Cascading the Balanced Scorecard:
Organizational Alignment ?
Dr.oec.HSG SYARIFA HANOUM, S.T., M.T., CSEP
Departement of Business Management
Institut Teknologi Sepuluh Nopember (ITS)
2023
Strategy
Department Department
Team/
Individual Team/
Individual
Measures Objectives
The Organizational Framework
Horizontal and Vertical Alignment !!
Strategic Business Unit (SBU)
Ensure Alignment:
Each sub-unit and individual link their objectives to the map.
3
Horizontal and Vertical Alignment !!
Effective strategy implementation can occur when all organizational units are synchronized (aligned).
Alignment is attained means what is done by business units support achievement objective at the corporate level
(vertical alignment).
Besides, a unit must be able to provide services that are needed by other units as long as it is relevant to the overall
organizational strategy
(horizontal alignment)
Alignment for Business Unit vs Functional Unit Scorecards
Steps in Vertical Alignment
Steps in Horizontal Alignment
Service Level Agreement
Intangible Assets
Alignment: Human and Information Capital
Individual Performance Alignment
Change Management in Creating a Strategy and Performance
Focused Organization
4
Horizontal and Vertical Alignment !!
STRATEGY MGMT
Organization Strategy
PERFORMANCE MGMT
VISION, MISSION, DESTINATION,
Strategy Objectives – LAG
(SH & Fin) Internal Factors
(Distinctive Competencies)
S W
Scorecard
VALUES
Organization SO – LEAD (BP, People)
O T
Company Strategic Initiatives
Company Initiative/Project
KPIs Strategic
Measures/
KPIs
Issue:
External Factors (Environment,
Industry CSF) Issue:
• Have we cascaded the strategic objectives of the corporate to the strategic objectives of the business units
Issue:
Issue:
• Have we aligned vision
& mission of the business units with vision & mission of the corpoarte
• Have we made sure that all leading indicators have been set to support lagging indicators
UNIT Strategy Scorecard
MISI UNIT BISNIS
SO –LAG (SH, Fin)
SO – LEAD Strenghts
Organization Strategic
Initiatives Initiative/Project KPIs Strategic
Measures/
KPIs UNIT Strategic
Initiatives (BP, PEOPLE)
Weaknesses
BUSINESS UNIT
Issue:
• Whether the strategic initiatives of the units contribute to KPS and objectives of the corporate
Horizontal and Vertical Alignment !!
• Have we aligned all the KPIs in Business Units with the Corporate KPIs?
• Have we aligned Unit’s KPIs to Corporate strategic objectives and KPIs?
Issue:
• How can units contribute to the execution of strategic initiatives of the Corporate
ARCHITECTURE OF DEPARTMENT/UNIT
STRATEGY MAP
BUSINESS UNIT ALIGNMENT
In the shared approach, relevant objectives and measures are identical to what’s on the corporate BSC.
SHARED CASCADING APPROACH
In the Contributory Approach, some objectives and
measures are translated others may be identical for each unit
CONTRIBUTORY CASCADING APPROACH
The Hybrid Approach, objectives and measures are both identical and translated for each unit while allowing for addition of local objectives
HYBRID CASCADING APPROACH
Vertical Alignment Matrix
Corporate Strategic Objectives (SOs)
Divisions in the company
THE MEANING OF THE SYMBOL USED IN THE VERTICAL ALIGNMENT
MATRIX
Symbol KPI
Fully cascaded Partially cascaded
Contributing
1. Fully-cascaded: i.e. KPI at Divisional level is the same as the KPI at Organization level and so is the target.
2. Partially-cascaded: i.e. KPI at the Divisional level is the same as the KPI at Organization level, but the target is set according to span of accountability.
3. Contributing: i.e. KPI at the Divisional level is defined independently and so is the target; however, we assume this KPI will contribute the fulfillment of KPI at Organization level.
Note: Contributing type is applicable only for Internal Business Process and Learning and Growth perspectives at Organization level.
14
THE MEANING OF THE SYMBOL USED IN THE VERTICAL ALIGNMENT MATRIX
1. Fully-cascaded: i.e. KPI at Divisional level is the same as the KPI at Organization level and so is the target.
2. Partially-cascaded: i.e. KPI at the Divisional level is the same as the KPI at Organization level, but the target is set according to span of accountability.
3. Contributing: i.e. KPI at the Divisional level is defined
independently and so is the target; however, we assume this KPI will contribute the fulfillment of KPI at Organization level.
Note: Contributing type is applicable only for Internal Business Process and
Learning and Growth perspectives at Organization level.
Cascading the Corporate BSC to Units’ BSC
Strategy Map Development
Develop the Unit’s Strategy Map
Formulate the Key Performance
Indicators (KPIs) of each
5
SODetermine Strategic Initiatives
6
Understand the missions of the Unit,
and identify the corporate SOs that
are relevant to the Unit’s missions
1
Identify Unit’s outputs, stakeholders &
their expectations
2
Formulate the Strategic
Objectives (SOs) of the
Unit
3 4
Scorecard Development
Should be reflected in the Strategy map of the unit
1.a. Understand the missions of the unit
1.b. Identify the Corporate SOs that are relevant with the mission’s of the unit
Revenue Growth Strategy
"Increase income consistency by expanding the product being sold."
Productivity Strategy "Reduce costs by increasing service efficiency"
Increas e ROA Increase
product variations
Increase operational
efficiency
Increase customer trust
Increase customer satisfaction
Increase marketin g quality
New produ ct
Cross-sell different
product
GCG and Risk Mangmt
Increase time response
Build efficient
service link
Increase employee productivity
Improve people Competency
Improve Performance Measurement
System Develop MIS that
supports HRM
BSC
STRATEGY MAP OF
BANK XYZ
"Customer" of the HR
Primary Stakeholders:
All Employee
All Unit
Board of Directors
Secondary Stakeholders:
University
Job Applicant (Fresh
Graduate)
"Customer" of the HR
HR Unit
Improve the performance
evaluation system Building
productive and competent HR
Develop strategic
skills
Customer Financial
Business Process
Learning and Growth
Deploying Corporate SO
“ Increase Employee
Productivity” into SOs of the HR
3.a. Cascading the Corporate’s SOs to SOs unit
3.b. Formulate SOs unit from HR Vision & Mission, and HR Stakeholders’ Output and Expectations
HR Unit HR Unit Mission HR Unit
Vision HR Unit
Vision
Customer Financial
Business Process
Learning and Growth Fulfill the
needs of employees
Manage internal financial effectively
Implementation of competency- based recruitment
system
Implmentati on of HRIS Build effective
career path system
Develop competencies of internal HR Unit
employees
Build a conducive work environment
These SOs are formulated based on Vision, Mission, and HR stakeholder’s outputs and expectations
HR Unit
Improve the performance
appraisal system
Building productive
and
competent HR
Develop strategic
skills
HR Unit
Mission HR Unit
Vision HR Unit
Vision
Customer Financial
Business Process
Learning and Growth
Cascaded from the Corporate SOs
Fulfill the needs of employees
Manage internal financial effectively
Implementation of competency- based recruitment
system
Implmentati on of HRIS Build effective
career path system
Develop competencies of internal HR Unit
employees
Build a conducive work environment
These SOs are formulated based on Vision, Mission, and HR stakeholder’s outputs and expectations
• Establish the cause-effect relationships between SOs.
• To maintain simplicity, the following guidelines can be used:
• Eliminate or combine SOs that have similarities
• The preparation of SOs refers to the priority scale If there are too many SOs, then focus on several SOs that are
really important
• As a guide try to limit the number of SOs between 8-13
Targets
Final Check: The Unit’s
Strategy Map should
covers 3 aspects
•
The formulation of Key Performance Indicators (KPIs) or Performance Measures or Performance Metrics
The process in step 5 is carried out to determine and compile a list of Key Performance Indicators (KPI) needed to measure the success of SS.
• As a guide, the number of KPIs that are compiled should range from 1-3 KPIs per SO and overall not more than 25 KPIs for one scorecard.
• Tip : The ideal KPI is the exact one with a relatively
short measurement period (monthly or quarterly) quarterly).
Case Study: Coca Cola
Secondary Goals and Objectives for the IT office
The accompanying objectives and goals represent the activity plan for the ICT Department.
Goal 1: Effectively deal with the delivery of Coca – Cola Technological Services and needs
Delivering and supporting critical innovation services is indispensable to each department. It provides the workforce with the fundamental resources, which is important for the company to operate profitably. The Department will move toward accomplishing this objective on the following objectives:
• Centralize Coca-Cola IT capacities to deliver essential framework services;
• Deploy and guarantee support of a standard structure that meets the company’s business needs;
• Forecast and budget to provide the best essential services to other departments.
Goal 2: Guide innovation choice making to guarantee consistency with the Coca-Cola business course The ICT investments and responsibilities achieved in the interest of the company must mirror its general fundamental needs. The administration process supports community decision-making and accountability to organise limited IT resources. Inability to accomplish this procedure would result in systems, services, and equipment that do not appropriately support the workforce. This would cause redundancy and absence of interoperability. The ICT Department will move toward accomplishing this goal on the following objectives:
• Implement and maintain compelling IT administration;
• Ensure IT speculations are adjusted to the Company’s Strategic Plan, special business needs, and IT guidelines.
Case Study: Coca Cola
Perspectives of the ICT Department
Perspective 1: Orientation of Users (End-Client View):
Mission: deliver value-adding products and services to end clients
Goals: build up and maintain the decent image and notoriety with end customers; abuse IT opportunities, set up positive associations with the customer group, satisfy end-client prerequisites, and be seen as the preferred supplier of IT products and services.
Discussion of the Metrics
Despite the difficult economic situation, the company’s performance in 2015 is a demonstration of the ability and astuteness of its kind. During FY 2016, the management will do its best to inspire and add to the majority of its kin, especially its cutting edge leaders. 100% of its General Managers and 66% of its capacity heads were advanced from within its ability pipeline. Recharging this pipeline through enlistment and
continuous advancement of its ability seat continue to be a necessity. The management selected 197 management students of 26 nationalities, with 51% being female (Ryan, 2014).
The management seeks to provide an operating environment that motivates employees to perform as well as they are to, and its 2014 employee engagement study results exhibit progress on this front. Its
commitment and qualities files were 82% and 81% individually, and are at a level that contrasts positively its industry peers.
The IT department seeks to offer an operating environment where employees are propelled to perform at their best. The IT division realizes that drew in, persuaded employees, attempting to their full ability and ready to understand their profession objectives are the basis of the Company’s long term achievement. In the meantime, the IT division strives to ensure that every worker comprehends their role within the business and understands how their individual exertion makes an immediate commitment to the achievement of Coca-Cola HBC. To quantify company advance, the IT department directs a worker engagement review every year. In 2014, the IT division took engagement to the measuring so as to follow manageable level
engagement and join the maintainable engagement study and the benchmarking pool of consulting firm Towers Watson (Noe, 2012). This new centre considers experiences on feasible engagement measuring essential contributing components; for example, worker association and inspiration, the interior
environment as an empowering agent of superior, differences and incorporation, wellbeing and employee quality suggestion. Support rates expanded for the 2014 engagement review a rise by 5% compared with 2013, with incorporate 95% of all workers. Company Group level records for engagement and qualities were 82% and 81%, separately, for 2014. Amongst 300 Senior Leaders, the engagement file was 93% while the qualities record achieved 95% (Sanders, 2008).
Case Study: Coca Cola
Perspectives 2: Business value (Management’s View)
Mission: Make a contribution to the value of the business.
Goals: set up and maintain a decent image and notoriety with the management, guarantee that IT anticipates providing business value, control IT expenses, and offer suitable IT products and
services to external stakeholders.
Discussion of the Metrics
Building a robust pipeline of leaders is a significant constituent of the company’s methodology. At the heart of company processes, there are three keys to advancement: appraisal, test, and support.
The IT division evaluates the performance and capability of all leaders yearly against the setup gauges reflecting the company techniques, key convictions and examination based division of management aspects. Subsequently, the IT department checked, surveyed and offered input to roughly 15,000 employees during the People Development Forums in 2014 (Lundgaard, 2014). The IT department maintains and deals with the performance of the company’s employees
comprehensively. The company concentrates on results, for example, advancement, supportability, and employee’s improvement, alongside with financial metrics; it supports suitable harmony
between short and long term objectives in the performance of the daily operations and decision making.
After an effective move, Leadership Training programs provide substantial support. They offer an organized learning environment where all around scrutinized methods for intuition and managing the new difficulties are adjusted, with gaining from associates and practicing in a protected
situation. To guarantee long-term achievement, a critical initial step is drawing in and enlisting employees with authority potential. During 2014, the IT department recruited 197 management students for 19 of company’s 20 specialty units (Carr et al., 2010). Among the company’s 2014 volunteers, 51% were female supporting company goals on sexual orientation parity. Management students are offered an institutionalized system that is normally two years old. The IT division is resolved to maintain the company’s current level of interest in student advancement chasing after contracting 200 learners annually throughout the previous two years.
Case Study: Coca Cola
Perspectives 3: Internal Procedures (Operations-Based Perspective):
Mission: successfully deliver IT products and services in a proficient way.
Objectives: foresee and impact demands from end clients and services, be proficient in arranging and developing IT applications, be productive in operating and keeping up IT applications, be skilled in gaining and testing new equipment and programming, and give savvy preparation that satisfies end-user clients.
Discussion of the Metrics
Constant effectiveness improvements are developed in its culture at each level of the Group, and the management continues performing exceptionally well during the year. The management diminished the quantity of creation lines by ten, without relinquishing limit potential, and the number of stockrooms and deliverance focuses by 17 to 307. The management accomplished further efficiencies in operating costs while supporting the company with the right level of ICT.
The conpany’s Shared Services Centre in Sofia, Bulgaria houses some of its back end office forms.
Having implemented the initial two stages, which included the exchange of money, HR, value- based and information management exercises for the huge larger role of its business sectors, the management is presently beginning the last stage. The management is exceptionally satisfied to see that the company is turning into a hatchery for skills and ability notwithstanding its essential part, which is to streamline and concentrate its back end office strategies, pick up efficiencies and apply best practices (Meyer, 2009). With Nigeria going ahead as a new market from January 2016, the strategy of the SAP coordinated information management stage is presently ending over the Group. The procedure institutionalization and effectiveness picked up as an aftereffect of this speculation will quicken system enhancement in the coming years, and the management anticipates profiting.
Case Study: Coca Cola
Perspective 4: Future Preparedness (Advancement and Learning View):
Mission: deliver continuous change and consider future difficulties.
Objectives: envision and get ready for IT issues that could emerge, consistently overterm IT
aptitudes through preparing and improvement, frequently update IT applications portfolio, routinely redesign equipment and programming, conduct financially savvy research into rising innovations and their suitability for the business.
Discussion of the Metrics
The management expects the difficulties it has already faced to manage in 2016. On-going geopolitical pressures are prone to fuel unfavourable outside trade patterns, and frail oil costs might continue, with negative results for economies in a percentage of the Emerging markets, in which the management works. The management will continue pursuing its procedure with an extensive variety of arranged activities from enhancing volumes through advertising activities and concentrating on reasonableness to proceed with the usage of its demonstrated self-improvement effectiveness measures. These endeavours, alongside with tangibly reduced data expenses, will relieve the adverse effects of cash instability and related vulnerability in some of its key markets.
The management expects a testing year and is hopeful that the company will demonstrate its qualities in misfortune. There are numerous motivations to be amped up for the eventual fate of the enterprise. The management has considerable resources including a world-class brand portfolio and a different geographic foot shaped impression. The management work in business sectors where moderately low per capita utilization of shining beverages and the potential for the piece of the pie extension present the open doors for development. Its rebuilding endeavours in the course of the recent five years have made a more powerful cost-cognizant society and an incline
fabricating foundation. Consolidated, these components fortify the trust in the company’s capacity to deliver on its methodology, augment value and create sustainable, long-term development.
Case Study: Coca Cola
Conclusion
The rare significance of the Balanced Scorecard in the practice today makes management question whether the issue of joining of Information Technology issues in a Balanced Scorecard is a helpful exchange. If such a limited number of organizations are utilizing this instrument
accurately, what use would it be able to do to incorporate in it? In any case investigating the four groups that were found to have both the Balanced Scorecard and a solid IT concentrate some preliminary
conclusions can be drawn. Coca-Cola’s management had initially noted that there was need to adjust IT management to the Balanced
Scorecard. The EMS and the important policy cycle (managed through the BSC) are in this way running in parallel, which is seen by the
management to curb various inefficiencies. In this admiration, Coca- Cola’s methodology of coordinating Information Technology issues
expressly on the Corporate BSC appeared to have tackled this problem
and enhanced the achievement of company goals and objectives. All
things considered, this is precisely what the BSC is attempting to do,
produce a range of goals, targets, activities and procedures, specific to
the company and department.
Develop the strategy map of Coca
Cola IT Department
Dr.oec.HSG Syarifa Hanoum, S.T., M.T., CSEP
Department of Business Management
Faculty of Creative Design & Digital Business Institut Teknologi Sepuluh Nopember (ITS)
The End
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