Multiple Measures of Performance

1. Multiple Measures of Performance Multiple measures of performance may be most useful as a way of providing a focus on what factors have the most impact on profitability. The use of nonfinancial measures of performance may be more appropriate for a given level within the organization. Each measure should flow from a set of objectives. Continuous improvement and benchmarking are part of this process.

2. Customers Financial Learningand growth Internalbusinessprocesses The Balanced Scorecard Management translates its strategy into multiple performance measures that employees understand and accept. Performancemeasures

3. The Balanced Scorecard: FromStrategy to Performance Measures Performance Measures Financial Has our financialperformance improved? What are ourfinancial goals? What customers dowe want to serve andhow are we going towin and retain them? Vision and Strategy Customer Do customers recognize thatwe are delivering more value? What internal busi-ness processes arecritical to providingvalue to customers? Internal Business Processes Have we improved key business processes so that we can deliver more value to customers? Learning and Growth Are we maintaining our abilityto change and improve?

4. Financial measures are lag indicators that summarize the results of past actions. Non-financial measures are leading indicators of future financial performance. • Top managers are ordinarily responsible for financial performance measures – not lower level managers. Non-financial measures are more likely to be understood and controlled by lower level managers. The Balanced Scorecard:Non-financial Measures The balanced scorecard relies on non-financial measures in addition to financial measures for two reasons:

5. The Balanced Scorecard for Individuals The entire organization should have an overall balanced scorecard. Each individual should have a personal balanced scorecard. A personal scorecard should contain measures that can beinfluenced by the individual being evaluated and thatsupport the measures in the overall balanced scorecard.

6. Then The Balanced Scorecard A balanced scorecard should have measuresthat are linked together on a cause-and-effect basis. If we improveone performancemeasure . . . Another desiredperformance measurewill improve. The balanced scorecard lays out concrete actions to attain desired outcomes.

7. Financial Customer Internal Business Processes Learningand Growth The Balanced ScorecardJaguar Example Profit Contribution per car Number of cars sold Customer satisfactionwith options Number ofoptions available Time toinstall option Employee skills in installing options

8. Satisfaction Increases Increase Options TimeDecreases Increase Skills The Balanced ScorecardJaguar Example Profit Contribution per car Number of cars sold Results Customer satisfactionwith options Strategies Number ofoptions available Time toinstall option Employee skills in installing options

9. Cars sold Increase Satisfaction Increases Increase Options The Balanced ScorecardJaguar Example Profit Contribution per car Results Number of cars sold Customer satisfactionwith options Strategies Number ofoptions available Time toinstall option Employee skills in installing options

10. ContributionIncreases TimeDecreases Increase Skills The Balanced ScorecardJaguar Example Results Profit Contribution per car Number of cars sold Customer satisfactionwith options Number ofoptions available Time toinstall option Strategies Employee skills in installing options

11. ProfitsIncrease ContributionIncreases Satisfaction Increases Increase Options TimeDecreases Increase Skills The Balanced ScorecardJaguar Example Results Profit If numberof cars soldand contributionper car increase,profits increase. Contribution per car Number of cars sold Customer satisfactionwith options Strategies Number ofoptions available Time toinstall option Employee skills in installing options