Professional Documents
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Balanced Scorecard 2010
Balanced Scorecard 2010
A general overview
Gartner Group suggests that over 50% of large
US firms have adopted the BSC
Bain & Co finds that about 44% of organisations
in North America use the BSC
Germany, Switzerland, and Austria - 26% of
firms use BSCs
The widest use of the BSC approach can be
found in the US, the UK, Northern Europe and
Japan
http://www.ap-institute.com/Balanced
%20Scorecard.html
Why?
developed in 1992 - Robert Kaplan and David Norton
Translating corporate vision and strategy into a set of
strategic objectives that drive behavior and
performance
built upon the premise that measurement motivates
and that measurement must start with a clearly
described strategy
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
history
http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx
establishing the linking between Balanced
Scorecard and the Strategic Management
system
BSC not linked to the Strategic
management turns from the fundamental
system into just the collection of the
isolated indicators which do not have any
influence on the strategic development of
the company
Financial
Has our financial What are our
performance improved? financial goals?
Customer Vision
Do customers recognize that What customers do and
we are delivering more value? we want to serve and Strategy
how are we going to
win and retain them?
Internal Business Processes
Have we improved key business
processes so that we can deliver
more value to customers? What internal busi-
ness processes are
critical to providing
Learning and Growth value to customers?
Are we maintaining our ability The Balanced Scorecard: From
to change and improve? Strategy to Performance
Measures
http://www.managerialaccounting.org/Balanced%20Scorecard.htm
Translates a company’s mission and
strategy into a comprehensive set of
performance measures
Financial and nonfinancial aspects
Elements
http://www.lenskold.com/content/articles/rigatuso_aug07.html
The Learning & Growth Perspective
◦ includes employee training and corporate cultural
attitudes related to both individual and corporate
self-improvement
The Business Process Perspective
◦ refers to internal business processes
The Customer Perspective
◦ the importance of customer focus and customer
satisfaction in any business
◦ Lead indicators
The Financial Perspective
Perspectives
Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard
Business Review (January-February 1996): 76.
Early BSC
Organization & Learning: people, teams,
training and recruiting
Internal Process: business process,
automation, technology & plant
infrastructure
Customer: marketing, value proposition,
and product/service in the eyes of the
customer
Financial: revenue, growth, earnings,
corporate governance, shareholder value
Perspectives of BSC
Modern BSC
http://www.ap-institute.com/resources_whitepapers.asp
http://www.torontospin.com/torontospin/events/doc/presentations/20041124-MarkKoza
k-Holland.pdf
http://www.torontospin.com/torontospin/events/doc/presentations/20041124-MarkKoza
k-Holland.pdf
http://www.torontospin.com/torontospin/events/doc/presentations/20041124-MarkKoza
k-Holland.pdf
historical internal (company) data (from
operational systems)
historical external data (from third parties)
forecast external data (from third parties)
forecast company internal data (financial
and non-financial)
target values (eg EPS targets, Sales
Quotas, etc)
Data availability – existing vs. to be
collected
Data
Decreed by executive management
Negotiated between the operational and
line management
Selected from an industry benchmark
Selected from competitors known (or
assumed) values
Selected as % change over last years
historical value
Target values
Key Performance Indicators
◦ reflect the critical success factors of an organization
◦ must be quantifiable
stay with the same definition from year to
year
set targets for each Key Performance
Indicator
identify everything that is easy to measure
and count
collect and report the data on everything that
is easy to measure and count
Good:
◦ Title of KPI: Employee Turnover
◦ Defined:
no of employees resigned + no of employees terminated due to performance
number of employees at the beginning of the year
◦ Measured: information available at human resources
◦ Target: Reduce Employee Turnover by 5% per year
Example KPI
Who should design your indicators?
◦ Strategist and a line manager
Do you have good indicators?
◦ indicators should not repeat each other, but taken together, they should describe
90% of your company or business unit
Are your indicators easy to measure?
◦ should be easy to understand and measure
How many indicators?
◦ three or four indicators in each category. If you have more, you are overloading
your scorecard
http://www.ap-
institute.com/download
s/100608%20How
%20to%20design
%20Key
%20Performance
%20Indicators.pdf
Type of data
◦ Raw
◦ Progress
◦ Change
Source of data
Frequency of data
Target performance
graphs
KPI
http://www.enterprise-dashboard.com/2007/04/05/difference-between-balanced-scorecard-and-enterprise-dashboard/
Culture
change
Human resources
◦ tasks, responsibilities
◦ Performance appraisal, bonuses
Measurement and data collection
Information management
Some sources
1. Recruitment KPI
2. Training KPI
3. Health and safety KPI
4. Performance KPI
5. Employee loyalty KPI
6. Working time KPI
7. HR efficiency KPI
8. Compensation KPI
9. Labor relation KPI
10. Regulation compliance KPI
11. Employee satisfaction KPI
• Attitude about compensation and benefits.
• Attitude about coworkers.
• Attitude about supervisors / managers.
• Attitude about promotions, training.
• Attitude about work tasks.
12. HR budget KPI
13. Job leaving KPI
◦ 1. Job leaving ratio per year.
◦ 2. Job leaving ratio per department.
◦ 3. Average age of employees that retire.
◦ 4. Percentage of early retirements
http://www.humanresources.hrvinet.com/recruitment-key-performance-indicators-kpi/
http://www.humanresources.hrvinet.com/sales-kpi/
Sales KPI
1. Public relations KPI
PR KPI include KPIs related to appraisal indicators of Public relations
such as effective PR items, press releases, conducting survey, the
level of awareness of the enterprise through the public relations did
etc.
2. Promotion KPI
Promotion KPI include KPIs related to appraisal indicators of promotion
activities in marketing such as the rate of sales in promotion period
and before the promotion, percentage of sales in promotion and after
promotion etc.
3. Advertisement KPI
Advertisement KPI include KPIs related to appraisal indicators of
advertisement activities in marketing such as the cost of advertising
on the 1000 target audiences, the level of awareness of the product
etc.
4. E-marketing KPI
E-marketing KPI include KPIs related to appraisal indicators of E-
marketing in marketing such as the rate of new visitors, number of
page views / visitors etc
http://www.humanresources.hrvinet.com/marketing-kpi/
Marketing KPI
1. Manufacturing cycle time
Measured from the Firm Planned Order until the final production is reported. It usually takes
into account the original planned production quantity verses the actual production quantity.
2. Defects per million opportunities (DPMO)
DPMO is a Six Sigma calculation used to indicate the amount of defects in a process per one
million opportunities.
Calculation: Total Number of Defects / Total Number of Opportunities for a Defect. Then
multiply the answer by 1 Million.
3. Average production costs of items
Average production costs of items produced within measurement period.
4. Mean-time between failure (MTBF)
The average time between equipment failures over a given period i.e. the average time a
device will function before failing. It is the reliability rating indicating the expected failure
rate of equipment.
5. Loss ratio of material per order
This is lost ratio of material per order. The rate is usually 3 – 5% custom types orders.
6. Rate of material defect by causes of material itself
By total material defect due to the nature of that material, measured by the number and value
of money.
7. Rate of damaged material by error of workers
By total material damage because of worker error, measured by the number and/or value of
money.
8. Scrap value %
Scrap value as a percentage of production value
Financial KPI
http://www.humanresources.hrvinet.com/financial-kpi/
1. Operating income: Operating Income equals Gross Profit minus SG&A Expenses. It is the
income from current operations.
2. Gross profit: Gross Profit equals Revenue minus Cost of Goods Sold. It identifies the
amount available to cover other operating expenses.
3. Gross profit margin: Gross Profit Margin equals Gross Profit divided by Revenue, expressed
as a percentage.
4. Cost of goods sold (COGS): Cost of Goods Sold includes all expenses directly associated
with the production of goods or services the company sells (such as material, labor,
overhead, and depreciation). It does not include SG&A.
5. Operating margin: Operating Margin equals Operating Income divided by Revenue,
expressed as a percentage.
6. Goodwill: Goodwill is an accounting term used to reflect the portion of the book value of a
business entity not directly attributable to its assets and liabilities.
7. Total Assets: Total Assets are everything of value that is owned by a company.
8. Accounts Payable: Money owed (payable) to suppliers for goods or services purchased on
credit that must be paid within a year.
9. Long-Term Debt: Long-Term Debt represents the amount of borrowings due more than one
year from the date of the balance sheet.
10. Total Liabilities: Total liabilities represent the sum of all monetary obligations of a
business and all claims creditors have on its assets.
11. Cumulative Annual Growth Rate (CAGR):
12. Cash Flow Return on Investments (CFROI): This is similar to ROI, but the only
difference is CASH is used inplace of Profit.
13. SG&A expenses: Selling, General, and Administrative Expenses include all salaries,
indirect production, marketing, and general corporate expenses.
14. Net profit margin: Net Profit Margin equals the Total Net Income divided by Revenue,
expressed as a percentage.
15. Shares Outstanding: Shares Outstanding is the outstanding number of shares of the class
of common stock that is most actively traded.