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Introduction to Balanced Scorecard Introduction to BPR

Introduction to Balanced Scorecard Developed by Robert Kaplan (Harvard) and David Norton early 90s.. The balanced scorecard is a strategic management system (not only a measurement system) Internal assessment, improvement and reporting system Key is the link to the strategic plan System to turn strategy into action

The balanced scorecard retains traditional financial measures The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation. Kaplan & Norton

Balanced Scorecard Enables organizations to clarify their vision and strategy and translate them into action It provides feedback about both the internal business processes and external outcomes Continuous improvement of strategic performance and results.

The balanced scorecard suggests that we view the organization from four perspectives: The learning growth perspective The business process perspective The customer perspective The financial perspective Develop metrics, collect data and analyze relative to each of these perspectives

Learning and Growth Perspective Development of the human resources This perspective supports the concept that people are a company's main resource and most valuable asset metrics defined for this perspective must measure various aspects of employee improvement, growth, and satisfaction. personnel training and improvement cultivation of corporate culture organizational development, including the nurturing of corporate experts, gurus, and mentors setting up of fast and efficient knowledge transfer infrastructure opening up of communication lines among personnel

Business Processes Perspective Internal business processes. These metrics, which measure various aspects (efficiency, speed, quality, etc.) of how well the company's products, services and internal support systems are produced or delivered

The customer perspective Focus on customer satisfaction.  Rigorous data analysis to understand the customer Difficult to reflect the true sentiment of the customer. 

Financial Perspective Indicates if the transformation of strategy leads to economic success Define the financial performance that the strategy is to achieve Revenue growth Cost reduction Cost reduction from energy efficiency Measures the effectiveness of the other perspectives

Characteristics of good metrics reflect the true present status of the company from many different perspectives provide constructive feedback to various company processes, leading to continuous improvement show trends in company performance over time, facilitating adjustments to changes quantify many things, making analyses more accurate and solutions more effective.

Close the loop once the metrics have been defined and implemented scorecard data becomes available, follow-through becomes imperative movements in the metrics must be analyzed to identify their causes. Causes that produce positive (negative) changes must be sustained or enhanced (eliminated)

What is BPR? Reengineering is the fundamental rethinking and redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed. (Hammer & Champy, 1993)

BPR is Not? Automation Downsizing Outsourcing

BPR Versus Process Simplification Incremental Change Process-Led Assume Attitudes & Behaviors Management-Led Various Simultaneous Projects Process Reengineering Radical Transformation Vision-Led Change Attitudes & Behaviors Director-Led Limited Number of Initiatives (Source Coulson-Thomas, 1992)

BPR Versus Continuous Improvement Incremental Change People Focus Low Investment Improve Existing Work Unit Driven Process Reengineering Radical Transformation People & Technology Focus High Investment Rebuild Champion Driven

What is a Process? A specific ordering of work activities across time and space, with a beginning, an end, and clearly identified inputs and outputs: a structure for action. (Davenport, 1993)

What is a Business Process? A group of logically related tasks that use the firm's resources to provide customer-oriented results in support of the organization's objectives

Why Reengineer? Customers Competition Demanding Sophistication Changing Needs Competition Local Global

Why Reengineer? Change Technology Customer Preferences

Why Organizations Don’t Reengineer? Complacency* A feeling of contentment or self-satisfaction, especially when coupled with an unawareness of danger, trouble, or controversy. An instance of contented self-satisfaction. *www.dictionary.com Political Resistance New Developments Fear of Unknown and Failure

Performance BPR seeks improvements of Cost Quality Service Speed

Origins Scientific Management. FW Taylor (1856-1915). Frederick Herzberg - Job Enrichment Deming et al - Total Quality Management and Kaizen In Search of Excellence (Peters and Waterman) Value-Added Analysis (Porter).

Key Characteristics Systems Philosophy Global Perspective on Business Processes Radical Improvement Integrated Change People Centred Focus on End-Customers Process-Based

Systems Perspective Feedback Inputs Transformation Outputs Environment

Process Based Added Value Customer-Led BPR Initiatives must add-value over and above the existing process Customer-Led BPR Initiatives must meet the needs of the customer

Radical Improvement Sustainable Stepped Approach Process improvements need to become firmly rooted within the organization Stepped Approach Process improvements will not happen over night they need to be gradually introduced Also assists the acceptance by staff of the change

Integrated Change Viable Solutions Balanced Improvements Process improvements must be viable and practical Balanced Improvements Process improvements must be realistic

People-Centred Business Understanding Empowerment & Participation Organizational Culture

Focus on End-Customers Process improvements must relate to the needs of the organization and be relevant to the end-customers to which they are designed to serve