The Balance Scorecard versus Quality Award Models as Strategic Frameworks

1. The Balance Scorecard versus Quality Award Models as Strategic Frameworks Dr. Shuki DrorHead, Department of Industrial Engineering and ManagementORT Braude College

2. Agenda • Paper objectives • Strategic frameworks for performance management • Comparison betweenorganizational performance management frameworks • QFD Balanced Scorecard Construction Map • Illustrative Example • Conclusions

3. Paper objectives • This paper extends the comparison presented by Wongrassamee et al., by using Otley's five points for comparing three performance management frameworks, i.e. MBNQA, EFQM, and the Balanced Scorecard. • A structured methodological approach based on the Quality Function Deployment (QFD) for implementing the Balanced Scorecard in an individual organization is presented.

4. Strategic frameworks for performance management • Malcolm Baldrige National Quality Award (MBNQA) (1987-2008) European Foundation for Quality Management (EFQM) (1988-2008) Balanced Scorecard (BSC) (1992, 1996, 2001)

5. profile • MBNQA Strategic planning Human resources Leadership Business results Customer focus Process management Measurement, analysis, and knowledge management

6. EFQM Enables Results People management People satisfaction leadership Processes Business results policy & strategy Customer satisfaction impact on society Partners & resources

7. BSC Learning Internal processes Customer Financial

8. Comparison betweenorganizational performance management frameworks • Otley (1999) suggested several topics that have to be considered in the development of an organizational performance management framework: (1) High level objectives (2) Long term programs (3) Processes (4) Targets and performance measures (5) Feedback

9. High level objectives

10. Long term programs

11. Processes

12. Targets and performance measures

13. Feedback

14. The balanced scorecard advantages • Sequential objectives • Capacity to support long-term programs • Potential to select relevant performance measures based on real data • Two levels of feedback

15. The balanced scorecard limitations • Focusing on learning as the only source for causality • No basic guidelines for selecting performance measures • No method for setting targets to measures • Complex feedback from the financial perspective to the customer perspective and to the process perspective • Lack of lag time consideration between causes and its effects

16. QFD To improve the implementation of the balanced scorecard The QFD helps to overcome the two of the limitations: (1) No basic guidelines for selecting performance measures (2) Complex feedback from the financial perspective to the customer perspective and to the process perspective

17. Quality Function Deployment (QFD) • Product quality design methodology. • The QFD technique was developed in 1972 at Mitsubishi and during the 80's and the 90’s has been gradually and successfully adopted by U.S. and Japanese firms.

18. Quality Function Deployment (QFD) • Extract the customers' needs or desires and translate them into demands on technical product characteristics, engineering parameters and ultimately into production systems.

19. QFD Modeling Approach

20. Balanced Scorecard Construction Map

21. Learning type/level Induced Operational Conceptual Relative weight Customer Perspective Relative weight Internal Perspective MATRIX 5 Quality and service performances Internal Processes Time/cost performances Internal Processes MATRIX 3 Product and service technical performances Internal perspective Efficiency Customer perspective Customer types and benefits Input from customers Product quality & service Input from team MATRIX 4 MATRIX 2 Relative weights Customer Types MATRIX 1 Relative weight Internal Perspective Input from management Revenue Growth Productivity

22. Learning type/level Induced Operational Conceptual Relative weight Customer Perspective Relative weight Internal Perspective MATRIX 5 Quality and service performances Internal Processes Time/cost performances Internal Processes MATRIX 3 Product and service technical performances MATRIX 4 Internal perspective Efficiency Input from customers Product quality & service Input from team MATRIX 2 Customer perspective Customer types and benefits MATRIX 1 Relative weights Customer Types Relative weight Internal Perspective Input from management Revenue Growth Productivity

23. Learning type/level Induced Operational Conceptual Relative weight Customer Perspective Relative weight Internal Perspective MATRIX 5 Quality and service performances Internal Processes Time/cost performances Internal Processes MATRIX 3 Product and service technical performances MATRIX 4 Internal perspective Efficiency Customer perspective Customer types and benefits Input from customers Product quality & service Input from team MATRIX 2 MATRIX 1 Relative weights Customer Types Relative weight Internal Perspective Input from management Revenue Growth Productivity

24. Learning type/level Induced Operational Conceptual Relative weight Customer Perspective Relative weight Internal Perspective MATRIX 5 Quality and service performances Internal Processes Time/cost performances Internal Processes MATRIX 3 Product and service technical performances MATRIX 4 Internal perspective Efficiency Customer perspective Customer types and benefits Input from customers Product quality & service Input from team MATRIX 2 MATRIX 1 Relative weights Customer Types Relative weight Internal Perspective Input from management Revenue Growth Productivity

25. Learning type/level Induced Operational Conceptual Relative weight Customer Perspective Relative weight Internal Perspective MATRIX 5 Quality and service performances Internal Processes Product and service technical performances Customer perspective Customer types and benefits Input from customers Product quality & service Input from team Time/cost performances Internal Processes MATRIX 3 MATRIX 4 MATRIX 2 Internal perspective Efficiency MATRIX 1 Relative weights Customer Types Relative weight Internal Perspective Input from management Revenue Growth Productivity

26. Learning type/level Induced Operational Conceptual Relative weight Customer Perspective Relative weight Internal Perspective MATRIX 5 Quality and service performances Internal Processes Product and service technical performances Customer perspective Customer types and benefits Input from customers Product quality & service Input from team Time/cost performances Internal Processes MATRIX 3 MATRIX 4 MATRIX 2 Internal perspective Efficiency MATRIX 1 Relative weights Customer Types Relative weight Internal Perspective Input from management Revenue Growth Productivity

27. Learning type/level Induced Operational Conceptual Relative weight Customer Perspective Relative weight Internal Perspective MATRIX 5 Quality and service performances Internal Processes Product and service technical performances Customer perspective Customer types and benefits Input from customers Product quality & service Input from team Time/cost performances Internal Processes MATRIX 3 MATRIX 4 MATRIX 2 Internal perspective Efficiency MATRIX 1 Relative weights Customer Types Relative weight Internal Perspective Input from management Revenue Growth Productivity

28. Learning type/level Induced Operational Conceptual Relative weight Customer Perspective Relative weight Internal Perspective MATRIX 5 Quality and service performances Internal Processes Product and service technical performances Customer perspective Customer types and benefits Input from customers Product quality & service Input from team Time/cost performances Internal Processes MATRIX 3 MATRIX 4 MATRIX 2 Internal perspective Efficiency MATRIX 1 Relative weights Customer Types Relative weight Internal Perspective Input from management Revenue Growth Productivity

29. Learning type/level Induced Operational Conceptual Relative weight Customer Perspective Relative weight Internal Perspective Quality and service performances Internal Processes Product and service technical performances Customer perspective Customer types and benefits Input from customers Product quality & service Input from team MATRIX 5 Time/cost performances Internal Processes MATRIX 3 MATRIX 4 MATRIX 2 Internal perspective Efficiency MATRIX 1 Relative weights Customer Types Relative weight Internal Perspective Input from management Revenue Growth Productivity

30. Induced Learning • Induced learning is training at the individual level and developing/enhancing Information Systems/Technology.

31. Operational & Conceptual Learning • Operational learning and conceptual learning are viewed here as combinations of organizational structures and improvement tools. • Both operational learning and conceptual learning involve teams.

32. Operational Learning • Operational learning as being achieved by means of local teams using rather basic tools such as the seven basic graphical tools or SPC.

33. Conceptual Learning • Conceptual learning has a wider scope and as such has to rely on cross functional teams applying more sophisticated tools such as enhanced QFD and advanced statistical tools such as Design of Experiments (DOE).

34. Illustrative Example

35. Cross Functional Team • Finance • Market oriented • Information systems • Human resource members • Industrial engineers • R&D representatives

36. Matrix 1 - Deployment of the financial perspective Importance

37. Matrix 2 – The House of Quality in simplified form Importance Sales Point WeightedImportance Users (0.45) Productperformance Customer Perspective Retailers (0.20) Service performance

38. Matrix 3 – Deployment of product/service technical characteristics Importance Flexibility Product and service technical performances Time Quality

39. Matrix 4 – Deployment of internal efficiency Importance Efficiency (0.35)

40. Matrix 5 – Deployment of internal process performances Importance Response Process Time Internal Processes Process Cost Process Quality Design Quality

41. Conclusions • It is shown that among the three frameworks the balanced scorecard has important advantages. Hence, it is selected here as a 'fundamental' strategic framework of an individual organization. • However, the balanced scorecard has some essential limitations. • To improve the implementation of the balanced scorecard in an individual organization a structured methodological approach based on the Quality Function Deployment (QFD) is presented.

42. Conclusions • The QFD matrices ensure that every financial performance defined by the enterprise strategy is linked to a set of performance measures in the relevant domains that may eventually influence its future results. • Through QFD, priorities for improving performance measures in each of the three other domains are determined.

43. Conclusions • The QFD matrices warrant that proposed learning actions are consistent with eventual financial results. • The QFD systematic approach assists in organizing the balanced scorecard thus promoting continuous improvement for achieving strategic goals.

44. Reference • Dror, S. The Balance Scorecard versus Quality Award Models as Strategic frameworks, Total Quality Management and Business Excellence, 19, 6: 583-593, 2008. • Dror, S. and Barad, M. Utilizing Quality Function Deployment to Construct a Balanced Scorecard Map, In Proceedings of the Performance Measurement and Management Conference, Boston, USA, 165-172, 2002.

45. E N D