Developing A Balanced Scorecard: CIPD Norfolk Group, 17 October 2006

Developing a Balanced Scorecard
CIPD Norfolk Group, 17 October 2006
Richard Barnes
Culturetracker.com
What is a Balanced Scorecard

A strategic and operational tool Owned by the Executive Shared by everyone Balances:
Long and short term Hard and soft measures Leading and trailing indicators Internal/external perspectives
Like writing a novel, not writing a list Measures support change, not monitoring
It is NOT
A new idea An end in itself A playing field for internal politics An initiative of Finance, HR, Marketing etc. Boardroom art A make-work exercise
Its origins

Nolan-Norton Consultants 1990 12 client Organisation of the Future study group Based on premise that financial measures were insufficient for a modern business Principles espoused previously by:
Rensis Likert (The Human Organisation, 1960) TQM gurus (Deming, Crosby, Juran etc.)* European Foundation for Quality Management (1985) Maisel and McNair parallel models
* Original K&N source was part of a TQ programme
The EFQM Excellence Model
9% 9%
10%
8%
14%
20% 15%
9%
6%
(percentages show how each elements is scored for importance)
Kaplan and Norton model (1996)

Customer
Balanced Scorecard
Financials
Business Processes
Learning & growth
A question of balance?
Customer perspective Corrective activity Developmental activity Balancing compliance with added value
Financial Measures Key performance ratios Financial health Balancing leading with trailing indicators
Balanced Scorecard
Learning and growth People measures Knowledge measures Balancing soft and hard indicators
Business Processes Drumbeat Time, cost, quality Balancing inputs and outputs
Building the Balanced Scorecard

How do you create value?
The key question
A strategic tool

Starts with strategy Continuous process Needs to become culturally embedded
The story of a scorecard

To be successful for our shareholders, we must be (position in market), which means that we must return superior financial results in ....... Our customers are the people who will secure these results for us so we must offer our customers superior value by ......... To deliver this superior value we must excel in the way we manage the processes for ....... These processes are operated by our people. We must provide our people with ....... to achieve excellent performance.
Cause and effect chain

May be reversed Strategic Objective What Financial Measure How Customer Value Measure How
Process Measure How

Employee Measure
Cause and effect chain example

Become No 2 player What F C Market share How Service span offer How
P Services delivered per customer How

E
Availability of data
The Balanced Scorecard
Where does it fit?
Where does it fit?

Balanced Scorecard
Vision Mission and CSFs Strategic Objectives Measures Alliances
Building Using
Structure
Culture and values (leadership/style/relationships etc.)
Rewards
Systems
Projects
Targets
Example Retail Strategic themes

Themes Projects Measures Broadening the Pharmacy store Pharmacy store offer expansion sales growth Focus on Health New store Brand Penetration and Beauty opening process (Market Research) Friendly and Fun Living the Mission Mystery Shopper Destination of Category Footfall and basket Choice management size
Sample retail scorecard

Customer perspective Basket Size Mystery Shopper index Footfall Complaints
Financial Measures Sales Revenue growth Return on Turnover Cost of sales Shrinkage
Balanced Scorecard
Learning and growth Absence level Stability index Mission involvement index Starfish.net ideas
Business Processes Stock Outs New store plan vs. actual Strategic Projects delivery Supply chain process time
Joined up thinking?
PEOPLE Blue arrows indicate positive correlation. Red arrows negative. Broken line is a weaker connection CUSTOMER Staff Loyalty Development
0.16
Complaints* Satisfaction * No data available for this element
Morale (absence)
-0.20
Loyalty*
0.16
only in Metro and Extra Stores Recruitment only in smaller store formats - Metro and Express One in Front*
-0.28
0.27
Market share*
Sales Growth*
0.1 0.13 0.17 -0.1 -0.16 0.22 0.11
Productivity
Cost Controls (Sales var)
Stock availability Waste Mgt*
-0.1
Profitability* Stock Mgt Driving extra sales to bottom line*
OPERATIONS
Number at arrow head indicates size of Pearson co-efficient of correlation. Superstores used for consistency of statistic except where indicated.
FINANCE
Using the Balanced Scorecard
Drill-down into HR systems
Performance management
Age Pre-industrial Age What is valued? Community Loyalty Key process Belonging Compliance Key Output Contribution Output Culture Social Work-ethic Mobility
Industrial Age Obedience Output Information Age Knowledge Innovation
Empowerment New value
Learning and growth

Employee satisfaction Employee capability Information availability Knowledge growth Performance and reward management systems Cultural measures from surveys e.g. leadership, communication, recognition (enablers)
Success factors
Drill-down into Systems

Planning and objective setting Operational targets Budgeting Internal audit Continuous improvement Project management Performance management/appraisal Reporting and meeting regimes Reward and recognition.......
Unfortunately, this years low score on morale in the employee survey means our balanced scorecard index is below the threshold for the bonus award
with grateful thanks to Catbert

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Developing a Balanced Scorecard

CIPD Norfolk Group, 17 October 2006

What is a Balanced Scorecard

* Original K&N source was part of a TQ programme

The EFQM Excellence Model

(percentages show how each elements is scored for importance)

Kaplan and Norton model (1996)

Learning & growth

Building the Balanced Scorecard

The key question

Starts with strategy Continuous process Needs to become culturally embedded

The story of a scorecard

Cause and effect chain

Process Measure How

Cause and effect chain example

P Services delivered per customer How

The Balanced Scorecard

Where does it fit?

Where does it fit?

Culture and values (leadership/style/relationships etc.)

Example Retail Strategic themes

Sample retail scorecard

Complaints* Satisfaction * No data available for this element

Cost Controls (Sales var)

Stock availability Waste Mgt*

Profitability* Stock Mgt Driving extra sales to bottom line*

Using the Balanced Scorecard

Drill-down into HR systems

Industrial Age Obedience Output Information Age Knowledge Innovation

Empowerment New value

Learning and growth

Drill-down into Systems

with grateful thanks to Catbert

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