Balanced Scorecard (BSC) by NITIN ROHILLA Head (IT-SAP) NORTH DELHI POWER LIMITED

1. Balanced Scorecard (BSC)byNITIN ROHILLAHead (IT-SAP)NORTH DELHI POWER LIMITED

2. Outline of Presentation • Background of BSC • Origin of BSC • What is BSC? • Components of BSC – Perspectives, Objectives, Measures, Targets, Initiatives etc • NDPL BSC Scenario – Vision, Strategies, BSCs • An example - IT BSC

3. Background • Organizational Performance Measurement • Organizational Strategy Management

4. Background Shortcomings of Traditional Performance Measurement System • Financial measures are not relevant to many levels in the organization • The reports sometimes stimulate actions that have a positive impact on the short term results, but a negative effect on the long term • Sacrifice long term thinking

5. Barriers to Strategy Execution - Robert S. Kaplan and David P. Norton

6. A Balanced Approach Financial statements will remain an important tool for organizations since they ultimately determine whether improvements in customer satisfaction, quality, on-time delivery, and innovation are leading to improved financial performance and wealth creation for shareholders. What we need is a method of balancing the accuracy and integrity of our financial measures with the drivers of future financial performance of the organization.

7. Origin of Balanced Scorecard • Developed in early 1990s by • Dr Robert Kaplan (accounting professor at Harvard university) • David Norton (a consultant) As a result of 1 year research project with 12 companies

8. Innovation of BSC "The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation.“ - Kaplan and Norton

9. What is BSC ?

10. BSC BSC = Strategy + Operations + Change • Strategy = Doing the right things • Operations = Doing things right • Change = Doing things differently SUCCESS = Effective, Well Executed Strategy + Efficient Operations + Meaningful Change

11. Strategy Management with BSC Desired state Differentiating activities What must be done well to implement strategies How strategic success is measured Mission Vision Strategies / Goals Objectives Measures

12. BSC – Measures four Perspectives

13. BSC – Financial Perspectives • What financial steps are necessary to ensure the execution of our strategy/goals? • Are the company’s strategy, implementation and execution are contributing to overall improvement ? • Are we meeting operational and financial targets?

14. BSC – Internal Process Perspective • What critical processes must we excel at to satisfy our customers/stakeholders? • What must be done internally to meet customer expectations? • Cluster for internal process perspectives are • Operations management • Customer management • Innovation • Regulatory and social etc.

15. BSC – Customer Perspectives • Who are our target customers • How do our customers see us? • How do customers rate our performance? • It measures • Value proposition (Time, quality, performance, service and cost) • Outcome of value proposition (Customer satisfaction, market share)

16. BSC – Learning, Innovation and Growth Perspective • Focus on intangible assets – skills, capabilities • How can we continue to improve? • What capabilities and tools do our employees need to execute our strategy/goals? • Clusters are • Human capital • Information capital • Organization capital • Includes • Employee training • Corporate self improvement

17. BSC - Objectives • Derived from strategy • Describe the activities that we must perform well to successfully implement strategy • Grouped in four perspectives • Start with an action verb: increase, develop, improve, lower, achieve etc. • For example - Improve Customer Service.

18. BSC - Measures • For each objective, a measure is assigned • Measurement provides feedback on meeting the strategic objective

19. BSC – Measure Target • Once measures are established, set a target for each measure • Targets put focus on the strategy, expressing the specifics of the strategy • Targets push the organization to a required level of performance • When an organization hits its targets, then it has successfully implemented its strategy

20. Strategic Initiatives • Special project initiated in order to achieve the objective • For example – • improving customer service may require a new customer management system

21. Building the BSC • Begin with strategic plan – what things are critical to future success? • Focus on customers – what values will we add to our customers • Define the processes – how will we deliver these services to our customers • Build the organization – what capabilities must we put in place

22. Benefits of using BSC • Focusing the whole organization on the few key things needed to create breakthrough performance. • Helping to integrate various corporate programs, such as quality, re-engineering, and customer service initiatives. • Breaking down strategic measures to local levels so that unit managers, operators, and employees can see what's required at their level to roll into excellent performance overall. - Kaplan and Norton

23. NDPL BSC SCENARIO

24. Management by Facts Corporate Balanced Scorecard O P M S Mapping the Objectives thru Funct. Scorecards Comm. HR Ops. TS&P Finance Admin. IT D P M S Mapping the Initiatives thro Perf. Scorecards 9 Grps. 3 Grps. Dst.,Zn TS&P 5 Grps. 6 Grps. 5 Grp. I P M S JD/KRA JD/KRA. JD/KRA. JD/KRA. JD/KRA. JD/KRA. JD/KRA. 24

25. NDPL Strategies • S1 – Maintain and grow core regulated electricity business in NDPL licensed area • S2 - Secure low cost power generation • S3 – Provide services not envisaged in the power distribution core business within or outside NDPL area • S4 – Deploy new electricity distribution elsewhere

26. NDPL BSCs • Corporate BSC • Administration BSC • Commercial BSC • Finance BSC • HR BSC • IT BSC • Operations BSC

27. BSC Implementation Tool at NDPL • SAP SEM (Strategic Enterprise Management Module) – development tool • SAP Enterprise Portal – user interface

28. Awards & Recognitions.. to name a few NDPL Wins Balanced Scorecard Hall of Fame Award – 2008 28

29. Thanks