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The document discusses strategic planning and the balanced scorecard. It provides an overview of strategic planning processes and strategies such as differentiation and cost leadership. It then discusses the balanced scorecard framework which links strategies to objectives and measures across four perspectives: financial, customer, internal processes, and learning and growth. The document also summarizes a survey of strategic planning in US and Korean ports and discusses how to develop a sample balanced scorecard for a port.

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Ravi Gajjar
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435 views26 pages

BSC Powerpoint Presentation

The document discusses strategic planning and the balanced scorecard. It provides an overview of strategic planning processes and strategies such as differentiation and cost leadership. It then discusses the balanced scorecard framework which links strategies to objectives and measures across four perspectives: financial, customer, internal processes, and learning and growth. The document also summarizes a survey of strategic planning in US and Korean ports and discusses how to develop a sample balanced scorecard for a port.

Uploaded by

Ravi Gajjar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Strategic Planning and the Balanced Scorecard

Henry Schwarzbach, Ph.D. University of Rhode Island

What is a Strategy?
Strategy describes how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its overall objectives.
The process for developing strategy can be either a formal strategic management process or if can be informal and on the fly. Informal strategic planning is often employed when: the stakeholders cannot agree on objectives; there is a lack of planning expertise: the environment is too turbulent for long term planning; the organization is not given the authority to conduct strategic planning.

Basic Strategies for any organization


1. Product differentiation/ Niche
How can our firm provide a better product for our customers?

2. Cost leadership
How can our firm provide services to our customers at a lower cost than our competitors? The essence of the strategic planning process is determining how to design and implement one the these two basic strategies, given the firms strengths and weaknesses, opportunities and threats. The Balanced Scorecard framework helps to link the strategic design,

implementation, and performance evaluation.

Steps in Classical Formal Strategic Planning


Define the mission , customers/stakeholders, Goals and objectives, shared values, and vision Analyze the firms strengths and weaknesses, opportunities and threats

Identify the current strategies


Evaluate the current strategies with respect to the SWOT analysis identifying critical issues

Define strategic alternatives Select the best strategic alternatives


Implement the strategy and monitor performance

Strategy and Porters Five Forces Model


External Analysis
When designing strategy must consider five forces:

Competitors other firmss Potential entrants into the market Equivalent products/services Bargaining power of customers
Bargaining power of input suppliers, including employees, regulators and the community

Port Strategy and the Balanced Scorecard


The BSC Model focuses on:
1.Strategies for Learning and Growth
2. Strategies for Adding Customer Value 3.Strategies for internal business processes

4.Financial Strategies

Survey Results on Current Status of Strategic Planning in U.S. and Korean Ports

Do ports have formal Mission Statements? Our survey found Yes, 76% of U.S. Ports Yes, 54.5% of Korean ports Do ports have formal strategic planning systems? Survey found. Yes, 51.5% of U.S. ports Yes, only 36.4% Korean ports SWOT Analysis - strengths, weaknesses, opportunities, and threats. Over 70% of U.S. and Korean ports with formal strategic planning conduct SWOT analysis Satisfaction with current Strategic Planning Process 5.56 out of a possible 7 for U.S. ports 4.25 out of a possible 7 for Korean ports

Status of the Balanced Scorecard In the Port Industry


Our survey asked port managers about the Balanced Scorecard and we found:
1. Very few ports in the U.S. and none in Korea are using the balanced scorecard? This is not surprising since most U.S. port managers are not familiar with the balanced scorecard and neither are those in Korea.

2. The few ports in the U.S. that we found using the Balanced Scorecard were very satisfied with it so far.

The Balanced Scorecard


The basic premise of the balanced scorecard is, managers do what is measured. Thus we need to develop performance measures that signify accomplishment of our strategies. The measures should flow directly from the strategies. Kaplan and Norton who originated the BSC recommend four perspectives

1.Customer/Stakeholder
2. Internal Business Process 3. Financial

4. Learning and growth

Linking The Balanced Scorecard to Strategy I


Mission
Customer Who do we define as our customer? How do we create value for our customer?

Financial How do we add value for customers while controlling costs? How do we raise the funds necessary to support operations.?

Internal Process To satisfy customers while meeting budgetary constraints, at what business processes must we excel?

Strategy

How do we enable ourselves to grow and change, meeting ongoing demands? Employee Learning & Growth

Linking The Balanced Scorecard to Strategy II


Achieve Objectives
Customer Increase value to the customers Internal Process Develop new products, better understand the customer needs, increase customer value, lower cost, improve effectiveness and efficiency of key processes

Financial

Increase revenue, control costs, cover the cost of capital, attract investment capital, manage cash flow

Strategy

Increase employee and information system capabilities Employee Learning & Growth

Linking The Balanced Scorecard to Strategy II


Strategic Initiatives for Product/Process Differentiation and cost leadership drive the model
Financial

Strategic Initiatives

Internal Process

Customer objectives

Learning and Growth

Developing A Model Balanced Scorecard for a Port


Customer Perspective

Objective 1: Attract more cruise ships


Strategic initiative: Develop a promotional marketing program and promote to cruise ship lines.

Measures: 1. Cruise ship passenger visits 2. Cruise ship fees earned 3. Economic impact of cruise ship tourism

Financial Perspective
Initiatives: Sell Surplus Property Improve collection procedures Target Actual Performance Performance $2,000,000
Lower days receivables to 30

$2,100,000 32 days

Internal Business Process Perspective


Initiatives: Expand cargo dock Target Actual Performance Performance
1200 ft of dock 1100 ft of dock

Add improved cargo 25 TEU loaded/ 26 TEU per Handling equipment Unloaded per hr. Hr.

Learning and Growth Perspective


Objectives:
Align employee and organization goals
Improve MIS cash forecasting capability

Measures:

Employee satisfaction survey


Finance department evaluation

Learning and Growth Perspective


Target Actual Performance Performance Employee 80% of 88% of participation and employees employees suggestion program give top give top to build teamwork two ratings two ratings Average Add Peoplesoft cash Average rating of 9 out Forecasting module Rating 5 of 10 Initiatives:

Aligning the Balanced Scorecard to Strategy


Different strategies call for different scorecards. What are some of the financial perspective measures? Operating income/Return on investment
Revenue/ Revenue growth/Revenue from new initiatives

Cost reduction is some areas/cost per TEU moved


Measures of economic impact in the community or region

Aligning the Balanced Scorecard to Strategy


What are some of the customer perspective measures? Market share
Customer satisfaction Customer retention percentage Time taken to fulfill customers requests
Community satisfaction/Environmental Impact

Aligning the Balanced Scorecard to Strategy


What are some of the internal business perspective measures? Ship Servicing

Cargo Handling capabilities


On time service

Downtime
Warehousing/storage

Aligning the Balanced Scorecard to Strategy


What are some of the learning and growth perspective measures? Employee education and skill level

Employee satisfaction scores


Employee turnover rates

Information system availability


Percentage of processes with advanced controls

Continuous Port Strategic Management with the Balanced Scorecard


Scan External Environment for opportunities and threats Develop a strategic intelligence system

Strategy Implementation

Implement required changes in operations to effect revised strategic initiatives


Adjust the mission, vision, strategies, and BSC Measures and targets for changes in the Internal and External environment Strategy Development

Internal Reporting on BSC performance


Collect and report data on BSC measures and compare to targets

Strengths of the Balanced Scorecard


1. Links strategy to mission to implementation and performance 2. Allows goal alignment through the organization. 3. Provides a means to evaluate strategic planning.
3. Provides a vehicle for communicating mission, vision and strategies.

Pitfalls When Implementing a Balanced Scorecard


What pitfalls should be avoided when implementing a balanced scorecard? 1. Dont assume the cause-and-effect linkages to be precise. 2. Dont seek improvements across all measures all the time. 3. Dont use only objective measures on the scorecard.

Pitfalls When Implementing a Balanced Scorecard


4. Dont fail to consider both costs and benefits of initiatives such as spending on information technology and research and development. 5. Dont ignore nonfinancial measures when evaluating managers and employees. 6. Dont use too many measures.

Pitfalls When Implementing a Balanced Scorecard


7. Maintain flexibility to add new measures for emergent strategies. Watch out for excessive centratization and rigidity. 8. Complexity adds cost. Keep it as simple as possible. Consider the cost versus the benefit of when selecting BSC measures. 9. Garbage in, garbage out. Insure that reliable data can be collected for all measures.

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