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11 th Edition Chapter 10

11 th Edition Chapter 10. The Balanced Scorecard. The Balanced Scorecard concept developed by Robert Kaplan David Norton. Customers. Financial. Learning and growth. Internal business processes. The Balanced Scorecard.

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11 th Edition Chapter 10

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  1. 11th EditionChapter 10

  2. The Balanced Scorecard The Balanced Scorecard concept developed by Robert Kaplan David Norton

  3. Customers Financial Learningand growth Internalbusinessprocesses The Balanced Scorecard Management translates its strategy into performance measures that employees understand and accept. Performancemeasures

  4. Exh. 10-11 The Balanced Scorecard: FromStrategy to Performance Measures Performance Measures Financial Has our financialperformance improved? What are ourfinancial goals? What customers dowe want to serve andhow are we going towin and retain them? Vision and Strategy Customer Do customers recognize thatwe are delivering more value? What internal busi-ness processes arecritical to providingvalue to customers? Internal Business Processes Have we improved key business processes so that we can deliver more value to customers? Learning and Growth Are we maintaining our abilityto change and improve?

  5. Performance Measures Examples • See p451

  6. Financial measures are lag indicators that summarize the results of past actions. Non-financial measures are leading indicators of future financial performance. • Top managers are ordinarily responsible for financial performance measures – not lower level managers. Non-financial measures are more likely to be understood and controlled by lower level managers. The Balanced Scorecard:Non-financial Measures The balanced scorecard relies on non-financial measures in addition to financial measures for two reasons:

  7. Financial vs. Non-Financial

  8. The Balanced Scorecard for Individuals The entire organization should have an overall balanced scorecard. Each individual should have a personal balanced scorecard. A personal scorecard should contain measures that can beinfluenced by the individual being evaluated and thatsupport the measures in the overall balanced scorecard.

  9. Then The Balanced Scorecard A balanced scorecard should have measuresthat are linked together on a cause-and-effect basis. If we improveone performancemeasure . . . Another desiredperformance measurewill improve. The balanced scorecard lays out concrete actions to attain desired outcomes.

  10. Improved businessprocesses improvecustomer satisfaction. Improving customersatisfaction improvesfinancial results. The Balanced Scorecard Learning improvesbusiness processes.

  11. The Balanced Scorecardand Compensation Incentive compensation should be linked to balanced scorecard performance measures.

  12. Exh. 10-13 Financial Customer Internal Business Processes Learningand Growth The Balanced ScorecardJaguar Example Profit Contribution per car Number of cars sold Customer satisfactionwith options Number ofoptions available Time toinstall option Employee skills in installing options

  13. Satisfaction Increases Increase Options TimeDecreases Increase Skills The Balanced ScorecardJaguar Example Profit Contribution per car Number of cars sold Results Customer satisfactionwith options Strategies Number ofoptions available Time toinstall option Employee skills in installing options

  14. Cars sold Increase Satisfaction Increases Increase Options The Balanced ScorecardJaguar Example Profit Contribution per car Results Number of cars sold Customer satisfactionwith options Strategies Number ofoptions available Time toinstall option Employee skills in installing options

  15. ContributionIncreases TimeDecreases Increase Skills The Balanced ScorecardJaguar Example Results Profit Contribution per car Number of cars sold Customer satisfactionwith options Number ofoptions available Time toinstall option Strategies Employee skills in installing options

  16. ProfitsIncrease ContributionIncreases Satisfaction Increases Increase Options TimeDecreases Increase Skills The Balanced ScorecardJaguar Example Results Profit If numberof cars soldand contributionper car increase,profits increase. Contribution per car Number of cars sold Customer satisfactionwith options Strategies Number ofoptions available Time toinstall option Employee skills in installing options

  17. Advantages of Graphic Feedback When interpreting its performance, Jaguar will look forcontinual improvement. It is easier to spot trends or unusual performance if this data is presented graphically.

  18. Order Received Goods Shipped ProductionStarted Throughput Time Delivery Cycle Time Delivery Performance Measures Process Time + Inspection Time + Move Time + Queue Time Wait Time Process time is the only value-added time.

  19. Order Received Goods Shipped ProductionStarted Throughput Time Delivery Cycle Time Manufacturing Cycle Efficiency Value-added timeManufacturing cycle time = Delivery Performance Measures Process Time + Inspection Time+ Move Time + Queue Time Wait Time

  20. Quick Check  A TQM team at Narton Corp has recorded the following average times for production: Wait 3.0 days Move 0.5 days Inspection 0.4 days Queue 9.3 days Process 0.2 days What is the throughput time? a. 10.4 days b. 0.2 days c. 4.1 days d. 13.4 days

  21. Quick Check  A TQM team at Narton Corp has recorded the following average times for production: Wait 3.0 days Move 0.5 days Inspection 0.4 days Queue 9.3 days Process 0.2 days What is the throughput time? a. 10.4 days b. 0.2 days c. 4.1 days d. 13.4 days Throughput time = Process + Inspection + Move + Queue = 0.2 days + 0.4 days + 0.5 days + 9.3 days = 10.4 days

  22. Quick Check  A TQM team at Narton Corp has recorded the following average times for production: Wait 3.0 days Move 0.5 days Inspection 0.4 days Queue 9.3 days Process 0.2 days What is the MCE? a. 50.0% b. 1.9% c. 52.0% d. 5.1%

  23. Quick Check  A TQM team at Narton Corp has recorded the following average times for production: Wait 3.0 days Move 0.5 days Inspection 0.4 days Queue 9.3 days Process 0.2 days What is the MCE? a. 50.0% b. 1.9% c. 52.0% d. 5.1% MCE = Value-added time ÷ Throughput time = Process time ÷ Throughput time = 0.2 days ÷ 10.4 days = 1.9%

  24. Quick Check  A TQM team at Narton Corp has recorded the following average times for production: Wait 3.0 days Move 0.5 days Inspection 0.4 days Queue 9.3 days Process 0.2 days What is the delivery cycle time? a. 0.5 days b. 0.7 days c. 13.4 days d. 10.4 days

  25. Quick Check  Delivery cycle time = Wait time + Throughput time = 3.0 days + 10.4 days = 13.4 days A TQM team at Narton Corp has recorded the following average times for production: Wait 3.0 days Move 0.5 days Inspection 0.4 days Queue 9.3 days Process 0.2 days What is the delivery cycle time? a. 0.5 days b. 0.7 days c. 13.4 days d. 10.4 days

  26. End of Chapter 10

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