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- 2. 2www.exploreHR.org You can download this presentation at: www.exploreHR.org Visit www.exploreHR.org for more presentations on HR management and people strategy
- 3. 3www.exploreHR.org Contents :Contents : 1. Corporate Performance Scorecard 2. Strategy Map Framework 3. Four Perspectives in Balanced Scorecard 4. Identifying Key Performance Indicators 5. Strategy Map in Corporate Functions (HR, IT, Finance and Marketing)
- 5. 5www.exploreHR.org Performance Management FrameworkPerformance Management Framework Identifying Defining Measuring Monitoring Reporting KeyKey PerformancePerformance IndicatorsIndicators CompanyCompany strategystrategy Vision Mission Strategy Strategy MapStrategy Map
- 6. 6www.exploreHR.org Three critical components for effective process of performance management Performance Management Infrastructure Performance Management Culture Performance Management Process Performance management cycle is continuous and consistent Culture that is based on performance accountability Logistic support and performance management administration Performance Management ComponentPerformance Management Component
- 7. 7www.exploreHR.org STRATEGY Plan and Execute Monitor and Evaluate Reward and Coach Set Measures and Target Performance Management CyclePerformance Management Cycle
- 8. 8www.exploreHR.org Managing Performance withManaging Performance with Balanced ScorecardBalanced Scorecard Balanced Scorecard is a management tool that provides stakeholders with a comprehensive measure of how the organization is progressing towards the achievement of its strategic goals.
- 9. 9www.exploreHR.org • Balances financial and non-financial measures • Balances short and long-term measures • Balances performance drivers (leading indicators) with outcome measures (lagging indicators) • Leads to strategic focus and organizational alignment. Managing Performance withManaging Performance with Balanced ScorecardBalanced Scorecard
- 10. 10www.exploreHR.org 4 Perspectives in Balanced Scorecard4 Perspectives in Balanced Scorecard If we succeed, how will we look to our shareholders? Financial Perspective To achieve our vision, how must we look to our customers? Customer Perspective To satisfy our customers, which processes must we excel at? Internal Perspective To achieve our vision, how must our organization learn and improve? Learning & Growth Perspective The Strategy
- 11. 11www.exploreHR.org Strategy and Balanced ScorecardStrategy and Balanced Scorecard Mission – Why We Exist Vision – What We Want to Be Values – What’s Important to Us Strategy : Our Game Plan Strategy Map : Translate the Strategy Balanced Scorecard : Measure and Focus Strategic Outcomes Satisfied Shareholders Delighted Customers Excellent Processes Motivated Workforce
- 12. 12www.exploreHR.org • The strategy map framework is presented in the following slides. • This framework describes the types of strategic target that should be presented in each perspective, namely the financial perspective, customers, internal business process, and learning & growth perspective. Strategy Map FrameworkStrategy Map Framework
- 13. 13www.exploreHR.org Cost Efficiency Long-term Shareholder Value Revenue Growth Price Availability BrandServiceQuality Operations Management Processes Human Capital Customer Management Processes Innovation Processes Regulatory and Social Processes Organization Capital Information Capital Strategy Map FrameworkStrategy Map Framework Financial Customer Internal Process Learning & Growth
- 14. 14www.exploreHR.org Financial PerspectiveFinancial Perspective • In private companies, the financial perspective is the main objective (ultimate goal) – without having to sacrifice the interests of other relevant stakeholders (community, environment, government, etc.) • In the financial perspective, the strategic goal is the long-term shareholder valuelong-term shareholder value. This goal is driven by two factors, namely : revenue growthrevenue growth and costcost efficiency.efficiency.
- 15. 15www.exploreHR.org Long-term Shareholder Value Revenue Growth Improve Cost Structure Increase Asset Utilization Cost Efficiency Strategic Objectives in FinancialStrategic Objectives in Financial Expand Revenue Opportunities Enhance Customer Value
- 16. 16www.exploreHR.org Customer PerspectiveCustomer Perspective • This perspective is very instrumental, because without customers, how can a company survive? • Customer perspective covers the following elements: • Customer acquisition • Customer retention • Customer profitability • Market share • Customer satisfaction
- 17. 17www.exploreHR.org Price Availability BrandServiceQuality Customer AcquisitionCustomer Acquisition Customer SatisfactionCustomer Satisfaction Customer RetentionCustomer Retention Customer ProfitabilityCustomer Profitability Market ShareMarket Share Strategic Objectives in CustomerStrategic Objectives in Customer
- 18. 18www.exploreHR.org Internal Process PerspectiveInternal Process Perspective • This perspective reflects the processes in key business that should be optimized in order to meet the needs of the customers. • There are four main themes in this perspective, namely: • Operations Management Process • Customer Management Process • Innovation Process • Regulatory and Social Process
- 19. 19www.exploreHR.org Operations Management Processes Customer Management Processes Innovation Processes Regulatory and Social Processes Processes that produce and deliver products and services Processes that enhance customer value Processes that create new products and services Processes that improve communities and the environment • Supply • Production • Distribution • Selection • Acquisition • Retention • Growth • New Ideas • R&D Portfolio • Design/ Develop • Launch • Environment • Safety & Health • Employment • Community Strategic Objectives in Internal ProcessStrategic Objectives in Internal Process
- 20. 20www.exploreHR.org Learning & Growth PerspectiveLearning & Growth Perspective • This perspective reflects the capability that a company should have, namely: • Human Capital • Organization Capital • Information Capital • This perspective shows us that good human resource development system, organizational system and information system forms a solid foundation for improving company performance.
- 21. 21www.exploreHR.org Human Capital Organization Capital Information Capital • Skills • Knowledge • Attitude • Systems • Database • Networks • Culture • Leadership • Organization Development Strategic Objectives inStrategic Objectives in Learning & GrowthLearning & Growth
- 22. 22www.exploreHR.org Strategy Map TemplateStrategy Map Template • The following slide displays the strategy map template comprising of four perspectives : financial, customer, internal business process, and learning & growth.
- 23. 23www.exploreHR.org Improve Cost Efficiency Enhance Long-term Shareholder Value Increase Revenue Growth Enhance Brand Image Build High Performance Products Achieve Operational Excellence Develop Strategic Competencies Drive Demand through Customer Relation Management Manage Dramatic Growth through Innovation Implement Good Environmental Policy Build Learning Culture Expand Capabilities with Technology Strategy Map TemplateStrategy Map Template Financial Customer Internal Process Learning & Growth Expand Market Share
- 25. 25www.exploreHR.org Vision Mission and Values Strategy Finance Customer Internal Business Process HR Development Key Performance Indicators Key Performance Indicators Key Performance Indicators Strategic ObjectivesStrategic Objectives KPI = Measurement or indicator that provides information on how far we have succeeded in achieving the strategic objectives Key Performance Indicators (KPI)Key Performance Indicators (KPI)
- 26. 26www.exploreHR.org • The measure of success must show clear, specific and measurable performance indicators. • The measure of success should be declared explicitly and in detail so that it is clear what is being measured. • Costs to identify and monitor the measure of success should not exceed the value that will be known from the measurement. Guidelines in Formulating the KPIGuidelines in Formulating the KPI KPI GuidelinesKPI Guidelines
- 27. 27www.exploreHR.org Relevant to the Strategic Objective Does KPI have a linkage with the strategic objectives? Controllable Are the KPI achievements still under control? Actionable Can any action be taken to improve the performance? Simple Is the KPI easy to explain? Credible Is the KPI not easy to manipulate? KPI GuidelinesKPI Guidelines
- 28. 28www.exploreHR.org KPIKPI Family DimensionFamily Dimension Productivity Measures employee output (units/ transactions/ dollars), the uptime levels and how employees use their time (sales-to- assets ratio, dollar revenue from new customers, sales pipeline). Measures the ability to meet and/or exceed the requirements and expectations of the customer (customer complaints, percent returns, DPMO -- defects per million opportunities). Quality
- 29. 29www.exploreHR.org KPIKPI Family DimensionFamily Dimension Profitability Measures the overall effectiveness of the management organization in generating profits (profit contribution by segment/customer, margin spreads). Measures the point in time (day/week/ month) when management and employee tasks are completed (on-time delivery, percent of late orders). Timeliness
- 30. 30www.exploreHR.org KPIKPI Family DimensionFamily Dimension Process Efficiency Measures how effectively the management organization incorporates quality control, Six Sigma and best practices to streamline operational processes (yield percentage, process uptime, capacity utilization). Measures how effectively the management organization leverages existing business resources such as assets, bricks and mortar, investments (sales per total assets, sales per channel, win rate). Resource Utilization
- 31. 31www.exploreHR.org KPIKPI Family DimensionFamily Dimension Cost Savings Measures how successfully the management organization achieves economies of scale and scope of work with its people, staff and practices to control operational and overhead costs (cost per unit, inventory turns, cost of goods). Measures the ability of the management organization to maintain competitive economic position in the growth of the economy and industry (market share, customer acquisition/retention, account penetration). Growth
- 32. 32www.exploreHR.org KPI Category DimensionKPI Category Dimension DirectThe actual raw data value as measured (e.g., sales volume). Percent The comparison of the changes in performance of one value relative to the same value at a different time, geography, etc. (e.g., percentage change in sales vs. last year).
- 33. 33www.exploreHR.org KPI Category DimensionKPI Category Dimension Simple Ratio The comparison of one value relative to another to provide a benchmark for comparison of performance (e.g., average sales per day). Index A combination of several separate measures added together that result in an overall indicator of performance (e.g., (company sales growth)/ (industry sales growth) for a specific geography).
- 34. 34www.exploreHR.org KPI Category DimensionKPI Category Dimension Composite Average The addition of the weighted averages of several similar measures that result in an overall composite indicator of performance (e.g., customer satisfaction composite is mixture of results from surveys, focus groups and product returns). Statistics Multiple measures such as mean, variance, standard deviation and variance that capture the spread and distribution of the performance measures (e.g., sales distribution by demographics, geography, channel).
- 35. 35www.exploreHR.org Strategy Map for Corporate Functions (HR, IT, Finance and Marketing)
- 36. 36www.exploreHR.org Vision Mission Strategy Integration between Corporate andIntegration between Corporate and Division/DepartmentDivision/Department Corporate Scorecard Division Scorecard The Division Scorecard is built by referring to the corporate scorecard
- 37. 37www.exploreHR.org Financial Customer Internal Process Learning & Growth Corporate Finance Corporate Marketing Production Supply Chain R & D Corporate HR Info Technology Corporate and Division ScorecardCorporate and Division Scorecard
- 38. 38www.exploreHR.org Corporate and Division ScorecardCorporate and Division Scorecard • Division Scorecard is formulated by looking at the four perspectives in Corporate Scorecard. • As shown in the previous slides, the learning & growth perspective provides guidelines for developing scorecard at the Human Resource and IT divisions, while the internal process perspective provides guidelines for developing scorecard at the supply chain division or R&D.
- 39. 39www.exploreHR.org Corporate and Division ScorecardCorporate and Division Scorecard Sample from GE Lighting Business Group Level of Organization Financial Customer Internal Process Learning & Growth Corporate Scorecard Increase profit margin Improve customer Increase inventory turns Increase level of satisfaction level Improve internal process employee competency Division Scorecard Optimize cost of production Improve customer Increase inventory turns Increase level of Reduce inventory levels satisfaction level Improve internal process employee competency Plant Scorecard Optimize cost of production Increase percent of Increase inventory turns Number of "on the Increase yields ratio on time delivery Reduce number of defects job training" delivered Increase labor productivity Reduce customer per million Number of performance Reduce inventory levels complaints per million Improve quality incoming coaching session materials Maintain optimum equipment speed Frontline Employee Reduce waste Reduce equipment downtime Number of "on the Scorecard Reduce overtime Reduce number of poor job training" attended Increase production rates solders Number of performance Reduce number of cracked coaching session bulbs attended The above example shows how the scorecard at corporate level is cascaded to division level, and further to plant level and employee level.
- 40. 40www.exploreHR.org Division Strategy Map TemplateDivision Strategy Map Template • The strategy map for HR Division, Information Technology Division, Finance Division, and Marketing Division are presented in the following slides.
- 41. 41www.exploreHR.org Optimize HR Efficiency Drive Long term Shareholder Value Enhance People & Organizational Effectiveness Achieve HR Process Excellence Develop Strategic & Functional HR Competencies Build Strategic Employee Competencies Drive Organizational Performance Enhance Technology for HR Create Climate for HR Action HR Strategy Map TemplateHR Strategy Map Template Financial Customer HR Internal Process Learning & Growth Create Positive Work Environment Provide Quality HR Service Provide High Performance People
- 42. 42www.exploreHR.org Optimize IT Efficiency Drive Long term Shareholder Value Enhance IT Impact on Enterprise Outcome Maintain a Reliable IT Infrastructure Develop Strategic & Functional IT Competencies Develop Effective Decision Support System Propose and Deliver Transformational Applications Enhance IT Tools that Enhance the IT Function Promote Customer- focused Culture IT Strategy Map TemplateIT Strategy Map Template Financial Customer IT Internal Process Learning & Growth Deliver Consistent, High Quality IT Service Provide Business Units with Innovative IT Solutions
- 43. 43www.exploreHR.org Optimize Financial Efficiency Drive Long term Shareholder Value Enhance Finance Effectiveness on Enterprise Outcome Achieve Finance Process Excellence Develop Strategic & Functional Finance Competencies Develop Financial Information to Improve Decision Making Ensure Compliance with Regulatory Requirements Use Technology to Improve Financial Information Delivery Finance Strategy Map TemplateFinance Strategy Map Template Financial Customer Finance Internal Process Learning & Growth Deliver Responsive & Efficient Finance Operations Provide Clear & Reliable Required Disclosure Promote Customer- focused Culture
- 44. 44www.exploreHR.org Optimize Marketing Efficiency Drive Long term Shareholder Value Increase Sales Revenue Develop Innovative Marketing Communication Program Develop Strategic & Functional Marketing Competencies Develop Marketing Business Intelligence Accelerate New Product Development Ideas Enhance Technology for Marketing Foster Creative Thinking & Innovative Solutions Marketing Strategy Map TemplateMarketing Strategy Map Template Financial Customer Internal Process Learning & Growth Create Satisfied and Loyal Customers Enhance Brand Image Develop Effective Customer Relation Management
- 45. 45www.exploreHR.org Recommended Further Readings: 1. Robert Kaplan and David Norton, Strategy Map : Converting Intangible Assets into Tangible Outcomes, HBS Press 2. Robert Kaplan and David Norton, Alignment : Using the Balanced Scorecard to Create Corporate Synergies, HBS Press
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