BALANCED SCORECARD

BALANCED SCORECARD

TEAM A2Bo KongthaisereekulJanet HoVeronica MwikwabhiEdelen Melo-OrtegaCresna PonthyJames Byrne

2 b. Winning strategies part 1

WaveRider’s

BSC Deployment

Fundamental Theory of BSC

Advantages and Disadvantages (Mitigating actions)

Comparison of other deployment method

Assumptions (people & operation way)

Wave Rider’s Vision

Deployment Plan recommendation (Five years)

Conclusion

Balanced ScoreCard – BSC (1990)

BSC is tool for leader to communicate strategy to employee and external stakeholders the outcome and performance drives by which the organization will achieve its mission & strategy objectivesMeasure Performance and Set Strategy:Effective organizational performance managementEffective implementation strategies (Removing barriers for Financial measurement and Strategy Execution)

Niven, P. (2002). Balanced Scorecard Maximizing Performance and Maintaining Results. New York: Jonh Wiley & Sons, Inc.

Kaplan , R., & Norton, D. (1993, September-October). Putting the Balanced Scorecard to Work.

HARVARD BUSINESS REVIEW

, p.5.

Learning & growth perspective. As enablers to other 3 perspectives (fundamental vehicle). It helps to close the gap to ensure sustainable performance in the future. Employee skills 2. Employee satisfactions 3. Availability of information 4. Alignment

Pal's Sudden Service. (2001 ). Retrieved February 10, 2011, from http://www.baldrige.nist.gov/PDF_files/Pals_Application_Summary.pdf

Kaplan , R., & Norton, D. (1993, September-October). Putting the Balanced Scorecard to Work. HARVARD BUSINESS REVIEW , p.5.

BSC – LEARNING AND GROWTH PERSPECTIVE

Internal business process. Efficient the process via: Product development 2. Production excellence 3. On time delivery 4. After sales services

Pal's Sudden Service. (2001 ). Retrieved February 10, 2011, from http://www.baldrige.nist.gov/PDF_files/Pals_Application_Summary.pdf

Kaplan , R., & Norton, D. (1993, September-October). Putting the Balanced Scorecard to Work. HARVARD BUSINESS REVIEW , p.5.

BSC – INTERNAL BUSINESSS PROCESS PERSPECTIVE

Operation excellence 2. Product leadership 3. Customer intimacy (Customer satisfaction, customer loyalty, market share & customer acquisition)

Pal's Sudden Service. (2001 ). Retrieved February 10, 2011, from http://www.baldrige.nist.gov/PDF_files/Pals_Application_Summary.pdf

Kaplan , R., & Norton, D. (1993, September-October). Putting the Balanced Scorecard to Work. HARVARD BUSINESS REVIEW , p.5.

BSC – CUSTOMER PERSPECTIVE

Financial measures. Result focus on bottom-line, indicators: Profitability 2. Revenue growth 3. Economic value added.

Pal's Sudden Service. (2001 ). Retrieved February 10, 2011, from http://www.baldrige.nist.gov/PDF_files/Pals_Application_Summary.pdf

Kaplan , R., & Norton, D. (1993, September-October). Putting the Balanced Scorecard to Work. HARVARD BUSINESS REVIEW , p.5.

BSC – FINANCIAL PERSPECTIVE

Advantages

Strategy alignment with 3 primary stakeholders: Shareholders, Customers and EmployeesBoth financial and non-financial criteriaAllows review the past financial situation in an ongoing consistent manner.Engagement of employee voice through learning and growth able to assess whether any strategic action implemented will match desired outcomeActs as an excellent education tool for staff

Pal's Sudden Service. (2001 ). Retrieved February 10, 2011, from http://www.baldrige.nist.gov/PDF_files/Pals_Application_Summary.pdf

Kaplan , R., & Norton, D. (1993, September-October). Putting the Balanced Scorecard to Work.

HARVARD BUSINESS REVIEW

, p.5.

Disadvantages

The concentration on three primary stakeholders has the converse effect of neglecting other stakeholderRequires a long thought process to developTrade-offs between different measures is ignored even when in direct conflictionShould not be taken as full comprehensive delineation of the company

Pal's Sudden Service. (2001 ). Retrieved February 10, 2011, from http://www.baldrige.nist.gov/PDF_files/Pals_Application_Summary.pdf

Kaplan , R., & Norton, D. (1993, September-October). Putting the Balanced Scorecard to Work.

HARVARD BUSINESS REVIEW

, p.5.

Mitigating the negative effects

Primary stakeholder must be clearly recognisedEmpowerment to the team members (flexible and freedom to achieve strategic priorities)

Pal's Sudden Service. (2001 ). Retrieved February 10, 2011, from http://www.baldrige.nist.gov/PDF_files/Pals_Application_Summary.pdf

Kaplan , R., & Norton, D. (1993, September-October). Putting the Balanced Scorecard to Work.

HARVARD BUSINESS REVIEW

, p.5.

Comparison of other deployment methodHoshin & BSC (Main differences)

Witcher, B.J. and Butterworth, R. (2001), “Hoshin kanri: policy management in Japanese-owned UK subsidiaries”, Journal of Management Studies, Vol. 38 No. 5, pp. 651-74.

Yang, T.M. and Su, C. T., (2007), “ Application of hoshin kanri for productivity improvement in a semiconductor manufacturing company.”, Journal of Manufacturing Technology Management, Vol. 18 (6), pp.761-775Witcher, B., (2002), ”Hoshin kanri: a study of practice in the UK”, Managerial Auditing Journal, Vol. 17(7), pp.390-396

Hoshin

focuses on selecting and monitoring the

right measure to drive change

(an “ends justifying the means” approach)

BSC

centered primarily on the capability of company’s process for delivering value to customer (means contributing toward end)

Flexibility

BSC strongly emphasized the goal must to be achieved (does not provide clearly approach of how) Hoshin does with short (annual)/middle (3-5y.) and long-term plan (5-10y.)

Change

BSC does not cover review and monitoring system (closed-loop) to modify plan (change)

Hoshin emphasized PDCA cycle. Hoshin deployment method sometimes neither delayed nor allowed the process(review)

Communication

Hoshin integrates people together from top-down and bottom-up deployment.

Although, it is difficult to achieve the involvement of everyone.

Assumptions…

The research Market is not yet concluded , but the correct approach seems to be to open the distribution channels to the European market.

Better negotiation strategy in terms of sourcing to foster competitive advantages.

ViSiON(Direction)

(Niven, 2002),

The vision s

tatement provides a word picture of what the organization intends ultimately to become in next 5,10,or 15 years.

By not having appropriate vision statement, organization might has a problem to guide the actions of employees which result lack direction and eventually unable to take benefits from any strategy that put on place. Thus there are several key points in order to create effective vision:

ViSiONKey points

(Niven, 2002),

· Concise (should be simple, powerful and compiling)

· Appeals to all stakeholders

· Consistent to mission and values

· Verifiable

· Feasible

· Inspirational

WaveRider’s Strategic Objectives

The VISION

Strategy 6

(Key Words)

Customers Delightment

Safety

Innovation (R&D)

Continuous ImprovementService

To

be the preferred boats provider in our market(s) achieving a large market share by providing:Exceptional value-Safe and Innovative productsCustomer Service Post-saleA fun, positive and profitable experience for all stakeholders

Pal's Sudden Service. (2001 ). Retrieved February 10, 2011, from http://www.baldrige.nist.gov/PDF_files/Pals_Application_Summary.pdf

Kaplan , R., & Norton, D. (1993, September-October). Putting the Balanced Scorecard to Work.

HARVARD BUSINESS REVIEW

, p.5.

Wave Rider - BSC

Financial

IB Process

Customer

L & G

VISION

Learning & Growth Deployment

Objects

Measures

Targets

Initiatives

Y1

Y2

Y3

Y4

Y5

Staff training

length of time for training (hours)

150

150

120

120

120

Training Program

Employee

satisfaction

% of satisfied employee

60%

70%

80%

90%

95%

Welfare & Benefits

collect by interviews and surveys

R & D and Innovation

number of patents compared with competitors

2

3

3

4

5

Research on

new product

Internal Business Process Deployment

Objects

Measures

Targets

Initiatives

Y1

Y2

Y3

Y4

Y5

Production efficiency of New Product

Lead time

Staff Training

Production Level

SeaHorse ↓

20%

20%

15%

15%

12%

Reorganise Production Plan

SeaSpray ↓

60%

50%

45%

35%

33%

SailAway ↑

20%

30%

40%

50%

55%

(% of each product)

Reduce stock level of Current Products

stock/ amount of total products produced

27%

25%

20%

18%

15%

Reorganise Production Plan

Improve Finance and HR Departments

Reorganise

Finance

and HR Department

Customer Deployment

Objects

Measures

Targets

Initiatives

Y1

Y2

Y3

Y4

Y5

Quality of new product (Sailaway)

DPMO

No. of Defects relative to total products produced

5.00%

2.00%

1.00%

0.5%

0.1%

Six Sigma

Customer Delightment

% complaints relative to total sales unit

10%

10%

8%

5%

2%

Membership Program

Increase No. of Customers

% number of new customers relative to total current customer

10%

15%

20%

30%

40%

Marketing Campaign

Competitive price

compare with competitors

8%

8%

8%

5%

5%

Benchmark

Shipment

(Delivery to Customers)

Sale Growth

10%

12%

12%

15%

18%

Promotion, Discount

Increase Market share of New Product

% of market share

5%

10%

15%

20%

30%

Find more distribution channels and customer base

Financial Deployment

Objects

Measures

Targets

Y1

Y2

Y3

Y4

Y5

Profitable

growth

Gross Margin

46.47%

48%

49%

50%

51%

Return on Sales

5.46%

6%

6.50%

8%

10%

Maximise returns

ROCE

7.99%

8%

9%

11%

14%

Manage operating costs

Administration

costs

(admin. cost/GP)

57%

57%

55%

53%

50%

Material costs

51%

50%

49%

46%

45%

Cause & Effect

Financial PerspectiveGross MarginReturn on SalesReturn on Capital EmployedAdministration CostsMaterial Costs Customer PerspectiveNew product Quality-Sail AwayCustomers DelightmentIncrease No. of CustomersCompetitive priceShipment (Delivery)Increase Market ShareInternal Business ProcessProductivity EfficiencyProduction Level Marketing-Sales (Efficiency)Reduce Stock Levels of Current ProductsNPI New Product IntroductionImprove Finance and HR DepartmentsLearning & GrowthStaff training EducationImprove Employee SatisfactionR&D (Innovation ) 

CONCLUSIONS

BSC provides a linkage between strategy and vision through four perspectives to achieve organization shared objectives. Yet, it has potential issues in terms of in review mechanism during deployment phase. Therefore, it requires adjustment to maximize its benefits.

Witcher, B.J. and Butterworth, R. (2001), “Hoshin kanri: policy management in Japanese-owned UK subsidiaries”, Journal of Management Studies, Vol. 38 No. 5, pp. 651-74.Yang, T.M. and Su, C. T., (2007), “ Application of hoshin kanri for productivity improvement in a semiconductor manufacturing company.”, Journal of Manufacturing Technology Management, Vol. 18 (6), pp.761-775Witcher, B., (2002), ”Hoshin kanri: a study of practice in the UK”, Managerial Auditing Journal, Vol. 17(7), pp.390-396Norreklit H. (2000), The balance on the balanced scorecard - a critical analysis of some of its assumptions, Management Accounting Research, 11, pp. 65–88. Kaplan R S and Norton D P (1996) “Balanced Scorecard: Translating Strategy into Action” Harvard Business School Press Marquardt, E.P., (1997), "Aligning Strategy and Performance with the Balances Scorecard," ACA Journal: 18-27.Yeung A. and B. Berman. (1997) Adding value through human resources: Reorienting human resource measurement to drive business performance. Human Resource Management 36 (3): 321Nair, M. (2004). Essentials of balanced scorecard. Hoboken, N.J: John Wiley & Sons. Andon, P., Baxter J., Mahama H. (2005). ‘The Balanced Scorecard: Slogans, Seduction, And State Of Play’. Australian Accounting Review, Vol.15, No.1, pp.29-38. Olve, N. G., Petri, C. J., Roy, J., and Roy, S. (2004). Twelve years later: Understanding and realizing the value of balanced scorecards. Ivey Business Journal online.[http://www.qa.au.edu/page2/research/BSC12YearsLater.pdf]

Reference