The Balanced Scorecard

Presented To

Alaoula Board Member

Presented By

Adnan Alshiha

Workshop Outline
Introduction to the Balanced Scorecard
What is it?
Why do it?
Brayer Break
Balanced Scorecard Fundamentals
The Four Perspectives
Measures, Targets and Initiatives
Roles and Responsibilities

Business Strategy

1-3

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.

Balanced Scorecard History

Measurement
and
Reporting

Enterprise-wide
Strategic
Management

Alignment and
Communication

1992

2000

1996

Articles in Harvard Business Review:

Acceptance and Acclaim:

The Balanced Scorecard

Measures that Drive Performance
January - February 1992

The Balanced

Putting the Balanced Scorecard to

Work September - October 1993

Selected by Harvard

Using the Balanced Scorecard as

a Strategic Management System
January - February 1996

Scorecard is translated
into 18 languages

1996

Business Review as
one of the most
important management
practices of the past 75
years.

2000

The Strategy-FocusedOrganization
The Balanced Scorecard is the main

management tool that has been used by

successful organizations in various fields
Private and Public Sector
For- Profit and Not For- Profit
Different industries
These successful organizations placed their
strategies at the centre of their operations.
Their strategies, guided Their day- to- day
activities
In this workshop, we will learn more about
strategy- focused organizations, and how to
develop Balanced Scorecards

Organizations Often Have A Gap

Between Strategy and Action
Strategy Is a Step In a Continuum
MISSION
Why we exist
VALUES
Whats important to us
VISION
What we want to be
STRATEGY
Our game plan

STRATEGIC OUTCOMES
Satisfied
SHAREHOLDERS

Delighted
CUSTOMERS

Efficient and Effective

PROCESSES

Motivated & Prepared

WORKFORCE

The Balanced Scorecard Is A

Bridge To Close That Gap
Strategy Is a Step In a Continuum
MISSION
Why we exist
VALUES
Whats important to us
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SCORECARD
Implementation & Focus
STRATEGIC INITIATIVES
What we need to do
PERSONAL OBJECTIVES
What I need to do

STRATEGIC OUTCOMES
Satisfied
SHAREHOLDERS

Delighted
CUSTOMERS

Efficient and Effective

PROCESSES

Motivated & Prepared

WORKFORCE

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.

The Balanced Scorecard Provides a Four

Perspective Framework to Translate Strategy Into
Operational Terms
The Vision
Financial Perspective

Measurement is the
language that gives
clarity to vague
concepts
Measurement is used
to communicate, not
simply to control

If we succeed,
how will we look
to our
shareholders?

Profitability
Growth
Shareholder
Value

Customer Perspective
To achieve our
vision, what
customer needs
must we serve?

Price
Service
Quality

Internal Perspective
To satisfy our
Cycle Time
customers and
Productivity
shareholders, at which Cost
business processes
must we excel?

Learning and Growth

To excel in our
processes, what
must our
organization
learn?

New Skills
Continuous
Improvement
Intellectual
Assets

A Good Balanced Scorecard Strategy

Map Tells the Story of Your Strategy
The Revenue Growth Strategy
Improve stability by broadening the sources of
revenue from current customers

The Productivity Strategy

Improve operating efficiency by shifting customers to
more cost-effective channels of distribution

Improve
Returns

Financial
Perspective

Improve
Operating
Efficiency

Broaden
Revenue
Mix

Increase
Customer
Confidence in
Our Financial
Advice

Increase
Customer
Satisfaction
Through Superior
Execution

Customer
Perspective

Internal
Perspective
Understand
Customer
Segments

Develop
New
Products

Cross-Sell
the Product
Line

Shift to
Appropriate
Channel

Increase
Employee
Productivity

Develop
Strategic
Skills

Access to
Strategic
Information

Minimize
Problems

Provide
Rapid
Response

Learning
Perspective
Align
Personal
Goals

A Good Balanced Scorecard Tells the Story of

Your Strategy Through A Set of Linked Cause
and Effect Hypotheses

Learning

Internal

Customer

Financial

Strategic
Objectives

Strategic Measurements
(Lag Indicators)

(Lead Indicators)

F1 - Improve Returns
F2 - Broaden Revenue Mix

Return on Investment
Revenue Growth

F3 - Reduce Cost Structure

Deposit Service Cost Change

C1 - Increase Customer
Satisfaction With Our
Products & People

Share of Segment

Depth of Relation

C2 - Increase Satisfaction After

the Sale

Customer Retention

Satisfaction Survey

I1 - Understand Our Customers

I2 - Create Innovative Products

New Product Revenue

Product Development Cycle

Cross-Sell Ratio

Hours with Customers

I3 - Cross-Sell Products
I4 - Shift Customers to CostEffective Channels
I5 - Minimize Operational
Problems
I6 - Responsive Service

L1 - Develop Strategic Skills

L2 - Provide Strategic Info
L3 - Align Personal Goals

Revenue Mix

Channel Mix Change

Service Error Rate
Request Fulfillment Time

Employee Satisfaction
Revenue per Employee

Strategic Job Coverage Ratio

Strategic Info Availability Ratio
Personal Goals Alignment (%)

Theme Example from Southwest Airlines

Balanced Scorecard
Strategy Map: Diagram of the
cause-and-effect relationships
between strategic objectives
Strategic Theme:
Operating Efficiency
Financial

Profitability

Lower Costs

Increase
Revenue

Statement of
what strategy
must achieve
and whats
critical to its
success

How success
in achieving
the strategy
will be
measured and
tracked

Objectives

Measurement

Target

On Ground Time
On-Time

30 Minutes
90%

The level of
performance
or rate of
improvement
needed

Key action
programs
required to
achieve
objectives

Customer
Flight
is on time

Internal
Fast ground
turnaround
Learning
Ground crew
alignment

Lowest
prices

Fast ground
turnaround

Departure

Initiative

Cycle time

optimization

The Balanced Scorecard Supports a Complete Strategic

Management System by Linking Long Term Strategy and
Measures to More Tactical Planning & Budgeting
Longer Term (3-5 year) View

Strategic

Objectives

Learning

Internal

Customer Financial

Themes/ Goals

1. Strengthen innovation
2. Improve customer satisfaction
3. Assure consistent high quality
4. Provide operational excellence

Vision

Serve the needs of patients excellently

ABC Hospital System will provide excellent

care in our selected specialty areas while
maintaining margin and growing share

Mission

Shorter Term (Annual) View

Grow
revenue
from patient
care

Meet access
expectations

Assure
optimum
patient mix

Promote
ABC Culture
Model

% patient
care revenue
growth

02 xx%

04 xx%

3rd available
appointment
(% met)
% patient mix

Employee
Satisfaction
Survey

Initiatives

Targets

Measures

Milestones

Accountable

Meet monthly
target

Resource Alloc.

03 xx%

02 xx%

04 xx%

Access
project

03 xx%

02 = 39%

03 = 40%

04 = 41%

02 xx%

04 xx%

03 xx%

Mix Margins
Project

Complete by
2003

Evaluate
survey
response

Deadline
met

Mkg. Team

$ xxxx

Dept. Chairs

$ xxxx

HR
Committee

$ xxxx

Tactical

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.

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 didnt 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 dont overreact
nearly as much as we used to.

Execution of Strategy Has

Become the Corporate
Challenge
of
Our
Times!
Strategy has never been more important
BusinessWeek
Less than 10% of strategies effectively formulated are effectively
executed
FortuneMagazine
The problem is that our ages fascination with strategy and vision
feeds the mistaken belief that developing the right strategy will
enable a company to rocket past competitors. In reality, strategy is
less than half the battle. .. In the majority of cases we estimate
70% the real problem isnt [bad strategy]. Its bad execution.
WhyCEOsFail
RamCharanandGeoffreyColvin
Fortune(6/21/99)

The Results are Widespread

CIGNA Property & Casualty
1993
1998

$275 loss
Top Quartile
$3b spin-off

Brown & Root Engineering (Rockwater)

1993
1996

Chemical Bank
1993
1998

Profits

X
20X

ATT Canada

Losing money
# 1 in Niche (growth & profits)

1995
1998
1999

$300M loss
Customer base doubles
$7b spin-off

Saint Marys/ Duluth Clinic Health System

Southern Citrus

Measure
Improvement
Operating
$18M since BSC
Days in AR
Decrease 16 days
Margin
implementation
Overall
15%
Hospital
Point
Duke Childrens Hospital
Satisfaction
Measure
% Improvement
Operating
25
Family
11
Margin
Length of
Satisfaction
25
Readmission 63
Stay
Rate

1995

Shipments on Spec
On Time Delivery
Rework
Absenteeism
Employee Turnover
Cost per Pound ()

70%
89%
6%
10%
100
28.8

Mobil US Marketing & Refining

Competitive Rank (out of 7,profit)

1993
1995
1996
1997
1998

#6
#1
#1
#1
#1

1998

97%
98%
2%
1%
31
18.9

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

..the question..?

What is our strategy?

Environmental Scan
Strengths

A Model
for
Strategi
c
Planning

Opportunities

Weaknesses
Threats

Values

Mission
&
Vision

Strategic Issues
Strategic Priorities
Objectives, Initiatives, and Evaluation

Business Strategy

Business Strategy

Corporate Culture

Corporate Culture
The beliefs and values shared by people
who work in an organisation
How people behave with each other
How people behave with customers/clients
How people view their relationship with
stakeholders
Peoples responses to energy use, community
involvement, absence, work ethic, etc.
How the organisation behaves to its
employees training, professional
development, etc.

Corporate Culture
May be driven by:
Vision where the organisation
wants to go in the future
Mission Statement summary
of the beliefs of the organisation and
where it is now

Corporate Culture
May be reflected in:
Attitude and behaviour of the leadership
Attitude to the role of individuals in the
workplace open plan offices, team based
working, etc.
Logo of the organisation
The image it presents to the outside world
Its attitude to change

Corporate Culture
What corporate
culture do you think
the following
businesses have
managed to develop?

Virgin
The
McDonalds
Nike
Body
Group
Shop
Copyright: alexbol
Joshua2150,
fadaquiqa,
alexallied
http://www.sxc.hu
http://www/sxc.hu

Strategic Planning

Strategic Planning
First Stage of Strategic
Planning may involve:
Futures Thinking

Thinking about what the

business might need to
do 1020 years ahead

Strategic Intents

Thinking about key

strategic themes
that will inform
decision making

The thicker the planning

document, the more useless
it will be

(Brent Davies: 1999)

Taking time to think and reflect

may be more important than many
businesses allow time for!
Copyright: Intuitives, http://www.sxc.hu

Strategic Planning
The Vision
Communicating to all staff where the
organisation is going and where
it intends to be in the future
Allows the firm to set goals

Aims and Objectives:

Aims long term target
Objectives the way in which you are going
to achieve the aim

Strategic Planning
Once the direction is identified:
Analyse position
Develop and introduce strategy
Evaluate:
Evaluation is constant and the results of
the evaluation feed back
into the vision

Analysis

SWOT
Strengths identifying existing
organisational strengths
Weaknesses identifying existing
organisational weaknesses
Opportunities what market opportunities
might there be
for the organisation to exploit?
Threats where might the threats
to the future success come from?

PEST
Political: local, national and international political
developments how will they affect the
organisation and in what way/s?
Economic: what are the main economic issues
both nationally and internationally that might
affect the organisation?
Social: what are the developing social trends
that may impact on how the organisation
operates and what will they mean for future
planning?
Technological: changing technology can impact
on competitive advantage very quickly!

PEST
Examples:
Growth of China and India as manufacturing centres
Concern over treatment of workers and the
environment in less developed countries who may be
suppliers
The future direction of the interest rate, consumer
spending, etc.
The changing age structure of the population
The popularity of fads like the Atkins Diet
The move towards greater political regulation of
business
The effect of more bureaucracy in the labour market

Five-Forces

Developed by Michael Porter: forces that shape and influence

the industry or market the organisation operates in.
Strength of Barriers to Entry - how easy is it
for new rivals to enter the industry?
Extent of rivalry between firms how competitive
is the existing market?
Supplier power the greater the power, the less control
the organisation has on the supply of its inputs.
Buyer power how much power do customers
in the industry have?
Threat from substitutes what alternative products
and services are there and what is the extent
of the threat they pose?

Required Inputs
Changing strategy will impact on the resources
needed to carry out the strategy:
Specifically the impact on:
Land opportunities for acquiring land for
development green belt, brownfield sites,
planning regulations, etc.
Labour ease of obtaining the skilled and
unskilled labour required
Capital the type of capital and the cost of the
capital needed to fulfil the strategy

Evaluation

Evaluation
Data from sales,
profit, etc. used to
evaluate the
progress and
success of the
strategy and to
inform of changes
to the strategy in
the light of that data

Information from a wide variety of sources

can help to measure and inform the impact
and direction of the strategy.
Copyright: Mad7986, http://www.sxc.hu

Types of Strategy

Types of Strategy
Competitive Advantage something
which gives the organisation
some advantage over its rivals
Cost advantage A strategy to
seek out and secure a cost
advantage
of some kind - lower average
costs, lower labour costs, etc.

Types of Strategy
Market Dominance:
Achieved through:
Internal growth
Acquisitions mergers and takeovers

New product development:

to keep ahead of rivals and set the
pace

Contraction/Expansion
focus on what you are good at (core
competencies) or seek to expand
into a range of markets?

Types of Strategy
Price Leadership through
dominating the industry others
follow your price lead
Global seeking to expand
global operations
Reengineering thinking outside
the box looking at news ways of
doing things to leverage the
organisations performance

Types of Strategy
Internal business level strategies

Downsizing selling off unwanted parts of

the business similar
to contraction
Delayering flattening the management
structure, removing bureaucracy, speed up
decision making
Restructuring complete re-think
of the way the business is organised

The Strategy Focused

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

The Strategy Focused

Organization
The Five Principles (cont.)
3. Make strategy everyones job.
4. Make strategy a continual
process.
5. Mobilize change through
executive leadership
Source: The Strategy Focused Organization, Norton & Kaplan

The Balanced Scorecard

and The Big Picture

Strategic
Planning
Mission
and
Vision
Balanced
Scorecard

Activity Based Costing

Economic Value Added
Forecasting
Benchmarking
Market Research
Best Practices
Six Sigma
Statistical Process Contro
Reengineering
ISO 9000
Total Quality Managemen
Empowerment
Learning Organization
Self-Directed Work Teams
Change Management

Strategic
Strategic Direction
Create Environment
Performance
For Change
Management
Communicate Strategies
System
Define Objectives
Implement BSC

Balanced Scorecard
Measure Performance
Improve Processes

Linking it all together.

Evaluate and Adjust

Continuous Improvement
Redefine Initiatives

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?

Customer Perspective

To achieve our vision, what customer needs

must we serve?
Possible Performance Measures
o Customer Satisfaction (Average)
o Satisfaction Gap Analysis (Satisfaction vs.
Level of Importance)
o Satisfaction Distribution (% of each area scored)

Financial / Regulatory
Perspective
To satisfy our constituents, what financial
and
regulatory objectives must we accomplish?
Possible Performance Measures
o Cost / Unit

o Unfunded Requirements or Projects

o Cost of Service
o Budget Projections and Targets

Internal Perspective

To satisfy our customers, in which business

processes must we excel?
Possible Performance Measures
o Cycle Time
o Completion Rate
o Workload and Employee Utilization
o Transactions per employee
o Errors or Rework

Learning and Growth

To achieve our goals and accomplish core activities,

how must we learn, communicate and work
together?
Possible Performance Measures
o Employee Satisfaction
o Retention and Turnover
o Training Hours and Resources
o Technology Investment

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

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

Targets

If you dont know where youre going,

youre probably not gonna get
there.
Forrest Gump

Targets
Targets need to be set for all measures
Should have a solid basis
Give personnel something for which
to aim
If achieved will transform the
organization

Targets
Careful not to develop
measures/targets in
a fragmented approach:
i.e. Asking people to increase
customer satisfaction has to be
backed up with the knowledge,
tools, and means to achieve
that target.

Initiatives
Once measures and targets are
established, it is the responsibility of
management to determine HOW the
organization will achieve its goals.
Measures are used to determine the
effectiveness of strategic initiatives.

The Leadership Team

Develops the divisions vision,
strategy and goals
Develops organizational objectives
and targets
Provides leadership, endorsement
and vision for the project
Clears barriers to scorecard progress

The Core Team

Drafts the strategy map and
scorecard
Works with employees to develop
measures supporting strategic
objectives
Works with the Leadership Team to
plan and implement the Balanced
Scorecard in the FAS Division

FY1999 CORPORATE LEVEL BALANCED SCORECARD

Financial
Indicator

Adjusted
Discharges

Target

23,890

Customer

FY99
Final

23,592

Encounters 912,188 892,243

Indicator

Patient
Satisfaction
Employer
Satisfaction

Target

Choose key
focus areas
for
improvement
Complete
survey
development in CY
1999
Select
indicators
for
development plan
Complete
reporting
process and
inventory

Operational
Stat
-us

Indicator

Arranging
Care

CY

Cost per
Adjusted
Discharge

6,964

7,535

HEDIS
Indicators

Cost per
Encounter

215

252

Community
Service

Operating
Margin

2.0

1.3

Community Awareness

Complete
survey in
CY 1999

CY

Excess
Margin

3.8

3.3

Market
Share

Complete
baseline

Days Cash
on Hand

103.6

108.6

Days in
Accounts
Receivable
Return on
Investment

77.7

82.8

3.4

2.9

Providing
Care

Documenting
and
Tracking
Care
Innovation and
Program
Development

Target

People
Stat
-us

Determine outpatient
phone model,
conduct pilots

Determine outpatient
model for
registration &
scheduling

Indicator

Target

Technical
Stat
-us

Complete
communications
strategy

Complete
physician
survey

Determine model for

patient delivery
system for clinical
divisions

Complete system
strategy for
ambulatory surgery

Complete plan for

decentralized coding
and charge entry

Complete feasibility
study for a womens
health center

Complete plan for a

geriatrics program

Cultural
Development

Employee
Relations
Strategy

C = task completed; CY = Calendar Year 1999 task; M = task modified

Finance section: Target met; Target not met

Indicator

Target

Status

Implement
system-wide
governance
structure

Complete
external quality
report in CY
1999

CY

Complete
employee
survey

Meet or exceed
standards for
SMDC
accreditation

Complete
plan to
maintain
Catholicity
Accomplish pay
equity

Complete IT
strategic plan
in CY 1999

CY

Complete Y2K
compliance by
12/99

CY

Synchronize
employee
benefits

Medical
Education
& Research

Complete
report of
funded grants
and
publications

Facilities
Planning

Complete
Perkins & Will
plan

Quality
Improvement

Information
Technology

Finance and Administrative

Services

Strategy Map

FUNCTION

DEPT.

DIVISION

Link it together.

FINANCIAL

Hum. Rscrs.

Police

CUSTOMER

Univ. Police

INTERNAL
PROCESS

Facilities

Parking
Measure: Satisfaction Index
Current: 3.0
Target: 4.0

LEARNING &
GROWTH

The Strategy Map: Cause and

Effect Relationships

What will drive margins?

How?

Attract targeted patient

population through targeted
referring physicians who value
leading edge technology &
expertise

What will the internal focus be?

Managed growth in high margin

programs/service lines

Ensure clinical excellence

through leading edge programs
and techniques in focused
specialty areas
Align research priorities to
support leading programs and
stay out front in treatment
methods

Will our people be prepared to

do that?

Yes, with appropriate

technology
Yes, by recruiting critical
expertise

Financial
Implement
Managed
Growth

Maximize High
Margin
Opportunities

Customer

Strong Financial
Base

Specialty Care Patients

Referring Providers

Leading Edge
Technology

Internal
Develop
Leading
Edge
Programs/
Techniques

Leading Edge
Expertise
Continually
Develop
Clinical
Excellence
Align Research
Priorities

Learning & Growth

Implement
Technology
to Support
Processes
and Programs

Develop Critical
Staffing
Resource Plans

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

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?

Rapid Deployment Case Study: Major

Federal Organization
Need

Definition of Corporate strategy

Rapid roll-out and broad reach

Develop internal capabilities to sustain momentum

Approach

Develop Corporate Balanced Scorecard

Define template for rolling out BSC
Train subordinate units
Streamline project management
Quality checks
Online education

Benefits

Clear guidance from Corporate

Active involvement from client teams
Rapid deployment with minimal resources
Quality control

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

Thank You