Prof. Dr. Dan Dumitru Popescu Balanced Scorecard Prof. Dr. Dan Dumitru Popescu

Main issues What is a Balanced Scorecard? Perspectives of a Balanced Scorecard Benefits of using the Balanced Scorecard Implementation principles Case Study: UNUM Corporation

A. What is a Balanced Scorecard? a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results financial measures by themselves are inadequate for guiding and evaluating the journey that information age companies must make to create future value

B. Perspectives of a Balanced Scorecard View the organization from 4 perspectives: The Learning and Growth Perspective The Business Process Perspective The Customer Perspective The Financial Perspective

B. Perspectives of a Balanced Scorecard

B. Perspectives of a Balanced Scorecard The Learning and Growth Perspective Employee training and corporate cultural attitudes People are a main resource Knowledge workers should be in a continuous learning mode The Business Process Perspective refers to internal business processes carefully designed metrics to determine how well the business is running mission-oriented processes and support processes

B. Perspectives of a Balanced Scorecard The Customer Perspective the importance of customer focus and customer satisfaction poor performance from this perspective is a leading indicator of future decline The Financial Perspective financial-related data Total Quality Management customer-defined quality, employee empowerment measurement-based management and feedback

C. Benefits of using the Balanced Scorecard Communicates Strategic Objectives defines key perspectives that will drive the business to success and measurement means helps align multiple strategies from various divisions and functional units communicates understandable information to all employees on all levels of the organization Makes Strategy Understandable translates the organization’s strategy into understandable goals and objectives provides management with a comprehensive picture of business operations

C. Benefits of using the Balanced Scorecard Assigns Responsibilities every key business driver and sub-measure must have a person assigned who has the responsibility for the performance of such driver Key Measures key measures are aligned to supporting the performance of key drivers of the business Processes management processes (business planning, forecasting, budgeting, performance management, etc.) support the strategy the balanced scorecard provides the link between priority and activity

D. Implementation Principles Gain senior management support Gain consensus on terminology and notation Find your internal sponsors Find the assessment framework & “Measure what matters” Communicate and agree on objectives and targets Align activities and initiatives to objectives and targets. Implement management processes Assess performance periodically Collaborate on opportunities to improve

E. Case Study: UNUM Corporation UNUM Corporation, a risk insurer, developed and implemented a five year balanced scorecard UNUM has about 7,200 employees and operations in US, UK, Canada, Europe, Latin America. focused on internal communication and an innovative compensation scheme developed a balanced set of measures that would reflect the interests of all UNUM’s stakeholder groups 13 senior managers form throughout the corporation developed a set of “balanced” goals and measures that would be meaningful to all employees the chairman told the team that he wanted financial, customer, employee and productivity targets, gave it a budget and, most importantly, his whole support

E. Case Study: UNUM Corporation UNUM’s balanced scorecard consisted of four perspectives: UNUM people Operating effectiveness Customer satisfaction Shareholder value. Each perspective had a vision, quantitative measure and goal. The achievements were time-sensitive The employees were encouraged to “have the mind of a customer and the pride of an owner” by implementing a Stock Option Plan A further compensation mechanism used to focus employees’ attention onto the goal was the annual bonus

E. Case Study: UNUM Corporation by the end of the five year period the company made outstanding improvements in areas concerning all four perspectives and obtained very good financial results the Vice-president of the company commented: “the Balanced Scorecard is an excellent way to focus attention on creating value”.