BSC/KPI NEGERI

1B FEBRUARI 2006

MESYUARAT PENGURUS NEGERI 1/2006

DISEDIAKAN OLEH:ABD RAHAMAN RASID

PENGURUS KANANJABATAN PERANCANGAN

KORPORAT/PENGURUS PROJEK EIS

SCOPE & OBJECTIVE OF PRESENTATION

Introduction and Background

To explain basic concept on Balanced Scored Card (BSC)

To highlight BPM Destination Statement

To elaborate on BPM Corporate Scorecard

To propose State Scorecard, Branch and Hub

To get feedback from State Manager

BALANCED SCORE CARD (BSC)

CONCEPT BSC

MY DEFINITION: A SYSTEMATIC WAY FOR MANAGEMENT TO PLAN AND EXCUTE STRATEGY FOR THE WHOLE ORGANIZATION

Formal Definition: A tool that translates an organization’s mission and strategy into a comprehensive set of a performance measures that provides the framework for a strategic measurement and management system

WHY BSC?

Traditional reliance on financial measures (e.g: ROA)

The rise rise of intangible assets

The importance of reputation ( part of intangible asses)

Organizations face difficulty in executing strategy

Only 10% organizations execute

strategy

Barriers to Strategy Execution

Barriers to Strategy Execution

Vision Barrier

People Barrier

Management Barrier

Resource Barrier

Only 5% workforce

understands the strategy

Only 25% managers

have incentives linked to strategy

85% executive teams spend less than 1 hour/month discussing strategy

60% of organizations

don’t link budgets to strategy

Source: Robert S. Kaplan & David P. Norton

BSC: HAS FOUR PERSPECTIVES

FINANCIAL

CUSTOMER

INTERNAL BUSINESS PROCESS

LEARNING & GROWTH

To succeed financially, how should we appear to our shareholders?

FINANCIAL PERSPECTIVE

BSC: FOUR PERSPECTIVES

To achieve our vision, how should we appear to our customers?

CUSTOMER PERSPECTIVE

To satisfy our shareholders & customers, what business processes must we excel at?

INTERNAL PERSPECTIVE

To achieve our vision, how will we sustain our ability to change and improve?

LEARNING & GROWTH PERSPECTIVE

BALANCED SCORECARD: AN OVERVIEW

ShareholderValue

FinancialPerspective

Learning &Growth

Perspective

Manage Operations

Manage Innovation

Human Capital

Information Capital

Organisation Capital

CustomerPerspective

InternalPerspective

Manage Customers

Price Quality Time Function Partnership Brand

ImageRelationshipProduct/Service Attributes

Productivity Strategy

GrowthStrategy

FINANCIAL PERSPECTIVE

ShareholderValue

FINANCIAL PERSPECTIVE

Growth StrategyProductivity Strategy

Improve Cost

Structure

Increase Asset

Utilization

Expand Revenue

Opportunities

Enhance Customer

Value

Reduce expenses Improve yields

Manage capacity from existing assets

New products New markets New partners

Improve profitability from existing customers

CUSTOMER PERSPECTIVE

Cu

sto

me

r P

ersp

ect

ive

Price Quality Availability

Selection Partnership

Brand

ImageRelationshipProduct/Service Attributes

CUSTOMER PERSPECTIVE

Functionality

Service

Customer Profitability

Market Share Account Share

Customer Acquisition

Customer Retention

Customer Value Proposition

Customer Satisfaction

FINANCIAL PERSPECTIVE

INTERNAL PERSPECTIVE

INTERNAL BUSINESS PROCESS

OperationManagementProcess

CustomerManagementProcess

InnovationManagementProcess

Processes that produce & deliver products & services

Processes that create new

products &

services

Processes that enhance

customer value

Acquire raw materials Convert raw materials to finished products Distribution

Select targeted customers Acquire targeted customers Retain customers Grow business with customers

Identify new products & services Manage research & development Develop new products

CUSTOMER PERPECTIVE

FINANCIAL PERPECTIVE

INT

EN

AL

PE

RS

PE

CT

IVE

LEARNING AND GROWTH

LEARNING AND GROWTH

Human Capital

Information Capital

Organization Capital

Attitude Skill Knowledge

Leadership Culture Teamwork

System Database Network

CUSTOMER PERPECTIVE

FINANCIAL PERPECTIVE

INTERNAL PERPECTIVE

LE

AR

NIN

G &

GR

OW

TH

Vision & Strategy

Objectives Measures Targets Initiatives

BALANCED SCORECARD: OBJECTIVES, MEASURES, TARGETS & INITIATIVES

FINANCIAL

CUSTOMER

INTERNAL BUSINESS PROCESS

LEARNING & GROWTH

Objectives Measures Targets Initiatives

“To succeed financially, how

should we appear to our shareholders?”

“To achieve our vision, how should we appear to our

customers?”

“To satisfy our shareholders & customers, what

business processes must we excel at?”

“To achieve our vision, how will we sustain our ability

to change & improve?”

Objectives Measures Targets Initiatives

Objectives Measures Targets Initiatives

MEASUREMENT

MEASURING BUSINESS STRATEGY

Financial ROI, ROA, ROE

PERSPECTIVES GENERIC MEASURES

Customer

Process

Learning & Growth

Satisfaction, retention, acquisition, market share

Response time, new products, cost, product & service quality

Employee satisfaction, information system, competency, value system

Purpose

• Focus on the performance results at the end of a time period or activity

Examples

• “year-end-budget expense”

• “client satisfaction”

• “cases per caseworker”

Strengths

• Usually objective and easily captured

Issues

• Outcome measures reflect success of past, not current, activities and decisions

Outcome (Lag) Measures Driver (Lead) Measures

Purpose

• Measure intermediate processes and activities

Examples

• “hours spent with clients”

• “$ spent on automation”.

Strengths

• More predictive in nature

• Allows organisations to adjust behaviors for performance

Issues

• Based on hypotheses of strategic “cause and effect”

• Often difficult to collect supporting data

Two Types of Strategic Objectives

MEASURES

STRATEGY MAP

Strategic Objectives

Create Product &

Services Offerings / Bundles

Statement of what strategy must achieve

and what’s critical to its

success

Target

• 8 new business bundle

The level of performance

or rate of improvement

needed

• Develop cross-sell business bundles

Key action programmes required to

achieve objectives

InitiativeMeasurement

• # of cross sell business bundles

How success in achieving the strategy

will be measured and

tracked

Strategic Theme: Operating Efficiency

Increase Shareholder

Value

Financial

Learning

Morecustomer

Improve Strategic Skills &

Competencies

One StopSolution

Defend Current

Business

Customer

InternalCreate

Product & Services Offerings

/ Bundles

Strategy Map: Diagram of the cause-and-effect relationships between strategic objectives

ExceptionalValue Services

BSC TERMINOLOGY

KEY PERFORMANCE INDICATOR (KPI)

FROM STRATEGY TO ACTION PLAN: LOAN BUSINESS

STRATEGY MAP BALANCED SCORECARD ACTION PLAN

Objective Measurement Target Initiative Budget

ROA

Grow Revenue

Customers

Fast Service

Decision making

Profitability

Increase loan

Attract new customer

Fast loan approval

Knowledge

Review New authority limit

No. customer

Days taken to approve loan

One week

Enhance Knowledge on corporate loan

2 timesNumber of training/year

Find suitable courses

RM4,000

700

Day taken to approve loan

Strategy

One week Proposal to Management

Corporate advertisement

RM10,000

Loan approval RM 2 million

Identify new customers Offer new limit to existing customers

INITIATIVE

Initiatives help close the gap between our current and desired performance

INITIATIVEImplement automated case management system and

train Every Rep in 99

Initiatives Are Defined to Help Close the Performance GapInitiatives Are Defined to Help Close the Performance Gap

Customer Satisfaction

Survey Rating

90% favorable overall

Measure

Target

Target Actual

90%

45%

$M

gap

Measures track our progress toward achieving and communicating the intent of the objective

MEASURE / TARGET

OBJECTIVEIncrease Customer

Satisfaction

Objectives articulate the components of our strategy

INITIATIVES

CASCADING

• The process of developing BSC at each division and business unit levels

• The scorecards must align with organization highest level scorecard by identifying the strategic objectives and measures

• Lower level scorecard will also include additional measures and initiatives that reflecting the specific opportunities and challenges faced at that level

CASCADING

What does cascading the BSC means?

BALANCED SCORECARD: THE CASCADING PROCESSC

OR

PO

RA

TE

Financial

O M T I

DE

PA

RT

ME

NT

ST

AT

EB

RA

NC

H

Note: O: Objectives M: Measures T: Targets I: Initiatives

Team & Personal BSC

Customer

O M T I

Internal

O M T I

L & G

O M T I

Financial

O M T I

Customer

O M T I

Internal

O M T I

L & G

O M T I

Financial

O M T I

Customer

O M T I

Internal

O M T I

L & G

O M T I

Financial

O M T I

Customer

O M T I

Internal

O M T I

L & G

O M T I

Strategy

Mission, Vision & Value

Three Ways to Cascade

Cascading is accomplished using one of three approaches

Shared Identical Objectives

Contributory Translated Objectives

Hybrid Identical, Translated and Unit Specific Objectives

Corporate Business Unit

Balanced Scorecard: A tool that translates an organization’s mission and strategy into a comprehensive set of a performance measures that provides the framework for a strategic measurement and management system

Cause and Effect Relationship: A cause and effect relationship identifies the initiatives, responsibilities or activities (causes) necessary to achieve an objective or target (effect)

Customer Value Proposition: Defines who the customer is and what they want

Initiative: Key action programs to achieve objectives or close gap between measures performance and targets. Initiatives are often known as projects, actions or activities.

Lag Indicator: Measures to determine the outcome of an objective that indicate company performance at the end of a period. These are results-oriented and do not reflect a process. Lag indicators often appear in BSC’s outcome-oriented Financial and Customer perspectives.

GLOSSARY

Lead Indicator: Measures that indicate progress againts a process or behavior. These measures are helpful in predicting the future outcome of an objective. Lead indicators tend often appear in the Internal and Learning & Growth perspectives.

Measures: Statement of how success in achieving an objective will be measured and tracked. Measures are written statements of WHAT we will track and trend over time, NOT the actual targets such as direction and speed. A measure should include a statement of the unit to be measured (RM, %, rating).

Objective: Concise statement articulating a specific component of what the strategy must achieve/what is critical to its success. Each perspective usually contains 3-6 primary objectives that state a key aspect of the strategy to be achieved over the next 3-5 years. Objectives are best stated as action phrases and may include the means and/or desired results as well as the action. E.g: “ Increase market share through current customers”

Strategy Map: A visual representation of an organization’s strategy and the processes and systems necessary to implement that strategy. A strategy map will show employees how their jobs are linked to the organization’s overall objectives

GLOSSARY