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Balanced Scorecard

 

Contents

1. What is Balanced Scorecard?

  • An analysis technique, developed by Robert Kaplan and David Norton, designed to translate an organization's mission statement and overall business strategy into specific, quantifiable goals and to monitor the organization's performance in terms of achieving these goals.

  • It links performance measures in four, balanced perspectives - Financial, Customer, Internal Process, and Employee Learning and Growth.

  • BSC acts as a measurement system, strategic management system, and communication tool.

  • When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise

  • The Balanced Scorecard process allows an organization to ALIGN and FOCUS all its resources on its strategy

  • In their 2001 book The Strategy-Focused Organization, Kaplan and Norton transformed their Balanced Scorecard, in 1992 introduced in the Harvard Business Review as a performance measurement system, to a strategic management system. A lot of that transformation was done in introducing the so called Strategy Map.

  • A successful Balanced Scorecard program is not a “metrics” project, it’s a “transformation” process.

http://www.oranz.co.uk/glossary_text.htm

http://www.consultacton.com/01GetReady/glossary.htm

http://www.balancedscorecard.biz/Glossary.html

http://www.valuebasedmanagement.net/methods_strategy_maps_strategic_communication.html

 

 

BSC links Vision and Strategy to Employees’ Everyday Actions

 

  • It is a diagram that describes how an organization creates value by connecting strategic objectives in explicit cause-and-effect relationship with each other in the four BSC objectives (financial, customer, processes, learning and growth).

  • Strategy Maps are a strategic part of the Balanced Scorecard framework to describe strategies for value creation.

  • All of the information is contained on one page; this enables relatively easy strategic communication.

What are the main principles behind Strategy Maps?

  1. Strategy balances contradictory forces.

  2. Strategy is based on a differentiated customer value proposition.

  3. Value is created through internal business processes.

  4. Strategy consists of simultaneous, complementary themes.

  5. Strategic alignment determines the value of intangible assets.

Need for understanding cause & effect relationships

 

Strategy Maps – The Complete Representation of How the Organization Creates Value

 

The internal-business-process value chain perspective.

a. Translate Strategy

  • Mission / Vision

  • Strategy Maps

  • Balanced Scorecard

  • Targets

  • Initiatives

b. Organization Alignment

  • Corporate

  • Corporate - SBU

  • SBU - Shared Services

c.  Creating a Climate to Support Strategic Change (Everyone’s Job )

  • Strategic Awareness

    Insure that each individual has sufficient understanding of the strategy (You can’t execute what you don’t understand)

  • Goal Alignment

    Insure that each individual knows where they fit into the overall game plan

  • Linked Incentives

    Reinforce desired behavior and increase intensity of awareness

d. Making Strategy a Continual Process

  • Integrate Strategy with Planning and Budgeting

    Establish stretch targets; Select initiatives, Align operational improvement programs (TQM, Six Sigma, Activity Based Management); Allocate resources to projects

  • Introduce the New Reporting System

    Develop systems for data collection, analysis, and reporting

  • Conduct the New Management Meeting

    The Leader Stimulates a Process of Strategic Learning:  Open discussion of performance shortfalls; team problem-solving; adapting and learning

e. A Strategy-Focused Leadership and Management

  • Mobilize

  • Create case for change

  • qqDevelop vision and strategy q

  • qExecutive team aligned

  • q qCreate accountability

  • Translate

  • Refresh strategy

  • Create strategy map

  • Create top-level scorecards

  • Set targets / rationalize initiatives

  • Align

  • qCorporate / SBU cascade

  • Corporate / SBU / support unit cascade

  • External linkages (customers / suppliers)

  • Motivate

  • qCommunicate to / educate workforce q

  • qAlign personal objectives

    q

  • qAlign personal development

    q

  • qAlign incentives

  • Govern

  • qMonthly/Quarterly strategic reviews

    q

  • qDevelop info system

    q

  • qLink BSC to planning / budgeting process

    q

  • qLink BSC to operational mgmt.

    q

  • qLearning/ Adapting

Organization Alignment

 

 

Creating Shared Service Unit Linkages


 

Linking the HR Organization to Enterprise Strategy