Balanced Scorecards For The Busy Business Person

Balanced Scorecards
for the Busy Business
Person
Presented by
Warren J. Rutherford
The Executive Suite

What is a Balanced
Scorecard?
 A strategic planning & management system.
 Used to align business activities to -
 business vision and strategy,
 improve internal and external communication,
 monitor performance against goals.

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Why is it used?
 1978 NYU Stern School
of Business Study
(5,000 companies)
 95% correlation
between balance sheet Balance Sheet

and business value
Intangible

95%


Why is it used?
 2005 NYU Stern School of
Business Study
 28% correlation between
balance sheet and business
value
 Intangibles – the 72% 28%
Balance Sheet

 Intellectual Property Intangible
 Strategy
 Brand
 Systems 72%
 Processes
 Access to Capital
 Off balance sheet items
 Customer reputation
 Executive Team


Why is it used?
 Financial measures not
enough
 Need to measure value
from knowledge -
centric activities and
perspectives

*Balanced Scorecard Institute


What does it measure?
Perspectives in each company concerning –
 Learning & Growth,

 Business Process,

 Customer, &

 Financial.


Why is that important to
you?
 Only 5% of a workforce understands their
company’s strategy.
 Only 15% of senior management spends more
than 1 hour a month defining strategy and
aligning operations to it.
 Only 25% have their operations aligned to the
strategy.
 Only 40% align company from budget to
strategy.
David Norton, Balanced Scorecard Report, Vol. 3, No. 5 (Sep/Oct 2001)


The Questions companies have
to ask themselves today are:

 What is it that makes us valuable and
profitable?

 How can we identify, quantify, and measure
the intangible assets so that we can increase
value and our performance?


Learning & Growth
Perspective
 Employee training.
 Company cultural attitudes toward individual &
corporate self-improvement.
 Workforce alignment -
 Person/future fit (selecting for the long-term
contributions of a person to the business’ long-term
strategy).
 Formal processes and procedures and professional
standards created the best, long-term workforce
alignment
 Family-like community created the best, long-term
workforce alignment.

Business Process Perspective
 Internal processes w/ metrics looking at -
 How well is the business running?
 Do products conform to customer requirements
(mission)?
 What are your major processes?
 Are they optimized – tasks, time, money?
 Who has participated in their review?


Customer Perspective
 Customer focus.
 Customer satisfaction.
 Analyze by kinds of customers.
 Analyze the kinds of processes that we use
to provide our products & services to those
different customer groups.


Financial Perspective
 Look at change from prior year & objective for
following year.
 Analyze significant indicators -
 Revenues,
 Profit,
 COGS,
 Gross Margin,
 Operating Expense,
 Inventory, &
 Return on Assets, etc.


What do you put in the
Scorecard?
 Objectives,
 Measures,
 Targets, &
 Initiatives.


What are some ways to
start?
 There are many ways to start, and there are
programs available to assist.
 Develop your vision for a multi-year period .
 Ensure your mission is in alignment with
customer needs.
 Develop strategies that complement your
vision and mission.


What are some ways to
start?
 Develop objectives that seek annual
achievement of these strategies.
 Develop action plans that set and track
targets for accomplishment of your
initiatives.
 These can be developed by project, by
section, division, department, by company.
 Report and discuss monthly to reinforce
accountability.

Example
 The following illustrate an approach by The
One Page® Business Plan to illustrate -
 Development of a Strategy,
 Objectives by the 4 perspectives, and
 Action plans for 1 quarter.


Summary
 Establish benchmarks that are manageable.
 Manage the data.
 Use the data to improve collaboration,
communication, & accountability toward
vision, mission, and strategy.


Thank you!
For more information -

Warren J. Rutherford
Owner
The Executive Suite
129 Airport Road
Hyannis, MA 02601
wjr@theexecutivesuite.com
www.theexecutivesuite.com
508-778-7700

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