Английский язык. Практический курс для решения бизнес-задач Пусенкова Нина

The Balanced Scorecard

In the industrial age, most of the assets of a firm were in property, plant and equipment, and the financial accounting system performed an adequate job of valuing these assets. In the information age, when much of the firm’s value is embedded in innovative processes, customer relationships, and human resources, the financial accounting system is not enough.

A new approach to strategic management was developed in the early 1990s by Drs. Robert Kaplan and David Norton. They named this system the ‘balanced scorecard’. The BSC approach provides a clear prescription as to what companies should measure in order to ‘balance’ the financial perspective.

The BSC is a measurement and management system that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.

The BSC methodology builds on some key concepts of previous management ideas such as Total Quality Management (TQM), including customer-defined quality, continuous improvement, employee empowerment, and – primarily – measurement-based management and feedback.

The balanced scorecard views the organization from four perspectives:

 – The Learning and Growth Perspective – includes measures such as employee satisfaction, employee retention, skill sets, etc.;

 – The Business Process Perspective – includes measures such as cost, throughput and quality. These are for business processes such as procurement, production, and order fulfilment;

 – The Customer Perspective – includes measures such as customer satisfaction, customer retention, and market share in target segments;

 – The Financial Perspective – includes measures such as operating income, return on capital employed, and economic value added.

There is a logical connection between these four perspectives – learning and growth lead to better business processes, which in turn lead to increased value to the customer, which finally leads to improved financial performance. Each perspective of the balanced scorecard includes objectives, measures of those objectives, target values of those measures, and initiatives that are aimed at meeting the objectives.

Double-Loop Feedback

In traditional industrial activity, «quality control» and «zero defects» were the watchwords. In order to shield the customer from receiving poor quality products, aggressive efforts were focused on inspection and testing at the end of the production line. The problem with this approach is that the true causes of defects are never identified, and there are always inefficiencies due to the rejection of defects. Variation is created at every step in a production process, and the causes of variation need to be identified and fixed. If this can be done, then there is a way to reduce the defects and improve product quality indefinitely. To establish such a process all business processes should be part of a system with feedback loops. The feedback data should be examined by managers to determine the causes of variation, what are the processes with significant problems, and then they can focus on fixing that subset of processes.

The BSC incorporates feedback around internal business process outputs, as in TQM, but also adds a feedback loop around the outcomes of business strategies. This creates a «double-loop feedback» process in the balanced scorecard.

Why Do Executives Love Balanced Scorecard?

The BSC does its magic by focusing the organization on the issues which the leadership team decides are key to its success. It does this through the process of implementing the scorecard – so a human element is the key.

There are other benefits – stronger communication (through the cascading and measurement tracking processes), warning of opportunities ahead (from watching key performance indicators), less «information overload» (from focusing on the most important measures), and greater alignment (from agreement on key objectives).

A sheet of paper with numbers on it can be created by one person and implemented by sheer force of authority. However, the point of a BSC is to:

– Align all members of an organization around common goals and strategies

– Link initiatives to the strategy, making prioritization easier

– Provide feedback to people on key issues – areas where they can have an impact

– Be an essential decision-making tool for everyone in the organization

The best process is to first create a clear business model, and then to select measurements based on that model. This increases commitment, brings more agreement on the direction of the organization, builds accountability to company goals, and increases the speed of change. The first part of the process is creating a model for the scorecard. First, review and clarify strategies. The next step is agreeing on what capabilities are needed within the company to actually pursue the strategy. The final part is creating the actual model. This is where you set up a simple diagram that reflects how you think the business works.

Larger organizations usually adopt a top-down approach: a balanced scorecard is first installed at the top, where commitment is most vital to success. It is then cascaded throughout the organization, to align departments’ goals with the overall company goals. For single stores or small companies, this step might be unnecessary.

The final step is getting people to use the scorecard as a routine matter – making it part of the culture. This is where most management initiatives go wrong, leading to this sage advice: If you want something to be a useful tool, make it the only initiative you try this quarter, give it your full attention, and don’t take any shortcuts. Otherwise, an initiative becomes a fad and eventually appears in the Dilbert cartoons.

Once created, the scorecard should become a part of your business’ daily life; it should be embedded into a company’s operations as a standard decision-making tool. The BSC leverages common sense into a substantial competitive advantage.

Source: www.quickmba.com, www.balancedscorecard.org, Paul Arveson, 1998

Happy customers are good, but profitable customers are much better.

The Balanced Scorecard introduced customer metrics into performance management systems. Scorecards feature all manner of wonderful objectives relating to the customer value proposition and customer outcome metrics – for example, market share, account share, acquisition, satisfaction, and retention.

Yet amid all these measures of customer success, some companies lose sight of the ultimate objective: to make a profit from selling products and services. In their zeal to delight customers, these companies actually lose money with them. They become customer-obsessed rather than customer-focused. When the customer says «jump,» they ask «how high?» They offer additional product features and services, but fail to receive prices that cover the costs for these additional features and services.

How can companies avoid this situation? By adding a metric that summarizes customer profitability.

Consider the situation faced in the 1990s by one of the nation’s largest distributors of medical and surgical supplies. In five years, sales had more than tripled to nearly $3 billion, yet selling, general, and administrative (SG&A) expenses, thought by many to be a fixed cost, had increased even faster than sales; margins had declined by one percentage point and the company had just incurred its first loss in decades.

The experience of this company is hardly unique. Companies often capture additional business by offering more services. The list is wide-ranging: product or service customization; small order quantities; special packaging; expedited and JIT delivery; substantial pre-sales support, etc. While all of these services create value and loyalty among customers, none of them come for free. For a differentiated customer intimacy strategy to succeed, the value created by the differentiation has to exceed the cost of creating and delivering customized features and services.

Unfortunately, many companies cannot accurately decompose their aggregate marketing, technical, service, and administrative costs into the cost of serving individual customers. Either they treat all such costs as fixed-period costs and don’t drive them to the customer level, or they use inaccurate methods, such as allocating a flat percentage of sales revenue to each customer to cover indirect «below-the-line» expenses.

The remedy to this situation is to apply activity-based costing (ABC) to accurately assign an organization’s indirect expenses to customers. Many companies, however, have tried ABC at some time during the past twenty years and abandoned it because it did not capture the complexity of their operations, took too long to implement, and was too expensive to build and maintain. Fortunately, a new approach is now available that is far simpler and much more powerful than traditional ABC.

«Time-driven» ABC requires obtaining information on two parameters: the cost per hour of each group of resources performing work; and the unit times spent on these resources by specific activities for products, services, and customers. For example, if a customer support department has a cost of $70 per hour, and a particular transaction for a customer takes 24 minutes (0.4 hours), the cost of this transaction for this customer is $28. The end result is the ability to measure individual customer profitability accurately and in a system that is easy to implement and inexpensive to maintain and update.

The Payoff: BSC Customer Profitability Metrics

The ability to measure profitability at the individual customer level allows companies to consider new customer profitability metrics such as «percentage of unprofitable customers.» Such customer profitability measures provide a valuable signal that satisfaction, retention, and growth in customer relationships are desirable only if these relationships contribute to higher, not lower, profits.

BSC customer profitability metrics are also highly actionable. If a company finds that an important customer is unprofitable, it should first look internally to see how it can improve its internal processes to lower the cost-to-serve. After all, we can’t expect customers to pay for our inefficiencies. For example, if important customers are migrating to smaller order sizes, the company can focus on reducing setup and order handling costs. The company can ask the customer to use electronic channels, such as Electronic Data Interchange (EDI) and the Internet, that greatly lower the cost of processing large quantities of small customer orders.

Customized pricing policies should be at the heart of any strategy to manage customer profitability. The company can set a base price for a standard product or service, with standard packaging, delivery, and payment. The company also provides customers with a menu of options representing variations from the standard order, such as a customized product or service, special packaging, expedited delivery, or extended credit terms. Each menu item has a price that at least covers its cost, as measured by the ABC model, so the company no longer suffers losses from offering customized services. The menu prices also motivate customers to shift their purchasing and delivery patterns in ways that lower total costs to the benefit of the company and its customers.

Scorecard measures of the incidence of unprofitable customers and the magnitude of losses from unprofitable relationships focus the organization on managing customers for profits, not just for sales – thus making the customer focus align with financial objectives.

Source: Robert S. Kaplan, Balanced Scorecard Report,

August 25, 2005. http://hbswk.hbs.edu

Essential Vocabulary

1.property, plant and equipment (PPE) – основные средства

2. financial accounting system – система финансового учета

3. embed v – вставлять, укреплять; врезаться, укладывать; внедрять

4. balanced scorecard – сбалансированная система показателей

5. perspective n – перспектива, вид, вид на будущее; угол зрения

6. outcome n – результат, последствие, исход, выход

7. Total Quality Management (TQM) – система тотального управления качеством

8.throughput n – пропускная способность, производительность

9. operating income – операционная прибыль

10. return on capital employed (ROCE) – доходность примененного капитала

11. economic value added (EVA) – экономическая добавленная ценность

12. zero defects – бездефектный

13. shield n – щит (напр. налоговый), защита

shield v – защищать, прикрывать, спасать, отвратить

14. cascade n – каскад

cascade v – спускать вниз по принципу каскада

15. track n – след, остаток, признак; образ жизни; тропа, цепь, ряд; выслеживание, преследование, отслеживание

tracking n – слежение, отслеживание

track v – следить, выслеживать, оставлять следы, прокладывать путь

16. key performance indicators (KPI) – ключевые показатели деятельности

17. overload n – перегрузка

overload v – форсировать режим, перегружать

18. alignment n – расположение по одной линии, выравнивание, совпадение

align v – располагать по одной линии, равняться, выравнивать; наводить

19. accountability n – отчетность, подотчетность; расчет; ответственность

accountable a – отчетный, подотчетный

20. top down – сверху вниз

21. leverage n – леверидж, (финансовый) рычаг

leverage v – использовать как рычаг или двигатель, использовать как средство достижения цели

22. selling, general and administrative (SG&A) expenses – торговые, общие и административные расходы

23. fixed cost – постоянные затраты

24. incur losses – нести убытки

25. package n – упаковка, контейнер, ящик, пакет

packaging n – упаковка

package v – упаковывать

26.treatment n – обращение; трактовка; лечение; обработка

treat v – обращаться, трактовать, лечить, обрабатывать

27. below-the-line expenses – расходы, имеющие необычный характер

28. activity-based costing (ABC) – система учета по видам деятельности

29. handling costs – затраты на обработку

30. pattern n – образец, пример, шаблон; узор; структура, модель

Exercise 1. Answer the following questions.

1. Why were financial accounting systems capable of valuing a firm’s assets in the industrial age, and why are they inadequate in the information age? 2. What does the balanced scorecard enable companies to do? 3. What previous management ideas does the BSC incorporate? 4. What are the four perspectives to view the organization from that the BSC envisages? 5. What is the connection between these perspectives? 6. Why is feedback so essential? 7. Why is human factor a key in implementing the BSC? 8. What does the process of creating a business model for the BSC consist of? 9. Why should the BSC be made part of the organizational culture? 10. Why is it dangerous for companies to become customer-obsessed? 11. How can a company incur losses while increasing sales? 12. Why could the time-driven ABC become a useful approach? 13. What new customer profitability metrics can be introduced?

Exercise 2*. Replace words in italics with synonyms from the text.

1. Process charts invented by Frank Gilbreth concentrated on all work elements, including non-value adding elements. 2. The assembly line was the result of innovations in production and management systems introduced by Henry Ford. 3. Two general determinants of demand are buyer’s ability to purchase and their willingness to purchase. 4. At General Motors, Alfred P. Sloan developed and put into practice business and manufacturing strategies for managing very large enterprises and dealing with variety. 5. Positioning is a marketing method which goal is to create the perception of a product, brand, or company identity. 6. Harley-Davidson Motor Co led the US heavyweight motorcycle market until the late 1970s, but then it suffered losses because of the strengthening Japanese competition and deteriorating quality of its products. 7. A connection exists between marketing problems and marketing opportunities in the dynamic environment. 8. Levi Strauss introduced Levi’s 501 jeans, a new specially developed product aimed at gold prospectors in California during the Gold Rush.

Exercise 3. A Russian manufacturing company wants to introduce the balanced scorecard in order to enhance its efficiency and competitiveness. You are a strategic management consultant and you were hired by this company to help manage the process. Explain to the general director of the company what the benefits of the BSC are; what pitfalls should be avoided; and how the BSC should be applied to become a real performance driver.

Exercise 4*. Fill in the blanks using terms given below.

Six Sigma

Six Sigma is a quality management methodology that provides businesses with the…… to improve the……… of their business processes. This increase in……… and decrease in process variation lead to………. reduction and improvement in profits, employees’……… and quality of products. It is a quality…….. and improvement program that was……… by Mikel Harry and Motorola. It………. on the control of a process until the point of Six Sigma (standard………) from a centerline, or 3.4 defects per million items. It includes identifying factors which are………. for the quality as determined by the customer. It reduces process……… and improvement capabilities, increases………. and designs systems to support the Six Sigma goals.

The Six Sigma model is a highly disciplined approach that can help companies to focus on developing and………. near-perfect products and services. It is based on the statistical work of Joseph Juran, a Rumanian-born US pioneer of quality management. The word «Sigma» is a Greek sign used for a statistical term that measures how far a given process deviates from………. (standards deviation). If the sigma…….. is higher, you are closer to perfection. One Sigma is not very good, six sigma is defined as only 3.4 defects per million. The central idea behind Six Sigma is that if you can measure how many «defects» you have in a process, you can systematically……. out how you can……… them. Thus you can almost come to «…………».

The Japanese…….. of Six Sigma can still be seen by the system of «belts» which it uses. If you are new to Six Sigma and you go on a basic………, you get a green belt. Anyone who has the………. for leading a Six Sigma team is called a black belt. Finally, there is a special elite group called Master Black Belts who…….. the Black Belts.

Typically, a Six Sigma process has the following five stages:

1. Definition. The first step in any Six Sigma project is to clarify the problem and narrow its…….. in such a way that measurable……… can be achieved within a few months. Then a team is assembled to examine the process in detail, suggest improvements, and……… those recommendations. In the manufacturing world, project managers and their……. typically begin by defining what constitutes a defect, and then establish a set of……… designed to reduce the……….. of such defects.

2. Measurement. In the second step of a Six Sigma project, the team gathers………. and prepares it for a high-level analysis.

3. Analysis. Once a process has been………. and documented, and the quality of the hard supporting data has been………, the Six Sigma team can begin the analysis. The team members usually start by………. the ways in which people fail to act as needed, or by identifying the way in which people fail to ensure……… control at each stage.

4. Improvement. Recommend, decide and implement improvements.

5. Control. In the final stage of a Six Sigma project, the team creates……. These are enabling the company to…….. and extend the improvements.

Source: www.valuebasedmanagement.com

Terms:

effective, occurrence, mapped, implement, number, verified, origin, figure, sponsors, goals, controls, sustain, data, objectives, zero-defects, supervise, tools, capability, performance, defect, scope, morale, measure, pioneered, focuses, deviations, critical, variation, stability, delivering, perfection, eliminate, training, responsibility, identifying

Exercise 5. Translate into English.

Сбалансированная система показателей

Почему некоторые компании, внедрившие сбалансированную систему показателей (ССП), сталкиваются с ситуацией, когда система перестает работать? Казалось бы, стратегия формализована, показатели разработаны, стратегическая карта создана, однако руководству по-прежнему не удается получать информацию по всем аспектам деятельности организации, а сотрудники все так же недоумевают, для чего была внедрена система и какую практическую пользу она может приносить в их ежедневной деятельности.

Это происходит в первую очередь потому, что ССП существует сама по себе и никак не связана с другими элементами управления организации: системами бюджетирования и управленческого учета, инструментами стратегического развития и оперативного управления. Другими словами, сбалансированная система показателей требует от компании единого развития, ориентации на стратегию всех подразделений, вплоть до каждого сотрудника, что невозможно без адаптации новой системы к уже существующим в организации.

Чтобы компания развивалась в соответствии со своей стратегией, должны быть выполнены следующие условия:

– каждая из подсистем управления вносит свой вклад в реализацию стратегии;

– каждая из систем управления служит источником информации для ССП;

– ССП, в свою очередь, способствует успешному функционированию других подсистем.

ССП и стратегическое управление

Прежде всего необходимо связать сбалансированную систему показателей с системой стратегического управления. В противном случае ССП будет всего лишь набором разрозненных показателей, никак не влияющих на стратегическое развитие организации.

Важным инструментом стратегического управления является стратегическое планирование. Именно на основе информации, полученной в результате планирования, и происходят разработка стратегической карты и формирование показателей.

Однако стратегическое планирование как таковое во многих российских организациях отсутствует. Согласно некоторым оценкам, стратегический план как документ есть только у 10% компаний, и только в 5% компаний этот план читал кто-либо, кроме разработчика и непосредственного заказчика. Многие стратегические документы ограничиваются туманными формулировками, такими, как «стабильное положение на рынке», «повышение рентабельности», «снижение издержек», и абсолютно не работают на претворение стратегических целей в жизнь.

Поэтому взаимодействие ССП с системой стратегического управления происходит, как правило, еще на этапе ее создания. Большинство наших проектов по внедрению сбалансированной системы показателей начинается со сбора информации для формализации стратегии. По результатам интервьюирования топ-менеджеров и анализа предложений ключевых сотрудников готовится отчет, на основе которого уже разрабатывается стратегическая карта компании.

В то же время структура ССП может стать хорошей основой для разработки полноценной стратегии. Четыре ключевые перспективы (финансы, клиенты, процессы, обучение и развитие) позволяют распределить цели таким образом, чтобы ни одна из сторон деятельности компании не была забыта и ее развитие происходило сбалансированно.

В дальнейшем информация, которая будет собираться по показателям, станет хорошей основой для пересмотра и корректировки стратегии, а сбалансированная система показателей, в свою очередь, стимулирует компанию более внимательно относиться к стратегическому планированию.

Какие бы системы управления ни использовались в вашей компании, следует всегда помнить, что для их успешного функционирования требуется единый механизм работы, слаженность и взаимодействие. Только в этом случае компания будет двигаться по пути своей стратегии, а управление будет продуманным, сбалансированным и успешным.

Источник: Андрей Гершун, управляющий партнер,

Мария Фурсеева, копирайтер, Маг Консалтинг (отрывок), www.intalev.ru

Delivering Superior Shareholder Value

Business Rationale of Value-Based Management

The creation and delivery of shareholder value has become a business mantra espoused by almost every-self respecting CEO. In their annual reports and published results few of them fail to mention their focus on «delivering shareholder value». However, many organizations fail to translate the aim into reality. Some manage to develop a strategy for creating value. Few actually deliver.