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The Concept: A ³dashboard´ to guide strategic direction
Managers, like pilots, need instrumentation about many aspects of their environment and performance to monitor the journey towards a successful future
Background and History
Kaplan and Norton introduced the Balanced Scorecard, in late 1980s and early 1990s, as a means for companies to measure & report performance in a way that balanced ± Multiple perspectives ± Both leading and lagging indicators ± Inward-facing measures like productivity ± Outward-facing measures, like customer loyalty
Norton¶s description of the Balanced Scorecard ³A balanced scorecard is a system of linked objectives. targets and initiatives which collectively describe the strategy of an organization and how the strategy can be achieved. It can take something as complicated and frequently nebulous as strategy and translate it into something that is specific and can be understood.Definition Dr. measures.´ 4 .
5 The Balanced Scorecard Approach .
Core Outcome Measures 6 .
The Learning and Growth Perspective Learning and growth constitute the essential foundation for success of any knowledgeworker organization Includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement 7 .
The Business Process Perspective Refers to internal business processes In addition to the strategic management process. two kinds of business processes may be identified ± Mission-oriented processes ± Support processes 8 .
The Customer Perspective An increasing realization of the importance of customer focus and customer satisfaction in any business Customers should be analyzed in terms of ± Kinds of customers ± Kinds of processes for which we are providing a product or service to those customer groups 9 .
The Financial Perspective Only emphasis on financials leads to an "unbalanced" situation with regard to other perspectives Important to include financial-related data. such as risk assessment and cost-benefit data 10 .
Balanced Scorecard ³Logic Model´ 11 .
Example: Southwest Airlines Strategic Theme: Operating Efficiency Financial Profitability Fewer planes Customer Flight Is on time Lowest prices More customers What will drive operating efficiency?´ More customers on fewer planes How will we do that? Attract targeted customer segments who value price and on time arrivals What must the internal focus be? Fast turnaround Internal Fast ground turnaround Learning Ground crew alignment Will our people do that? Educate and compensate ground crew regarding how they contribute to the firm¶s success Employee stockholder program 12 .
Critical Success Factors for BSC Development Mobilize change through executive leadership ± Building a strategy focused organization usually involves significant culture change Make strategy a continual process ± A strategic focus is not maintained if strategy formulation becomes a one-time activity 13 .
Critical Success Factors for BSC Development Make strategy everyone¶s job ± Done through strategic education and awareness and by cascading the scorecard down through the organization Align the organization to the strategy Translate the strategy into operational terms ± Tasks should be done in ways that support the strategies 14 .
Common Pitfalls Measures that do not focus on strategy Failure to communicate and educate Measures tied to compensation too soon No accountability Employees not empowered Too many initiatives 15 .
The HR Perspective of BSC Transforming Strategic Performance Through BSC ± A Case Study of Banking 365 .
Context Dublin based Banking 365 is a business unit of Bank of Ireland¶s Retail Division Created in 1996 as a multi-channel direct banking operation Banking 365 now accounts for more than 20% of all Bank of Ireland¶s personal lending Adopted the BSC at its inception 17 .
Vision To create a world class direct bank based on three strategic themes ± Customer satisfaction in selected markets ± Achieving low cost delivery through self service channels and operational efficiency ± Sales growth 18 .
the enablers were ± µQuality¶ of people in building a µbest-in-class¶ sales organization ± Business process effectiveness ± Technology / IT systems 19 .Enablers Underpinning the strategic themes.
BSC in Banking 365 The BSC has made a fundamental contribution to the organization achieving many of its original objectives BSC provided both a strategy map and a strategic management system It links the three strategic themes to strategic objectives and on to selected strategic measures 20 .
BSC in Banking 365 Significant performance improvements have been realized: ± Monthly service call volumes have increased ± Increasing percentage of calls processed through the automated service. interactive Voice Response (IVR) ± Monthly sales have risen 21 .
BSC in Banking 365 Significant performance improvements have been realized«contd: ± Sales book value has increased ± Employee numbers have risen ± Customer satisfaction rates have gone up ± Employee satisfaction has achieved a world class benchmark for the call center industry 22 .
Introducing the Scorecard A BSC strategy map provides senior management with a high level depiction of what needs to be done It achieves this by graphically tracing the cause and effect relationships between the various strategic objectives It is operationalized through the measures. targets and initiatives found within a conventional scorecard 23 .
Strategic Focus Two questions are central to the strategy and scorecard connection ± Is the strategy working? ± Is the scorecard maintaining effectiveness in delivering strategy? These questions are crucial as the scorecard is essentially a framework for implementing strategy 24 .
Banking 365¶s management team makes adjustments to strategic objectives and the corresponding targets and measures in its scorecard 25 .Strategic Focus When any strategy shortcomings emerge.
The People Perspective Banking 365 recognizes that the people perspective. alongwith employee satisfaction results. a staff handbook has been published detailing the business plan 26 . are crucial levers for strategy execution It has a clear focus on people satisfaction To ensure that employees understand the unit¶s strategy.
The People Perspective The communication mechanism supports other strategy awareness building mechanisms A recent Banking 365 staff survey confirms that employees are aligned to strategic goals and that 365 is successful in keeping them satisfied 27 .
28 . etc.The People Perspective An early learning from scorecard deployment led to rethinking a key aspect of employee facing performance ± that of staff retention The new recruitment strategy included: ± The use of psychometric testing ± Skills matching ± Engaging employees on permanent contracts from the outset ± A review of job rotation / development opportunities.
Key Learnings The senior management team¶s commitment to. and belief in. the efficacy of the scorecard has not wavered since the launch of the business Delivering excellent service to the customer has remained a key focus throughout the bank¶s existence. despite a significant change in how service is delivered to the customer The senior team wanted the scorecard to be a practical tool rather than theoretic conversations of the boardroom 29 .
Key Learnings The bank places great score on building employee satisfaction The CEO believes that whatever is important to Banking 365 should be contained in the scorecard perspectives The scorecard has become an effective tool for communicating strategic requirements up the line within Bank of Ireland 30 .
technology and IT systems are enablers of improved performance and scorecard effectiveness 31 . strategic themes. people.Key Decisions and Steps CEO conviction to champion scorecard deployment and senior management team buy-in to drive the process Using the scorecard as a strategy map to link vision. strategic objectives and operational measures through cause-effect relationships Recognizing that business processes.
gets done¶ corporate mindset Leveraging the organization¶s talents and cultural attributes to support strategic themes and priorities Building understanding and alignment through different communication practices. including strategy updates.Key Decisions and Steps Adopting and sustaining a µwhat gets measured. and the staff handbook 32 .
Key Decisions and Steps Using external benchmarking to compare performance against competitors Remaining focused by asking key questions: Is the strategy working? Is the scorecard maintaining its effectiveness in delivering strategy? 33 .
First Generation BSC Initially described a a simple µ4 box¶ approach to performance management Relatively few detailed case studies concerning BSC implementation experiences 34 .
Second Generation BSC Introduction of the concept of µstrategic objectives¶ related to each of the areas Measures selected to reflect achievement of these strategic objectives Evolved from ³an improved measurement system to a core management system´ 35 .
measures & targets chosen ³Strategic objectives´ to enable the organization to µreach¶ its destination on time Strategic objectives spread across 4 zones ± 2 relating to the most important activities and 2 relating to the desired results of the activities Measures and initiatives to realize the objectives 36 .Third Generation BSC Incorporation of the ³Destination Statement´ to µcheck¶ the objectives.
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