BSC/KPI NEGERI

1. MESYUARAT PENGURUS NEGERI 1/2006 BSC/KPI NEGERI DISEDIAKAN OLEH: ABD RAHAMAN RASID PENGURUS KANAN JABATAN PERANCANGAN KORPORAT/PENGURUS PROJEK EIS 1B FEBRUARI 2006

2. 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

3. BALANCED SCORE CARD (BSC)

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

5. 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

6. Barriers to Strategy Execution Only 10% organizations execute strategy Barriers to Strategy Execution Vision Barrier People Barrier Management Barrier Resource Barrier 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 Only 5% workforce understands the strategy Source: Robert S. Kaplan & David P. Norton

7. BSC: HAS FOUR PERSPECTIVES • FINANCIAL • CUSTOMER • INTERNAL BUSINESS PROCESS • LEARNING & GROWTH

8. BSC: FOUR PERSPECTIVES FINANCIAL PERSPECTIVE To succeed financially, how should we appear to our shareholders? CUSTOMER PERSPECTIVE To achieve our vision, how should we appear to our customers? INTERNAL PERSPECTIVE To satisfy our shareholders & customers, what business processes must we excel at? LEARNING & GROWTH PERSPECTIVE To achieve our vision, how will we sustain our ability to change and improve?

9. BALANCED SCORECARD: AN OVERVIEW Shareholder Value Financial Perspective Productivity Strategy Growth Strategy Product/Service Attributes Relationship Image Customer Perspective Partnership Quality Time Function Brand Price Manage Innovation Manage Customers Internal Perspective Manage Operations Learning & Growth Perspective Human Capital Information Capital Organisation Capital

10. FINANCIAL PERSPECTIVE

11. FINANCIAL PERSPECTIVE Shareholder Value Productivity Strategy Growth Strategy Improve Cost Structure Increase Asset Utilization Enhance Customer Value Expand Revenue Opportunities • Improve profitability from existing customers • Manage capacity from existing assets • New products • New markets • New partners • Reduce expenses • Improve yields

12. CUSTOMER PERSPECTIVE

13. CUSTOMER PERSPECTIVE FINANCIAL PERSPECTIVE • Customer Profitability • Market Share • Account Share • Customer Acquisition • Customer Retention • Customer Satisfaction Product/Service Attributes Relationship Image Customer Perspective Service Quality Availability Price Brand Functionality Partnership Selection Customer Value Proposition

14. INTERNAL PERSPECTIVE

15. INTERNAL BUSINESS PROCESS FINANCIAL PERPECTIVE CUSTOMER PERPECTIVE • Acquire raw materials • Convert raw materials to finished products • Distribution Processes that produce & deliver products & services Operation Management Process • Select targeted customers • Acquire targeted customers • Retain customers • Grow business with customers Processes that enhance customer value Customer Management Process INTENAL PERSPECTIVE Processes that create new products & services • Identify new products & services • Manage research & development • Develop new products Innovation Management Process

16. LEARNING AND GROWTH

17. LEARNING AND GROWTH FINANCIAL PERPECTIVE CUSTOMER PERPECTIVE INTERNAL PERPECTIVE • Attitude • Skill • Knowledge Human Capital • System • Database • Network Information Capital LEARNING & GROWTH • Leadership • Culture • Teamwork Organization Capital

18. BALANCED SCORECARD: OBJECTIVES, MEASURES, TARGETS & INITIATIVES FINANCIAL “To succeed financially, how should we appear to our shareholders?” INTERNAL BUSINESS PROCESS CUSTOMER “To satisfy our shareholders & customers, what business processes must we excel at?” Objectives Measures Targets Initiatives “To achieve our vision, how should we appear to our customers?” Objectives Measures Targets Initiatives Objectives Measures Targets Initiatives Vision & Strategy LEARNING & GROWTH Objectives Measures Targets Initiatives “To achieve our vision, how will we sustain our ability to change & improve?”

19. MEASUREMENT

20. MEASURING BUSINESS STRATEGY PERSPECTIVES GENERIC MEASURES Financial ROI, ROA, ROE Satisfaction, retention, acquisition, market share Customer Response time, new products, cost, product & service quality Process Employee satisfaction, information system, competency, value system Learning & Growth

21. MEASURES Two Types of Strategic Objectives Outcome (Lag) Measures Driver (Lead) Measures • 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 • 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

22. STRATEGY MAP

23. Strategy Map: Diagram of the cause-and-effect relationships between strategic objectives Statement of what strategy must achieve and what’s critical to its success How success in achieving the strategy will be measured and tracked Strategic Theme: Operating Efficiency The level of performance or rate of improvement needed Key action programmes required to achieve objectives Increase Shareholder Value Financial Defend Current Business More customer Customer Exceptional Value Services One Stop Solution Strategic Objectives Measurement Target Initiative Internal • # of cross sell business bundles • 8 new business bundle • Develop cross-sell business bundles Create Product & Services Offerings / Bundles Create Product & Services Offerings / Bundles Learning Improve Strategic Skills & Competencies BSC TERMINOLOGY KEY PERFORMANCE INDICATOR (KPI)

24. FROM STRATEGY TO ACTION PLAN: LOAN BUSINESS STRATEGY MAP BALANCED SCORECARD ACTION PLAN Strategy Objective Measurement Target Initiative Budget • Identify new customers • Offer new limit to existing customers ROA • Profitability Grow Revenue • Increase loan • Loan approval • RM 2 million • Attract new customer • No. customer • 700 • Corporate advertisement Customers RM10,000 • Days taken to approve loan • Fast loan approval • One week Fast Service • Review New authority limit • Day taken to approve loan • Proposal to Management Decision making • One week • Enhance Knowledge on corporate loan Knowledge Number of training/year • Find suitable courses 2 times RM4,000

25. INITIATIVE

26. INITIATIVES Initiatives Are Defined to Help Close the Performance Gap OBJECTIVE Increase Customer Satisfaction Objectives articulate the components of our strategy MEASURE / TARGET 90% Measure Customer Satisfaction Survey Rating gap INITIATIVE Implement automated case management system and train Every Rep in 99 45% $M Target 90% favorable overall Target Actual Measures track our progress toward achieving and communicating the intent of the objective Initiatives help close the gap between our current and desired performance

27. CASCADING

28. CASCADING What does cascading the BSC means? • 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

29. BALANCED SCORECARD: THE CASCADING PROCESS Mission, Vision & Value Strategy CORPORATE DEPARTMENT STATE BRANCH Team & Personal BSC Note: O: Objectives M: Measures T: Targets I: Initiatives

30. Three Ways to Cascade Cascading is accomplished using one of three approaches Corporate Business Unit Shared Identical Objectives Contributory Translated Objectives Hybrid Identical, Translated and Unit Specific Objectives

31. GLOSSARY 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.

32. 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