The Balanced Scorecard
Presented To
Smart Service for Smart Cars
Presented By
Hussam El Faramawi
Seminar Outline
Introduction to the Balanced Scorecard
What is it?
Why do it?
Balanced Scorecard Fundamentals
The Four Perspectives
Measures, Targets and Initiatives
Roles and Responsibilities
The Smart Service for Smart Car Strategy Map
Using the BSC as a Management System
The Balanced Scorecard
What is it?
Definition:
The Balanced Scorecard is a
management tool that provides
stakeholders with a comprehensive
measure of how the organization is
progressing towards the
achievement of its strategic goals.
The Balanced Scorecard
What is it?
The Balanced Scorecard:
Balances financial and non-financial measures
Balances short and long-term measures
Balances performance drivers (leading indicators) with
outcome measures (lagging indicators)
Should contain just enough data to give a complete
picture of organizational performance… and no more!
Leads to strategic focus and organizational alignment.
The Balanced Scorecard
Why do it?
• To achieve strategic objectives.
• To provide quality with fewer resources.
• To eliminate non-value added efforts.
• To align customer priorities and
expectations with the customer.
• To track progress.
• To evaluate process changes.
• To continually improve.
• To increase accountability.
The Balanced Scorecard
Why do it?
It works!
In just 90 days, Sandia Labs was able to redirect $190,000
in savings by dropping initiatives that didn’t fit their
overall strategy.
“The BSC has forced our management team to focus
beyond financial measures… too often in the past we
would get sucked into short-term thinking.”
“The BSC dramatically improved our data analysis… we
don’t overreact nearly as much as we used to.”
The Strategy Focused
Organization
Mission – What we do
Vision – What we aspire to be
Strategies – How we accomplish our
goals
Measures – Indicators of our progress
Environmental Scan
Strengths Weaknesses
Opportunities Threats
A Model for
Values
Strategic
Planning
Mission &
Vision
Strategic Issues
Strategic Priorities
Objectives, Initiatives, and Evaluation
The Strategy Focused
Organization
The Five Principles
1. Translate the strategy to
operational terms.
2. Align the organization to the
strategy.
Source: The Strategy Focused Organization, Norton & Kaplan
The Strategy Focused
Organization
The Five Principles (cont.)
3. Make strategy everyone’s job.
4. Make strategy a continual
process.
5. Mobilize change through
executive leadership
Source: The Strategy Focused Organization, Norton & Kaplan
The Balanced Scorecard
and The Big Picture
•Activity Based Costing
•Economic Value Added
•Forecasting
Strategic •Benchmarking
Planning •Market Research
•Best Practices
Mission
•Six Sigma
and
•Statistical Process Control
Vision
•Reengineering
Balanced •ISO 9000
Scorecard •Total Quality Management
•Empowerment
•Learning Organization
•Self-Directed Work Teams
•Change Management
Strategic Direction
Create Environment Strategic Performance Management
For Change System
Communicate Strategies
Define Objectives
Implement BSC
Balanced Scorecard
Measure Performance
Improve Processes
Evaluate and Adjust
Linking it all together…. Continuous Improvement
Redefine Initiatives
THE BALANCED SCORECARD
FINANCIAL/REGULATORY
CUSTOMER
To satisfy our constituents,
To achieve our vision,
what financial & regulatory
what customer needs must
objectives must
we serve?
we accomplish?
INTERNAL
To satisfy our customers and
stakeholders, in which business
processes must we excel?
LEARNING & GROWTH
To achieve our goals, how
must we learn, communicate
and grow?
Customer Perspective
To achieve our vision, what customer needs
must we serve?
Possible Performance Measures
o Customer Satisfaction (Average)
o Satisfaction Gap Analysis (Satisfaction vs.
Level of Importance)
o Satisfaction Distribution (% of each area scored)
Financial / Regulatory Perspective
To satisfy our constituents, what financial
and
regulatory objectives must we accomplish?
Possible Performance Measures
o Cost / Unit
o Unfunded Requirements or Projects
o Cost of Service
o Budget Projections and Targets
Internal Perspective
To satisfy our customers, in which business
processes must we excel?
Possible Performance Measures
o Cycle Time
o Completion Rate
o Workload and Employee Utilization
o Transactions per employee
o Errors or Rework
Learning and Growth
To achieve our goals and accomplish core activities,
how must we learn, communicate and work
together?
Possible Performance Measures
o Employee Satisfaction
o Retention and Turnover
o Training Hours and Resources
o Technology Investment
Why Measure?
• To determine how effectively and
efficiently the process or service satisfies
the customer.
• To identify improvement opportunities.
• To make decisions based on FACT and
DATA
Measurements Should:
• Translate customer expectations into goals.
• Evaluate the quality of processes.
• Track our improvement.
• Focus our efforts on our customers.
• Support our strategies.
Targets
“If you don’t know where you’re
going, you’re probably not gonna
get there.”
Forrest Gump
Targets
• Targets need to be set for all measures
• Should have a “solid basis”
• Give personnel something for which to aim
• If achieved will transform the organization
• Careful not to develop measures/targets in
a fragmented approach:
i.e. Asking people to increase customer satisfaction has
to be backed up with the knowledge, tools, and means
to achieve that target.
Initiatives
Once measures and targets are
established, it is the responsibility
of management to determine
HOW the organization will achieve
its goals.
Measures are used to determine
the effectiveness of strategic
initiatives.
The Leadership Team
Develops the division’s vision,
strategy and goals
Develops organizational objectives
and targets
Provides leadership, endorsement
and vision for the project
Clears barriers to scorecard
progress
The Core Team
Drafts the strategy map and scorecard
Works with employees to develop
measures supporting strategic
objectives
Works with the Leadership Team to plan
and implement the Balanced Scorecard
in the FAS Division
Finance and Administrative Services
Strategy Map
Link it together….
DIVISION
CUSTOMER INTERNAL LEARNING &
FINANCIAL
PROCESS GROWTH
DEPT.
Hum. Rscrs. Univ. Police Facilities
FUNCTION
Police Parking
Measure: Satisfaction Index
Current: 3.0 Target: 4.0
The Balanced Scorecard
as a Management System
BSC reviewed regularly to enhance
operational decision-making
Success of initiatives assessed
based on DATA… not opinions
Leading indicators evaluated to
confirm accuracy of assumptions
The Balanced Scorecard
as a Management System
The BSC is a “Living Document” that
requires regular revision of objectives,
measures and initiatives:
How are we doing?
Are we measuring the right things?
What initiatives do we need to get us
where we want to go?
Have our organizational goals
changed?
Advantages to this Approach
Simple to Use and Understand
Based on Vision and Strategy
Multidimensional
•Quantitative and Qualitative Measures
•Current and Future
Provides Measurement of and Method
for Improving our Services
Ties QI initiatives together
Serves as a Communication Tool
Suggested Readings
Kaplan, Robert and Norton, Edward. The Balanced Scorecard.
Harvard Business Publishing, 1998
Kaplan, Robert and Norton, Edward. The Strategy-Focused Organization.
Harvard Business Publishing, 2001
Buckingham, Marcus and Coffman, Curt. First, Break All the Rules
The Gallup Organization, 1999
Brown, Mark. Keeping Score. Mark Graham Brown, 1996
http://www.afd.calpoly.edu/afd/Strategic_plan/
http://cqi.csusb.edu/
Thank You
Hussam El Faramawi
Smart Service for Smart Cars
Chief Executive Officer
