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 companys 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 Everyones 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
Dcor
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 BSCs work
1. Commitment form the CEO
2. Alignment and Ownership
3. Connect to KRAs / compensation
4. Adopt Business Excellence
5. Create QMS
6. Continuous , structured review
7. Strategic thinking