balanced scorecard
TRANSCRIPT
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BALANCED SCORECARD
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Lord Kelvin a prominent British scientist
I often say that when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.
If you can not measure it, you can not improve it
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Background
Business competition based on information
Companies ability to exploit intangible assets has become more decisive than their ability to invest in and manage their physical assets
Intangible assets played a central role in value creation
Companies want to improve the management of their intangible assets, they had to integrate the measurement of intangible assets into their management systems
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Financial Perspective
Objectives
Measures
Targets
Initiatives
1 2 3
Learning and Growth Perspective
Objectives
Measures
Targets
Initiatives
1 2 3
Customer Perspective
Objectives
Measures
Targets
Initiatives
1 2 3
Internal Business Process Perspective
Objectives
Measures
Targets
Initiatives
1 2 3
Business Strategy
To succeed financially, how should we appear to our shareholders?.
To satisfy our shareholders and customers, what business processes must we excel at?.
To achieve our vision,how will we sustain our ability to change and improve
To achieve our vision, how should we appear to our customers?.
BALANCED SCORECARD (Kaplan and Norton)
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The Four Perspectives of BSC
The four BSC perspectives provides a robust structure for companies to express their strategic objectives
The financial objective would include a high-level objective for sustained shareholder value creation and supporting sub-objectives for revenue growth, productivity, and risk management.
The customer perspective would include objectives for desired customer outcomes, such as to acquire, satisfy, and retain targeted customers, and to build the share of their spending done with the company
Objectives in the process perspective reflected how the company would create and deliver the differentiated value proposition and meet the financial objectives for productivity improvements.
Objectives in the learning and growth perspectives described the goals for employees, information systems, and organizational alignment
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BALANCED SCORECARD
Enables companies to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they would need for future growth
BSC wasnt a replacement for financial measures, but it is the complement
BSC addresses a serious deficiency in traditional management system which is their inability to link a companys long-term strategy with it short-term actions
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Four new management process that linking long-term strategic objectives with short-term actions
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Vision and strategys statement must be expressed as an integrated set of objectives and measures
Translating the vision
Manager must communicate their strategy up and down the organization and link it to departmental and individual objectives
Communicating and Linking Enables company to integrate
their business and financial plans
Manager can undertake and coordinate those initiatives that move them toward long-term strategic objectives
Business Planning
Company can monitor short-term results from three additional perspectives customers, internal business process, and learning & growth and evaluate strategy in the light of recent performance
Feedback and Learning
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How one company linked measures from the four perspectives
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THE IMPLEMENTATION OF BSC EXAMPLE North America Marketing and Refining
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EXAMPLE
North America Marketing and Refining :
product leadership strategy : brand image and product characteristic
competitor pursued similar strategy
NAMR lose competitive advantage
NAMR adopted business strategy
Revenue Growth Strategy
Productivity Strategy
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FINANCIAL PERSPECTIVE
INCREASE ROCE TO 12 %
Revenue Growth Strategy Productivity Strategy
ROCE Net Margin vs Industrty
New Sources of
Non-gasoline
Revenue
Increase Customer
Profitability through
Premium Barnds
Become Industry
Cost Leader
Maximize use of
Existing Assets
Non-gasoline revenue and margin
Volume vs industry Premium Ratio
Cash Expense (Cents per gallon)
vs
Industry
Cash Flow
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CUSTOMER PERSPECTIVES
ROAD WARRIORS
16 %
Generally higher-income, middle-aged men who drive 25.000 to
50.000 miles a year.. Buy premium gasoline with credit card Purchase sandwiches and drinks from convenience storewill Sometimes wash their cars at the carwash
TRUE BLUES
16 %
Usually men and women with moderate to high incomes who
Are loyal to a brand and sometimes to a particular station Frequently buy premium gasoline and pay in cash
GENERATION F3
27 % Fuel, Food and Fast : Upwordly mobile men and women half under 25 years of age who are constantly on the go..Drive a lot and snack heavily from the convenience store.
HOMEBODIES
21 %
Usually housewives who shuttle their children around during the day
And use whatever gasoline station is based in town or along their
route or travel
PRICE SHOPPERS
20 % Generally arent loyal to either a brabd or a particular station, and Rarely buy the premium lone frequently on the tight budgets.
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SERVICE PROFILE
Immediate access to a gasoline pump Self-payment mechanism at the pump Covered area for gasoline pumps 100 % availability of product, especially premium grades Clean restrooms Satisfactory exterior station appearance Safe, well-lit station Convenience store, stocked with fresh, high-quality merchandises Speedy purchase Ample parking spaces near convenience store Friendly employees Availability of minor services
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Speedy
Purchase
Friendly,
Helpful
employee
Recognize
loyalty
More
Consumer
product
Help develop
Business
skill
Basic
Clean Sale Quality Trusted brand
Differentiators
Delight the customer Win-win Dealer
Relationship
Mystery shopper
rating
Share of segment
CUSTOMER PERSPECTIVES
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INTERNAL BUSINESS PROCESS PERSPECTIVES
Two important internal processes :
1. Develop new products and services
2. Generate dealer profits from non-gasoline revenues
Create
Non-gasoline
Product and
services
New Product ROI
New product Acceptance
Rate
Understand
Customer
Segment
Share of Target segment
Best-In-Class
Franchise
Team
Dealer quality rating
Improve
Hardware
performance
Yield gap Un-planned downtime
On Spec
On Time
Perfect Orders
Improve
Inventory
management
Inventory level Run-out rate
Industry Cost
Leader
Activity cost vs Competitors
Improve
SHE
Environmental Incident
Safety Incident
Build the franchise
Increase customer
value Achieve operational excellence Be a good neighbor
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Functional excellence Leadership skill Integrated view
Personal scorecard Employee feedback
Process improvement Y2K
LEARNING AND GROWTH PERSPECTIVES
Aligned Personal growth
A motivated and prepared workforce
Climate for action Competencies Technology
Strategic skill coverage ratio
System milestone
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NAMR BALANCED SCORECARD
PERSPECTIVE STRATEGIC THEMES STRATEGIC OBJECTIVES STRATEGIC MEASURES
FINANCIAL Financial Growth F1 Return On Capital
Employed
F2 Asset utilization
F3 Profitability]
F4 Industry cost leader
F5 Profitable growth
ROCE Cash flow Net margin rank Fuel cost per gallon Volume growth rate Premium ratio Non-gasoline revenue and margin
CUSTOMER Delight the customer
Win-win dealer relations
C1 Continuously delight
targeted customer
C2 Build win-win relations
with dealer
Market share in targeted market
Mystery shopper rating
Dealer gross profit growth Dealer survey
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NAMR BALANCED SCORECARD
PERSPECTIVE STRATEGIC THEMES STRATEGIC OBJECTIVES STRATEGIC MEASURES
INTERNAL
BUSINESS
PROCESS
Build the franchise
Safe and reliable
Competitive supplier
Quality
Good neighbor
I1 Innovative products and
services
I2 Best-in-Class Franchise
teams
I3 Refinery performance
I4 Inventory management
I5 Industry cost leader
I6 On spec, on time
I7 Improve SHE
New product ROI New product acceptance rate
Dealer quality score
Yield gap Unplanned down time
Inventory level Runout rate
Activity cost vs competitor
Perfect orders
Number of environmental incidents
Days away from work rate
LEARNING
AND
GROWTH
Motivated and prepared
workforce
L1 Climate for action
L2 Core competencies
and skills
L3 Access to strategic Inf.
Employee survey Personal BSC Strategic Competency av. Strategic Inf. availability