Week 14 - Chapter 2 - The Balanced Scorecard

• Communicate the company's strategic objectives.
• Motivate employees to help the company achieve its strategic objectives.
• Evaluate the performance of managers, employees, and operating units.
• Help managers allocate resources to the most productive and profitable opportunities.
• Provide feedback on whether the company is making progress in improving processes and meeting the expectations of customers and shareholders.

It measures organizational performance across four different but linked perspectives that are derived from the organization's mission, vision, and strategy.

• Financial: How is success measured by our shareholders?
• Customer: How do we create value for our customers?
• Process: At which processes must we excel to meet our customer and shareholder expectations?
• Learning and growth: What employee capabilities, information systems, and organizational capabilities do we need to continually improve our processes and customer relationships?

To increase the ROE

• Retain customers
• Deliver products on time
• Offer competitive prices

• Percentage of repeat customers
• Growth in customers' salaries
• % deliveries made on time
• Prices compared to competitors

• Reduce process cycle times
• Improve process quality

• % improvement in cycle times
• Product defect rates
• Process yield improvement

Develop employees' process improvement skills

% employees trained and certified in process improvement capabilities.

• The company's advantage in the marketplace.
• The scope for the strategy.

What the company is attempting to accomplish with its strategy.

Descriptions in more precise terms how success in achieving an objective will be determined.

A picture, used to illustrate the causal relationships among the strategic objectives across the four balanced scorecard perspectives.

• Productivity improvements (i.e., improve cost structure & increase asset utilization)
• Revenue growth (i.e., enhance existing customer value & expand revenue opportunities)

• Lowest total cost (i.e., Wal-Mart, McDonald's)
• Product leadership (i.e., Apple, Mercedes)
• Complete customer solutions (i.e., IBM, Nordstrom sales staff)

Basic, day-to-day processes that product products and services and deliver them to customers.

• Achieve superior supplier capability.
• Improve the cost, quality, and cycle times of operating (production) processes.
• Improve asset utilization.
• Deliver goods and services responsively to customers.

Expand and deepen relationships with targeted customers.

• Acquire new customers.
• Satisfy and retain existing customers.
• Generate growth with customers.

Develop new products, processes, and services, often enabling the company to penetrate new markets and customer segments.

Processes that earn the company the right to operate in the communities and countries in which they produce and sell.

• Human resources
• Information technology (IT)
• Organization

• Senior management is not committed.
• Scorecard responsibilities do not filter down.
• The solution is over-designed, or the scorecard is treated as a one-time event.
• It is treated as a systems or consulting project.

How to link everday operation objectives to corporate strategy?

A low patient consensus combined with higher costs (of operating a new facility and the introduction of managed care all negatively affected the hospital's financial situation.

• Prior to mid-1980s "fee-for-service" basis
• Rise of managed care (with reduced fee-for-service) and "capitation" payment system
• General Hospital was capturing the bulk of "new business"
• Substantial excess capacity (low "patient census" at St. Elsewhere

"Establish an environment that promotes customer satisfaction through personal attention and quality service"

• Changed patient mix (greater proportion of patients form the more affluent, and growing, suburban locations)
• Increased patient volume