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
COMPANY
i. Facilitates strategy alignment process.
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.

7. Strategic Initiative
COMPANY
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. KPI shall contain below elements:

a. Definitions
b. Formula
c. Polarizations
d. Target
e. Weight
f. Period Level
g. Unit of Measurement

3. 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−k . Actual x 100%, where :

e : Exponantial value
k : penalty factor (0.1 – 0.2)

e. Minimize Fatality
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.
COMPANY
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 Year Year+1
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Evaluate
Directorate BSC

Strategic Direction Quarterly BOD BSC Meeting for current year

Board of
(Meeting shall be led by President Director to evaluate all Directorate achievement)
Director
Approve
Goal year+1

Evaluate
Directorate Monthly Directorate BSC Meeting Division BSC
Level

SMO (Strategy BSC Clinic Coordinate the process of strategy planning, budgeting, and unit performance management
Management
Office)
BSC Clinic

Finance &
Accounting WP&B Review and coordinate alignment of budgeting process against strategy

Human Capital Manpower PlanningCoordinate the whole process of individual Performance Management System

The cycle process can be described as follow:

Step Activity / Procedure Person in charge Time frame
1. Strategic Announce strategic direction for next President October
Direction year regarding what the company Director
need to focus and where it is heading
to.

2. Work Coordinate preparation of Work Director Finance October

Program & Program & Budget for all Units. & Control
Budget

3. Manpower Coordinate preparation of manpower SMO October

Planning planning and incorporate ini Work
COMPANY
Program & Budget for all Units.

4. BSC Clinic  Coordinate setting up KPI and Target SMO October-

for next near for all units November

5. Setup Approve Company Goals for next President December

Company year including objective, KPI, and Director
Goals Targets.

6. Quarterly  Lead quarterly BSC meeting to President Mar, Jun, Sep,

BOD BSC discuss strategic matters with BOD Director Dec.
Meeting including Year To Date achievments.
7. Monthly Lead monthly BSC meeting with all All Directors Monthly
Directorate divisions under his/her
BSC Meeting responsibilities.
8. BSC Coordinate the whole process SMO Daily.
Governance strategic and performance
management within the company.
9. BSC Cliniic  SMO review and discuss with all SMO Oct-Nov
units to coordinate YTD
achievement, constraint, corrective
action, and progress strategic
initiative.
 SMO coordinate setting up KPI and
Target for (Year+1).

10. Individual  Coordinate the whole process of Human Capital Monthly
Performance individual performance evaluation.

11. Stratex Review and coordinate alignment of Finance & Oct

budgeting process against strategy Control

12. BSC Divsion Evaluate Result BSC Divison Respective Feb (Year+1)
director
COMPANY
13. BSC Evaluate Result BSC Directorate President Feb (Year+1)
Directorate Director

3.