Key balanced scorecard terms
The scorecard vision is the long-term status the organisation is attempting to achieve – “Where are we going?”, “How do we see ourselves in the future?”. It is stated so that owners and employees can share and be guided by the organisation’s view of its future.
To be recognised as a world leader in …
To have graduates with excellent employment opportunities
To have an international reputation for the quality of its …
To be the country’s leader in …
To be the most successful organisation in the business of …
To become a leader in the niche market of … by developing leading edge technology.
To be the preferred provider of … to ….
Whereas the vision is the long-term outlook of the organisation, the mission is a statement of what the organisation is doing over the next 3 to 5 years – “What are we here to do?”
To deliver quality products and services to customers on time profitability.
To provide education that develops people for employment.
To supply … to ….
A balanced scorecard strategy sets out a plan to realize the vision. For example – if the business vision is to be the market leader one immediate plan of attack would be to increase turnover.
The strategies of the organisation are usually decided upon by a small group. Ask questions like:
How can the organisation achieve a competitive advantage?
What should we be doing to achieve our vision?
How can we compete more effectively?
Should we have a strategy to improve (whatever)?
Should we develop new products or services”, “What can we do to improve (whatever)?
Our current activities and capabilities deliver the current financial and customer outcomes; to improve the outcomes, what internal processes can be changed and what innovations should we introduce to improve our capabilities and skills?.
The perspectives are used to assist in formulating useful measures of performance. While financial measurements are important, they should not be used as the sole criterion of success. Customer satisfaction should always be taken into account. Employee abilities may need to be improved, processes improved and innovations implemented. Internal processes may need investment.
Does the strategy deliver the required financial result? What do the owners expect? Measurements of success include profitability, return on capital employed, economic value added, growth…
What outcomes will the strategy have for the customers? Measurements include new customers obtained, existing ones retained, customer satisfaction. Without customers there is no business. What will the strategy deliver for them?
Process perspective (or operations)
The internal processes or operations of the organisation are often critical to the success of a strategy. The organisation should do these well, improve them, work on them. Whereas the financial and customer perspective are outcomes, the process perspective is a driver. What happens here determines the outcomes achieved. What new processes must be done to achieve the outcomes desired?
(includes learning, growth; renewal and development)
What new skills are needed, or need improvement, to achieve the long-term goals. This perspective requires thinking of people skills, system capabilities (what other systems are required to achieve the strategies – IT?). What must the organisation do to ensure its long-term success? What can it do to sustain the processes so that financial outcomes continue to be achieved in the future?
The strategic objectives define what will be done to achieve a strategy. These objectives take into account each of the perspectives.
Ensure the project is EVA positive
Achieve desired return on capital and profitability
Achieve cost savings of…
Increase stock turnover from 4 to 6
Minimise re-work to reduce costs by…
All new customers must be EVA positive
Ensure that all capital investment does not reduce the return on capital employed
Increase the number of high quality customers over the next 12 months
Add value to existing clients
Deliver right the first time
Deliver on time at the customers’ designated location
Be the supplier the client considers first
Be the preferred organisation for delivering customer support
Identify existing markets at risk
Provide customers with value for money.
Improve availability of raw materials
Reduce turnaround time
Deliveries on time
Minimise the number of product rejects and rework
Product is ready when required
Customise products to customers requirements
Maintain software at latest revision level
Review of departments IT needs
Improve system availability
Appoint a new sales consultant
Implement staff training program to improve the production process
Make staff aware of the importance of customers
Respond quickly to customer complaints and returns
(learning and growth, renewal and development)
Collect information on acquisition opportunities
Identify new product opportunities
Identify new technology advantages to our process
Find suitable production planning software
Obtain bench marking data for the industry
Develop a new technique
Develop expertise in bar-coding
Find and implement new technology to reduce expenses
Maintain skill level of IT staff
Provide a caring and supportive work environment for employees
Develop a market intelligence system
Develop and assess the implementation of an executive health program
Document the vision, mission and strategic plan and communicate with staff and stakeholders
Identify joint venture partners, strategic alliances or acquisitions that will benefit the organisation
Identify and evaluate existing research
Training on the effective use of ABC for all managers
Analyse customer database to find opportunities
Be re-active to community needs.
Weight is used to designate the relative importance of items. A weight of 1.00 is neutral. If an item has a weighting of 2.00 it’s rating will be counted as twice as important as an item that has a rating of 1.00. It is used to determine the average rating of the next higher level. For example to assess the overall rating of an objective: the ratings of the measures for that objective will be averaged, taking account of any relative weightings that have been entered.
In the software all actions are associated with a measure. A measure is used to determine the success of an objective. If problematic, the measure that is relevant is looked at, and actions are then decided upon.
Examples of processes are:
Prepare management reports
Strategic objectives can be assigned to a process. The performance of the process can then be reported.
Salience is the “importance” of a process on a scale of 1 (not important) to 100 (very important). The Salience graph available under Processes plots the process cost versus its salience. When one is looking at re-engineering opportunities, those processes with high cost and low salience are often good candidates to consider first. High cost low salience items are usually quickly identified from the Salience graph.
This is a grouping that the user can implement. For example, it could be a workgroup or region. Results can be analysed by person, department, process or sector.
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