SCORECARD STEP-BY-STEP By : Paul R. Niven Measures For Financial Perspective “ We start with the destination. What are we trying to achieve?... If you look at the logic of the Scorecard, the arrows all end up with financials.” Presented To: Prof. Dr. Ahmed Fahmy Galal Presented By : Motaz Moustafa

Issues Relating To Financial Measures They are not consistent with today’s business environment. Financial measures provide a great “rearview mirror”. Long-term value-creating activities may be compromised by short- term financial metrics. Financial measures provide little in guidance employees in their day-to-day actions. A well-constructed Balanced Scorecard is not complete without financial measures of performance. By using the Balanced Scorecard an organization has the opportunity to mitigate, if not eliminate entirely, many of the issues related to financial measures.

What type of Financial Measures should we Choose? Not every organization will choose financial measures relating to growth, profitability, or value. Some, may choose indicators of risk management to complement other financial measures. As with all Balanced Scorecard measures, the key is alignment to one’s strategy.

MEASURES FOR THE CUSTOMER PERSPECTIVE Customer SatisfactionMarket ShareCustomer Profitability If you look closely at these measures, they all reflect a bias toward actions already taken, and hence are what would be described as lagging indicators of performance. While each of these indicators is valuable, their results will reveal little until we know what actually drives their performance. In other words, what are their leading indicators?

Using Your Value Proposition to Determine Leading Indicators To develop a customer value proposition, many organizations choose one of three “disciplines” articulated by Treacy and Wiersema in The Discipline of Market Leaders.

Other Sources of Customer Measures Once you have developed financial objectives and measures, ask yourself how they translate into customer requirements. Financial objectives and measures. The Internet is an incredibly powerful medium for spreading customer perceptions about your products and services, Take advantage of this opportunity by listening to what your customers have to say about you, and then proactively defining yourself. The customer’s voice. Any point at which a customer comes in contact with a business defines a moment of truth by mapping those moments we can isolate your differentiating features. Moments of truth.

Cont.: Other Sources of Customer Measures Retailer They may offer shopping over the Internet, in retail stores, or by catalog, Each of these channels has specific processes and will entail different performance measures. Look to your channels. Economy is undergoing a shift to experiences in which every business is a stage and memorable events must be created for customers. Work from the customer experience. Companies should measure CRM with a balanced Scorecard. Your customer perspective should contain measures that track the effectiveness of your considerable investment in customer relationship management programs. Customer relationship management (CRM) initiatives.

What Is A “Lag” Measure And What Represents “Leading” Performance? Every measure is in effect “lagging “because it is historical in nature. We could argue the semantics of this topic forever, but in the end it comes down to choosing measures and asking yourself, “What drives this measure?” Whenever you choose one measure and can hypothesize a relationship with a related metric you believe drives the performance of the first measure, you have determined a lag and lead relationship.

MEASURES FOR THE INTERNAL PROCESS PERSPECTIVE To achieve our customer objectives, and ultimately our financial objectives, we must now develop performance measures to track the key internal processes and activities that support our customer value proposition. Firms will focus on the internal processes supporting their value proposition, but cannot simply ignore other supporting processes. the appropriate balance should be maintained. Let’s examine each of the value propositions and determine which internal processes must be closely monitored to ensure success.

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