Performance

Management

Balanced Score Card

LOGO
 Bees Inc.

 Two beekeepers(BeeX & BeeY), each with a bee hive

 Customers loved their honey, demand increased
 Management of Bees Inc. assigned both beekeepers
to increase honey production
 Bees Inc. (BeeX)

 BeeX established a performance

management approach that measured
“The number of flowers each bee visited”
 Bees Inc. (BeeY)

 BeeY measured two aspects of bees

performance
 The amount of nectar each bee brought back to the
hive
 The amount of honey the beehive produced
 Performance Management

 Performance management reminds us

that being busy is not the same as
producing results. It reminds us that
training, strong commitment and lots of
hard
 Work alone are not results. The major
contribution of performance management
is its focus on achieving results
 Performance management redirects our
efforts away from busyness toward
effectiveness.
 Performance

 Performance is often defined simply in

output terms – the achievement of
quantified objectives. But performance is
a matter not only of what people achieve
but how they achieve it.
 High performance results from
appropriate behavior, especially
discretionary behavior, and the effective
use of the required knowledge, skills and
competencies.
 Performance Management
 Performance means both behaviors and results.
Behaviors emanate from the performer and
transform performance from abstraction to action.
Not just the instruments for results, behaviors are
also outcomes in their own right – the product of
mental and physical effort applied to tasks – and can
be judged apart from results.’
 This definition of performance leads to the
conclusion that when managing performance both
inputs (behavior) and outputs (results) need to be
considered.
 It is not a question of simply considering the
achievement of targets as used to happen in
management-by-objectives schemes.
 Competence factors need to be included in the
process.
 This is the so-called ‘mixed model’ of performance
management, which covers the achievement of
expected levels of competence as well as objective
setting and review.
 Performance Measurement Systems
 Limitations of Financial Control Systems:
Relying solely on financial measurements is
inadequate.
 It may encourage short term actions that are not
in company’s long term interests
 Bausch & Lomb (1993)
Some divisional presidents under pressure to
produce bottom line results adopt tactics which
maximized short term bonuses but harmed
company in long term.
“Under pressure to beat sales target in 1993,
B&L managers shipped products that doctor
never ordered and forced distributors to take up
two years of unwanted inventory, while assuring
many that they wouldn’t have to pay till they
sold the lenses.
(Source: BusinessWeek)
 Balanced Scorecard

 Balanced Scorecard is a tool developed

by Robert S. Kaplan and David P. Norton.
 “The Balanced Scorecard translates an
organization's mission and strategy into a
comprehensive set of performance
measures that provides the framework
for a strategic measurement and
management system.”
 Balanced Scorecard – Why?

• Important to have a plan, set goals, and

measure your success
• Having a plan is more important than the
specific tool you use
• “Holistic” approach that extends beyond
financials measures and incorporates
other priorities
• Linking strategic institutional plans and
priorities
 Objectives of Balanced Scorecard

 Consistently deliver superb customer

experience
 Optimize resource utilization and be
accountable and financial stewards
 Achieve operational excellence in our
internal processes
 Organization must consistently strive for
learning and growth
 Balanced Scorecard

Financial Perspective
 How do we appear to our
 How should we stakeholders?
appear to our  Goals
customers?  What financial outcomes do we
 Measures need to generate?
 Are they satisfied?

Organizational Learning
Customer Perspective
Perspective

 Goals
Vision and  Goals
 Measures
Strategy  Measures

 Are we able to sustain

Process/Product innovation, change and
 What business processes improvement?
must we excel at to satisfy Perspective
 How will we maintain our
our customers?
ability to meet customer
 Are these processes expectations?
 Goals
effective (i.e., adding value
for customers)?  Measures
 Are they efficient?
 Customer Perspective

 How do customers see us?

 ECI (Electronic Circuits Incorporated, , a
semi conductor company) established
general goals for customer performance
 Get standard products to the market sooner
 Improve customers’ time to market
 Become customers supplier of choice
through partnerships
 Develop innovative product tailored to
customer needs
 Customer Perspective

Goals Measures

New Products Percentage of sales from new

products

Percentage of sales from

proprietary products

Responsive Supply On – Time Delivery (as defined by

Customer)

Preferred Suppliers Share of key accounts’ purchases

Ranking by key accounts

Customer partnerships Number of cooperative

engineering efforts
 Financial Perspective

 How do we look to our shareholders

 ECIs Goals
 To Survive
 To Succeed
 To Prosper
 Financial Perspective

Goals Measures

Survive Cash Flow

Succeed Quarterly sales growth and

operating income by division

Prosper Increased market share and ROE

 Internal Business Perspective

 What must we excel at?

 Managers at ECI identified the following:
 Submicron technology was critical to its
market position
 Have to focus on manufacturing excellence
 Design productivity
 New product introduction
 Internal Business Perspective

Goals Measures

Technology Capability Manufacturing geometry versus

competition

Manufacturing Excellence Cycle Time, Unit Cost, Yield

Design productivity Silicon efficiency, engineering

efficiency

New product introduction Actual introduction schedule

versus plan
 Innovation & Learning Perspective

 Intense global competition requires that

companies make Continual improvement
 ECIs innovation measures focus on the
company’s ability to develop and
introduce standard products rapidly, the
products that the company expects will
be the bulk of its future sales
 Innovation and Learning
Goals Measures

Technology leadership Time to develop next generation

Manufacturing learning Process time to maturity

Product focus Percentage of products that equal

80% of sales

Time to market New product introduction versus

competition
Thank You