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Advanced Management Concepts

The document discusses advanced management concepts related to performance management using a balanced scorecard approach. It provides details on key elements of a performance management framework including vision, mission, strategy maps, key performance indicators (KPIs), and the components and cycle of performance management. It also explains the four perspectives of a balanced scorecard - financial, customer, internal processes, and learning and growth - and examples of strategic objectives and KPIs within each perspective. Finally, it provides a sample of how a corporate scorecard can be cascaded down to division, plant, and employee levels.

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Pooja Rana
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135 views

Advanced Management Concepts

The document discusses advanced management concepts related to performance management using a balanced scorecard approach. It provides details on key elements of a performance management framework including vision, mission, strategy maps, key performance indicators (KPIs), and the components and cycle of performance management. It also explains the four perspectives of a balanced scorecard - financial, customer, internal processes, and learning and growth - and examples of strategic objectives and KPIs within each perspective. Finally, it provides a sample of how a corporate scorecard can be cascaded down to division, plant, and employee levels.

Uploaded by

Pooja Rana
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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ADVANCED MANAGEMENT CONCEPTS

Managing Corporate Performance with Balanced Scorecard

Corporate Performance Management

Performance Management Framework


Vision Mission Strategy Strategy Map

Key Performance Indicators Company strategy


Identifying Defining Measuring Monitoring Reporting

Performance Management Component


Three critical components for effective process of performance management
Performance Management Process

Performance management cycle is continuous and consistent

Performance Management Infrastructure

Performance Management Culture

Logistic support and performance management administration

Culture that is based on performance accountability

Performance Management Cycle


STRATEGY

Set Measures and Target

Reward and Coach

Plan and Execute

Monitor and Evaluate

Managing Performance with Balanced Scorecard


The balanced scorecard is a strategic planning and management systemthat is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic nonfinancial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.

4 Perspectives in Balanced Scorecard


Financial Perspective

The Strategy

If we succeed, how will we look to our shareholders?

Customer Perspective
To achieve our vision, how must we look to our customers? Internal Perspective To satisfy our customers, which processes must we excel at? Learning & Growth Perspective To achieve our vision, how must our organization learn and improve?

Strategy and Balanced Scorecard


Mission Why We Exist

Strategy Map : Translate the Strategy

Strategic Outcomes Satisfied Shareholders Delighted Customers

Vision What We Want to Be

Strategy : Our Game Plan


Balanced Scorecard : Measure and Focus

Values Whats Important to Us

Excellent Processes Motivated Workforce

Financial Perspective
In private companies, the financial perspective is the main objective (ultimate goal) without having to sacrifice the interests of other relevant stakeholders (community, environment, government, etc.) In the financial perspective, the strategic goal is the long-term shareholder value. This goal is driven by two factors, namely : revenue growth and cost efficiency.

Strategic Objectives in Financial


Long-term Shareholder Value

Cost Efficiency Improve Cost Structure Increase Asset Utilization

Revenue Growth Expand Revenue Opportunities Enhance Customer Value

Customer Perspective
This perspective is very instrumental, because without customers, how can a company survive?

Customer perspective covers the following elements:


Customer acquisition Customer retention Customer profitability Market share Customer satisfaction

Strategic Objectives in Customer


Customer Retention Customer Satisfaction Customer Profitability Market Share

Customer Acquisition

Price

Quality

Service

Availability

Brand

Internal Process Perspective


This perspective reflects the processes in key business that should be optimized in order to meet the needs of the customers.

There are four main themes in this perspective, namely:


Operations Management Process Customer Management Process Innovation Process Regulatory and Social Process

Strategic Objectives in Internal Process


Operations Management Processes
Processes that produce and deliver products and services

Customer Management Processes


Processes that enhance customer value

Innovation Processes

Regulatory and Social Processes


Processes that improve communities and the environment

Processes that create new products and services

Supply Production

Selection Acquisition

New Ideas R&D Portfolio

Environment Safety & Health

Distribution

Retention
Growth

Design/ Develop
Launch

Employment
Community

Learning & Growth Perspective


This perspective reflects the capability that a company should have, namely: Human Capital Organization Capital Information Capital

This perspective shows us that good human resource development system, organizational system and information system forms a solid foundation for improving company performance.

Strategic Objectives in Learning & Growth


Organization Capital Information Capital

Human Capital

Skills Knowledge Attitude

Culture Leadership Organization Development

Systems Database Networks

Identifying Key Performance Indicators (KPI)

Key Performance Indicators (KPI)


Vision Mission and Values
KPI = Measurement or indicator that provides information on how far we have succeeded in achieving the strategic objectives

Strategy

Strategic Objectives
Finance Customer Internal Business Process HR Development

Key Performance Indicators Key Performance Indicators Key Performance Indicators

KPI Guidelines
Guidelines in Formulating the KPI
The measure of success must show clear, specific and measurable performance indicators. The measure of success should be declared explicitly and in detail so that it is clear what is being measured. Costs to identify and monitor the measure of success should not exceed the value that will be known from the measurement.

KPI Family Dimension


Productivity Measures employee output (units/ transactions/ dollars), the uptime levels and how employees use their time (salesto-assets ratio, dollar revenue from new customers, sales pipeline).

Quality

Measures the ability to meet and/or exceed the requirements and expectations of the customer (customer complaints, percent returns, DPMO -- defects per million opportunities).

KPI Family Dimension


Profitability Measures the overall effectiveness of the management organization in generating profits (profit contribution by segment/customer, margin spreads).

Timeliness

Measures the point in time (day/week/ month) when management and employee tasks are completed (on-time delivery, percent of late orders).

KPI Family Dimension


Process Efficiency

Measures how effectively the management organization incorporates quality control, Six Sigma and best practices to streamline operational processes (yield percentage, process uptime, capacity utilization).

Resource Utilization

Measures how effectively the management organization leverages existing business resources such as assets, bricks and mortar, investments (sales per total assets, sales per channel, win rate).

KPI Family Dimension


Cost Savings

Measures how successfully the management organization achieves economies of scale and scope of work with its people, staff and practices to control operational and overhead costs (cost per unit, inventory turns, cost of goods).

Growth

Measures the ability of the management organization to maintain competitive economic position in the growth of the economy and industry (market share, customer acquisition/retention, account penetration).

Corporate and Division Scorecard


Sample from GE Lighting Business Group
Level of Organization Corporate Scorecard Financial Increase profit margin Customer Improve customer satisfaction level Improve customer satisfaction level Increase percent of on time delivery Reduce customer complaints per million Internal Process Increase inventory turns Improve internal process Increase inventory turns Improve internal process Increase inventory turns Reduce number of defects per million Improve quality incoming materials Maintain optimum equipment speed Reduce equipment downtime Reduce number of poor solders Reduce number of cracked bulbs Learning & Growth Increase level of employee competency Increase level of employee competency Number of "on the job training" delivered Number of performance coaching session

Division Scorecard

Optimize cost of production Reduce inventory levels Optimize cost of production Increase yields ratio Increase labor productivity Reduce inventory levels

Plant Scorecard

Frontline Employee Scorecard

Reduce waste Reduce overtime Increase production rates

Number of "on the job training" attended Number of performance coaching session attended

The above example shows how the scorecard at corporate level is cascaded to division level, and further to plant level and employee level.

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