I. Balanced Scorecard Basics

Balanced Scorecard
Table of Contents
I. II. III. IV. V. VI. Balanced Scorecard Basics Creating the Strategy Map Good Performance Measurements The Final Scorecard Components Case Study Exercise Some Final Points
Why the Balanced Scorecard?

The Organization will become more strategically focused over the next ten years given the recent policy directive issued by BSP (Budget & Strategic Planning). Need more balanced approach to looking at performance, both tactical and strategic. Only 5% of a workforce tends to understand their companys strategy. 86% of executive teams spend less than one hour per month discussing strategy.
A Major Driver is . . .
The Balanced Scorecard is a strategic view of performance for the company, balancing out current tactical view of performance which is already in place and aligning it with the companys objectives.
Where it started . . .
Introduced in 1992, by Robert Kaplan and David Norton, the Balanced Scorecard is the most commonly used framework for ensuring that agencies execute their strategies. Today, about 70% of the Fortune 1,000 companies utilize the Balanced Scorecard to help manage performance.
Some Basic Principles

Quantifies the company Strategy in measurable terms Strategy is summarized on a Strategy Map over four views of performance (perspectives). Critical Components include: - Measurements - Targets - Initiatives Everything must be linked: Goals to Objectives, Objectives to Measurements, Measurements to Targets.
Four Views of Performance

Strategic Objectives
Strategy can be described as a series of cause and effect relationships. Provides a line of sight from strategic to operational activity working on the right things.
Stakeholders
If we succeed, how will we look to our stakeholders?
Internal Processes
To satisfy our customers, at which processes must we excel?
Learning & Growth

"To execute our processes, how must our organization learn and improve?"
company Investments
In order to succeed, what investments in people and infrastructure must we make?
In order to be successful, the company should . . .

Be comprised of a balanced set of a limited vital few measures;
Produce timely and useful reports at a reasonable cost; Display and make readily available information that is shared, understood, and used by the company; and Supports the organizations values and the relationship the organization has with customers, suppliers, and stakeholders.
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Before we can map our strategy . . .

Get down to a set of quantifiable strategic objectives:
Too vague More precise
Improve Customer Service
Reduce average customer wait times by 30% by year end
Make sure your objectives have a direct relationship to your goals and your goals have a direct relationship to your mission and values.
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Table Of Contents
I. II. III. IV. V. VI.
Balanced Scorecard Basics Creating the Strategy Map Good Performance Measurements The Final Scorecard Components Case Study Exercise Some Final Points
Strategy Maps A Better Way to Communicate Strategy

Executive consensus and accountability: Building the map eliminates ambiguity and clarifies responsibility. Educate and Communicate: Build awareness and understanding of organization strategy across the workforce.
Promote Transparency: Ensure Alignment: Each sub-unit and individual link their objectives to the map. Communicate with and educate constituents, partners, oversight bodies, and the general public.
Source: "Using Balanced Scorecard Technology to Create Strategy-Focused Public Sector Organizations", Robert S. 10 Kaplan, April 21, 2004, pg. 20
Research by Harvard Business School suggests four major benefits to using a Strategy Map: 1.Helps build consensus on what the company must do strategically. 2.Effectively communicates strategy across the company. 3.Helps ensure that all components in the company are aligned around strategy. 4.Promotes strategy outside the company to others who have a vested interest in the companys strategy.
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The Context of Measurement

Performance Measurement is a process by which a company objectively assesses and evaluates the extent to which it is accomplishing a specific objective, goal, or mission. Performance measurement alone is incomplete. Performance Management is a systemic link between company strategy, Investments, and processes. Performance Management is a comprehensive management process.
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Why Measure Performance?

Enables decision making Manage by results Promote accountability Distinguish between program success and failure Allow for organizational learning and improvement Justify budget requests Optimize Investments Provide means of performance comparison Fulfill mandates Establish catalysts for change And so on
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Without Measuring, Decision Makers Have No Basis For:

Knowing what is going on in their enterprise Effectively making and supporting decisions regarding Investments, plans, policies, schedules, and structure Specifically communicating performance expectations to subordinates Identifying performance gaps that should be analyzed and eliminated Providing feedback that compares performance to a standard Identifying performance that should be rewarded
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Examples of Measurements by Perspective

Stakeholder / Customer
Current customer satisfaction level Improvement in customer satisfaction Customer retention rate Frequency of customer contact by customer service Average time to resolve a customer inquiry Number of customer complaints
Internal Processes
Number of unscheduled maintenance calls Production time lost because of maintenance problems Percentage of equipment maintained on schedule Average number of monthly unscheduled outages Mean time between failures
Learning and Growth

Percentage employee absenteeism Hours of absenteeism Job posting response rate Personnel turnover rate Ratio of acceptances to offers Time to fill vacancy
Investments
% of facility assets fully funded for upgrading % of IT infrastructure investments approved # of new hire positions authorized for filling % of required contracts awarded and in place
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Selection Criteria for Performance Measurements
MEANINGFUL - related significantly and directly to organizations mission and goal VALUABLE measure the most important activities of the organization BALANCED inclusive of several types of measures (i.e. quality, efficiency) LINKED - matched to a unit responsible for achieving the measure PRACTICAL affordable price to retrieve and/or capture data
COMPARABLE used to make comparisons with other data over time

CREDIBLE - based on accurate and reliable data TIMELY - use and report data in a usable timeframe SIMPLE -- easy to calculate and understand
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Three Criteria Used for company Scorecard

1. Relevant Addresses an operational or strategic performance issue Is results- or outcome-focused Provides useful information to enable decision making Measurable Quantifiable and Objective Facilitates Analysis Can be done in a timely manner with high accuracy Data are available and collectable Actionable Can be tracked to an appropriate person or team responsible for the activity measured Measure relates to process inputs that can be controlled/adjusted to address concerns
2.
3.
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Top Ten Metrics in the Public Sector

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Outputs/Product Program Inputs Financial Indicators Work/Activities Timeliness of Services Internal Measures of Quality Operating Ratios Outcomes of Products or Services External Customer Service Equity of Services to Users
Source: GAO-GGD-92-65 company Use of Performance Measures
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How to Set Targets

Past performance trends per historical data. Performance levels of similar organizational units at a comparable level that facilitates benchmarking. Best practices across the company, the public sector or the private sector. Must be at a preexisting high level of performance before you use this approach. For newly launched services, may have to establish a baseline per a prototype test and extend out from this point forward. For major strategic shifts, may have to set directly per the plan itself without regard for hard data.
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Checklist for Setting Targets

Targets match up with measurements, one to one. Targets require improving current levels of performance. Targets are a stretch, but achievable: they may require improvements to existing processes. Targets are quantifiable so that the target communicates if the expected performance was met. Long-term targets are established before shortterm targets. Financial/Budget related targets are established before non-financial targets.
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Characteristics of Initiatives
Leader Sponsored Requires Investments people, funding, technology, etc. Has designated owners Includes deliverables or milestones Usually has time deadlines May be difficult to launch not resourced Could encounter obstacles people are confused, conflicts with other functions
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Initiatives should enable strategic execution

Initiatives
Value Mapping Project
Goals or Objectives
Improve identification and delivery of all company services across the full stakeholder spectrum Improve the employee turnover and satisfaction scores Reduce company costs and streamline our services for more direct service delivery Expand the overall knowledge base so that inter-functions can learn from one another Develop a more systematic process across the entire company to better connect to our customers Reduce reworks and overlaps between our seven shared service centers
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Employee Rotation Program Web Self Service Portal Common Knowledge Center Customer Survey and Analysis Tool Program Shared Service Center Tracking System
Going from Output to Outcome

When you first launch your Initiative, you probably want to use an Output Measurement. Once the Initiative is up and running, change your measurement to an Outcome to see if the Initiative is really having strategic impact.
Initiative
Lean Process / Six Sigma Employee Competency Models
Output Measurement
Number of Projects Defined by Region % of Employees who have a Competency Model in place
Outcome Measurement
Overall reductions in errors, reworks, and cycle times Higher skill levels of employees using the models
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Balanced Scorecard

Why the Balanced Scorecard?

Some Basic Principles

Four Views of Performance

Learning & Growth

In order to be successful, the company should . . .

Before we can map our strategy . . .

Reduce average customer wait times by 30% by year end

I. II. III. IV. V. VI.

Strategy Maps A Better Way to Communicate Strategy

I. II. III. IV. V. VI.

The Context of Measurement

Why Measure Performance?

Without Measuring, Decision Makers Have No Basis For:

Examples of Measurements by Perspective

Learning and Growth

Selection Criteria for Performance Measurements

COMPARABLE used to make comparisons with other data over time

Three Criteria Used for company Scorecard

Top Ten Metrics in the Public Sector

Source: GAO-GGD-92-65 company Use of Performance Measures

I. II. III. IV. V. VI.

How to Set Targets

Checklist for Setting Targets

Initiatives should enable strategic execution

Going from Output to Outcome

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