COMPANY Strategy and Performance Management through BALANCED SCORECARD Standard Operating Procedure (SOP) Prepared by : Reviewed by: Approved by: Strategy Management Office (SMO) Director Corporate Planning President Director COMPANY I. OBJECTIVE This procedure is set up to describe methods, steps or work process or guidance for all levels and functions within the Company to monitor, facilitate and ensure execution of company strategy based on Balanced Scorecard framework in order to attain highly sustainable organizational performance. II. APPLICABILITY This Standard Operating Procedure (SOP) shall be implemented to all unit organization within the Company as guidance in managing organization performance through Balanced Scorecard. III. ROLES & RESPONSIBILITIES 1. BSC Champion (President Director and Vice President Director) a. Take a lead during the BSC Implementation b. Lead Strategic Directorate Meeting c. Monitors company performance score progression 2. Director a. Lead Quarterly Directorate BSC Meeting b. Monitors divisions’ performance under respective area c. Mobilize strategic initiatives, corrective action and changes d. Controls division performance to meet standard 3. SMO (Strategy Management Office) a. Developing company-wide strategy b. Monitors the external dynamics and studies its impacts on organization strategy c. Together with stakeholders, reviews, develops and propose organization vision, mission and strategy d. Communicates organization strategy to all elements within the organization e. Facilitating strategic governance processes f. Ensures Quarterly Directorate BSC Meeting take place. g. Analyze periodical (monthly, quarterly, semester, yearly) performance management reports based on BSC Score and facilitates the review of organization and Divisions performance h. Monitors the progress of strategic initiatives of the organization and report regularly to BSC Champion i. Facilitates strategy alignment process. COMPANY j. Facilitates Directorates and Divisions in developing their strategies, Key Performance Indicators, targets, initiatives, and budgets. k. Facilitates the alignment of corporate, companies, divisions, and divisional strategy and performance (vertical and horizontal alignment) l. Ensures Monthly Division BSC Meeting take place. m. Acting as an internal consultant for the company in performance improvements 4. BSC Officer a. Ensure proper operation of BSC portal b. Maintain integrity and update BSC model c. Administer end-users’ access rights d. Provide technical support to end-users for utilizing the BSC portal e. Provide assistance in monitoring strategic governance process f. Monitor the action plan and follow-up regular BSC meetings. g. Prepare periodical (monthly, quarterly, semester, yearly) performance management reports. 5. Division Heads a. Provide Division directions b. Lead Monthly BSC Meeting c. Support the systems integrity and utilization d. Review KPI Performance e. Ensure strategic initiatives are conducted accordingly. f. Develope and implement action plan for improvement g. Be a Change Sponsor for respective Division 6. KPI Officer a. Preparing the KPI (if any new KPI required by respective division) b. Managing the operations of BSC Portal (monitor and keep update KPI Actual in BSC Portal equipped with supporting document) c. Reporting KPI (review and discuss dept performance based on KPI Target and KPI Actual) d. Evaluating KPI and continuous allignment with strategy (If any changes in company or division strategy) e. Be a Change Agent for respective Division 7. IT Division COMPANY a. Ensure the availability and reliability of all IT facilities required to support BSC system. These include : i. BSC Portal server ii. Database server iii. Web server iv. Network infrastructure v. Client computers used by System Admin and End-user b. Communicate with SMO for any changes in the IT infrastructure that relates to BSC System. c. Ensure interface between BSC Portal and other business application are working as intended. IV. DEFINITIONS 1. Vision Vision is a desired future outcome of an organization 2. Mission Mission is the reason of organization’s existence, what we do today to achieve vision 3. Value Value is standard of belief and behaviors that guide people’s actions 4. Strategy Strategy is a deliberate process of choosing a set of activities differently from competitor, in order to deliver a unique mix value 5. Straegy Map Strategy Map is an interrelationship among strategic objectives in cause-effect fomatr that reflects the “journey” of an organization’s strategy. 6. Strategic Objective Strategic Objective is a concise statement describing the major activities that an organization must do well in order to execute its strategy. A cause-effect mapping of SO is termed as strategy map. COMPANY 7. Strategic Initiative Strategic Initiative is specific projects that need to be implemented in order to support the achievement of strategic objectives. Normally it has a beginning and end points. 8. Key Performance Indicator Key Performance Indicator often said as a measure, a quantifiable formula whose variables define what needs to be measured and monitored in order that a target is achieved. Guidelines for KPI are further governed in next Section. 9. Balanced Scorecard Balanced Scorecard is a management system that allows organization to translate its vision, mission and strategies into actions by focusing on a “dashboard” which shows balanced measures / indicators in defining the causal-effect of the company strategies, beyond mere financial measures or in the other definition it is a tool to communicate strategy in operational terms to the stakeholders: management, employees, shareholders, customers, and communities. COMPANY Balanced scorecard has four perspectives that can guide companies as they translate strategy into actionable terms. Below pictures describe the four perspectives. Figure 1 V. KPI Procedure 1. KPI shall be well-defined and doesn’t lead to ambiguity or multi interpretations 2. 3. KPI shall contain below elements: a. Definitions b. Formula c. Polarizations d. Target e. Weight f. Period Level g. Unit of Measurement KPI shall have data that can be acquired on regular basis and has following criteria : a. Specific COMPANY KPIs need to be specific to the individual job and if possible expressed as statements of actual on-the-job behaviours. b. Measurable KPIs must be measurable, that is based on behaviour that can be observed and documented, and which is job-related. They should also provide employees with continuous feedback on their standard of performance. c. Agreeable d. Realistic / Relevant Setting realistic targets means being fair on the people who will have to reach them. Make sure you only ask for performance improvements in areas that your staff can actually influence and also the the improvement of a KPI has to be relevant to the success of the organization. e. Timebound Which means the value or outcomes are shown for a predefined and relevant period, placing goal achievement in a certain time frame. 4. KPI shall measure areas that are within our influence. In some cases, when level of influence is very low yet attention is needed, the indicator is called: monitoring KPIs which would have 0% weighting COMPANY VI. KPI Manual The KPI Manual contains the description of each KPI in respective division. Each KPI has below description : 1. Perspective 2. Strategic Objective 3. Description of Strategic Objective 4. Definition of KPI Definition of KPI Formula Strategic Purpose of KPI 5. Unit of Measurement 6. Person In Charge 7. Source of Data 8. KPI Polarization 9. Period of Data Collection 10. Periodic Consolidation 11. Weight 12. Table of Data COMPANY COMPANY VII. SCORING SYSTEM OF BSC There are several series of Key Performance Indicator that contribute in calculate BSC Score, they are: 1. Annual Target 2. YTD Target 3. YTD Actual 4. Achievement 5. Score 6. Weight 7. Result 1. Annual Target Annual Target is set based on Work Program & Budget and Annual Strategic Planning. Annual Target shall be complete by every November for subsequent year. Annual Target shall be authorized input to BSC Portal by BSC Officer only. 2. Year To Date Target Annual Target shall be broken down into year to date target depend on respective period of KPI collected. If the period of KPI is monthly, YTD Target shall be provided monthly as well. This data shall be authorized input to BSC Portal by BSC Officer only. 3. Year To Date Actual Year to Date Actual shall be input into BSC Portal in accordance with the perid of KPI collected. This data shall be authorized input by respective KPI Officer. 4. Achievement Achievement is principally comparison between actual performance and target performance, however, the formula is subject to polarization of KPI. The polarization of KPI is determined by the behaviour of the KPI itself as originally defined. Achievement is applicable for level KPI only, not applicable for level Strategic Objective and Perspective. There are several formula of achievement calculation depend on its polarization. COMPANY a. Maximize General The purpose of this polarization is to maximize actual data as much as possible compare to its target. The higher actual the better. Example of this type of KPI are Production, Revenue, Profit, Productivity, ROA, etc. Achievement = (Actual / Target) x 100% b. Maximize Availability The purpose of this polarization is to maximize actual data as much as possible compare to its target, the higher actual the better. However, availability of 100% shall be considered excellent with achievement of 115%. Example of this type of KPI are Availability of IT Communication, availability of Power Supply, availability of critical material, etc. Achievement = 115% - 15% ( (1-Actual) / (1-Target)) c. Minimize General The purpose of this polarization is to minimize actual data as much as possible compare to its target, the lower actual the better. Example of this type of KPI are Unit Cost, Man.hours rework, Rejection Rate, Penalty, etc. Achievement = (2- (Actual / Target)) x 100% d. Minimize with Target=0 The purpose of this polarization is to minimize actual data approaching its target, the lower actual the better. Example of this type of KPI are no of accident with damage>100 USD, no of audit findings, etc. Achievement = 𝑒 e : Exponantial value k : penalty factor (0.1 – 0.2) e. Minimize Fatality −𝑘.𝐴𝑐𝑡𝑢𝑎𝑙 x 100%, where : COMPANY The purpose of this polarization is to minimize actual data approaching its target, the lower actual the better. Example of this type of KPI are no of accident with fatality. production shutdown, no of fire, no of employee strike, etc. IF Actual = 0 THEN Achievement = 100%, ELSE Achievement = 0% f. Stabilize The purpose of this polarization is to stabilize actual data as close as its target, the closer actual the better. Example of this type of KPI are Budget Deviation, C&B Rating. Achievement = (115% - (|Actual-Target|/Target) x k) k = penalty factor k=1.5 for KPI of Budget Deviation k=3 for KPI C&B Rating 5. Score Achievement can be translated into Score with the following correlation. COMPANY ACHIEVEMENT SCORE Category Colour Achievement > 115% Score = 4 Excellent BLUE 100% < Achievement < 115% 3 < Score < 4 Good GREEN 85% < Achievement < 100% 2 < Score < 3 Fair YELLOW 70% < Achievement < 85% 1 < Score < 2 Poor RED Achievement < 70% Score = 1 Poor RED Score for Strategic Initiative is defined as follow: Strategic Initiatives SCORE Colour Timely 4 BLUE Delay 3 GREEN In progress 2 YELLOW Not started yet 1 RED Table 1 Score is also agregate for level Strategic Objective and Perspective by the following rule. n Score SO = ∑ (Score KPI i x Weight KPI i) / ∑ Weight KPI i I=1 n Score Perspective = ∑ (Score SO i x Weight SO i) / ∑ Weight SO i I=1 COMPANY 6. Weight Weight of KPI is determined based on degree of importance of each KPI, the more important the KPI, the higher weight of KPI. Degree of importance can be interpreted as degree of impact to overall score for respective unit organization. Total Weight of KPI for each unit organization shall be 100%. 7. Result Result KPI = Score KPI x Weight KPI Total Result = Overall Score of BSC COMPANY VIII. BSC Governance Below is the cycle process of BSC governance in one year period. Year-1 Oct Nov Dec Jan Feb Mar Year Apr May Jun Jul Year+1 Aug Sep Oct Nov Dec Jan Feb Mar Evaluate Directorate BSC Strategic Direction Board of Director Quarterly BOD BSC Meeting for current year (Meeting shall be led by President Director to evaluate all Directorate achievement) Approve Goal year+1 Directorate Level SMO (Strategy Evaluate Division BSC Monthly Directorate BSC Meeting BSC Clinic Coordinate the process of strategy planning, budgeting, and unit performance management Management Office) BSC Clinic Finance & Accounting Human Capital WP&B Review and coordinate alignment of budgeting process against strategy Manpower PlanningCoordinate the whole process of individual Performance Management System The cycle process can be described as follow: Step 1. Strategic Direction Activity / Procedure Person in charge Announce strategic direction for next President year regarding what the company Director Time frame October need to focus and where it is heading to. 2. Work Program & Budget Coordinate preparation of Work Director Finance Program & Budget for all Units. & Control October COMPANY 3. Manpower Coordinate preparation of manpower SMO Planning October planning and incorporate ini Work Program & Budget for all Units. 4. BSC Clinic Coordinate setting up KPI and Target SMO November for next near for all units 5. Setup Approve Company Goals for next President Company year including objective, KPI, and Director Goals Targets. 6. Quarterly Lead quarterly BSC meeting to Mar, Jun, Sep, Director Dec. All Directors Monthly SMO Daily. SMO Oct-Nov Human Capital Monthly Review and coordinate alignment of Finance & Oct budgeting process against strategy Control discuss strategic matters with BOD Meeting including Year To Date achievments. Lead monthly BSC meeting with all Directorate divisions under his/her BSC Meeting responsibilities. 8. BSC Coordinate the whole process Governance December President BOD BSC 7. Monthly October- strategic and performance management within the company. SMO review and discuss with all 9. BSC Cliniic units to coordinate YTD achievement, constraint, corrective action, and progress strategic initiative. SMO coordinate setting up KPI and Target for (Year+1). 10. Individual Performance 11. Stratex Coordinate the whole process of individual performance evaluation. COMPANY 12. BSC Divsion Evaluate Result BSC Divison Respective Feb (Year+1) director 13. BSC Directorate Evaluate Result BSC Directorate President Director Feb (Year+1)
© Copyright 2024 Paperzz