Balanced Scorecard

02/26/17 BSC/PFM10/SSP
Agenda
• Why Balanced Scorecard?
• What is Balanced Scorecard?
• How it works?
• Which are different perspectives?
• How they are interlinked?
• Building strategy focused organizations
• A case of Tata Steel
What is a balanced scorecard?
• The Balanced Scorecard is about measuring the activities,
processes, and outputs that are most important for the success of
the organization.

– For eg: A company may be excellent in one area (sales) can cause major
problems in another (manufacturing).
– So, the balance of process and activities are important measures.

• Evolution:-
– Actually Balanced Scorecard originated in the United States in a company
called ‘Analogue Devices.’
– Since 1992, Robert Kaplan and David Norton have been developing the
balanced Scorecard in terms of four perspectives.
What does BSC do?

•Clarify and translate vision and strategy

•Communicate and link strategic objectives and
measures

•Plan ,set targets, and align strategic initiatives

•Enhance strategic feedback and learning
What does BSC do?

•Clarify and gain consensus about strategy

•Communicate strategy throughout the organization

•Align departmental and personal goals to strategy

•Link strategic objectives to long term targets and
annual budgets

•Perform periodic and systematic strategic reviews

•Obtain feedback to learn about and improve strategy
BSC: Few Examples
Financial perspective

Indicate whether company’s strategy implementation and
execution are contributing to bottom-line improvement
•Profitability
t ive e
c ll w
•Operating income, r sp
e
wi ers
l Pe how old
ia ed, reh
•Return-on-capital employed (ROCE) an cce sha
c
Fin su our
e to
•EVA w
“If look

•Growth
•Cash flow
t ive e
Financial perspective p ec ill w s
ers w w er
l P ho old
cia ed, reh
a n ce sha
c
Increase EVA to +2% Fin su our
f we to
“I look

Revenue Growth Strategy Productivity Strategy

New Products High end products Cost Productivity
Customer Perspective
Customer & Market segment in which the unit is
competing
•Performance in the targeted markets tive ow
pec n, h
rs sio ur
•Customer satisfaction r
e
P vi o o
e my k t
t o ve loo rs?
m
•Customer retention u s ie e
h
C c t w to m
e
a
To mus cus
•New customer acquisition “

•Customer profitability
•Specific measures of value propositions- short lead
time or on-time delivery
•New approaches to satisfy emerging needs
Customer Perspective

Win-win Relations with
Differentiators Channel partners

On time Relation Technical Survey Assistance
delivery ship support

•Basic Requirement
•Clean
•Quality
•Variability within
specified limits
Internal –Business-process perspective

Critical internal process in which organization must
excel
Deliver value Satisfy shareholders
proposition expectations t
it ve r, a
p ec me st I
ers sto mu
l P cu s
y e
rna m ss ”
nte isfy oce el?
I at pr xc
s h e
o ic
“T wh
Internal – Process
Identify entirely new process at which organization must
excel to meet customer & financial objectives
Internal –Business-process perspective

Customer Value lowest cost producer
Proposition

t
it ve r, a
p ec me st I
Achieve Operational ers sto mu
l P cu s
excellence rna m ss ”
y e
nte isfy oce el?
I at pr xc
s h e
o ic
“T wh
Learning and growth perspective

Infrastructure that organization must build to create
long-term growth and improvement

e? y
•People based measures

ov t m
’’
pr us
an , ho ing
im m
n
ar on ar
d w
•ESI

le visi Le
n
tio my tio
a
•Competencies

ni ve niz

n
ga hie a
or ac Org

n
•Skill Mix

za
o
“T
•Systems (Technology)
Learning and growth perspective

Motivated and prepared
workforce

Climate for Competencies IT Technology
action
•ESI
Modern approach for Balanced
Scorecard within a performance
management process
Financial Improved Profitability,
Perspective Increased sales.

Customer Improved customer satisfaction,
Perspective Delivery on time.

Process Improved quality control,
Perspective Reduced rework.

Innovation
and learning Improve employee job specific skills,
Perspective Greater employee engagement
Cause and Effect Relationship

ROCE

Customer
Loyalty

On-line
delivery

Process Process
Quality Cycle Time

Employee
Competency
Build STRATEGY-FOCUSED ORGANIZATIONS

1 Mobilize Change
through Executive
Leadership
• Mobilization
• Governance Processes 5
• Strategic Management Make Strategy
2 Translate the a Continual
Strategy to process
Operational Terms
• Link Budgets & Strategy
• Strategy Mape • Strategic Learning
• Balanced Scorecards STRATEGY • Analysis & Information System

4
Make Strategy
3 Align the Everyone’s Job
Organization to
the Strategy • Strategic Awareness
• Personal Scorecard
• Corporate Role • Balanced Paychecks
• Business Unit Synergic
• Support Unit Synergic
Describing Strategy : Strategy Is a Step in a
Continuum
MISSION
Why we exist
VALUES
What we believe In
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SOCRECARD
Implementation & Focus
STRATEGIC INITIATIVES
What we need to do
PERSONAL OBJECTIVES
What I need to do

STRATEGIC OUTCOMES

Satisfied Delighted Satisfied Motivated & Prepared
SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
BSC at Tata Steel: Key Factors

Alignment
All the organizational activities support strategic objectives

Strategic Objectives/
Goals

Plan,Processes,actions,initiatives, decisions
Growth Strategy

Horizon 3
(H 3)
Create viable
Horizon 2 options to build
(H 2) future business
Build emerging •Logistics
business to fuel •E-commerce
Horizon 1
growth
(H 1)
•Chrome
•Titanium
Extend &
•Iron Ore
defend core steel
Time frame
Competitive positioning
Position Tata Steel strategically by being a leader in selected markets

Narrow our Operational
Focus Excellence
Strategy
Balanced Dominate
Selected
Scorecar Markets
Know our Customer
d Attractiveness
Customers Intimacy
Market

Competitive Position
Vision
Tata Steel enters the new millennium with the confidence
of a learning , knowledge based and a happy
organization .
We will establish ourselves as a supplier of choice by
delighting our customers with our services and products
In the coming decade , we will become the most cost
competitive steel plant and so serve the community and
the nation
Where Tata Steel ventures …………..others will follow
BSC Perspectives Strategic Goals
Shareholders
Wealth Creation
Perspective
Customer Perspective World class service and
goods

Internal process Lowest cost producer
Perspective
Learning-(Employee) Knowledge based &
Perspective learning organization

Community Establish Industry leadership
New Framework

Strategic
Vision
Goals
We C A R E
( What? )
•Strategic New
Challenges Strategic
Analysis Measures
•Aspirations
Objectives BSC New
Wisdom /Themes* Initiatives
Action
Programs
Goals/
Targets ( how? ) Key Strategic
initiatives
*All stake holder's need
Financial Perspective

Strategic Strategic Measures Strategic Initiatives
Objectives
Process + Outcome HOW ?
WHAT?
•EVA
•Improve EVA •ROIC
•Market to book ratio
•Working Capital Effi
Financial

Reduce Overall
D/E ratio
debt ratio

•lowest cost steel •Cost of #
producer •# initiative
•Cost of #
•# implementation
•#
Financial Perspective

Strategic Strategic Measures Strategic Initiatives
objectives
Process + Outcome HOW ?
WHAT?
•EBDIT (vs.competion) *Product mix
•Profitability
Financial

Reduce Overall
D/E ratio
debt ratio
Improve internal generation

•lowest cost steel •Cost of #
producer •# initiative
•Cost of #
•# implementation
•#
Customer Perspective-
World Class service & Products

Strategic Measures Key Strategic
Strategic Objectives
initiatives
•Satisfy Customer
CSI •Market share position in
• WC Customer service chosen segment
CDI
•Mode Survey
Call Compliance
Complaint resolution •Develop & Build #
Customer

time Partners
Delivery compliance •Integrate (CR/HR)

•Share of Spend •Build Relationship with
•Improve loyalty, Key Customers
•Retention rate
retention,repeat
Customer Perspective-
World Class service & Products

Strategic Measures Key Strategic
Strategic Objectives
Process + Output initiatives
•Initiate Mystery shopper
activity
•Superior Buying Mystery shopper Index
Experience •Standardize Sales Office
Décor
Customer

•Enhancing Brand
Value Halo effect
Brand management

•Acquire new Number of new
Customer customers

Market share in Chosen segment
Internal Perspective

Strategic Objectives Strategic Measures Key Strategic
Process + Output Initiatives
•lowest cost producer
Cost of HR/CR •Continue #
Savings through * •Implement #
Savings through Strategic • Improve hot Charging at
Sourcing #
Internal

Specific energy •Strategic Sourcing
consumption
•Improve Waste
Sp,energy cost Utilization
•Improve Procurement
cost
Internal Perspective

Strategic Objectives Strategic Measures Key Strategic
Process + Output Initiatives/AP
Operational Excellence
Procurement cost/t Strategic sourcing
Improve in-bound
performance
Internal

World class Products & Prod.Quality rating in
product Quality CSI
No. of new products
developed

Availability TPM
Improve Product/
production Productivity
Performance
Quality
Learning Perspective

Strategic Themes Strategic Measures Strategic initiatives/AP

WHAT? Process + Output HOW?

•Create a culture of a No of presentations Establish e-business
•Set up Knowledge
Learning

learning and knowledge
based Organization Use of knowledge /learning centers

•Develop & Retain Strategic skill Implement #
talent required/ available Have ESI yearly
ratio

•Improve Technology/
Information
infrastructure
Processes for making the BSC’s work
1. Commitment form the CEO
2. Alignment and Ownership
3. Connect to KRA’s / compensation
4. Adopt Business Excellence
5. Create QMS
6. Continuous , structured review
7. Strategic thinking