You are on page 1of 35

Balanced Score Card

& Giving Feedback

Jayati Singh
Today’s Agenda
 Origin
 Defining BSC

 4 perspectives in detail

 Cascading BSC

 Example of BSC

 BSC Automation

 Giving Feedback
 Imagine entering the cockpit of a Jet Plane and observing
that there is only a single instrument. How would you feel
about flying on that plane after the following discussion
with the pilot:

 Q: I am surprised to see you operating the plane with a


single instrument. What does it measure?

 A: Airspeed, I am really working on airspeed this flight.

 Q: That's good. Airspeed certainly seems important but


what about altitude. Wouldn't an altimeter be helpful?

 A: I have worked on altitude for the last few flights and I've
got pretty good on altitude .Now I have to concentrate on
air speed.
 Q: But I notice that you don't even have a fuel gauge.
Wouldn't that be useful?
 A: Fuel is important, but I can't concentrate on doing too
many things well at the same time. So this flight I want all
my attention focused on air speed. Once I get to be
excellent at airspeed, as well as altitude, I intend to
concentrate on fuel consumption on the next set of flights.

 Probably no one would choose to be a passenger on this


plane after such a conversation. Managers are like pilots.
Navigating today's enterprises through complex
competitive environments is at least as complicated as
flying an airplane. The executives thus need a full battery
of instrumentation to guide their journey.
 The Balanced Score Card provides an Enterprise view of an
organizations overall performance by integrating Financial
measures with other key performance indicators around
Customer satisfaction, Internal business processes and
Organizational growth, learning and innovation.
Need for BSC
 In the Industrial Age (1850-about 1975) co.s succeeded by
how well they could capture the economies of scale & scope
 Technology mattered but not as much

 With the increasing pressure to achieve performance


improvement, the need to implement highly effective
efficient and integrated management systems is
continuously increasing.

 There has been an emphasis on understanding how


performance is created within the firm.

 To understand what drives performance, managers must


have in place performance measurement systems designed
to capture information on all aspects of the business.
Origin
 It was originated by Dr. 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.
Measurement Matters
“ If you can’t measure it, you can’t manage it”.

 If companies are to survive/prosper in the


information age they must use measurements and
management systems derived from their
strategies and capabilities. Unfortunately many
organizations espouse strategies about customer
relationships, core competencies, and
organizational capabilities while motivating and
measuring performance only with financial
measures.
 Financial measures are lagging indicators:
they report on the outcomes of past actions.
Exclusive reliance on financial indicators
promoted short-term behavior that
sacrificed long-term value creation.

 Recently, Kaplan and Norton (2001, a) have


transformed the BSC from a performance
measurement system to a strategic
management control system (strategic
performance measurement system).
Usage
 Approximately 50% of Fortune 1,000
companies in North American use a
version of the BSC, according to a
recent survey by Bain & Co. The BSC
model support non-financial
information which can enhance the
organizational future performance
(Missroon, 1999).
Major Elements of an Effective
Performance Management System
Strategy Maps
 A strategy map is a visual representation of the strategy of an
organization. It illustrates how the organization plans to achieve
its mission and vision by means of a linked chain of continuous
improvements.

 For a commercial business, the strategy map illustrates the long-


term game plan or competitive strategy to achieve increased
profitability.

 For a nonprofit or governmental organization, it illustrates the


plan by which the organization intends to improve performance of
its mission.

 In either case it illustrates the cause-and-effect relationships


between different strategic objectives and their measures, or key
performance indicators (KPIs) that are included in a balanced
scorecard.
Example of a Strategy Map
Balanced Score Card (BSC)
 The Balanced Scorecard is a performance
management approach that focuses on
various overall performance indicators,
including customer perspective, internal-
business processes, learning and growth
and financials, to monitor progress toward
organization's strategic goals.
The Balanced Financial
perspective
Scorecard & To succeed Objectives
Measures
Strategy financially, how Targets
should we appear Initiatives
to our
shareholders?
To satisfy our
To achieve our
Vision & shareholders &
vision, how should
Strategy customers, what
we appear to
business processes
Customers?
must we excel at?
To achieve our
Customer vision, how will Internal
perspective we sustain our business
ability to change perspective
and improve?
Learning & Growth perspective
Financial Perspective
 The BSC retains the financial perspective
since financial measures are valuable in
summarizing the readily measurable
economic consequences of actions already
taken. They indicate whether a company's
strategy, implementation and execution
are contributing to the bottom line.
 The financial measures tend to be profit
related (by operating income), return on
capital employed (ROCE or EVA) and Sales
growth or generation of cash flow.
Customer Perspective
 Identifies the customer and market segment in which the business will
compete and measures performance in these targeted segments.

 The perspective typically includes several core/generic measures like


customer satisfaction, customer retention & acquisition and market
share.

 Drivers that represent those factors critical for customers to switch to


or remain loyal to their suppliers
should also be included.

 The perspective should also include specific measures of value


proposition in the specific market/customer i.e. lead-time, on time
delivery if applicable.
The Internal perspective
 The Internal perspective identifies the critical
internal processes in which the organization must
excel. These processes enable the business to:
 Deliver the value propositions that attract and
retain customers
 Satisfy shareholder expectations on financial
returns
 The internal measures focus on the processes
that have the greatest impact on customer
satisfaction and financial objectives.
 The inclusion of innovation measures in this
perspective also gives the organization drivers of
long-term financial success as well as short-term
operational measures.
Learning and Growth perspective
 Learning and Growth perspective identifies the infrastructure that the
organization must build to create long-term growth and improvement.

 Businesses are unlikely to be able to meet their long-term targets for


customers and internal processes using today's technologies and
capabilities. Also intense global competition requires companies continually
to deliver value to customers and shareholders.

 Learning and Growth comes from people, systems and organizational


procedures.

 The financial, customer, and internal perspectives will reveal gaps in the
capabilities of people, systems and procedures. To close these gaps
businesses will have to invest in reskilling employees, enhancing IT
systems and aligning organizational procedures. Measures include:
Employee satisfaction, employee retention, system availability & "front
line" customer information, Alignment of employee incentives with overall
organization success factors etc.
 The “balance” of the scorecard is
reflected in it mix of lagging
(outcome measure) and leading
(performance drivers) indicators, and
of financial and non-financial
measures.
 In turn, each perspective of the
BSC involves
 four elements which are:
1. objectives,
2. measures,
3. targets,
4. initiatives
Balanced Score Card (BSC)
 Each major unit throughout the
organization often establishes its own
scorecard which, in turn, is integrated with
the scorecards of other units to achieve
the scorecard of the overall organization.
Cascading BSC
 With the cascade BSC, the corporate-wide scorecard is
actually broken down into several units.
 The corporate-wide level or the topmost level would be
referred to as Tier 1.

 From Tier 1, the BSC would then be translated right down


to the next level of business units, departments, or support
units. This next level would then be known as Tier 2.

 Once this is achieved, the BSC is then translated down to


individuals or teams. This next level is then referred to as
Tier 3.

The end result of this endeavor would then be made the


focus across all organizational levels.
Line Managers
 it is most usually carried out by line
managers rather than HR
professionals, it is important that they
understand their role in performance
management and how performance
appraisal contributes to the overall
aims of performance management
Fundamental Differences between
Traditional and the BSC
1. Traditional approaches attempt to
monitor and improve
existing business processes. The BSC
approach, however, will usually identify
entirely new processes at which an
organization must excel to meet
customer and financial objectives.

2. To incorporate innovation processes.


Often these may result in the
development of new products or services.
Also, it provides a strategic management system to
accomplish critical management
processes:

 Clarify and gain consensus about vision and strategy


 Communicate strategic objectives, performance measures
and drivers at all levels
 Link strategic objectives to targets and annual budgets
Identify and launch strategic initiatives
 Enhance periodic systematic strategic reviews
 Obtain feedback to learn about and improve strategy
BSC Automation
 There are over a hundred Balanced Scorecard
and/or performance management automation
development companies.

 Some of the options are specifically dedicated to


Performance Management and/or the Balanced
Scorecard.

 Others include tools which are primarily designed


for Business Intelligence, Analytics or Data
Warehousing, but have modules dedicated to
Performance Management.
Giving Feedback
 Feedback should be based on facts not subjective opinion and
should always be backed up with evidence and examples.

 The aim of feedback should be to promote the understanding


of the individual so that they are aware of the impact of their
actions and behavior.

 It may require corrective action where the feedback indicates


that something has gone wrong. However, wherever possible
feedback should be used positively to reinforce the good and
identify opportunities for further positive action.

 Giving feedback is a skill and those with no training should be


discouraged from giving feedback.
Feedback for effective & ineffective
Interpersonal Communication
EFFECTIVE FEEDBACK INEFFECTIVE FEEDBACK
Intended to help Intended to belittle
employee employee
Specific General
Descriptive Evaluative
Useful Inappropriate
Timely Untimely
Considers employee Makes the employee
readiness for feedback defensive
Clear Not understandable
Valid Inaccurate
• Difficult feedback is avoided,
postponed, sugar-coated or lied
about during the appraisal
Why is dealing with things in the
moment so difficult?
 So difficult in fact, that it's routinely avoided rather than
dealt with?
 Because:

 The other person might cry


The other person might get angry
The other person might get defensive
The other person might accuse me of not being fair or not
understanding their job
I don't like giving bad news
I don't want people to think badly of me
They must know there's a problem, they're just being
difficult
What if I know they're lying?
It's really uncomfortable
Another collection of poor, but understandable, excuses.
A Couple of Tips
 Take a good look at what your own fears and concerns are. There is no
reason why you shouldn't mention them when you speak to someone who
you notice has gone off track:
 "Elaine, I'm concerned you might get angry with what I'm going to say,
yet I'm aware that you're making too many personal calls during working
hours and you need to stop."
 Or
 "Elaine, this is really uncomfortable for me to say, but you are making far
too many personal calls and you need to stop."
 We also have a very simple model that takes the sting out of giving
difficult messages:
 I noticed that you've not met your deadlines the past few weeks.
Would it be a good idea if we reviewed your work schedule on a weekly
basis,
So that we can identify any additional support you might need.
 Tell the truth whenever possible. If you treat people like children by
withholding information that affects them or their job, then chances are
they will react like children. If people are going to get upset with the truth,
better they hear it earlier rather than later.
Thank You