EVALUATION of STRATEGY

BALANCED
SCORECARD
What Is a Balanced Scorecard?
A
Measurement
System?

A Management
System?

A Management
Philosophy?
• Robert Kaplan and David Norton first
publicized the balanced scorecard in a series
of journal articles and published this concept
in their book, The Balanced Scorecard.
• 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.
 The Balanced Scorecard Focuses on Factors
that Create Long-Term Value
• Traditional financial reports look backward
– Reflect only the past: spending incurred and revenues earned
– Do not measure creation or destruction of future economic value
• The Balanced Scorecard identifies the factors that create long-term economic
value in an organization, for example:
– Customer Focus: satisfy, retain and acquire customers in targeted segments
– Business Processes: deliver the value proposition to targeted customers
• innovative products and services
• high-quality, flexible, and responsive operating processes
• excellent post-sales support
Customers
– Organizational Learning & Growth:
• develop skilled, motivated employees;
Processes People
• provide access to strategic information
• align individuals and teams to business unit
objectives
 BSC provides 4 difft. Perspective on
performance measurment
• CUSTOMER PERSPECTIVE –
1. Developing new products
2. Providing on- time delivery
3. Choosing the right suppliers
4. Promoting customer partnership
• BUSINESS PROCESS PERSPECTIVE –
1. TECHNOLOGICAL CAPABILITIES
2. IMPROVING MANUFACTURING EXCELLENCE
3. INNOVATIVE DESIGNS IN PRODUCTIVITY
4. NEW PRODUCT DEVELOPMENT
• FINANCIAL PERSPECTIVE
1. INCREASE IN CASH FLOW
2. INCREASED MARKET SHARE & ROE
• LEARNING & GROWTH PERSPECTIVE
1. TECHNOLOGY LEADERSHIP
2. EMPLOYEE MOTIVATIION
3. KNOWLEDGE MANAGEMENT
4. INNOVATION & LEARNING
 BSC is management process involving 4
main step :
• Determining the vision of the organization
• Determining how the vision can be turned into
competitive advantage .
• Determining how the 4 perspectives- financial ,
customer, business process, learning growth
perspective – help improve the performance of an
organisation
• Determining how far the organisation has suceeded
 The Four Perspectives Apply to Mission Driven
As Well As Profit Driven Organizations

Profit
Profit Driven
Driven Mission
Mission Driven
Driven
• What must we do to satisfy our • What must we do to satisfy our
shareholders? FINANCIAL PERSPECTIVE financial contributors?

• What are our fiscal obligations?

• What do our customers expect CUSTOMER PERSPECTIVE
from us? • Who is our customer?
• What do our customers expect
from us?
• What internal processes must we INTERNAL PERSPECTIVE
excel at to satisfy our shareholder • What internal processes must we
and customer? excel at to satisfy our fiscal
obligations, our customers and
LEARNING & GROWTH the requirements of our mission?
• How must our people learn and PERSPECTIVE
develop skills to respond to these • How must our people learn and
and future challenges? develop skills to respond to these
and future challenges?
 Why are Companies Adopting a Balanced
• Change
Scorecard?
Formulate and communicate a
new strategy for a more The Revenue Growth Strategy

“Improve stability by broadening the sources of revenue from current

customers”

Improve
Returns
The Productivity Strategy

“Improve operating efficiency by shifting customers to more cost-

effective channels of distribution”

Improve
Financial
Perspective

competitive environment
Broaden Operating
Revenue Mix Efficiency

Increase Increase
Customer Customer Customer
Confidence in Our Satisfaction Through Perspective
Financial Advice Superior Execution

Internal
Perspective

Understand Develop New Cross-Sell the Shift to Provide

Minimize
Customer Products Product Line Appropriate Rapid
Problems
Segments Channel Response

Increase
Employee
Productivity Learning
Perspective

•Growth
Develop Access to Align
Strategic Strategic Personal
Skills Information Goals

Increase revenues, not just cut

costs and enhance productivity

• Implement
From the 10 to the 10,000.
Every employee implements
the new growth strategy in
their day-to-day operations
Six Sigma Process
• In the 1980s, Motorola brought Six Sigma into the
mainstream by using the methodology to create more
consistent quality in the company’s products, according
to “Six Sigma” .

• The Six Sigma methodology calls for bringing operations

to a “six sigma” level, which essentially means 3.4
defects for every one million opportunities. The goal is
to use continuous process improvement and refine
processes until they produce stable and predictable
results.
• Six Sigma is a data-driven methodology that
provides tools and techniques to define and
evaluate each step of a process.
• It provides methods to improve efficiencies in
a business structure, improve the quality of
the process and increase the bottom-line
profit.
There are two major methodologies used
within Six Sigma,
• DMAIC: The DMAIC method is used primarily for
improving existing business processes.
• Define the problem and the project goals
• Measure in detail the various aspects of the
current process
• Analyze data to, among other things, find the
root defects in a process
• Improve the process
• Control how the process is done in the future
DMADV: The DMADV method is typically used to create
new processes and new products or services .
• Define the project goals
• Measure critical components of the process and
the product capabilities
• Analyze the data and develop various designs for
the process, eventually picking the best one
• Design and test details of the process
• Verify the design by running simulations and a
pilot program, and then handing over the process
to the client
STRATEGIC CONTROL
• Strategic control is related to that aspect of strategic
management through which an organization ensures
whether it is achieving its objectives contemplated in the
strategic action.

• The purpose of strategic control is to identify whether the

organization should continue with its present strategy or
modify it in the light of changed circumstances.
• Operational control should assist the organization to be
both efficient and effective, and in this way help the
chosen strategy to work successfully
 There are 4 types of controls
• Premise Control: It defines the key assumptions and
keeps track of any change in them to assess its
impact on strategy and implementation. The goal is
to find if assumptions are still valid or not. It is
generally handled by corporate planning staff
considering the environment and organizational
factors
 Implementation control:
• When the strategy is chosen, it has to be implemented,
and that is a prerequisite to have an optimum number of
programs, plans, and projects.
• The entire purpose of implementation control is to
confirm and ascertain that these programs and projects
help the organization achieve its goals.
• If it is seen that the commitment of resources has a
predefined plan or a program is not getting as many
results as expected, then a matching revision should be
done. Therefore, implementation control is nothing but
strategic rethinking to avoid different wastes.
 Implementation control:
• Technical controls use technology.
• Management controls use administrative
or management methods.
• Operational controls are implemented by
people in day-to-day operations.
 Strategic Surveillance
Strategic surveillance is more generalized than the
premise and implementation controls, which are more
specific by nature.
Strategic surveillance aims to monitor a wide range of
events both outside and inside the organization.
They usually are the ones who threaten the strategy of
the company. Such strategic surveillance can be
performed by a broad-based and general monitoring
based on different selected information sources.
The objective is to uncover events that are likely to
affect the organizational strategy
 STRATEGIC ALERT CONTROL
• This is a special alert based on an immediate
reassessment of the strategy when an unexpected
event hits and stops it.
• This special alert can be implemented by formulating
contingency strategies and assigning different
responsibilities for unforeseen events. These incidences
can be unexpected events like pandemic outbreaks,
sudden change or fall of government at Centre or state,
industrial disaster, terrorist attack or unforeseen natural
calamity like floods, fire, earthquake, etc