1. Bench Marking & Balanced Score CardBy
CA. Pramod Prabhu. S.H.,
B.Sc, P.G.D.B.A., A.C.A, C.I.S.A (U.S.A)

2. BSC - Meaning
Is a set of financial & non financial measures relating to a company’s critical success factors
It provides a balance which supports progress against predetermined objectives, without sub optimization
This concept was developed by Prof. Robert Kaplan of Harvard Business school & David Norton
This has been adopted by a growing No. of organisations as a means to effectively manage their performance & strategy. BSC being a new performance measurement concept, retains the characteristics of traditional performance measurement techniques
It’s main objective is to provide a comprehensive framework for translating a firm’s strategic objectives into a coherent set of performance measures

3. BSC - Advantages
Wholistic Approach: Brings strategy & vision as the centre of management focus. It helps companies to assess overall performance, improve operational procedures & enable management to develop better plans for improvements. It provides management with a comprehensive picture of business operations
Overall Agenda: Brings together in a single report, various aspects like customer orientation, shortening the response time, improving quality etc. of a competitive agenda
Objectivity: Emphasizes the need to provide the user with a set of information addressing all relevant areas of performance in an objective & unbiased manner
MBO: facilitates communication & understanding of business goals & strategies at all levels of the firm, which enables MBO

4. BSC - Advantages
Feedback & Learning: By providing strategic feedback & learning, it guards against sub ordination. It emphasizes a combination of traditional & non-traditional performance measures
System approach: Helps senior management to consider all important performance measures together & allows them to see whether an improvement in one area has been achieved at the expense of another.

5. Major components of a BSC
A well designed BSC combines financial measures of past performance with measures of the firm’s drivers of future performance
The specific objectives & measures of a BSC are derived from a firm’s vision & strategy
Generally the BSC has following perspectives from which a company’s activities can be evaluated:
a) Customer perspective: How customers see us?
Here the business is viewed through eyes of customers, measuring & reflecting upon customer satisfaction
b) Internal perspective: In what processes must the firm excel?
The focus is on key internal processes that drive the business
c) Innovation & learning perspective: Can we continue to improve & create value. Is a measure of potential financial performance concentrating on organisation’s people & infrastructure

6. Major components of a BSC
d) Financial Perspective – Value to shareholders:
It measures the results that the organisation delivers to its stakeholders
Perspective
Goals & Financial Measures
Customer
Goal: Price, delivery, Quality, Support
Perf Measures: Competitive Price, No. of on time deliveries, lead time for delivery, quality vis –a- vis industry standards, No. of defects, Response time, customer satisfaction surveys etc.
Internal Business
Goal: Manufacturing process efficiency, Sales penetration, New product introduction
Perf Measures: Manf cycle time, Annual sales Vs Plan sales, Increase in customers , rate of new product introduction per Q

7. Major components of a BSC
Perspective
Goals & Financial Measures
Innovation & Learning
Goal: Tech/Cost/Market leadership, R & D
Perf Measures: Product performance vis a vis competitors, No. of new products with patented technology, Mnf OH per Q as a % of sales, rate of decrease in cost per Q, Market share in all major markets, No. of new products & patents
Financial
Goal: Sales, Cost of sales, Profitability, Prosperity
Perf Measures: Revenue & Profit growth, Extent to which the cost remained fixed/decreased each year, ROCE, Cash flow

8. Benchmarking
Is the process of identifying & learning from best practices anywhere in the world. Is a powerful tool for continuous performance improvement.
It involves comparing the firm’s products, services or activities against other best performing organisations to find out how the product/service or activity can be improved & ensure that improvements are implemented
Types of Benchmarking:
1. Competitive: Comparison of own products, processes & business results with that of competitors. Usually done through associations of third parties
2. Strategic: LT strategies, viz. new product/service/core competencies development etc. are compared with those of best practice organisation
3. Global: The distinctions in international culture, business processes, trade practices across companies are bridged & their impact for business process improvements are understood & utilised

9. Benchmarking
4. Process: Comparison of firm’s critical business processes & operations against best practice organisation performing similar work/service
5. Functional: Used when businesses draw benchmarking partners from different business sectors/ areas of activity to find ways to improve similar functions/work processes
6. Internal: Involves seeking BM partners within same firm, say, business units located in different areas
7. External: Involves seeking help of outside firm that are known to be best in class
BM can also be categorized into
i. Intra-group BM: A group of companies in same industry agree that similar units within co-operating companies will pool & share data on their processes. The processes are benchmarked against each other at /near operational level

10. Benchmarking
ii. Inter – Industry BM: A non competing business with similar process is identified & asked to take part in a BM exercise. Ex. Publisher of school books approaching a publisher of university level books to establish a BM relationship

11. Benchmarking - Stages 1. Planning:
Determining BM goal statement, Identify best performance, establish BM/process improvement team, define relevant BM measures
2. Collection of data & info:
3. Analysis of findings based on data collected
4. Formulation & implementation of recommendations
5. constant monitoring & reviewing

12. Benchmarking – Pre requisites
1. Commitment: Support of senior managers & commitment towards continuous improvements
2. Clarity of objectives: BM teams should have a clear picture of their performance & other BM measures before approaching others
3. Appropriate scope: Scope of work should be appropriate in light of objectives, resources, time available & experience level of people involved
4. Resources: Sufficient for timely completion of project
5. Skills: & competencies as required for the process
6. Communication: Stakeholders, staff & their representatives should be kept informed of the reasons for BM

13. Benchmarking – Difficulties in Implementation
1. Time consuming: Significant staff time & company resources may be wasted benchmarking non critical functions
2. Lack of management support: Direct involvement of top brass required
3. Resistance from employees:
4. Paper goals: Goal may become not to improve processes but to match best practice at any cost
5. Copy Paste attitude: Key element in BM is adaptation of a best practice to tailor it to company’s needs & culture

14. Benchmarking code of conduct
To contribute to efficient, effective & ethical BM, individuals agree for themselves & their organisation to abide by the following principles for BM with other organisations:
1. Principle of legality: Avoid discussions/actions that may result in restraint of trade
2. Principle of exchange: Be willing to provide same level of info that you request
3. Principle of confidentiality: BM info should not be communicated outside the BM partners
4. Principle of use: Use the info only for operations improvement within the BM partners
5. Principle of first party contact: Initiate contacts only through a BM contact designated by the partner company

15. Benchmarking code of conduct
6. Principle of third party contact: obtain permission of the person concerned before providing their name in response to a contact request
7. Principle of preparation: Through adequate preparation at each process stage, demonstrate commitment to the efficiency & effectiveness of BM process