Building the Balanced Scorecard

Balanced Scorecards provide a framework for communicating

strategy in operating terms (measurements and targets). 

You must communicate strategy in operating terms if you expect

people to execute on your strategy. 

When people are asked about strategy, they reach for their balanced


otherwise you create pockets of under-performance.Why do we need Balanced Scorecard«???  Improves how you communicate strategy  Superimposes a discipline whereby you capture cause- effect.  Forces to think about strategic measurement as opposed to tactical or operating type measurements .

!!  Begin with strategic plan ² what things are critical to future success?  Focus on customers ² what values will we add to our customers  Define the processes ² how will we deliver these services to our customers  Build the organization ² what capabilities must we put in place .HOW TO BEGIN«.

 Strategic goals establish direction in concrete terms.  Strategic goals anchor the rest of the process.  Strategic goals should fit with the vision and mission of the organization.Strategic Goals  The first components of any strategy are goals. .

Improve Customer Service .Leverage Core Competencies .Attributes of a Goal  Should be a very short statement  Directly relates to the mission  Broad in scope  Covers long time period (such as 3 years)  Examples: .Develop more innovative products .

For example. we must introduce new products and expand our market share. in order to grow revenues. develop a set of strategic objectives.  Strategic objectives define what actions must be taken to reach the strategic goals. .Strategic Objectives  Once first anchor (goals) are established.  Objectives are critical to future success.

Objective Attributes  Longer statement than goal statement  More specific than goal statement  Relationship to mission  Covers shorter time period than goal (such as 6 months or 1 year)  Example: .We will expand call center services to include technical support .

develop a strategic map. Product Innovation. o From these themes. . three to five strategic themes should emerge. o Four common strategic themes are: Operating Efficiencies. Customer Relations.Strategic Themes o Based on strategic goals. and Growing the Business.

Translate strategies into operating terms. 3. 2.Strategic Model Strategic Models can emerge from four principles: 1. Make strategizing a continuous process of learning and adjusting to change. . Commit everyone to implementing strategy. 4. Link strategies throughout the entire organization.

etc. price.4 Perspectives of BSC  Financial: Top layer in the map. etc. represents financial outcomes (profits. production. quality. enables financial results (service. revenues. image. distribution. systems. .)  Customer: Next layer down. such as delivery. and organization that enable processes.)  Internal Processes: The values added to customers.  Learning & Growth: The people. etc.

Strategic Mapping  Strategic Maps are the foundation of the Balanced Scorecard.  You will need one strategic map for each strategic theme. linked together.  Maps are constructed over four perspectives. .  Strategic objectives are mapped over the four perspectives.

 Objectives may cross over more than one perspective. .  Start at the top with outcomes and work our way down.Linking BSC to Business Strategy  Strategic objectives should be placed in the Strategic Map according to which perspective fits with the objective. looking at what drives the outcome.

.Approval of Maps  After strategic maps are done.´Does this map accurately tell the story of our strategy?µ  If management disagrees with the map. get approval from executive management. Ask questions likes«. go back and redo the maps.

 Measurement provides us with feedback on meeting the strategic objective.Measurements  For each strategic objective. you need one measurement. .

 Measurements define objectives in specific terms.. providing teeth to our strategy.  Measurements should be SMART.Measurement Criteria  Measurements should drive change. A good measurement should tell you what your objective is.!! .

Customer Satisfaction Survey Scores Process Efficiency: .Response Time to service customer .Examples of Good Measurements Customer satisfaction: .No.Cycle time .Downtime (time / ratio) . of Restarts .

. you need to set a target for each measurement.  When an organization hits its targets.  Targets put focus on the strategy.  Targets push the organization to a required level of performance. expressing the specifics of the strategy.Targets Setting  Once measurements are established. then it has successfully implemented its strategy.

Examples of Targets  Total Time to Recruit New Employees: Less than ´xµ days by 2005  Utilization of rental facilities: Increase to 90% during peak summer months  Growth in top line revenues: 12% increase than 2004  Improve overall customer satisfaction: Total scores on satisfaction exceed 85% .

This closes the loopholes and everything is linked. you must initiate major projects or programs.Initiatives Takers  In order for things to happen in an organization. you should be able to meet your strategic objectives.  Once you launch appropriate initiatives. .

Initiative Attributes  Sponsored by Top Management  Designated project(s) owners  Includes deliverables or milestones  Has some deadlines .

defining measurements.Templates Throughout this process. use templates to capture. Strategic Map for Strategic Theme #1: Learning Internal Customer Financial . etc. analyze and document data. Templates are used for strategic mapping.

 Scorecards are built around frequent group meetings: Kick Off Meeting followed by one meeting for each of the three teams.Pointers to keep in mind«. . Core Team (middle level management) and Measurement Team (lower level functional personnel).!!  Scorecards are built around three teams: Leadership Team (upper level management).

Services.Implementation  The minimum time for developing a balanced scorecard is 3 months. Production. Innovation.  The best place to start building a scorecard is where all components of the value chain are in place: Customer. etc. Delivery.  Full deployment of scorecards throughout the entire organization can take one year or even more than that. .

and Initiatives.  Scorecards rely on a fully integrated approach: Goals. Objectives.  The building of a balanced scorecard can be experimental. whereby you test your strategies.Summary  Balanced Scorecards are the best way of putting organization in its place. refine. Mapping. Measurements. Targets. . and make changes as you get feedback and learn what works.


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