MCS: Balanced Score Card: J.K.Oke

MCS: BALANCED SCORE CARD
J.K.OKE
BALANCE SCORECARD
THE BALANCE SCORECARD IS A PERFORMANCE MEASUREMENT & STRATEGY DEPLOYMENT METHODOLOGY DEVELOPED BY DAVID NORTON & ROBERT KAPLAN IN 1992. THE BSC WAS DESCRIBED BY THE HARVARD BUSINESS REVIEW AS ONE OF THE SEMINAL IDEAS OF THE PAST 75 YEARS.
BALANCE SCORECARD
GLOBALLY THE BSC WAS DEVELOPED TO ADDRESS A RESEARCH FINDING THAT NINE OUT OF TEN COMPANIES WHICH COULD FORMULATE BUSINESS STRATEGIES WERE UNABLE TO IMPLEMENT IT.
BALANCE SCORECARD
IT FOSTERS A BALANCE BETWEEN OTHERWISE DISPARATE STRATEGIC MEASURES IN AN EFFORT TO ACHIEVE GOAL CONGRUENCE, THUS ENCOURAGING EMPLOYEES TO ACT IN THE BEST INTEREST OF THE ORGANISATION .
BALANCE SCORECARD
WHILE AUGMENTING THE GOAL-CONGRUENCE FUNCTION, THE BSC ALSO HELPS AS A TOOL FOR FOCUSSING THE ORGN., IMPROVING COMMUNACATION , SETTING THE ORGANISATIONAL OBJECTIVES, & PROVIDING FEEDBACK ON THE STRATEGIES AS EVERY MEASURE ON THE BSC ADDRESSES AN ASPECT OF AN ORGANISATIONS STRATEGY.
BALANCE SCORECARD
BUT THERE ARE LOT OF MISCONCEPTIONS ABOUT THE BSC. IT MUST BE REMEMBERED THAT IT IS NOT A MAGIC WAND GIVING MIRACULOUS RESULTS. IT MUST ALSO BE REMEMBERED THAT
IT IS NOT A SUBSTITUTE FOR A WELL DEFINED OR A FORMAL BUSINESS PLANNING PROCESS IT IS NOT JUST A MANAGEMENT CONTROL DEVICE
HOW DOES THE BSC HELP?

IT FILTERS INITIATIVES IT MAKES STRATEGY EVERYBODYS JOB IT PROVIDES A FRAMEWORK TO DESCRIBE THE ORGANISATIONS STRATEGY IT HELPS PEOPLE SIMULTANEOUSLY LEAD & MANAGE
IT STRESSES COMPETITIVE ADVANTAGE
HOW DOES THE BSC HELP?

IT HELPS EXECUTIVES COMMUNICATE A SENSE OF VISION & MISSION & GETS THEIR PEOPLE ALIGNED TO THE MISSION IT FACILITATES ORGANISATIONAL LEARNING IT ALLOWS CORRECTIVE ACTION WELL IN TIME
IT OFFERS A MORE INTER-LINKED SYSTEM OF PERFORMANCE APPRAISAL
BSC : PRE-REQUISITES
THE PRE-REQUISITES FOR A SUCCESSFUL BSC ARE AS FOLLOWS: CEO COMMITMENT SELECTING AN EFFECTIVE SCORE-BOARD CO-ORDINATOR IMPLEMENTATION IN
A PHASED MANNER COMMITMENT TO SIMPLICITY, NOT PERFECTION
HOW DOES THE BSC WORK ?

IT WORKS BY ENDEAVOURING TO CREATE A BLEND OF STRATEGIC MEASURES: OUTCOME & DRIVER MEASURES FINANCIAL & NON-FINANCIAL MEASURES INTERNAL/EXTERNALMEASURES
OUTCOME MEASURES
OUTCOME MEASURES ARE INDICATIVE OF RESULT OF STRATEGY LIKE INCREASED
REVENUE / QUALITY TYPICALLY LAGGING INDICATORS TELL WHAT HAS HAPPENED
DRIVER MEASURES
DRIVER MEASURES ARE TYPICALLY LEADING INDICATORS SHOW PROGRESS IN KEY AREAS (CYCLE TIME) FOCUS MANAGEMENT ATTENTION ON KEY ASPECTS AFFECT BEHAVIOUR IN THE ORGANISATION
ILLUSTRATIVE FINANCIAL MEASURES:

FINANCIAL PERFORMANCE (PROFIT & LOSS,BALANCE SHEET) CAPITAL EXPENDITURE PROJECTS PROGRESS PROFITABILITY OVERHEAD RECOVERY( PLANTWISE / DIVISION-WISE) COST OVER/UNDER RUNS VARIANCE ANALYSIS
NON-FINANCIAL MEASURES:
MARKET SHARE ORDERS BOOKED ORDERS BACK-LOG INNOVATIONS NEW PRODUCTS MATERIALS MANAGEMENT
NON-FINANCIAL MEASURES:
LOGISTICS MAJOR PURCHASE ORDERS PLACED / OUTSTANDING MANUFACTURING PLANT UTILISATION REJECTION / REWORK / DEFECTIVES MACHINE UTILISATION (UP-TIME/DOWN-TIME/IDLE
INTERNAL / EXTERNAL MEASURES:

INTERNAL MEASURES: MANUFACTURING YIELDS EXTERNAL MEASURES: CUSTOMER SATISFACTION
BSC : FOUR LAYERED PERSPECTIVE

THE BALANCED SCORE-CARD ALSO OFFERS A FOUR LAYERED PERSPECTIVE OF THE STATE OF STRATEGY IMPLEMENTATION AS IT CASCADES DOWN. THE FIRST LAYER IS THE FINANCIAL LAYER THE SECOND LAYER IS THE
THE THIRD LAYER IS THE
CUSTOMER PERSPECTIVE LAYER
THE FOURTH LAYER IS ABOUT
INTERNAL BUSINESS PROCESSES LAYER LEARNING & GROWTH LAYER
FINANCIAL LAYER
INTERNAL BUSINESS PERSPECTIVE LAYER
LEARNING & GROWTH LAYER
FINANCIAL PERSPECTIVE LAYER

FINAN -CIAL LAYER
RETURN ON
CAPITAL EMPLOYED CASH FLOW PROJECT PROFITABILITY PROFIT FORECAST FEASIBILITY SALES BACKLOG
THE FINANCIAL PERSPECTIVE

THE ILLUSTRATIVE AREAS COVERED UNDER THE FINANCIAL PERSPECTIVE ARE:
RETURN ON CAPITAL EMPLOYED CASH FLOW PROJECT PROFITABILITY PROFIT FORECAST FEASIBILITY SALES BACKLOG

CUSTOMER
PERSPECTIVE
LAYER
PRICING INDEX TIER II CUSTOMERS CUSTOMER RANKING SURVEY CUSTOMER SATISFACTION SURVEY MARKET SHARE
THE CUSTOMER PERSPECTIVE

THE ILLUSTRATIVE AREAS COVERED UNDER THE CUSTOMER PERSPECTIVE ARE:
PRICING INDEX TIER II CUSTOMERS CUSTOMER RANKING SURVEY CUSTOMER SATISFACTION SURVEY MARKET SHARE
INTERNAL BUSINESS PERSPECTIVE LAYER

HOURS WITH CUSTOMERS TENDER SUCCESS RATE REWORK SAFETY INCIDENT INDEX PROJECT PERFORMANCE INDEX PROJECT CLOSEOUT INDEX
INTERNAL BUSINESS
PERSPECTIVE
LAYER
THE INTERNAL BUSINESS PERSPECTIVE

THE ILLUSTRATIVE AREAS COVERED UNDER THE INTERNAL BUSINESS PERSPECTIVE ARE:
HOURS WITH CUSTOMERS TENDER SUCCESS RATE REWORK SAFETY INCIDENT INDEX PROJECT PERFORMANCE INDEX PROJECT CLOSE-OUT INDEX
INNOVATION, LEARNING & GROWTH PERSPECTIVE LAYER

PERCENTAGE REVENUE FROM NEW SERVICES RATE OF IMPROVEMENT INDEX STAFF ATTITUDE SURVEY PERCENTAGE OF EMPLOYEE SUGGESTION REVENUE PER EMPLOYEE
LEARNING
& GROWTH PERSPECTIVE
INNOVATION , LEARNING & GROWTH PERSPECTIVE

THE ILLUSTRATIVE AREAS COVERED UNDER INNOVATION , LEARNING & GROWTH PERSPECTIVE PERCENTAGE REVENUE FROM NEW SERVICES RATE OF IMPROVEMENT INDEX STAFF ATTITUDE SURVEY PERCENTAGE OF EMPLOYEE SUGGESTION REVENUE PER EMPLOYEE
THE FOURTH LAYER IS ABOUT

WHAT ARE THE ORGANISATIONAL COMPETENCIES ? WHAT ARE THE SKILLS & SYSTEMS THAT THE ORGANISATION MUST CREATE TO HAVE A MOTIVATED WORK-FORCE THAT WILL ULTIMATELY ENABLE ACHIEVEMENT OF THE OVERALL VISION / MISSION / STRATEGIC GOALS
INNOVATION , LEARNING & GROWTH PERSPECTIVE
LEARNING & GROWTH :

MCS: Balanced Score Card: J.K.Oke

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MCS: Balanced Score Card: J.K.Oke

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MCS: BALANCED SCORE CARD

HOW DOES THE BSC HELP?

HOW DOES THE BSC HELP?

HOW DOES THE BSC WORK ?

REVENUE / QUALITY TYPICALLY LAGGING INDICATORS TELL WHAT HAS HAPPENED

ILLUSTRATIVE FINANCIAL MEASURES:

INTERNAL / EXTERNAL MEASURES:

BSC : FOUR LAYERED PERSPECTIVE

CUSTOMER PERSPECTIVE LAYER

THE FOURTH LAYER IS ABOUT

INTERNAL BUSINESS PROCESSES LAYER LEARNING & GROWTH LAYER

INTERNAL BUSINESS PERSPECTIVE LAYER

CUSTOMER PERSPECTIVE LAYER

LEARNING & GROWTH LAYER

FINANCIAL PERSPECTIVE LAYER

THE FINANCIAL PERSPECTIVE

CUSTOMER PERSPECTIVE LAYER

THE CUSTOMER PERSPECTIVE

INTERNAL BUSINESS PERSPECTIVE LAYER

THE INTERNAL BUSINESS PERSPECTIVE

INNOVATION, LEARNING & GROWTH PERSPECTIVE LAYER

& GROWTH PERSPECTIVE

INNOVATION , LEARNING & GROWTH PERSPECTIVE

THE FOURTH LAYER IS ABOUT

INNOVATION , LEARNING & GROWTH PERSPECTIVE

LEARNING & GROWTH :

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