Warsaw University of Technology Faculty of Production Engineering Institute for Organization of Production Systems
Introduction to the Balanced ScoreCard what is it?
The Balanced Scorecard translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system.
(Kaplan and Norton, 1996)
OPERATIONS AND PRODUCTION MANAGEMENT
Balanced Scorecard
Presented by: MSc. Eng. Bartomiej Gadysz MSc. Eng Aldona Kluczek
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BSC is a tool developed by Robert Kaplan and David P. Norton.
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BSC aims
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.
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Balanced Scorecard
To achieve our vision, how should to appear to our customers?
Financial
To succeed, how should to appear to our shareholders?
Customer
Vision
Business Process
To satisfy our shareholders and customers, what business processes must we excel at?
To achieve our vision, how will we sustain our ability to change and improve?
Development
Source: R.S. Kaplan, D.P. Norton, Strategiczna karta wynikw (The Balanced Scorecard), Warszawa 2001, p. 28. 22-Nov-11 OPMAN exercises A.Kluczek&B.Gadysz 3/22
BSC perspectives
The four perspectives
Financial Perspective Financial performance Diversity and stability of funding Investment strategy Customer Perspective Customer focus Customer satisfaction Changing customer demands and needs The value of the organization to its customers Customer relationships Organization's image and reputation with customers Innovation & Learning Perspective Employee training Individual and institutional improvement Human resource capabilities Learning capacity Motivation and reward system Information technology and systems capabilities and capacity
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Internal Process Perspective Internal business processes Resource allocation and unit cost Quality control Productivity
Adapted from Kaplan R.S., Norton D.P., Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review (January-February 1996): 76.
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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.
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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.
SMART
Specified Measureable Ambitious Realistic in Time
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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.
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How to start it?
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Business Process Perspective
Examples of objectives and measurements
Goals
Measures An improvement in delivery time (40%) Half the time of completion of an order ( from 4 days to 2 days) The 10% rise to the end of years
Example
Customer Perspective Goals Increase customer satisfaction A rise in participation of regular customers Meetinig the customers` need Measures 85% of surveys rank high satisfaction A 40 % increase of customers 0 of broken contracts
An improvement in delivery time Shortening the time of completion of an order Investing in a safety of information
Development Perspective Goals Increase customer satisfaction Staff training Measures A 5 % increase in employment in a company An amount of training hours/one person within one year 2 new products within a year
Vision and strategy Extending the range of products` offer
Finance Perspective Goals Net turnover Measures A 30% rise in net turnover compared to last year A decrease in spending by 20% to the end of a year
Source: http://www.exinfm.com/training/pdfiles/course11r.pdf
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Decreasing expenditure on office
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Strategy mapping BSC 2nd generation
The Balanced Scorecard in practice
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Why implement the Balanced Scorecard?
Increase focus on strategy and results Improve organizational performance by measuring what matters Align organization strategy with the work people do on a day-today basis Focus on the drivers of future performance
BSC software support
BSC Designer Improve communication of the organizations vision and strategy Prioritize projects / Initiatives
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List of ca. 100 software vendors
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BSC few facts
Cranfield Uni. >50%of large enterprises use BSC
BSC few facts
Balanced Scorecard Forum 80% of organizations using BSC reported improvements in operating performance 66% of these organizations reported an increase in profits
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
Bain & Co
ca. 70% of organizations had at least partially implemented a balanced scorecard by 2006 50% of Fortune 1,000 companies are using BSC
Microsoft Business Intelligence Conference
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30% of companies think that the most important to their company today is performance management
Source: http://www.bscdesigner.com/balanced-scorecard-fact-sheet.htm
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Source: http://www.bscdesigner.com/balanced-scorecard-fact-sheet.htm
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Evolution
2nd generation strategy map, links between objectives
References
1. Balanced Scorecard Basics, Balanced Scorecard Institute 2008 2. Chen C.-H., Chou S.-Y., A BSC Framework for Air Cargo Terminal Design: Procedure and Case Study, Journal of Industrial technology, Vol. 22, No. 1, http://atmae.org/jit/Articles/chen021606.pdf 3. Kaplan R., Norton E., The Balanced Scorecard, Harvard Business Publishing, 1998. 4. Kaplan R., Norton E., The Strategy-Focused Organization, Harvard Business Publishing, 2001 5. Shanahan Y.P., Proctor Plumbing Limited: A Case Study Of The Balanced Scorecard (BSC), Journal of Business Case Studies 4th Qtr 2006, Vol. 2, No. 4, http://www.cluteinstitute-onlinejournals.com/PDFs/200628.pdf 6. http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/ Default.aspx 7. Case studies: a. http://www.2gc.co.uk/resources-casestudies b. http://www.balancedscorecard.org/LinkClick.aspx?fileticket=tOmjwPcVlUQ%3D&tabi d=36 c. http://www.balancedscorecard.org/LinkClick.aspx?fileticket=LS4KXycFC%2B8%3D&t abid=56 d. http://www.bscdesigner.com/case-studies e. http://www.excitant.co.uk/pages/case_studies_access.htm f. http://www.exinfm.com/training/pdfiles/course11r.pdf g. http://www.tefkuwait.com/photos/sem121107/handout/NovaScotiaPowerBSC.pdf
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1st generation only list of metrics
Ari Schneiderman - 1st BSC
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3rd generation destination statement, framework for drawing links
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Team work
1.Join Your team. 2.List objectives for each strategic perspective. 3.List measures for each objective. 4.List targets for each measure 5.Draw sketch of BSC for Rockford. 6.Show sketch and improve it at home. 7.Incorporate BSC in final paper.
Thank you for your time!
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