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BALANCED SCORECARD 2 b. Winning strategies part 1 TEAM A2 Bo Kongthaisereekul Janet Ho Veronica Mwikwabhi Edelen Melo-Ortega Cresna Ponthy James Byrne 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 objectives Measure Performance and Set Strategy: • Effective organizational performance management • Effective 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. BSC – LEARNING AND GROWTH PERSPECTIVE Learning & growth perspective. As enablers to other 3 perspectives (fundamental vehicle). It helps to close the gap to ensure sustainable performance in the future. 1. 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 – INTERNAL BUSINESSS PROCESS PERSPECTIVE Internal business process. Efficient the process via: 1. 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 – CUSTOMER PERSPECTIVE 1. 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 – FINANCIAL PERSPECTIVE Financial measures. Result focus on bottom-line, indicators: 1. 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. Advantages • Strategy alignment with 3 primary stakeholders: Shareholders, Customers and Employees • Both financial and non-financial criteria • Allows 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 outcome • Acts 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 stakeholder • Requires a long thought process to develop • Trade-offs between different measures is ignored even when in direct confliction • Should 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 recognised • Empowerment 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 method Hoshin & BSC (Main differences) 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. 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.761-775 Witcher, B., (2002), ”Hoshin kanri: a study of practice in the UK”, Managerial Auditing Journal, Vol. 17(7), pp.390-396 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) The vision statement 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: (Niven, 2002), ViSiON Key points · Concise (should be simple, powerful and compiling) · Appeals to all stakeholders · Consistent to mission and values · Verifiable · Feasible · Inspirational (Niven, 2002), WaveRider’s Strategic Objectives The VISION To be the preferred boats provider in our market(s) achieving a large market share by providing: Exceptional valueSafe and Innovative products FINANCIAL Strategy 6 (Key Words) Customers Delightment CUSTOMER Safety Customer Service Post-sale Innovation (R&D) A fun, positive and profitable experience for all stakeholders Continuous Improvement Service Pal's Sudden Service. (2001 ). Retrieved February 10, 2011, from http://www.baldrige.nist.gov/PDF_files/Pals_Application_Summary.pdf INTERNAL GROWTH Kaplan , R., & Norton, D. (1993, September-October). Putting the Balanced Scorecard to Work. HARVARD BUSINESS REVIEW , p.5. Wave Rider - BSC Financial L&G Customer IB Process Learning & Growth Deployment Objects Staff training Employee satisfaction Measures Targets Initiatives Y1 Y2 Y3 Y4 Y5 length of time for training (hours) 150 150 120 120 120 Training Program % of satisfied employee 60% 70% 80% 90% 95% Welfare & Benefits 2 3 3 4 5 collect by interviews and surveys R & D and Innovation number of patents compared with competitors Research on new product Internal Business Process Deployment Objects Measures Targets Y1 Production efficiency of New Product Production Level Y2 Y3 Initiatives Y4 Y5 Lead time Staff Training SeaHorse ↓ 20% 20% 15% 15% 12% SeaSpray ↓ 60% 50% 45% 35% 33% SailAway ↑ 20% 30% 40% 50% 55% stock/ amount of total products 27% produced 25% 20% 18% 15% Reorganise Production Plan (% of each product) Reduce stock level of Current Products Improve Finance and HR Departments Reorganise Production Plan 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 % number of new customers relative to total current customer 10% 15% 20% 30% 40% Marketing Campaign 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 Increase No. of Customers Competitive price Financial Deployment Objects Measures Targets Y1 Y2 Y3 Y4 Y5 Gross Margin 46.47% 48% 49% 50% 51% Return on Sales 5.46% 6% 6.50% 8% 10% ROCE 7.99% 8% 9% 11% 14% Administration costs (admin. cost/GP) 57% 57% 55% 53% 50% Material costs 51% 50% 49% 46% 45% Profitable growth Maximise returns Manage operating costs Cause & Effect Financial Perspective Customer Perspective Gross Margin Return on Sales New product Quality-Sail Customers Delightment Away Return on Capital Employed Administration Costs Material Costs Increase No. of Customers Competitive price Shipment (Delivery) Increase Market Share Reduce Stock Levels of Current Products NPI New Product Introduction Improve Finance and HR Departments Internal Business Process Productivity Efficiency Production Level Marketing-Sales (Efficiency) Learning & Growth Staff training Education Improve Employee Satisfaction R&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. Reference 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.761-775 Witcher, B., (2002), ”Hoshin kanri: a study of practice in the UK”, Managerial Auditing Journal, Vol. 17(7), pp.390-396 Norreklit H. (2000), The balance on the balanced scorecard - a critical analysis of some of its assumptions, Management Accounting Research, 11, pp. 65–88. 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