of identifying a small number of financial and non-financial measures, but illustrate the requirement for whatever design process is used to fit within broader thinking about how the resulting Balanced Scorecard will integrate with the wider business management process. This is also illustrated by books and articles referring to balanced scorecards confusing the design process elements and the balanced scorecard itself. In particular, it is common for people to refer to a “strategic linkage model” or “strategy map” as being a balanced scorecard. Although it helps focus managers' attention on strategic issues and the management of the implementation of strategy, it is important to remember that the balanced scorecard itself has no role in the formation of strategy. In fact, balanced scorecards can comfortably co-exist with strategic planning systems and other tools. 2.6.1 Improved design Method of Kaplan and Norton In the mid 1990s, an improved design method emerged. In the new method, measures are selected based on a set of "strategic objectives" plotted on a "strategic linkage model" or "strategy map". With this modified approach, the strategic objectives are distributed across the four measurement perspectives, so as to "connect the dots" to form a visual presentation of strategy and measures. To develop a strategy map, managers select a few strategic objectives within each of the perspectives, and then define the cause-effect chain among these objectives by drawing links between them. A balanced scorecard of strategic performance measures is then derived directly from the strategic objectives. This type of approach provides greater contextual justification for the measures chosen, and is generally easier for managers to work through. This style of Balanced Scorecard has been commonly used since 1996 or so: it is significantly different in approach to the methods originally proposed, and so can be thought of as representing the "2nd Generation" of design approach adopted for Balanced Scorecard since its introduction. Several design issues still remain with this enhanced approach to Balanced Scorecard design, but it has been much more successful than the design approach it superseded.
In the late 1990s, the design approach had evolved yet again. One problem with the "2nd generation" design approach described above was that the plotting of causal links amongst twenty or so medium-term strategic goals was still a relatively abstract activity. In practice it ignored the fact that opportunities to intervene, to influence strategic goals are, and need to be anchored in the "now;" in current and real management activity. Secondly, the need to "roll forward" and test the impact of these goals necessitated the creation of an additional design instrument; the Vision or Destination Statement. This device was a statement of what "strategic success," or the "strategic endstate" looked like. It was quickly realized, that if a Destination Statement was created at the beginning of the design process then it was much easier to select strategic Activity and Outcome objectives to respond to it. Measures and targets could then be selected to track the achievement of these objectives. Design methods that incorporate a "Destination Statement" or equivalent (e.g. the Results Based Management method proposed by the UN in 2002) represent a tangibly different design approach to those that went before, and have been proposed as representing a "3rd Generation" design method for Balanced Scorecard. Design methods for Balanced Scorecard continue to evolve and adapt to reflect the deficiencies in the currently used methods, and the particular needs of communities of interest (e.g. NGO's and Government Departments have found the 3rd Generation methods embedded in Results Based Management more useful than 1st or 2nd Generation design methods). 2.7 KEY MEASURES OF BALANCED SCORECARD The Balanced Scorecard is currently a very trendy (and often misunderstood) topic in business circles, but there are other measurement frameworks such as the Performance Prism, the Quantum Performance Management Model and the Tableau de Bord. All are useful, but none of them is the answer to everything despite what their advocates may say. Combining elements of various measurement frameworks yields the measurement model below. It works as follows:
1. The needs and expectations of customers and stakeholders are the primary drivers of strategies. Stakeholders include shareholders and employees, but suppliers, the community, government entities and other organizations could also be important stakeholders. 2. Strategy consists of defining your intended customers and how you are going to compete for them. A company’s strategy is made up of individual strategies, which are the key actions a company must take to achieve its vision and goals. When developing strategies, all other elements of the model must be considered. 3. Operations include all direct and support business activities that execute strategies and produce products and services for customers and stakeholders. 4. The capabilities of a company’s organization and infrastructure enable its operations to efficiently satisfy customer and stakeholder requirements. Stakeholder capabilities may also be important to a company’s operations. In the short-term, capabilities can limit what strategies are feasible; in the long-term they may need to be developed to implement certain strategies. 5. Stakeholder contributions include products or services that are essential to operations. For example, suppliers may provide critical technical support for designing products. 6. Products and services provided to customers create financial returns for shareholders and perhaps other stakeholders as well. Measurement and business success All of the listed variables can be measured to a useful degree of accuracy and some companies are doing it. Companies that have won the Baldrige Award or similar state award have extensive measurement systems that include all of the above measures. In reviewing numerous Baldrige-based quality award applications, I have found that a good estimate of a company’s final score can be made by just examining the measures being used. Why? Because the depth, breadth and underlying logic of a company’s measures reflect management’s understanding of the business and how well it is being managed.
Not surprisingly, over a five-year period ending in 1998, the winners of Baldrige and similar awards did two to three times better than comparable companies in terms of their growth in sales and operating income. That is a huge difference!
Determining what to measure So how can you determine what your company should measure? As mentioned before, there are several frameworks that can be used. Although they all have merit, some have advantages in terms of their state of development, ease of use, and direct relationship to common business practices. I believe the best approach for developing company or business unit strategy and related measures is to use the Balanced Scorecard methodology in conjunction with the robust perspectives of the Performance Prism. Balanced Scorecard performance systems have an established record of success, but one needs a disciplined way of building and implementing the system to ensure that business strategies get executed and that the necessary organization culture change gets implemented. One framework that is becoming an international "best practice" is the Balanced Scorecard Institute's Nine-Step Methodology for developing strategic themes, business strategies, strategic goals, strategy maps, performance measures, targets, and new initiatives. The result is a strategic management system that is comprehensive, logically sound, and supported by the whole organization. This does not assure the strategies will work, but the measures will provide timely feedback about how well they are working so timely corrective action can be taken regarding the strategies or their execution. Without the measures, a company’s strategy and finances could get substantially off-track before any problems are even recognized.
But having good strategies is not enough to be successful. Operational excellence is also needed to execute them. To achieve and maintain high levels of productivity, quality, and customer service, comprehensive operations or process measurement systems are needed to manage processes, departments and work units. These systems would include the measures that are strategically important, but those measures alone are insufficient for effectively managing operations. For developing operational measures, I recommend the approach and model given in my book Operational Performance Measurement: Increasing Total Productivity. No doubt I am biased, but the book’s process measurement model is the only one I’ve seen that meets three critical criteria: it is logically sound, it readily relates to real world processes, and it has a record of successful application. The model is also consistent with TQM and Six Sigma methodologies that contain many specialized techniques for measuring and managing processes. Becoming familiar with the Baldrige Criteria for Performance Excellence is also recommended. Since it outlines general management best practices, it provides a very helpful perspective on what a well-managed company should be measuring, as well as what it should be doing. Cascading measures Corporate level measures are very important, but they aren’t going to have much impact unless they are cascaded all the way down to front-line employees. The case for cascading is simple: Do you want 10% of your employees working toward company objectives or 100%? With some exceptions, such as market share, what you measure at the top is what must be measured at all levels. However, the specific measures will change with every function and organizational level because managers doing different jobs need different information to make different decisions.
The same methodologies used to develop measures at the corporate level can be used to cascade the measures down to front-line managers, supervisors, and employees. However, as you go down the organization chart, the focus is on operations or processes. Strategy is incorporated into operational measures by giving more weight to the measures that are strategically important. This communicates strategy to all employees by translating it into operational terms - a primary objective of the Balanced Scorecard. Implementing performance measures Determining what to measure can take considerable effort, but it will probably be less than one-third of the total effort required to implement an efficient and effective measurement system. Data collection and processing systems will have to be implemented to produce the measures; everyone will have to be trained in using the systems and measures; and as the measures are used, some problems are sure to be identified that will require changes to the system. Perhaps the greatest challenge faced when implementing performance measurement systems is changing an organization’s culture. Using performance measures requires managers and employees to change the way they think and act. For most people, this is relatively easy, but for some, changing old beliefs and habits is very difficult. Overcoming such problems requires strong leadership to provide appropriate direction and support. The best measurement system in the world will yield few benefits if the right knowledge, skills, abilities, and values are not developed in a company. An organization doesn’t just interface with a measurement system; it is part of the system.
3.1 RESEARCH METHODOLOGY Research Methodology is the way in which the data are collected for the research project. TYPE OF RESEARCH: In this study, the type of research is “Qualitative Research” QUALITATIVE RESEARCH MEANS: Qualitative research seeks out the ‘why’, not the ‘how’ of its topic through the analysis of unstructured information – things like interview transcripts, open ended survey responses, emails, notes, feedback forms, photos and videos. It doesn’t just rely on statistics or numbers, which are the domain of quantitative researchers.
Qualitative research is used to gain insight into people's attitudes, behaviors, value systems, concerns, motivations, aspirations, culture or lifestyles. It’s used to inform business decisions, policy formation, communication and research. Focus groups, indepth interviews, content analysis, ethnography, evaluation and semiotics are among the many formal approaches that are used, but qualitative research also involves the analysis of any unstructured material, including customer feedback forms, reports or media clips. Collecting and analyzing this unstructured information can be messy and time consuming using manual methods. When faced with volumes of materials, finding themes and extracting meaning can be a daunting task. 3.2 LIMITATIONS OF THE STUDY: • • • • Lack of top management support No access to confidential data Complexity of the process Time consuming process
CHAPTER 4 4.1 ZENTA BUSINESS MEASUREMENT SYSTEM 4.1.1 GOAL FLOW In ZENTA all business process operates separately under different BG’s it is classified according to the nature of business. In Zenta there are five business groups • • • • • Commercial Service group Residential mortgage service Due diligence Financial service Lease administration
All the business groups have separate goals but all the separate goals are linked with corporate goal as shown the figure
Accounti ng goal
Goal flow SBG level goal
Figure 3.1 Figure 4.1
4.1.2 VISION AND MISSION BASED BALANCED SCORECARD The May 2007 realignment of the Company’s services under the Zenta brand reflects the new corporate vision of building a world-class Knowledge and Business Process Outsourcing Company focused on the real estate and financial services industries. As a fully integrated global enterprise, Zenta now offers real estate and financial services customers a broad array of services from its centers of excellence around the globe. Financial objective • High return on investment • Borden revenue Mix
Business process (Innovation cycle) • Reduction in cycle time
Customer objective • Improve customer retention • Deliver high quality service
Business process (Operational cycle) • Achieve high CU • Improve FTE competency
STAFF SKILLS Improvement Learning and growth Objective • vision communication • Increase training Hrs Figure 4.2 4.3 METRIC ANALYSIS IN ZENTA 4.3.1 SEAT UTILIZATION Seat utilization mean occupancy of seat on work floor, this is calculated with the head count of the current period. Seat utilization is considered as internal business metric which is linked with the financial metric i.e. the cost of seat. When seat utilization was high overall seat cost will go down this increase the profitability and on time delivery. Seat utilization mainly depends on the seat management, where seat management Seat is a method of coordinating all the workstations in an enterprise network by overseeing utilization the installation, operation, and maintenance of hardware and software at each workstation. This will greatly reduce the overall cost of operation compared with unmanaged systems and it will improve overall performance of the organization. On time Seat utilization is inversely proportional to seat cost, where it is directly delivery proportional to on time delivery.
Increase information asset
Internal business process
Financial perspective Figure 4.3
4.3.2 TRANSPORTATION COST Transportation is simple metric but it will also impact in customer satisfaction and retention. Transportation cost is considered as one of the key metric in financial perspective of the company. Vehicle seat utilization is considered for knowing the total number of employee using the company transport and how much the company paying for it. Average travel time is calculated to identify to satisfaction level of the employee. Average travel time: Time taken by the employee to reach destination from work place. When average travel time for an employee is high it will lead to low employee morale. Vehicle Seat Utilization: rate of occupancy of vehicles for a given route. If vehicle seat utilization is high then transportation cost is lower but average travel time will be higher.
Average Travel Time Transportat ion Cost
Financial perspective Vehicle Seat Utilization Internal business process Figure 4.4
4.3.3 EMPLOYEE SKILL EFFECTIVENESS Employees are considered as important asset for any organization. Skill set for Skills per any employee plays an important role in organizational development. All the employees FTE (IT) are trained according to the requirement of the respective business group. This training makes the employee to be efficient in the work flow. Efficiency is considered as internal business process metric when efficient employee is working in the process then there will Efficiency of work no deviation from turnaround time (TAT). With low skills of the FTE’s the process time will be more and this will lead to increase in the TAT.
Deviation Learning and Growth from TAT
Internal business process
Figure 4.5 Skill per FTE (IT): the basic information technology skills which employees posses. This will help in improving productivity or efficiency. The skill per FTE is increased with help of training given by the organization. Deviation from TAT: it refers to the increase in process time from the regular cycle time. In order to meet desired TAT employees has to be trained as per requirement. Revenue generation: Deviation from TAT is inversely proportional to revenue generated. With the effective skills of employees the process time will get reduce, which increases the workflow efficiency, which helps in revenue generation. 4.3.4 COMPETENCY PER FTE Competence (or competency) is the ability of an individual to perform a job properly. Some scholars see "competence" as a combination of knowledge, skills and behavior used to improve performance; or as the state or quality of being adequately or well qualified, having the ability to perform a specific role. Regardless of training,
competency would grow through experience and the extent of an individual to learn and adapt. Resource utilization: It is the process of utilizing the available resources with in the organization effectively to increase efficiency of the work so that profitability of the organization will be increased. Profitability: It is a financial metrics that is used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. Profitability will be increased with increase in resource utilization.
Competenc y per FTE
Learning and growth
Internal business process
On time delivery
Figure 4.6 4.3.5 CUSTOMER SATISFACTION Customer satisfaction is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as "the number of customer or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty. Customer satisfaction data are among the most frequently collected indicators of market perceptions.
Remedial training Remedial training : Specific remedial training for personnel may be required to refresh and upgrade knowledge and skills related to their duties. A standard method of implementing this training and evaluating the personnel involved should be established. Zenta is following remedial training method to ensure efficiency in the process so that it increases customer satisfaction. Defective units
Learning and Growth
Internal business process
Cost of rework
Financial perspective Figure 4.7
Cost of rework: Rework cost is the standard or actual cost that is spent on correcting defective work. Rework cost is an unnecessary and additional cost for the organization, which affects the overall operating cost. 4.3.6 ASSET UTILIZATION
IT skills per FTE Learning and growth
Asset utilization Internal business process Figure 4.8
CSAT By quality of service Customer perspective
Profitability Financial perspective
The term asset utilization means proper utilization of internal facilities to the greater extent. Higher asset utilization increases the profitability and decreases the overall
expense incurred by the organization. All the internal facilities are more of IT related so employees also should posses IT skills to use the facilities effectively. This will result in increase in quality of service to the customer, which is the base line for any organization. 4.2 BALANCED SCORECARD ANALYSIS FOR ZENTA The balanced scorecard framework for Zenta is formulated with the help of above strategies given in the balanced scorecard approach figure. The final balanced scorecard is shown in the table given below. This include two important strategies they are • • Strategic objective: Strategic objective consist of four perspectives along with the metrics calculated in Zenta this strategic objective is framed with help of vision and mission of the company. Strategic objective Strategic measurement
Financial perspective In financial perspective balanced scorecard comprises of three important metric which is considered in Zenta they are • Improve financial Returns o Broaden Revenue Mix o Reduce cost Structure To achieve higher financial returns there should be more area for revenue generation which also helps organization to grow. Reduce cost structure is productivity term to control cost in organizational process high cost reduction will impact in quality of the service provided to the customers this will the lagging indicator. Customer perspective
In customer perspective table, increase in customer satisfaction through superior execution is the strategic objective (These objectives are considered for Zenta). To increase CSAT employee in the organization should be well trained how to handle the customer. How to serve them but making proper relationship will be challenge so this will be in lagging indicator. There should a proper execution of service this will result in high customer retention so market share in the segment will go up this will the leading indicator.
TABLE: 1 (BALANCED SCORECARD OF ZENTA) Strategic Objective Strategic Measurement Lagging Indicators Leading Indicators
FINANCIAL PERSPECTIVE Improve returns ROI Broaden revenue Mix Revenue growth Reduce cost Structure Quality reduction CUSTOMER PESPECTIVE Increase Customer Satisfaction CRM Through Superior Execution INTERNAL BUSINESS PROCESS Understand Customer Segments High capacity utilization Asset utilization
Revenue mix Process Improvement Through Kaizen and Lean tool Share of the segment
Meeting Client Targets Business volume No Tracking system
FTE competency Cycle time reduction Provide Rapid Response(internal) LEARNING AND GROWTH Increase Employee Productivity Develop Strategic Skills Access to Strategic Information Align Personal Goals .
Remedial training Application Tracking Application Tracking(Track IT) Efficiency Drivers Attrition Application Restriction
Application Support Effective Work force
Good Performance Appraisal
Internal business process In Zenta I am considering six internal businesses metric to measure balanced scorecard. The considered metric are • • • • • • Understand Customer Segments High Capacity Utilization Asset Utilization FTE Competency Cycle Time Reduction Provide Rapid Response
These metrics are considered is to cover all the business area in the company. Provide rapid response is only for internal communication purpose, not with external customers. Learning and Growth perspective Learning and growth is one the key perspective which helps to improve the bottom line of the company. To increase employee productivity training is important only with training employee cannot become competent to make employee competent some key metric are considered they are • • Develop strategic skills Access to strategic information
Align personal goals
Develop strategic skills In order to make process improvement employee should be trained according to the business requirement. When there is lack of training employee cannot perform their job well so it leads to attrition. For effective performance in their job employee should be well motivated and trained this will increase overall efficiency of the organization. Access to strategic information In Zenta all the process is application oriented and application controlled. All employees cannot access all files they have a limit but some of the strategic information’s are common to all. This kind of systematic procedure of allowing access to data will motivate employee to achieve more in their work process. Align personal goals Each and every employee in the organization will be aligned with specific goals as assigned by the business head. With the proper communication of goal employee can work on it and achieve it. STRATEGIC MEASUREMENT Strategic measurement has to main parts which will access the all the metric of strategic objective the two parts of strategic measurement are • • Lagging Indicator In balanced scorecard outcomes are called lagging indicators. It will determine what to be improved in the company so that company can earn more. Lagging indicators are not measured as leading but measuring lagging indicator will help organization to change it to leading indicator Lagging Indicator Leading Indicator
Leading indicator In balanced scorecard leading indicators are the performance drivers which makes company profitable. The leading indicator makes company to act according to the strengths this will help them to achieve more in the market place. In strategic measurement leading indicator will tell the strength of the company which was shown in table below.
4.4 ZENTA APPROACH ON BALANCED SCORECARD The process of developing a balanced scorecard at Zenta is translated each of these strategies into objectives and measures in the four perspectives. Particular emphasis was placed on understanding and describing the cause and effect relationships on which the strategy was based. A simplified version of the results of this effort is shown in the figure (4.1).
REVENUE GROW TH STR
F ina nc ia l perspective
Broaden R evenu M ix e
For the revenue growth strategy, the financial perspective is to broaden the revenue mix for the company. Strategically it is meant to increase the business process by acquiring new clients and identifying new processes. In case of customer perspective, increase customer confidence will be the key factor for the Zenta in customer retention. Then the scorecard design focused on the internal business process perspective, Zenta has three main objectives first is understanding customer segments, Zenta is an outsourcing company understanding the customer needs and wants is important for better servicing. All customers are not same so segmenting them according to there requirement and work accordingly will increase their confidence. Second was to improve capacity utilization of the company, CU is one of key metric measured in the company which helps to measure the performance of the business group, there will a CU target which is to be achieved by the all BG’s in the company but the target will be different according to the work flow of the BG’s. High CU leads to higher revenue. Third will be the asset utilization this will measure the resource utilization i.e. the internal facilities provided by the company to their employees. The next scorecard measure will be the productivity strategy, the financial perspective is to improve the operating efficiency this achieved by implanting new techniques which reduce the cost Zenta follows Kaizen tool as technique which helps to reduce the production hours due to that cost is reduced. These both revenue growth financial measure and productivity strategic financial measure will lead to more returns to the company which helps to achieve the financial goal. For customer perspective in productivity strategy is to improve the customer satisfaction through superior execution this suggest that fulfilling customer wants and needs with help of facilities available. In internal business process I am considering three important productivity improvement strategies are measured they are • • • Improve Competency of FTE Cycle time reduction this applicable for all business process Compliance to organizational policies
CYCLE TIME REDUCTION: Cycle Time Reduction is identifying and implementing more efficient ways to do things. Reducing cycle time requires eliminating or reducing non-value-added activity, which is defined as any activity that does not add value to the product. Examples of nonvalue- added activity in which cycle time can be reduced or eliminated include repair due to defects, machine set-up, inspection, test and schedule delays. Reducing cycle time will have a significant impact on a company's bottom line when implemented. COMPLIANCE: Conformity to the organizational policies or requirements to meet the overall objectives. A system or framework developed internally to implement the above either manually or application which will help in controlling and monitoring of key metrics. All this metrics in balanced scorecard will help organization to measure the performance and effectiveness of the work flow process. These three strategies gives way to next set of questions on this that is what kind competency to be improved? And how cycle time reduction can be done? To answer this question there will proper training program will be given. In this balanced scorecard there will be another perspective that is learning and growth. This perspective is common base for both the revenue growth strategy and productivity strategy. Learning and growth three important metric they are first is develop strategic skills this is achieved with help of proper on the job training. Second will be Access to strategic information should ensure that all employees can access to the common goals, financial status of the company then new deal. This helps them to improve the knowledge about the work flow. Third will be alignment of personal goals. Each employee in the company should have a goal this goal should be communicated to the individual through training and development team in the company. All these strategies lead to increase in employee productivity. This employee productivity helps in improvement above mentioned strategies that is revenue growth and productivity.
4.5 ACHIVING STRATEGIC ALIGNMENT: FROM TOP TO BOTTOM Implementation of balanced scorecard begins by educating people who is involving in executing it. Some organizations hold their strategy to top management to make it secret that is shared among the senior executive and control group. Implement group is controlled and commanded by top management but this is only for centralized management company. Now a day’s all the organization is customer driven so all are included in implementing and all are allocated with different strategy that is to be implemented. when balanced scorecard is implemented in an organization their management system will get varied it will follow Top to Bottom level of management system. And a different management system will be followed that is communicating and linking which is shown in the figure
Clarifying and Translating the Vision and Strategy
Communicating and Linking
Strategic feedback and learning System
Planning and Target Setting
There are three distinct mechanisms are used in this method they are 1. Communication and education programs. A prerequisite for implementing strategy is that all employees, senior corporate executives, and the board of directors understand the strategy and the required behavior to achieve the strategic objectives. A consistent and continuing program to educate the organization on the components of the strategy, as well as reinforcing this education with feedback on actual performance. 2. Goal-setting programs. Once a base level of understanding exists, individuals and teams throughout the business unit must translate the higher level strategic objectives into personal and team objectives. The traditional management by objectives (MBO) programs used by most organizations should be linked to the objectives and measures articulated in the balanced scorecard. 3. Reward linkage system. Alignment of the organization towards the strategy must ultimately be motivated through the incentives and reward. In this system its incorporated in strategy itself Key Features of this management strategy• • • Goal alignment exists from top to bottom Education and open communication about strategy are basis for employee empowerment Compensation is linked to strategy. For formulating a balanced scorecard that links a business unit’s mission and strategy to explicit objectives and measures is only the start of using the scorecard as a management system. the balanced scorecard must be communicated to all the employees including top level to bottom level reason for communicating this to all employees is to align all employees with the organization as well as individuals to whom the business unit is accountable to the strategy. The knowledge and alignment among these constituents will facilitate local goal setting, feedback, and accountability to the SBG’s strategic path. Alignment and accountability will clearly be enhanced when individual contribution to achieving scorecard objectives are linked to recognition, promotion and compensation programs. Whether such linkage should be explicit, based on
predetermined formulas, or applied judgmentally, using the heighted visibility and observability gained from formulation, more knowledge about benefits and costs of explicit linkages will undoubtedly continue to be accumulated in the years ahead.
5.1 SUMMARY: FINDINGS Companies initially adopt the balanced scorecard for various reasons which include clarifying and gaining consensus on the strategy, focusing organizational change initiatives, and developing leadership capabilities at strategic business units and how effectively they manage and coordinate with other business units. In Zenta there are five business groups which have lack of communication between each other this will one major reason why Zenta will go for balanced scorecard in future. The balanced scorecard can be a cornerstone for any organization’s management system because it aligns and supports some of the key process they are • • • • • Communicate the strategy throughout the organization Align goals to all departments and employees Linking all the available strategies in the organization Aligns a new kind of performance management system It take cares both internal and external side of the organization
If an organization which is implemented balanced scorecard what to quick transition, from vision to action plan mean they will feel the real excitement and gain of real value of balanced scorecard because it mobilizes the system according to the new vision and make quick change in the performance system which will suit the new vision. So it will become very comfortable and easier to change the entire management system in short period.
It will line up strategic initiatives that follow "best practices" methodologies cascade through the entire organization. It will leads to increased creativity and unexpected Ideas The Balanced Scorecard helps to align key performance measures with strategy at all levels of an organization It (balanced scorecard as performance management tool) will provide management with a comprehensive picture of business operations Balanced scorecard methodology will facilitate communication and understanding of business goals and strategies at all levels of an organization It leads to maximized Cooperation - Team members are focused on helping one another succeed Early identification of problems and opportunities; Usable Results - Transforms strategy into action and desired behaviors It leads to a cohesive organization working toward common goals. The Balanced Scorecard concept provides strategic feedback and learning A cross organizational team - More open channels of communications Enthusiastic People Increased productivity, quality, and customer service can be achieved Initiatives are continually measured and evaluated against industry standards Balanced Scorecard helps reduce the vast amount of information that the organization's IT systems process into essentials Unique Competitive Advantage Reduced Time-frames Improved Decisions and Better Solutions Improved Processes
• • • • •
• • •
• • • •
Controlling is an extraneous task in any organization, as it is to include various aspects of Business – like Client Management, Process Management, Support Management etc. Hence, it is important to implement control measures systematically. KAPLAN AND NORTAN came up with a tool which helps achieving this, which is called “Balanced Scorecard”. All the process in an organization has to function in a manner which achieves the organization objectives ultimately. “Balanced Scorecard” is an effective tool to align this taking a “Top Bottom” approach In Zenta, I have made an attempt to do a Quantitative study of how “Balanced Scorecard” can be in built to the process and as a Performance Management tool. The outcome has been very interesting & further scope can be explored.
APPENDIX BIBLIOGRAPHY • • • • • The balanced scorecard “translating strategy into action” by Robert S. Kaplan and David P. Norton www.balancedscorecard.org/.../AbouttheBalancedScorecard/.../Default.aspx en.wikipedia.org/wiki/Balanced_scorecard http://management.energy.gov/documents/ http://www.qsrinternational.com/