Strategic Performance Measurement

Balanced ScoreCard
The role of Performance measurement
systems

• Communicate the company’s strategic objectives.

• Motivate employees to help the company achieve its
strategic objectives.
• Evaluate the performance of managers, employees, and
operating units.
• Help managers allocate resources to the most productive
and profitable opportunities.
• Provide feedback on whether the company is making
progress in improving processes and meeting the
expectations of customers and shareholders
Traditional method of performance
measurement

❖Using data from the INCOME STATEMENT

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financial accounting -----------------

+
system.
NOTE

❖Use financial metrics to --------------------

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evaluate performance. +
(ROI, ROA, ROE, ...) OTHERS
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Challenges in Performance measurement
systems

❖ Firms could no longer create value only through their

physical and financial assets. They needed to create
value through their intangible assets—customer loyalty
and relationships, efficient and high-quality operating
processes, new products and services, employee skills
and motivation, databases and information systems,
organizational culture…
❖ Financial measures become insufficient for measuring
and managing company performance.
The gap between Mission-Vision-Strategy and
employees' daily actions
Mission
Why do we exist?
Core value
What is important to us?
Vision
Who do we want to be?

Strategy
What is our action plan?

Balanced Scorecard
Communicate, Execute

Personal target
Tôi cần làm gì?

STRATEGY IMPLEMENTATION RESULTS

SHAREHOLDER CLIENT PROCESSES LABOR

Satisfied Fun Efficiency and effectively Dedicated and ready
Vision & Mission
Vision
▪ A statement that defines
the medium-long term (3-
10 years) goals of the
business
▪ Should look to the outside,
often describing how the
business wants to be seen
by the world
▪ HOW WILL ENTERPRISE
IN THE FUTURE???
Mission:
▪ A brief sentence focusing on
the internal business,
describing what the business
will do to compete and
provide value to customers.
▪ Often presents the reason for
the existence of the
enterprise, the basic purposes
of its activities, the values that
are "guidelines" for the
activities of employees.
7
What is strategy?

❖A clear statement of the company’s advantage in

the competitive marketplace, what it does or
intends to do differently, better, or uniquely
compared to competitors,
❖The scope for the strategy, where the company
intends to compete most aggressively, either for
targeted customer segments, technologies
employed, geographic locations served, or
product line breadth.
❖“The focus strategy has two variants, cost focus
and differentiation focus” (Michael Porter)
What is strategy?
Balanced Scorecard

❖Balanced Scorecard (BSC) is a strategic

management tool as well as a performance
measurement tool.
❖The way managers use to manage the business
❖The role of the BSC is to concretize the mission
statement, vision and strategy so that it is
meaningful and enforceable for employees.
Management translates its strategy
into performance measures that employees
understand and influence.
Balanced scorecard
Balanced scorecard

Learning and growth: Are we maintaining our ability to

change and improve?
Internal business processes: Have we improved key
business processes so that we can deliver more value to
customers?
• What internal business processes are critical to providing
value to customers?
Customer: Do customers recognize that we are
delivering more value?
• What customers do we want to serve and how are we going
to win and retain them?
Financial: Has our financial performance improved?
• What are our financial goals?
The significance of BSC in
performance measurement

❖BSC is a performance measurement system that

balances between:
▪ Financial and non-financial goals
▪ Short-term and long-term goals
▪ Internal and external goals

BSC directs the organization to the implementation

of the business strategy
The significance of BSC in
performance measurement
The balanced scorecard relies on non- financial
measures in addition to financial measures for two
reasons:
1. Financial measures are lag indicators that summarize the
results of past actions.
Non-financial measures are leading indicators of future
financial performance.
2. Top managers are ordinarily responsible for financial
performance measures—not lower level managers. Non-
financial measures are more likely to be understood and
controlled by lower level managers.
The Balanced Scorecard –
Important Links
❖A balanced scorecard should have measures
that are linked together on a cause-and-effect
basis.
▪ If we improve one performance measure then another
desired performance measure will improve.
▪ The balanced scorecard lays out concrete actions to
attain desired outcomes.
 Mission, vision, and strategy The Balanced Scorecard
Financial perspective
transforms the strategy
Financial
Objectives Measure Target Solution into a unified system that is
Income
perspective Growth
defined across the four
Giá trị tài sản
của cổ đông perspectives of the business
Customer perspective
Customer Objectives Measure Target Solution
perspective Hình ảnh
Dịch vụ
Giá bán/
chi phí

Process perspective
Process Objectives Measure Target Solution
Thời gian
perspective Thực hiện
Chất lượng
Hiệu suất

Learning and growth perspective

Objectives Measure Target Solution
Learning and growth Đổi mới
thị trường
perspective Hoc hỏi
không ngừng
Tài sản
trí tuệ
Financial Measures
Customer Measures
Internal Business Process Measures
Learning and Growth Measures
The Balanced Scorecard and
Compensation

Incentive compensation should be

linked to balanced scorecard
performance measures.
Developing a Strategy Map for a
Balanced Scorecard
❖A strategy map is a diagram of the relationships
of the strategic objectives across the four
dimensions of the balanced scorecard
▪ It is useful to test the soundness of the strategy
and how the strategy is linked to measures on the
scorecard
▪ It is useful to communicates strategic objectives to
employees
Strategy Map Example
Strategic Map
Strategic Map
The Balanced Scorecard –
Jaguar Example – Part 1
The Balanced Scorecard –
Jaguar Example – Part 2
The Balanced Scorecard –
Jaguar Example – Part 3
The Balanced Scorecard –
Jaguar Example – Part 4
The Balanced Scorecard –
Jaguar Example – Part 5
Keys to a Successful Balanced Scorecard

Targets
For each measure, there should be a target so
managers know what they are expected to achieve
Solutions
For each measure, the company must identify actions
that will be taken to achieve the target
Responsibility
A specific employee must be given
responsibility/accountability for the implementation of
each initiative
Funding
Solutions must be funded appropriately
Top Management Support
It is crucial to have the full support of top management
The Balanced Scorecard for Individuals –
Personal Scorecard
❖The entire organization should have an
overall balanced scorecard.
❖Each individual should have a personal
balanced scorecard.
❖A personal scorecard should contain
measures that can be influenced by the
individual being evaluated and that support
the measures in the overall balanced
scorecard.