Strategy can be described as a series of cause and effect relationships.
Strategy provides a “line of sight” from strategic to operational activity working on the “right” things.
Only 5% of a Workforce tends to understand their company’s strategy.
85% of Executive teams spend less than one hour per month discussing strategy.
So the most important question is? We all in the organization must know Where We Want to Go?
When we come to a stage where the need of the Balance Score Card is felt the organization has already implemented the basic tools like 5S,TPM,Flow, Supermarket, Kanban etc. and all the workmen, staff and managers are part of one team of another. The values generated for the customer is understood and all employees are beginning to be aware of the variables and fixed expenses occurring in their value streams and for the organization they work for.
They have also understood the Total Systems-Value stream Approach. Every one is aware of their next customer and the final customer.
It is time now that we have a system in place where everyone starting from the senior managers know what their key results areas are.This brings clarity to the individuals as well to the Top Management to monitor their performance and link the reward and recognition scheme .
This way the whole organization is aligned in one direction working on the pull of the customers.
Thru Creation of Balance Score Card and monitoring on monthly basis becomes the need of the hour at this stage of Lean Production System.
Introduced in 1992, by Robert Kaplan and David Norton, the Balanced Scorecard is the most commonly used framework for ensuring that companies execute their strategies. Today, about 70% of the Fortune 500 companies utilize the Balanced Scorecard to help manage performance and suitably reward and recognize the performers.
Balanced Scorecards are used as the roadmap for creating the “Strategic Management System”. And this will drive overall organizational performance for our entire agency.
Why Balance Score Card-
- 1. To achieve strategic objectives
- 2. To align customer priorities and expectations
- 3. To track progress
- 4. To increase accountability
- 5. To help prepare a reward and recognition scheme.
- 6. Speak a common language
Balanced Scorecard Framework
The Balanced Scorecard is a Performance Management approach that focuses on various overall key performance indicators to monitor progress toward company’s strategic goals as envisaged in Vision and Mission.
Each major plant of the company establishes its own scorecard system which, in turn, is integrated with the scorecards of other plants to achieve the scorecard of the overall organization. All plants and other functional heads and their second and third line head of departments are brought under the Balance Score Card System.
The Balance Score Card is NEVER used to punish the staff on the contrary it’s a tool to assist employees link their day to day actions to the overall strategy
The BSC process helps strategy to become everyone’s everyday job.There is no minimum passing marks. It is always looked at positively. The current score tells you where you are. Balance Score Card gives absolute clarity and way forward as what is to be done to increase the scores. Balance Score Card brings transparency to the Performance Measurement and Reward Management system.
There is no textbook giving straightforward quick fix Balance Score Card format which can be applied across the industries. Presented here is an example to illustrate the system. For every industry and the company it has to be designed based on the current status of the company and their Vision and Mission.
Balance Score Card focuses on the following –
- 1.Financial focused Key Results areas,
- 2.Customer focused Key Results areas,
- 3.Internal Business Process focused Key Results areas,
- 4.Learning & Growth focused Key Results areas,
- 5.Corporate Governance and Risk Management focused Key Results areas.
1. Financial focused Key Results areas,
“Financial measures are essential in summarizing the economic consequences of strategy implementation.”
What are some possible measures?
Typicals parameters under financial focused Key Result Areas can be
- Monthly Despatch targets.
- Monthly value addition.
- Diesel + Electricity expenses.
- Tooling costs.
- Fabrication Rate.
- Set Budgeted purchase price for select A class items and target.reductions-Evaluation of prices of select vendors periodically ,negotiating and ordering accordingly.
- Monthly variance analysis .
- Overall raw material rejections.
- Credit period-creditor ageing report .
2. Customer focused Key Results areas –
Develop KRA’s & Measures to track customer satisfaction with the value provided
- Customer satisfaction
- Customer Account Share
- Customer Loyalty
- Customer Retention
- Customer Acquisition
- Develop KRAs & Measures of customer profitability
- Throughput Time of the various value streams.
- OTIFEF status of the Value streams ( Manufacturing only).
- Completeness of despatch.
- No of Customer complaints ( External).
- OTIFEF of Design Department.
3. Internal Business Process focused Key Results areas,
Internal processes create the products or services Company sells to its Customers.
Need to be:-
- Efficient – time to deliver service or product
- Effective – quality of service or product
- How can you be innovative in order to serve customers better by improving on existing processes or coming up with new process?
- Do you have a process or processes that don’t add value for the customer?
- Find it…through process mapping exercise…
- OEE of critical machines.
- 5S Score .
- Implementation of AM Step 1. Implementation of AM Step 2. Implementation of AM Step 3.
- SMED (Changeover time reduction) in critical machines.
- Process Standardisation for repeated machined items and assembly.
- Standardization the logistics processes for interplant movement of goods, Domestic despatch and Export despatch .
- Standardisation the logistics processes for incoming raw materials.
- Freeze standard Purchase procurement process-SOP.
- Time taken to issue PO from indent / email .
- Reduction of non moving stock.
- Reduction of slow moving stock.
- Implementation of supermarket MIL,Kanban system for Runner,repeaters items for stores .
- Implementation of supermarket MIL,Kanban system for Assembly Floor..
- Implementation of supermarket MIL,Kanban system for Production.
- Implementation of supermarket MIL,Kanban system for FG .
- Creating vendor list for different category of materials for raw materials and bought out items.
- Create vendor rating system for A Class items.
- Standardise , Improve and Implement QC formats.
- Freeze QAPs.
- Certification of Operators.
- Procedure for clearance of non conformity
- QUALITY -Rework hours
- Participation in the Kaizen Teams.
- Material traceability ISO Compliance.
4. Learning & Growth focused Key Results areas,
- Why is it important to measure this?
“Businesses are unlikely to be able to meet their long-term targets for customers and internal processes using today’s (and past) technologies and capabilities.”
- Gaps between present capabilities and needed capabilities require change
- People: training people
- Systems: improving information and other systems
- Organizational procedures: must be aligned over time with the strategy
- Workmen Kaizen and technical Training
- Workmen Skill Matrix Index
- Executive Skill Matrix Index
- Numbers of successfully completed kaizen Projects .
- Purchase dept Skill Matrix Score
- Training on materials science.
- Creating Standards for QC.
- Creating Standards for incoming material testings .
- Training on Basic 7 QC tools
- QC dept Skill Matrix Score
5. Corporate Governance and Risk Management focused Key Results areas.
- SHE Audit Score .
- 5S Audit Score .
- QC Audit Score .
Balance Score Card-
What is the Target Score ?
Balance Score Card-
Who is going to monitor it every month ?
Balance Score Card-
What I am going to get out of this ?.
All these concerned will be answered. It is to be made sure that everyone understands how the Balance Score Card works.
Jishuken Center of Excellence has expertise in implementation of the Balance Score Card to measure the performance of the Managers to achieve the corporate Strategies and also for suitably rewarding and recognize the performers. This will bring in the sustenance of the Lean Production System. These experts work with all departments and teams and Top Management and ensures that Balance Score Cards are finalized and implemented.
We also supervise the reviews of these Balance Score Cards on month to month basis so that the gains are converted to Top line growth and bottom line gains and ensure these gains are sustained and become a habits and culture of the organization.
Jishuken Center of Excellence offers the highest quality training and consulting services available anywhere; and we feel strongly about producing results in your plant, with your people, addressing your problems and opportunities.