Brief Introduction On

BALANCED SCORECARD CONCEPT

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e-mail: ajaygupta@ainapur.com
 WHY CONTINUOUS
IMPROVEMENT
 Earlier organizations used to think- “Today's performance will
ensure future success”.
 TQM approach says- “Today's excellence is tomorrows
mediocrity”
 So, we have to benchmark ourselves with “best in the world”
(now it is more true as it is Global Village / open market) and
 Continuously improve (at the rate higher than our
competitors/potential competitors).
 PERFORMANCE
MEASUREMENT FOR
Continual Improvement

A General rule :
“You get what you measure”
 What does not get measured cannot be Recorded.
 What does not get recorded cannot be Monitored.
 What cannot get monitored cannot be Controlled
 What cannot get controlled cannot be Improved.
 PERFORMANCE
MEASUREMENT FOR
Continual Improvement

 Therefore , an organization must measure the critical few parameters

that represent its strategy for long-term value creation.
 Many times measures are to measure workload rather than results
 Measures focused in one area may yield unintended consequences in
other areas
 Measurement is a powerful motivator, so “Be careful what you wish for
(measure), you might get it”
 CONCEPT OF BALANCED SCORE CARD

TRANSLATING STRATEGY INTO ACTION

Harvard Business School Professor, Robert Kaplan and

Management Consultant, David Norton conceived the concept of
Balanced Score Card (BSC) in 1991.

“The Balanced Score Card is one of the most important

management practices of the past 75 years”-Harvard Business
Review.
 FACTS ABOUT BALANCED SCORECARD

According to Balanced Scorecard Collaborative

 95% of typical workforce does not understand its
organizations' strategy
 90% of organizations fail to execute their strategies
successfully
 86% of executive teams spend less than one hour per month
discussing strategy

 70% of organizations do not link middle management

incentives to strategy
 60% of organizations do not link strategy to budgeting
 WHY DO COMPANIES NEED A
BALANCED SCORE CARD
Balanced Scorecard translates vision and strategy into objectives and measures
organized into four different perspectives :

Financial Customer

Learning Internal
and Process
Growth
 WHAT IS A “BALANCED” SCORE CARD

Balanced Score Card is a multi-dimensional framework that

gives top managers a fast but comprehensive view of the
business.
 WHAT IS A “BALANCED” SCORE CARD

The scorecard provides a framework to communicate mission and strategy.

It uses measurement to inform employees about the drivers of current and future
success.

By Controlling the outcomes the organization desires and drivers of those

outcomes, senior executives would be able to mobilize their energies, abilities
and the specific knowledge of people throughout the organization towards
achieving the long term goals
 Logistics of a Balanced Score Card

Internal
Process Innovation
Financial Customer
Perspective : and learning
Perspective : Perspective :
perspective :
To satisfy
To satisfy To achieve
shareholders To achieve our
shareholders Financial
and customers goals, how
what financial objectives,
in which must our
objectives what customer
internal organization
must we needs must we
processes learn and
accomplish? serve?
must we innovate?
excel?
BSC as a Strategy
Management Tools
 Strategy Maps:

• Strategy Map is a Logical and Comprehensive Architecture for

describing strategy.
• It provides the visual framework for integrating the organization’s
objectives in the four perspectives of a Balanced Scorecard.
• It provides a single-page view of the strategy.
• A properly constructed BSC should tell the story of the business units
strategy.
• It should identify and make explicit the sequence of hypothesis
about the cause-and-effect relationships between outcome
measures and the performance drivers of those outcomes.
 Cause – & – Effect Relationship
ROCE
Financial

Customer
Loyalty
Customer
On-time
Delivery

Internal/ Process
Process
Business Cycle Time
Process Quality

Learning Employee
and Skills
Growth
 Achieve profitable Growth to be one of top 5 Global
Financial Companies

Improve Market Share of Niche Attain World Class Cost

products Competitiveness

Customer
Retain Profitable Customers
Acquire Customers Through Existing
Offerings
Improve Customer Satisfaction
Acquire Customers Through New Offerings & Reach

Business Processes Acquire/Enhance Capacity Increase Loyalty Through Customer

Relationship Mgmt
Product Rationalization Product
Development Improve Order Management process

Improve Process Capability

Improve Supplier Management

Learning & Growth

Create culture of high Performance & Team Based
Enhance Strategic Skills Working

Knowledge Mgmt Enhance Employee Satisfaction Leadership Development

 STRATEGY MAP
Financial Improve ROCE/ Improve
profitability Attain cost
Increase Turnover
competitiveness

Improve customer
Customer satisfaction

Operate at high reliability

Improve Reduce O&M

Internal Process efficiency costs

Improve safety Project Optimise MAN/

standards MW ratio
Completion
Achieve ISO 9001:2000
Certification
Increase employee
Satisfaction level Conserve Energy

Provide an environment to encourage

creativity & innovation among all Enhance employee skills and
the employees
Learning & Develop multi-skilled employees
Adopt benchmarking concept/
Increase BM projects
Growth

Corporate social
Achieve Community
responsibility Development targets
Afforestation of barren
Improve Health and Improve ash Achieve ISO 14001
Areas in and around
hygiene all around utilisation Certification Simhadri Project
 Strategic Initiatives
•Objectives and targets will not be achieved simply
because they have been identified ;
•The organisation must launch a set of action programs
that will enable the targets for all the measures to be
achieved.
•The organization must supply scarce resources-
people, funding and capacity- for each action program.
•These action programs referred as strategic
initiatives.
•Hence the execution of strategy is managed through
the execution of initiatives.
 Alignment of all the Scorecards with Group Strategy
ABC GROUP PURPOSE AND GROUP STRATEGY

ABC STEEL’S MISSION,VISION ,VALUES

ABC STEEL’S STRATEGIC GOALS

MD’s BALANCED SCORE CARD

QUALITY COUNCIL’S OBJECTIVES &

SCORECARD / KEY PERFORMANCE MEASURES (KPMS)

SUB COUNCIL’S OBJECTIVES & SCORECARD / KEY

PERFORMANCE MEASURES (KPMS)

DEPARTMENTAL OBJECTIVES
(GOALS) & SCORECARD / KEY
PERFORMANCE MEASURES (KPMS)

DEVELOP AQUIP,PRIORITIZE PERSONAL KRA’s ALIGNED

IMPROVEMENT ACTIVITIES/PROJECTS TO GOALS/KPM’s
ALIGNED TO STRATEGIC GOALS/KMP’s
Strategic VP GM Sr, Mgr. Mgr/ Asst.
Mgr Supervis
Goal of Operational (Mines) Level Umgr.
KPM level or Level
Company KPM Level
Cost of Bit Avg.Bit
Drilling Consumptio Life
Maintenan n
ce Cost of
LS Hrly.
Cost of
To reach Cost of Diesel
Blasting
the Cost of Diesel in Cons.
Cost of
position Product drilling
Producti
of most ion of Cost of
on of Operatio
cost Lime Diesel &
Cement n Cost of
competitiv Stone Power
Lime Drilling
e Cement
Stone Rate
Producer Drilling
Stores Opn. Rate
Cost
Grinding
Interval
 Aligning HR to Organisational Strategy (Sample)

Organisational
HR Strategy HR KPIs with UoM
Strategy
Marketing Executives
Recruited
Develop
Marketing Nos
Team Training on Marketing Skill
Enhancement
Enter New Man Days
Markets
Design Incentive Scheme
for Marketing Team
New Policy
for Marketing Target Date
Team
Develop HR Policy for
International Marketing
Target Date
 How Balanced?

The four perspectives of the score card permit a balance

between
 Short and Long-term Objectives
 Between outcomes desired and the performance drivers
of those outcomes
 Between hard objective measures and softer, more
subjective measures and
 Balance the focus on all the stakeholders