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Lesson 4 Performance Methodology: The Balanced Scorecard

Lesson 4 Performance Methodology: The Balanced Scorecard. At its Simplest - Performance Management Actions. Set Goals/ Objectives. Plan Initiatives. Implement Actions. Make Improvements. Analyze Results Against Expectations. Report to Stakeholders. Traditional Business Information.

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Lesson 4 Performance Methodology: The Balanced Scorecard

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  1. Lesson 4Performance Methodology: The Balanced Scorecard

  2. At its Simplest - Performance Management Actions Set Goals/ Objectives Plan Initiatives Implement Actions Make Improvements Analyze Results Against Expectations Report to Stakeholders

  3. Traditional Business Information • Traditional financial measures tell the story of past events (lagging indicators) • Financially-based measures tend to the focus of on the compliance purpose of measurement, • Financial measures provided only limited insightful information for: • guiding and evaluating whether organizations are able to sustain their performance into the future; • Identifying opportunities to create future value for their customers and stakeholders, and • developing effective capabilities to sustain future performance aspirations

  4. What is a Balanced Scorecard? A toolthat 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.

  5. Balanced Scorecard Framework • Translate a Strategy Into Operational Terms • Ensure Clarity of the Strategy Across the Organization • Communicate Through Measurement • Create Consensus and Teamwork Through the Process of Developing a Scorecard

  6. Kaplan and Norton’s Balanced Scorecard for Industry Financial Mission Vision Strategy Internal Business Processes Customer Learning and Growth

  7. Kaplan and Norton’s Balanced Scorecard for Industry Financial To succeed financially, how should we appear to our shareholders? Mission Vision Strategy Internal Processes To satisfy shareholders and customers, what business processes must we excel at? Customers To achieve our vision, how should we appear to our customers? Learning and Growth To achieve our vision, how will we sustain our ability to change and improve?

  8. Asking the Right Questions Financial Are we meeting the expectations of our Shareholders? Mission Vision Strategy Internal Processes Are we doing the right things, and doing things right? Customers Are we delighting (or at least satisfying) our Customers? Learning and Growth Are we prepared for the future?

  9. “Score-Carding” the Perspectives Financial Objectives……………… Measures………………… Targets…………………… Initiatives………………. Mission Vision Strategy Customers Objectives……………….. Measures………………….. Targets…………………….. Initiatives…………………. Internal Processes Objectives……………… Measures………………… Targets…………………… Initiatives……………… Learning and Growth Objectives……………… Measures………………… Targets…………………… Initiatives………………

  10. Linkage among the Scorecard Perspectives Profitability Revenue ROI Financial Satisfaction Relationship Market Share Customers Quality Efficiency Innovation Internal Processes Competencies Technology Culture Learning and Growth

  11. The Balanced Scorecard for Government Stakeholder (Mission) Customers Internal Processes Learning and Growth Resources and Capabilities

  12. Steps for Building a Balanced Scorecard 4 Scorecard Areas 1. Customer Perspective: Differentiate your organization from competitors. 2. Internal Process perspective: Identify operational, customer-relationship, and innovation processes to support your customer and financial goals. 3. Learning and Growth perspective: Define the skills, technologies, and corporate culture needed to support your strategy. 4. Resource/Capabilities/Financial Perspective: Balance revenue growth and production improvement.

  13. Steps for Building a Balanced Scorecard (cont.) The KEY steps to build Balanced Scorecard are: Step 1: Clarify the mission and vision

  14. Steps for Building a Balanced Scorecard (cont.) Step 2: Specify at least one goal to accomplish mission and realize vision Then, create objectives for accomplishing the goal in each one of the four scorecard perspectives

  15. Steps for Building a Balanced Scorecard (cont.) Step 3: Define performance measurements to measure the objectives

  16. 3 Principles of Performance Measurement Principle 1: Make Measurement Simple • Easy to understand - by everyone (well-defined) • Easy to collect – data accessible • Timely – hourly, daily or weekly, monthly • Visible – posted on the wall • Informative – no interpretation required Principle 2: Make Measurement Relevant • Linked to organizational strategy – encourage actions that will result in achieving strategy • Linked to the customers and their expectations Principle 3: Measure Outcomes • Intended Strategic Results/Benefits to the Customer • Predictors of the future

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