Creating a Balanced Scorecard for a Financial Services Organization
Designed to help financial services organizations build and implement the strategic management framework known as the balanced scorecard, Creating a Balanced Scorecard for a Financial Services Organization is the book you need to ensure accountability, transparency, and risk management in your enterprise. The financial crisis revealed the many shortcomings of the industry, but with this book in hand you can make the most of the mistakes of the past to build a better, stronger business that balances both short- and long-term goals.
Rich in the latest theoretical thinking and incorporating case studies that show the balanced scorecard system in action, the book covers both financial and non-financial performance perspectives in one comprehensive volume. Written by two leading practitioners with years of real-life experience, the book is the definitive step-by-step guide to implementing the balanced scorecard throughout your organization, aligning your whole business with your strategic goals.
- Includes everything you need to improve performance transparency, accountability, governance procedures, risk management, and more for financial services organizations of any kind
- Packed with expert advice and case studies that show the ideas presented in action
- Written by leading experts who have successfully implemented the balanced scorecard system in their own companies
Accessible and in-depth, Creating a Balanced Scorecard for a Financial Services Organization is the book you need to improve your business.
CHAPTER 1: THE CURSE OF LIVING IN "INTERESTING TIMES," THE CREDIT CRUNCH, AND OTHER CHALLENGES 1
Executive Summary 1
The Impact of the Credit Crunch 2
Deregulation, Globalization, and Technology 6
The Collapse of Customer Loyalty 6
Scorecard Pioneers 9
Other Scorecard-Using Financial Services Companies 10
CHAPTER 2: DESCRIBING THE BALANCED SCORECARD 13
Executive Summary 13
The Scorecard's Origins 14
A Balanced Measurement System 15
The Emergence of the Strategy Map 15
The Strategy-Focused Organization 19
Enterprisewide Alignment 25
Creating a Board Scorecard System 27
The Office of Strategy Management 31
The Execution Premium Model 38
CHAPTER 3: THE BALANCED SCORECARD AND RISK MANAGEMENT 43
Executive Summary 43
Linking Strategy Management with Risk Management: A History 44
Strategic Risk Management: The New Core Competency 48
Risk-Based Performance 53
A Risk Balanced Scorecard 55
The Five Principles of SRM 60
CHAPTER 4: BUILDING A STRATEGY MAP 67
Executive Summary 67
Start with the Strategy 68
SeniorManagement Must Own the Strategy Map 72
Strategy Clarification 73
The Use of External Facilitation 73
Creating Objectives 78
Strategic Themes 80
Risk-Balanced Scorecard 85
Value Creation Map 88
Risk Map 91
CHAPTER 5: SELECTING METRICS AND TARGETS 95
Executive Summary 95
The Critical Few Measures 96
Key Performance Questions 97
Common Definitions 108
Key Risk Indicators 111
A Risk Scorecard 117
Selecting Targets 118
Comparative Performance Goals 121
CHAPTER 6: SELECTING INITIATIVES 127
Executive Summary 127
Organizational Awareness of the Importance of Initiatives 128
The Challenges of Selecting Initiatives 128
Linkage to the Strategy Map 129
Initiative Prioritization 130
CHAPTER 7: CASCADING THE BALANCED SCORECARD: THE STRUCTURAL CHALLENGES 137
Executive Summary 137
Strategic Line-of-Sight 138
Mandated Objectives and Measures 139
An Ideal Scorecard Cascade 139
Scorecard Pilots 140
A Hybrid IT Strategy Map: The Case of the Bank of England 146
To Cascade or Not to Cascade? 150
CHAPTER 8: CASCADING THE BALANCED SCORECARD: THE CULTURAL CHALLENGES 159
Executive Summary 159
Transparency and Accountability 160
Fear ofMeasurement 161
A Major Change Effort 163
Senior Management Behavior 167
Local Champions 170
CHAPTER 9: INDIVIDUAL PERFORMANCE APPRAISAL AND INCENTIVE COMPENSATION 175
Executive Summary 175
Personal Scorecards 176
Arguments Against the Personal Scorecard 177
Truncated Personal Scorecards 178
Competency Development 178
Personal Scorecards for the Senior Team 179
Linking Performance to Pay 179
The Arguments AgainstMaking the Link 184
Making the Choice 185
CHAPTER 10: GETTING THE BEST FROM SOFTWARE 189
Executive Summary 189
The Benefits of Automation 190
What Software Cannot Do 193
Certified Vendors 194
Criteria for Choosing Software 195
Advanced Performance Institute Software Selection Criteria 196
Developing an IT Strategy 199
Strategy and Risk Management 201
CHAPTER 11: ALIGNING BUDGETING AND PLANNING WITH STRATEGY THROUGH THE BALANCED SCORECARD 205
Executive Summary 205
The Shortcomings of the Budget 206
Out of Step with Strategy 207
The Scorecard Driving the Budget 208
Devolved Responsibility 210
Alternatives to Conventional Budgeting 210
Reporting Risk 219
CHAPTER 12: CONCLUSION AND ACTION ROADMAP 225
Executive Summary 225
Part One: The Future of the Balanced Scorecard Within Financial Services Organizations 226
Part Two: Action-Oriented Roadmap 228
Parting Remarks 233
In 1995, Naresh was the first consultant in Asia to implement Balanced Scorecard with Management Cockpit following in 1999. Since then he has implemented over 100 Balanced Scorecards in over 20 industries across 10 countries on three continents.
He has implemented Balanced Scorecard for over 18 organizations in financial services in Asia including government ministries, deposit insurance agencies, development banks, private and state banks, insurance companies, finance companies and stock clearing agencies.
He has been educated in Asia, Europe and USA.
James Creelman is a management author, educator and practitioner specializing in the Balanced Scorecard and related Enterprise Performance Management disciplines. He had written 22 books or reports including More with Less: Maximizing Value in the Public Sector, which he coauthored with Bernard Marr; and Mastering Business in Asia: Succeeding with the Balanced Scorecard, which he coauthored with Naresh Makhijani.
James leads Balanced Scoredcard-related workshops and seminars throughout the world. He is presently working within the office of strategy management at the Ministry of Works, Bahrain.
After the devastation of the credit crunch of 2008, what emerged clearly from the wreckage was that the financial sector, specifically banking, needed a new roadmap to make its way into the post-credit crunch economy.
This book by Naresh Makhijani and James Creelman presents that roadmap. In an easy-to-use, practical format, it describes how financial organizations throughout the globe are using a single tool to successfully deal with the challenges of reorganizing themselves for more transparency and accountability, more watertight risk management and sustainable long-term financial return – the Balanced Scorecard.
The Balanced Scorecard is the world’s most popular strategy management framework, lauded for its efficacy in balancing financial performance with non-financial results and short-term requirements with long-term goals. Creating a Balanced Scorecard for Financial Services Organization is based on rigorous research of case studies to offer a practical, step-by-step guide for designing and implementing a Balanced Scorecard. Through the many case study examples, ranging from Pentagon Federal Credit Union to Canadian giant Scotiabank, supported by up-to-the-minute theoretical thinking, this detailed manual explains how to integrate risk management with strategy management through the Balanced Scorecard framework and how to link operational management with strategy management.
For those wanting to implement the Balanced Scorecard on all levels of an organisation, the book also details clearly how to develop a range of synergistic scorecards from corporate through business unit, function and even individual employee levels so that strategy becomes seamlessly integrated into “everyone’s everyday job”.
Creating a Balanced Scorecard outlines also how to foster the appropriate culture for managing using the framework and how to make suitable technology choices to support such strategy management. As well, the authors explain how to refine the incentive compensation system to reflect the drivers of future value creation as well as historical financial performance.
For executives in the financial and banking industries, Creating a Balanced Scorecard is an indispensable guide to aligning the entire organization behind the strategic goals of the enterprise through a single, comprehensive framework.