Organizational Appraisal Balance Scorecard

1. Organizational Appraisal Balance Scorecard Presented By: Kavya M Chandra (82017) BartiGola (82056) RohitVerma (82037) Suhail Khan (82079)

2. Agenda • Introduction • Importance • Linking Balance Scorecard measures to Business strategy • Balance Scorecard : Analysis in context of Bain & Company

3. Introduction: Balance Scorecard • The balance scorecard a new approach to strategic management was developed in the early 1990s by Robert Kaplan and David Norton. • The balance scorecard a new performance management tool helps companies examine their performance from four perspectives: • Financial perspective • Customer perspective • Learning and Growth perspective • Internal business process perspective

4. Building Using Balanced Scorecard Where does it fit? Vision Mission and CSFs Strategic Objectives Targets Measures Projects Rewards Alliances Systems Structure Culture and values (leadership/style/relationships etc.)

5. Customer perspective Corrective activity Developmental activity Balancing compliancewith added value Financial Measures Key performance ratios Financial health Balancing leading withtrailing indicators Balanced Scorecard Business Processes Time, cost, quality Balancing inputsand outputs Learning and growth People measures Knowledge measures Balancing soft and hard indicators

6. Agenda • Introduction • Importance • Linking Balance Scorecard measures to Business strategy • Balance Scorecard : Analysis in context of Bain & Company

7. Importance: Balance Scorecard • The balance scorecard helps the organizations gain a wider perspective on their strategies by focusing not only on financial aspects but also on other perspectives like customer perceptive, learning and growth perspective and internal business perspective. • The balance scorecard is a management system that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback regarding both internal business processes and external outcomes, thus helping organizations improve strategic performance and results on a continuous basis.

8. Importance: Balance Scorecard • Building a balanced score card: According to Nils Goran Olve, Jan Roy and Magnus Vetter in their book “Performance drivers” constructing a balance score card involves an eleven step process. • The firm’s internal and external framework must be analyzed. External analysis involves an examination of the competitors and other external factors like the impact of the economy, political, technological environment on the organization. Internal analysis focuses on assessing a firm’s resources core competencies and other assets. • This step involves the development of a strategic vision. The company must ensure that employees are informed of the vision of the company and are committed to the implementation of vision.

9. Importance: Balance Scorecard 3. The company must decide which perspective it must adopt. It also needs to analyze the areas in which it is not performing as expected. 4. The company must examine the implication of the vision for each perspective. For example, In the costumer perspective, a company should clearly define as to how it is going to build market share, build loyalty with existing costumers and acquire new costumers etc. 5. This step involves creating top five objectives for each perspective. These objectives will help a firm in deciding the top criteria for each perspective. 6. In this step a balance set of measures should be created that bring in congruence between the short term and the long term consideration of the organization. This stage also involves assessing the cost associated with collecting the data for the proposed perspectives.

10. Importance: Balance Scorecard 7. The measures developed in the above step should be communicated to top management for their approval. After approval, the measures must be communicated to the whole organization. 8. This score card should be communicated to the appropriate organizational units. Depending on the size of the organization, score cards can be created for various divisions, business units, and department and in some cases for each employee. 9. The next stage involves creating goals for the each measure, indicating short and long term objectives. 10. The next step involves developing an action plan for the successful implementation of the organization’s projects.

11. Importance: Balance Scorecard 11. The final step involves implementing the balance score card process by conducting regular reviews against the current score card and the effectiveness of the current score card and strategy. It also involves discussion about the progress of the score

12. Agenda • Introduction • Importance • Linking Balance Scorecard measures to Business strategy • Balance Scorecard : Analysis in context of Bain & Company

13. LINKING BALANCED SCORE MEASURES TO BUSINESS STRATEGY • There are three basic principles that link and organization balanced score card to its strategy and they are: • Cause and effect relationships: According to this principle a balance score card to be effective, should, clearly state the sequence of the relationships between the different perspective and the performance measures of these perspectives. • Balance between performance measures and outcome: A good balance score card should strike a stability between the performance measures and the outcomes. Outcomes are called lagging indicators while performance drives are called leading indicators.

14. LINKING BALANCED SCORE MEASURES TO BUSINESS STRATEGY 3. Linkage to financial aspects: According to this principle a balance score card should be linked to financial aspects like return on capital employed of economic value added. Programs such as total quality management, employee empowerment should be linked to outcomes that directly influence costumers and deliver future financial performance. These three principles link the balance score card to strategy.

15. Agenda • Introduction • Importance • Linking Balance Scorecard measures to Business strategy • Balance Scorecard : Analysis in context of Bain & Company

16. Bain & Company • Bain & Company is a global business consulting firm. Bain works across a wide range of industries, from corporate clients to private equity. They think and act like owners and have the talent, the will, and the open-mindedness required to succeed. All share passion for results and are prepared to act decisively to achieve them. • The four "perspectives” which are being proposed in BAIN & Consulting

17. Methodology • To construct and implement a Balanced Scorecard, managers here: • Articulate the business's vision and strategy; • Identify the performance categories that best link the business's vision and strategy to its results (e.g., financial performance, operations, innovation, employee performance); • Establish objectives that support the business's vision and strategy; • Develop effective measures and meaningful standards, establishing both short-term milestones and long-term targets; • Ensure companywide acceptance of the measures;

18. Methodology 6. Create appropriate budgeting, tracking, communication, and reward systems; 7. Collect and analyze performance data and compare actual results with desired performance; 8. Take action to close unfavorable gaps.

19. Corporate Strategy • Bain believes that all value-driving strategies must: • Target sustained value creation through leadership in chosen markets and segments • Be based on a robust definition of boundaries between markets, discovered through correctly analyzing cost and customer sharing • Understand a company's position in the "F-E-R" growth cycle: either focus on the core, expand, or redefine • Clearly define which leadership model or models to pursue: cost, differentiation or industry influence • Challenge established industry rules of the game

20. Corporate Strategy 6. Define repeatable models that allow you to win again and again 7. Identify what it will take to win from the standpoints of organization and capabilities 8. Be dynamic and flexible, with contingency plans for reacting to leading indicators of external changes 9. Be implementable; that is be achievable, affordable and focused 10. Translate into action and drive to results

21. Corporate Strategy • Over 30 years, Bain has demonstrated superior capabilities helping thousands of clients in every industry develop and deliver winning strategies. • Collaborative results delivery process -work collaboratively, build lasting capabilities into their team, and help the organization mobilize for change. • People passionate about success - define success by results, they enjoy their work and have fun doing it, and takecare deeply about their clients as people.

22. Corporate Strategy Bain & companyclients have found new sources of profitable growth, repositioned their businesses for the future, and sharpened their competitive advantage. Since 1983, their clients have outperformed the stock market by a ratio of four to one. • Business Unit Strategy: driving a specific business to full economic potential, whether it be through an annual planning process, a transformation effort, or turnaround situation • Corporate Strategy: tapping into the additional value created by the center and addressing the unique challenges of multi-core organizations

23. Corporate Strategy • Fundamentals of growth:  our point of view on driving a business to full potential, expanding into profitable adjacent businesses, and redefining the core business by leveraging a company's "hidden assets" and repeatable business models • Emerging Markets: playing to win in new fast-growing markets, and how to compete against "emerging market champions" expanding globally • "Both Brain" Innovation: leveraging the creative AND the analytic to revolutionize new product development processes and ensure efficient allocation of R&D • Sustainability: addressing relevant social, environmental and ethical issues responsibly and profitably

24. Mission & Vision: • Bain helps clients build and refine their mission and vision statements as part of strategy engagements. • Creating a sound mission and vision statement is the first step in building strategies that help clients to reach their full potential. This work is not done in a vacuum. Bain gathers and tests data from relevant stakeholders to ground a client's aspirations in statements that are also feasible and practical. • Working with a company's stakeholders, we identify refinements to the mission and vision, and weigh the implications of any changes necessary in the current business model. As part of this work, we develop a detailed roadmap to prepare the organization to deliver on the new strategic goals.

25. Performance Management • Bain helps clients build and refine their mission and vision statements as part of strategy engagements. • Creating a sound mission and vision statement is the first step in building strategies that help clients to reach their full potential. This work is not done in a vacuum. Bain gathers and tests data from relevant stakeholders to ground a client's aspirations in statements that are also feasible and practical. • Working with a company's stakeholders, theyidentify refinements to the mission and vision, and weigh the implications of any changes necessary in the current business model. As part of this work, we develop a detailed roadmap to prepare the organization to deliver on the new strategic goals.

26. Performance Management To reach its full potential, a company must achieve world class performance across multiple dimensions. Improving performance may come in the form of: Revenue enhancement, cost management, supply chain, purchasing, manufacturing, service operations, complexity management, change management, lean six sigma, capability sourcing, and/or business process redesign. In combination with a differentiated and well focused strategy, performance improvement is fundamental to a company's success.

27. Performance Management • A survey of major projects in this area shows that, within two to three years, there clients achieve an average of 15 percent revenue growth and raise margins by 7 percentage points. As part of theircommitment to creating value, theyoften tie own fees to their clients' results. • The company approach ensures that clients achieve leadership in their core business, expand thoughtfully, and constantly improve through operational excellence. Typically, theystart by using simple diagnostic tools, such as the revenue sieve and proprietary cost benchmarks, to identify the key levers for improving performance in a given situation.  For the key priorities to improve performance, theydefine specific goals.  Then theypool client and Bain resources and use the most valuable tools, Bain functional expertise, and change management techniques to deliver results.