Managing
Managing
Corporate
Corporate
Performance
Performance
with Balanced
with Balanced
Scorecard
Scorecard
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Contents :
Contents :
1. Corporate Performance Scorecard 2. Strategy Map Framework
3. Four Perspectives in Balanced Scorecard 4. Identifying Key Performance Indicators
5. Strategy Map in Corporate Functions (HR, IT, Finance and Marketing)
Corporate
Performance Management
Performance Management Framework
Performance Management Framework
Identifying Defining Measuring Monitoring
Key
Key
Performance
Performance
Indicators
Indicators
Company
Company
strategy
strategy
Vision
Mission
Strategy
Strategy Map
Strategy Map
Three critical components for effective process of
performance management
Performance Management Infrastructure Performance Management Culture Performance Management Process Performance management cycle is continuous andconsistent
Performance Management Component
Performance Management Component
STRATEGY
Plan and Execute
Monitor and Evaluate Reward and Coach
Set Measures and Target
Performance Management Cycle
Performance Management Cycle
Managing Performance with
Managing Performance with
Balanced Scorecard
Balanced Scorecard
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.
• Balances financial and non-financial measures
• Balances short and long-term measures
• Balances performance drivers (leading indicators)
with outcome measures (lagging indicators)
• Leads to strategic focus and organizational
alignment.
Managing Performance with
Managing Performance with
Balanced Scorecard
4 Perspectives in Balanced Scorecard
4 Perspectives in Balanced Scorecard
If we succeed, how will we look to our shareholders? Financial Perspective
To achieve our vision, how must we look to our
customers?
Customer Perspective
To satisfy our customers, which processes must we
excel at?
Internal Perspective
Strategy and Balanced Scorecard
Strategy and Balanced Scorecard
Mission – Why We Exist Vision – What We Want to Be Values – What’s Important to Us Strategy : Our Game Plan Strategy Map : Translate the Strategy Balanced Scorecard : Measure and Focus Strategic Outcomes Satisfied Shareholders Delighted Customers Excellent Processes Motivated Workforce
•
The strategy map framework is presented in the
following slides.
•
This framework describes the types of strategic
target that should be presented in each perspective,
namely the financial perspective, customers, internal
business process, and learning & growth perspective.
Strategy Map Framework
Strategy Map Framework
Cost Efficiency
Long-term Shareholder Value
Revenue Growth
Price Quality Service Availability Brand
Operations Management Processes Human Capital Customer Management Processes Innovation Processes Regulatory and Social Processes
Organization Capital Information Capital
Strategy Map Framework
Strategy Map Framework
Financial
Customer
Internal Process
Financial Perspective
Financial Perspective
• In private companies, the financial perspective is the
main objective (ultimate goal) – without having to
sacrifice the interests of other relevant stakeholders (community, environment, government, etc.)
• In the financial perspective, the strategic goal is the
long-term shareholder value
long-term shareholder value. This goal is driven by
two factors, namely : revenue growth and revenue growth cost cost efficiency.
Long-term Shareholder Value
Revenue Growth
Improve Cost Structure Increase Asset Utilization
Cost Efficiency
Strategic Objectives in Financial
Strategic Objectives in Financial
Expand Revenue Opportunities
Customer Perspective
Customer Perspective
• This perspective is very instrumental, because without customers, how can a company survive?
• Customer perspective covers the following elements: • Customer acquisition
• Customer retention
• Customer profitability
• Market share
Price Quality Service Availability Brand Customer Acquisition Customer Acquisition Customer Satisfaction Customer Satisfaction Customer Retention
Customer Retention Customer ProfitabilityCustomer Profitability Market Share
Market Share
Strategic Objectives in Customer
Strategic Objectives in Customer
Internal Process Perspective
Internal Process Perspective
• This perspective reflects the processes in key business that should be optimized in order to meet the needs of the customers.
• There are four main themes in this perspective, namely: • Operations Management Process
• Customer Management Process • Innovation Process
Operations Management Processes Customer Management Processes Innovation Processes Regulatory and Social Processes Processes that produce and deliver products and services Processes that enhance customer value Processes that create new products and services Processes that improve communities and the environment • Supply • Production • Distribution • Selection • Acquisition • Retention • Growth • New Ideas • R&D Portfolio • Design/ Develop • Launch • Environment • Safety & Health • Employment • Community
Strategic Objectives in Internal Process
Learning & Growth Perspective
Learning & Growth Perspective
• This perspective reflects the capability that a company should have, namely:
• Human Capital
• Organization Capital • Information Capital
• This perspective shows us that good human resource development system, organizational system and
Human Capital Organization Capital Information Capital • Skills • Knowledge • Attitude • Systems • Database • Networks • Culture • Leadership • Organization Development
Strategic Objectives in
Strategic Objectives in
Learning & Growth
Strategy Map Template
Strategy Map Template
• The following slide displays the strategy map template comprising of four perspectives : financial, customer, internal business process, and learning & growth.
Improve Cost Efficiency
Enhance Long-term Shareholder Value
Increase Revenue Growth
Enhance Brand Image Build High Performance Products Achieve Operational Excellence Develop Strategic Drive Demand through Customer Relation Management Manage Dramatic Growth through Innovation Implement Good Environmental Policy
Build Learning Expand Capabilities with
Strategy Map Template
Strategy Map Template
Financial
Customer
Internal Process Learning & Growth
Expand Market Share
Identifying Key Performance
Indicators (KPI)
Vision Mission and Values Strategy Finance Customer Internal Business Process HR Development Key Performance Indicators Key Performance Indicators Key Performance Indicators Strategic Objectives Strategic Objectives KPI = Measurement or indicator that provides information on how far we
have succeeded in achieving the strategic
objectives
Key Performance Indicators (KPI)
• The measure of success must show clear, specific and measurable performance indicators.
• The measure of success should be declared explicitly and in detail so that it is clear what is being measured.
• Costs to identify and monitor the measure of success should
not exceed the value that will be known from the measurement.
Guidelines in Formulating the KPI
Guidelines in Formulating the KPI
KPI Guidelines
Relevant to the
Strategic Objective Does KPI have a linkage with the strategic objectives? Controllable Are the KPI achievements still under control?
Actionable Can any action be taken to improve the
performance?
Simple Is the KPI easy to explain?
Credible Is the KPI not easy to manipulate?
KPI Guidelines
KPI
KPI
Family Dimension
Family Dimension
Productivity Measures employee output (units/
transactions/ dollars), the uptime levels and how employees use their time
(sales-to-assets ratio, dollar revenue from new customers, sales pipeline).
Measures the ability to meet and/or exceed the requirements and expectations of the customer (customer complaints, percent
KPI
KPI
Family Dimension
Family Dimension
Profitability Measures the overall effectiveness of the
management organization in generating profits (profit contribution by
segment/customer, margin spreads). Measures the point in time (day/week/
month) when management and employee tasks are completed (on-time delivery,
percent of late orders).
KPI
KPI
Family Dimension
Family Dimension
Process Efficiency
Measures how effectively the management organization incorporates quality control, Six Sigma and best practices to streamline
operational processes (yield percentage, process uptime, capacity utilization).
Measures how effectively the management organization leverages existing business
resources such as assets, bricks and mortar, investments (sales per total assets, sales per
Resource Utilization
KPI
KPI
Family Dimension
Family Dimension
Cost Savings
Measures how successfully the management organization achieves economies of scale and scope of work with its people, staff and
practices to control operational and overhead costs (cost per unit, inventory turns, cost of goods).
Measures the ability of the management
organization to maintain competitive economic position in the growth of the economy and
industry (market share, customer
acquisition/retention, account penetration).
KPI Category Dimension
KPI Category Dimension
Direct
The actual raw data value as measured (e.g., sales volume).
Percent
The comparison of the changes in performance of one value relative to the same value at a different time, geography, etc. (e.g., percentage change in sales vs. last year).
KPI Category Dimension
KPI Category Dimension
Simple Ratio The comparison of one value relative to another to
provide a benchmark for comparison of performance (e.g., average sales per day).
Index A combination of several separate measures
added together that result in an overall indicator of performance (e.g., (company sales growth)/ (industry sales growth) for a specific geography).
KPI Category Dimension
KPI Category Dimension
Composite Average The addition of the weighted averages of several
similar measures that result in an overall composite indicator of performance (e.g., customer satisfaction composite is mixture of results from surveys, focus groups and product returns).
Statistics Multiple measures such as mean, variance,
standard deviation and variance that capture the spread and distribution of the performance
Strategy Map for
Corporate Functions (HR, IT, Finance and
Vision
Mission
Strategy
Integration between Corporate and
Integration between Corporate and
Division/Department
Division/Department
Corporate Scorecard Division ScorecardThe Division Scorecard
is built by referring to the
corporate scorecard
Financial
Customer
Internal Process Learning & Growth
Corporate Finance Corporate Marketing Production Supply Chain R & D Corporate HR Info
Corporate and Division Scorecard
Corporate and Division Scorecard
Corporate and Division Scorecard
Corporate and Division Scorecard
• Division Scorecard is formulated by looking at the four perspectives in Corporate Scorecard.
• As shown in the previous slides, the learning & growth
perspective provides guidelines for developing scorecard at the Human Resource and IT divisions, while the internal
process perspective provides guidelines for developing scorecard at the supply chain division or R&D.
39
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Corporate and Division Scorecard
Corporate and Division Scorecard
Sample from GE Lighting Business Group
Level of Organization
Financial
Customer
Internal Process
Learning & Growth
Corporate Scorecard
Increase profit margin
Improve customer
Increase inventory turns
Increase level of
satisfaction level
Improve internal process
employee competency
Division Scorecard
Optimize cost of production
Improve customer
Increase inventory turns
Increase level of
Reduce inventory levels
satisfaction level
Improve internal process
employee competency
Plant Scorecard
Optimize cost of production
Increase percent of
Increase inventory turns
Number of "on the
Increase yields ratio
on time delivery
Reduce number of defects
job training" delivered
Increase labor productivity
Reduce customer
per million
Number of performance
Reduce inventory levels
complaints per million Improve quality incoming
coaching session
materials
Maintain optimum equipment
speed
Frontline Employee
Reduce waste
Reduce equipment downtime
Number of "on the
Scorecard
Reduce overtime
Reduce number of poor
job training" attended
Increase production rates
solders
Number of performance
Reduce number of cracked
coaching session
bulbs
attended
The above example shows how the scorecard at corporate level is
Division Strategy Map Template
Division Strategy Map Template
• The strategy map for HR Division, Information Technology Division, Finance Division, and Marketing Division are
Optimize HR Efficiency
Drive Long term Shareholder Value
Enhance People & Organizational Effectiveness
Achieve HR Process Excellence
Develop Strategic &
Build Strategic Employee Competencies Drive Organizational Performance
Enhance Technology Create Climate for
HR Strategy Map Template
HR Strategy Map Template
Financial
Customer
HR Internal Process
Learning & Growth
Create Positive Work Environment
Provide Quality HR Service
Provide High Performance People
Optimize IT Efficiency
Drive Long term Shareholder Value Enhance IT Impact on Enterprise Outcome Maintain a Reliable IT Infrastructure Develop Effective Decision Support System
Propose and Deliver Transformational
Applications
IT Strategy Map Template
IT Strategy Map Template
Financial
Customer
IT Internal Process
Deliver Consistent, High Quality IT Service
Provide Business Units with Innovative IT Solutions
Optimize Financial Efficiency
Drive Long term Shareholder Value
Enhance Finance Effectiveness on Enterprise Outcome
Achieve Finance Process Excellence
Develop Strategic &
Develop Financial Information to Improve Decision Making Ensure Compliance with Regulatory Requirements
Use Technology to Improve
Finance Strategy Map Template
Finance Strategy Map Template
Financial
Customer
Finance Internal Process
Learning & Growth
Deliver Responsive & Efficient Finance Operations
Provide Clear & Reliable Required Disclosure
Customer-Optimize Marketing Efficiency
Drive Long term Shareholder Value Increase Sales Revenue Develop Innovative Marketing Communication Program Develop Marketing Business Intelligence Accelerate New Product Development Ideas
Marketing Strategy Map Template
Marketing Strategy Map Template
Financial
Customer
Internal Process
Create Satisfied and Loyal Customers Enhance Brand Image Develop Effective Customer Relation Management
Recommended Further Readings:
1. Robert Kaplan and David Norton, Strategy Map : Converting Intangible
Assets into Tangible Outcomes, HBS Press
2. Robert Kaplan and David Norton, Alignment : Using the Balanced
End of Material
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