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Balance Score Card

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					         EIN 5322 Engineering
             Management

Balance Score Card
   Diana Rodriguez
    PID # 1941693

  Professor: Dr Lee.

      Fall 2007
                    Content
1.    Definition and History
2.    Perspectives and key performance indicators
   1.   Financial
   2.   Customer
   3.   Internal Business Processes
   4.   Learning & Growth
3. Problems associated to KPI
4. Implementation
   1.   Strategy focus (step 1)
   2.   Assessment (steps 2-5)
   3.   Change planning and implementation (step 6)
   4.   Continuous improvement (steps 7-8)
                       Content

5. Actual use of balance scored cards
6. Software application for BSCs
   1.  Software products and prices
Definition & History
           Balance Score Card
 A new approach to strategic management was
        developed in the early 1990's by Drs.
     Robert Kaplan (Harvard Business School)
    and David Norton. They named this system
       the 'balanced scorecard'. Recognizing
    some of the weaknesses and vagueness of
      previous management approaches, the
     balanced scorecard approach provides a
      clear prescription as to what companies
      should measure in order to 'balance' the
                financial perspective.
Definition & History
            Balance Score Card

    a concept for measuring whether the
    activities of a company are meeting its
         objectives in terms of vision and
        strategy. By focusing not only on
       financial outcomes but also on the
           human issues, the balanced
       scorecard helps to provide a more
      comprehensive view of a business
      which in turn helps organizations to
      act in their best long-term interests
          Definition & History
  Since the original concept was
 introduced, balanced scorecards
have become a fertile field of theory
      and research, and many
practitioners have diverted from the
 original Kaplan & Norton articles.
   Kaplan & Norton themselves
  revisited the scorecard with the
 benefit of a decade's experience
      since the original article.
Definition & History
    A balanced scorecard is a central
    list of numbers, which show each
        key part of an organization's
        success, such as financials,
       people, operations, suppliers,
    customers, and support systems.
      The numbers should measure
     not just important outcomes, but
     also the factors which influence,
         or drive, those outcomes.
Definition & History
  The point of a balanced scorecard is to:

    • Align all members of an organization around
              common goals and strategies
 • Link initiatives to the strategy, making prioritization
                           easier

     • Provide feedback to people on key issues -
    notably, areas where they can have an impact
 • Be an essential decision-making tool for everyone
                  in the organization
              Perspectives
The balanced scorecard suggests that we view the
 organization from four perspectives, and to develop
metrics, collect data and analyze it relative to each of
                 these perspectives:

                     Processes


                       Vision &     Learning &
     Customer          Strategy       Growth


                     Financial
   Key performance indicators
 Key Performance Indicators (KPI) are financial and non-financial
  metrics used to quantify objectives to reflect strategic performance
 of an organization. KPIs are used in Business Intelligence to assess
the present state of the business and to prescribe a course of action.
The act of monitoring KPIs in real-time is known as business activity
  monitoring. KPIs are frequently used to "value" difficult to measure
       activities such as the benefits of leadership development,
                  engagement, service, and satisfaction
               Perspectives
     The Financial
      Perspective

Kaplan and Norton do not
  disregard the traditional
  need for financial data.
    Timely and accurate
 funding data will always
        be a priority
    Key performance indicators
           The Financial Perspective
          Key performance indicators

   Cash flow
   ROI
   Financial result
   Return on capital employed
   Return on equity
Perspectives
 The Business Process Perspective
 This perspective refers to internal
business processes. Metrics based on
this perspective allow the managers to
    know how well their business is
running, and whether its products and
     services conform to customer
      requirements (the mission).
    Key performance indicators
    The Business Process Perspective
       Key performance indicators
   Number of activities
   Opportunity success rate
   Accident Ratios
   Defect Rates
Perspectives
         The Customer
            Perspective
      Recent management
      philosophy has shown
           an increasing
         realization of the
           importance of
       customer focus and
      customer satisfaction
         in any business.
    Key performance indicators
          The Customer Perspective
          Key performance indicators
   Delivery performance to customer – by date
   Delivery performance to customer – by quantity
   Customer satisfaction rate
   Customer retention
               Perspectives
    The learning and growth Perspective

This perspective includes employee training and
     corporate cultural attitudes related to both
    individual and corporate self-improvement.
    Key performance indicators
The learning and growth Perspective
    Key performance indicators
   Investment rate
   Illness rate
   Internal Promotions %
   Employee Turnover
   Gender/Racial Ratios
             Problems
     Key performance indicators
It is difficult or impossible to measure the
performance indicators exactly required to
a particular business or process objective.
Often a rough guide rather than an exact
measurement
Once a KPI is created, it becomes difficult
to change them as your yearly comparisons
with previous years can be lost
If it is too inhouse, it may be extremely
difficult for an organization to use its KPIs
to get comparisons with other similar
organizations.
               Implementation
The approach to change focuses attention on the critical
  few performance measures that drive success,
  eliminating non-essential metrics that add complexity
  and cost through a four-phase balanced scorecard

This approach present 8 steps to develop an strategic
  implementation of balance score cards in a company
Implementation
                  Implementation
                I. Strategic Focus
Step 1. Define Strategy Specifics
The specific strategy is the foundation for
performance measures

What are the most important business objectives for
the organization to achieve?

What “driver” results — for example, employee
commitment, retention of high performers, and
customer focus — are critical to achieve these
objectives?

What “drivers” — for example, leadership, training,
diversity, and values — impact performance on these
driver results?
                 Implementation
                 II. Assessment
Step 2. Audit existing measures

• Assessment of the fit between strategy and the existing
measures.
• Examination of the measurement processes in your
organization.
                  Implementation
                  II. Assessment
Step 3. Develop new driver and performance measures

•Develop new measures as needed; Using tools like: employee
survey.
•Wherever possible, existing measures are incorporated to ensure
continuity.
                Implementation
                II. Assessment
Step 4. Apply new balanced scorecard

Use tools that make them easier to understand and to
implement; Examples: balanced scorecard's dashboard of
performance metrics.
                 Implementation
                 II. Assessment
Step 5. Analyze and report

Analysis is a critical element of
strategic assessment. At this step in
the process, a linkage analyses can
be performed to identify the
relationships between the employee
data and the performance in key areas
such as customer satisfaction,
productivity, employee retention, and
financial performance.
                 Implementation
 III. Change planning & Implementation
Step 6. Implement improvement plans

This process embeds the balanced scorecard and its
measures in the day-to-day working life of the organization,
spreads awareness of the impact of effective people
management, and initiates the necessary change processes.
                 Implementation
         IV. Continuous Improvement
Step 7. Track improvement with balanced scorecards

 Leading organizations continuously track performance on
their people measures. Ongoing tracking measures the short-
term impact of improvement efforts and identifies emerging
issues quickly.
                Implementation
        IV. Continuous Improvement
Step 8. Continuous improvement
through balanced scorecards

By re-embarking on the cycle once
again, and cascading it down (or
across, or up) to other levels, while
continuing to track key measures and
re-set goals, organizations can create
and support continuous improvement
programs which will provide a long-
lasting competitive advantage
Actual usage of the balanced
         scorecard
          Companies are using the
          scorecard to:

          • Clarify and update budgets
          • Identify and align strategic
          initiatives
          • Conduct periodic performance
          reviews to learn about and
          improve strategy.
      Software Applications
Software packages are available that provide some ability
to automate the reporting of Balanced Scorecard
information. Meanwhile, many firms choose to use
standard office software (such as spreadsheets, word
processors, presentation software) to provide the same
functions as are provided by
commercial software packages -
trading the time taken to develop
the appropriate templates in the
packages and then use them
against the typically high cost of
commercial Balanced Scorecard
software packages / services.
        Software Applications

• Crystal Decisions Balanced Scorecard Solution

Key Features : Cause and effect diagrams. Multiple-level
scorecard support, from the individual to the enterprise. Data
and text driven from industry-standard RDBMS. Integration
with the data warehouse and many other data sources.
Identification of potential problems and opportunities using
the Highlighter view. Weighted scores view (high-level
performance overview based on achievement). Multi-
dimensional access to textual commentary. Powerful
Performance Indicator Engine (PI Engine) for practical data-
handling issues.
        Software Applications

Host Scorecard

•Key Features : This web-architected Balanced Scorecard
and Dashboard software provides the ability to: - Easily
access the organizational strategy, vision, and mission - Add
and Link Objectives and Key Performance Indicators - Weight
measures/objectives/scorecards - Add Initiatives (Action
Plans) and track progress on projects - Enter feedback and
notes related to any measure, initiative, or objective - Create
and view multiple hierarchies for scorecards – ex. Corporate
Scorecards and Strategic Business Unit (SBU) Scorecards
       Software Applications

•KPI Scorecard Enterprise Edition

Key Features : - Monitor all your financial and non-financial
KPIs. - Instantly determine performance levels with Traffic
Light reporting. - Produce easily interpreted and actionable
one page scorecard reports. - Automatic graph, text and table
development. - Export your reports into pdf, MS Word, MS
Excel and even MS PowerPoint. - Extremely easy to use.
        Software Applications

•Microsoft Office Business Scorecard Manager

Key Features : Optimizing Business Performance and
Strategic Decision-Making Business Scorecard Manager is a
comprehensive scorecard and dashboard application that
provides knowledge workers with deep contextual insight into
business drivers. Information is delivered in a collaborative
environment for effective business management and action in
the performance-driven organization. A Microsoft Office
product, Business Scorecard Manager empowers employees
to build, manage, and use their own scorecards, reports, and
visual resources using familiar tools.
       Software Applications
•   Power*Scorecard

Key Features : Fully automates the process of Balanced
Scorecarding. Web-Enables the administration and the
viewing of Scorecards. Provides a Scorecard page at every
level of the organization. Ensures that individual objectives
are in support of departmental and corporate objectives.
Provides quick access to supporting data. Provides ability to
graph organizational performance and to drill-down on the

				
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