The Balanced Scorecard

1. The Balanced Scorecard Presented To MM PROGRAM The Siliwangi University Post Graduate Programs

2. The Balanced Scorecard What is it? Definition: The Balanced Scorecard is a management tool that provides stakeholders with a comprehensive measure of how the organization is progressing towards the achievement of its strategic goals.

3. The Balanced Scorecard What is it? The Balanced Scorecard: • Balances financial and non-financial measures • Balances short and long-term measures • Balances performance drivers (leading indicators) with outcome measures (lagging indicators) • Should contain just enough data to give a complete picture of organizational performance… and no more! • Leads to strategic focus and organizational alignment.

4. The Balanced Scorecard Why do it? • To achieve strategic objectives. • To provide quality with fewer resources. • To eliminate non-value added efforts. • To align customer priorities and expectations with the customer. • To track progress. • To evaluate process changes. • To continually improve. • To increase accountability.

5. The Balanced Scorecard Why do it? It works! In just 90 days, Sandia Labs was able to redirect $190,000 in savings by dropping initiatives that didn’t fit their overall strategy. “The BSC has forced our management team to focus beyond financial measures… too often in the past we would get sucked into short-term thinking.” “The BSC dramatically improved our data analysis… we don’t overreact nearly as much as we used to.”

6. The Strategy Focused Organization Mission – What we do Vision – What we aspire to be Strategies – How we accomplish our goals Measures – Indicators of our progress

7. Environmental Scan Strengths Weaknesses Opportunities Threats A Model for Strategic Planning Values Mission & Vision Strategic Issues Strategic Priorities Objectives, Initiatives, and Evaluation

8. The Strategy Focused Organization • The Five Principles • Translate the strategy to operational terms. • Align the organization to the strategy. Source: The Strategy Focused Organization, Norton & Kaplan

9. The Strategy Focused Organization • The Five Principles (cont.) • Make strategy everyone’s job. • Make strategy a continual process. • Mobilize change through executive leadership Source: The Strategy Focused Organization, Norton & Kaplan

10. The Balanced Scorecard and The Big Picture • Activity Based Costing • Economic Value Added • Forecasting • Benchmarking • Market Research • Best Practices • Six Sigma • Statistical Process Control • Reengineering • ISO 9000 • Total Quality Management • Empowerment • Learning Organization • Self-Directed Work Teams • Change Management

11. Strategic Direction Create Environment For Change Strategic Performance Management System Communicate Strategies Define Objectives Implement BSC Balanced Scorecard Measure Performance Improve Processes Evaluate and Adjust Continuous Improvement Redefine Initiatives Linking it all together….

12. THE BALANCED SCORECARD FINANCIAL/REGULATORY To satisfy our constituents, what financial & regulatory objectives must we accomplish? CUSTOMER To achieve our vision, what customer needs must we serve? INTERNAL To satisfy our customers and stakeholders, in which business processes must we excel? LEARNING & GROWTH To achieve our goals, how must we learn, communicate and grow?

13. Customer Perspective To achieve our vision, what customer needs must we serve? Possible Performance Measures • Customer Satisfaction (Average) • Satisfaction Gap Analysis (Satisfaction vs. • Level of Importance) • Satisfaction Distribution (% of each area scored)

14. Financial / Regulatory Perspective To satisfy our constituents, what financial and regulatory objectives must we accomplish? Possible Performance Measures • Cost / Unit • Unfunded Requirements or Projects • Cost of Service • Budget Projections and Targets

15. Internal Perspective To satisfy our customers, in which business processes must we excel? Possible Performance Measures • Cycle Time • Completion Rate • Workload and Employee Utilization • Transactions per employee • Errors or Rework

16. Learning and Growth To achieve our goals and accomplish core activities, how must we learn, communicate and work together? Possible Performance Measures • Employee Satisfaction • Retention and Turnover • Training Hours and Resources • Technology Investment

17. Why Measure? • To determine how effectively and efficiently the process or service satisfies the customer. • To identify improvement opportunities. • To make decisions based on FACT and DATA

18. Measurements Should: • Translate customer expectations into goals. • Evaluate the quality of processes. • Track our improvement. • Focus our efforts on our customers. • Support our strategies.

19. Targets “If you don’t know where you’re going, you’re probably not gonna get there.” Forrest Gump

20. Link it together…. DIVISION CUSTOMER  FINANCIAL INTERNAL PROCESS  LEARNING & GROWTH Hum. Rscrs. Univ. Police Facilities DEPT. Police Parking FUNCTION Measure: Satisfaction Index Current: 3.0 Target: 4.0

21. The Balanced Scorecard as a Management System BSC reviewed regularly to enhance operational decision-making • Success of initiatives assessed based on DATA… not opinions • Leading indicators evaluated to confirm accuracy of assumptions

22. The Balanced Scorecard as a Management System The BSC is a “Living Document” that requires regular revision of objectives, measures and initiatives: • How are we doing? • Are we measuring the right things? • What initiatives do we need to get us where we want to go? • Have our organizational goals changed?

23. Advantages to this Approach • Simple to Use and Understand • Based on Vision and Strategy • Multidimensional • Quantitative and Qualitative Measures • Current and Future • Provides Measurement of and Method for Improving our Services • Ties QI initiatives together • Serves as a Communication Tool

24. Suggested Readings Kaplan, Robert and Norton, Edward. The Balanced Scorecard. Harvard Business Publishing, 1998 Kaplan, Robert and Norton, Edward. The Strategy-Focused Organization. Harvard Business Publishing, 2001 Buckingham, Marcus and Coffman, Curt. First, Break All the Rules The Gallup Organization, 1999 Brown, Mark. Keeping Score. Mark Graham Brown, 1996 http://www.afd.calpoly.edu/afd/Strategic_plan/ http://cqi.csusb.edu/

25. Thank You Iman Pirman Hidayat Siliwangi University www.imanph.wordpress.com