Balanced Scorecard Workshop

Balanced Scorecard Workshop
Presented by:
Matt H. Evans, CPA, CMA, CFM
Public Sector Retreat on
Malcolm Baldrige Performance Excellence
1
Purpose of the Workshop
• Introduce the Balanced Scorecard to the
Organization
• Make sure everyone understands how the
scorecard works
• Communicate how the Balanced
Scorecard fits with the Malcolm Baldrige
Model of performance excellence
2
Table of Contents
I.
Balanced Scorecard Basics
II.
Creating the Strategy Map
III.
Good Performance Measurements
IV.
The Final Scorecard Components
V.
Case Study Exercise
VI.
Some Final Points
3
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).
• People at all levels have relied heavily on tactical
performance measurements, such as number of maps
submitted, number of land structures in flow, and % of supply
vendor contracts in place.
• Need more balanced approach to looking at performance,
both tactical and strategic.
• Only 5% of a workforce tends to understand their company’s
strategy.
• 86% of executive teams spend less than one hour per month
discussing strategy.
4
A Major Driver is . . .
• The Organization’s Information Resource Planning System
(IRPS):
- Enterprise wide system for how we will evaluate success –
division read outs, data turnarounds, global partnerships, etc.
- Must be integrated into all agency components (such as
region and global outlet offices)
- Designed around the Balanced Scorecard framework
• The Balanced Scorecard will be the strategic view of
performance for the agency, balancing out our current tactical
view of performance which is already in place.
5
Government Performance Results Act
 Required to develop long-term Strategic Plans
("SP")
 Specify general Goals and Objectives
 Develop Annual Performance Plans ("APP")
 Specify measurable performance goals
 Annual Performance Report ("APR")
 Demonstrate actual results
 APP goals should show the expected progress
toward meeting the long-term goals of the SP
6
Public Sector Organizations –
More Strategic Focus
7
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.
Balanced Scorecards are used as the roadmap for
creating the “Strategic Management System” or our
IRPS. And this will drive overall organizational
performance for our entire agency!
8
Some Basic Principles
• Quantifies the Agency Strategy in measurable terms
• Strategy is summarized on a Strategy Map over four views
of performance (perspectives).
• Must capture a cause-effect relationship between strategic
objectives over the four perspectives on the Strategy Map.
• Critical Components include:
- Measurements
- Targets
- Initiatives
• Everything must be linked: Goals to Objectives, Objectives
to Measurements, Measurements to Targets.
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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?"
Agency Investments
“In order to succeed, what
investments in people and
infrastructure must we make?”
10
The Importance of Alignment
Complete Framework for IRPS
Strategy
Objectives
Measures
Agency
Department
Team/
Individual
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Alignment all the Way Through
Goal: Improve environmental health
Performance Gap: Less than Organization watershed water quality
Initiative: Data Mining
Resource
Investment
Management
Innovation
Improved "Cause
and Effect"
Knowledge
Business
Processes
Improved Environmental
Assessment Reports
Financial
Management
Decreased Litigation
Costs
Relationship
Management
Justified Initiatives to
Improve Water Quality
Investments Available to
be Allocated to Other
Critical Areas
Environmental
Health
Improved Water Quality
Enhanced Public
Confidence
Increased
Investment
Accountability
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In order to be successful, the
Agency’s IRPS 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 Agency; and
• Supports the organization’s values and the
relationship the organization has with customers,
suppliers, and stakeholders.
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Before we can map your 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.
Balanced Scorecard Basics
II.
Creating the Strategy Map
III.
Good Performance Measurements
IV.
The Final Scorecard Components
V.
Case Study Exercise
VI.
Some Final Points
15
Improved Returns
on Investments
Learning
& Growth
Economic
Model Process
Expand Global
Facility Reach
Investments
Internal Process
Stakeholder
Strategy Map: Capture a Cause Effect
Relationship from the Bottom Up
Facilities and
Fixed Assets
More rapid and
accessible services
Reduce Re-Activities
thru ABC/M
Leadership
Development
Human Capital
Establish Web
Based Self Services
Knowledge
Management
IT Infrastructure
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Two Special Techniques
for Building Strategy Maps
General Rule of Thumb to ensure strategy map is developed both
vertically and horizontally
The 4 to 5
Rule
Splitting the
Perspective
Weak
Strong
Way of pulling out both drivers and outcomes that match up
against the core competencies of the business model
Customer Perspective
Customer Growth
Timely Delivery
Retention Rate
Pricing
Quality
Customer Satisfaction
Service
Reputation
Outcomes
Drivers
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Key Benefits of Strategy Maps
• Articulates how the organization creates value for its constituents
and legitimizing authority
• Displays key priorities and relationships between outcomes (the
"what") and performance enablers or drivers (the "how")
• Provides a clear view of "how I fit in" for sub-organizations, teams,
and individuals
• "Cascading the scorecard throughout the organization, and clearly
mapping the various units and functions back to the organization
or agency-wide map is critical to leveraging and ensuring
alignment"
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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.
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Kaplan, April 21, 2004, pg. 20
Multiple Choice Question –
Cause Effect on Strategy Map
The top perspective of the Balanced Scorecard is the final end
results or outcomes we want to achieve. This perspective is
called:
a. Internal Processes
b. Stakeholder / Customer
c. Learning & Growth
d. Agency Investments
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Multiple Choice Question –
and the answer is . . .
b – “Stakeholder / Customer” are those who we ultimately
serve and we must meet their needs and requirements. This
is our final end result within the scorecard model.
Balanced Scorecards tell you the knowledge, skills and systems that your
employees will need (learning and growth) to innovate and build the right
strategic capabilities and efficiencies (internal processes) that deliver
specific value to the market (customer) which will eventually lead to
higher shareholder value (financial).
– “Having Trouble with Your Strategy? Then Map It” by Robert S. Kaplan
and David P. Norton - Harvard Business Review
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Aligning the Scorecards
Once you have completed your strategy map, make sure it aligns with agencies or divisions you report
up to. This overall alignment of scorecards throughout the entire Organization forms the Strategic
Management System within IRPS.
IRPS
Best Business
Practices
Expand Global
Reach
Expand the
Skill Base
Lean Processes
Improve Asian
Footprint
Develop the
Workforce
Agency
Scorecard
Process Efficiency
Grow
Globally
Highly
Skilled
Workers
Outlet
Scorecard
Streamline
Processes
Continue to
Expand Range
Improve
Employee
Competencies
Organization
Scorecard
GOG
Scorecard
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Internal Process
Stakeholder
Extend the Map into Measurements,
Targets and Initiatives
Strategy Map
Faster Service Access
Self Service
Applications
Lean Processes
L&G
Objective
Description
Eliminate waste,
reworks, and
other errors in
our processes
Process and Value
Map Analysis
Investments
Detailed
statement of
what is critical to
successfully
achieving the
strategy
How success in
achieving the
strategy will be
measured and
tracked
Measure
Number of
Reworks
The level of
performance
or rate of
improvement
needed
Target
2 per setup per
month each
Outlet Office
Key action
programs
required to
achieve
objectives
Initiative
Lean / Six
Sigma
Web Enable
Technologies
Invest in IT
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Alignment of Scorecard Components
Make sure the components of your scorecard fit together. We want to
create a tight model for driving execution of your strategy.
Goal
Achieve
Agency
operational
efficiencies
with best
practices in
the private
sector
Objective
Measurement
Target
Initiative
Reduce
Operational
Service Costs by
50% over the
next 5 years
Cost per Outlet
Office, Cost per
Region, Cost
per FTE
5% - Year 1
10% - Year 2
15% - Year 3
Activity
Based
Costing /
Management
Reduce identified
re-activities
within primary
processes by
80% over the
next 3 years
Waste Volume
Charts, Rework
Tracking, Cycle
Time End to End
in S-LX (5 of 7
Regions)
Waste stream
reductions of
5% each year,
Reworks cut in
half for next 3
years, cycle
time cut by 75%
Lean / Six
Sigma
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Multiple Choice Question –
Create a Tight Model
The Balanced Scorecard process captures a cause
and effect relationship based on having all parts
linked together. Strategic goals link down to
objectives, objectives link down to measurements,
and measurements link to:
a. Mission
b. Goals
c. Budgets
d. Targets
25
Multiple Choice Question –
and the answer is . . .
d – Measurements should be linked to
targets. We want a one-to-one
relationship so that measurements are
actionable to the Agency.
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Table Of Contents
I.
Balanced Scorecard Basics
II.
Creating the Strategy Map
III.
Good Performance Measurements
IV.
The Final Scorecard Components
V.
Case Study Exercise
VI.
Some Final Points
27
The Context of Measurement
Performance Measurement is a process by which
an agency / program / function / outlet office
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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Types of Measurements
Measure Type
Leading
Definition
Intermediate outcomes that predicts or
drive bottom-line performance results
Example
Employee turnover rate
Lagging
Bottom-line performance results
resulting from actions taken
Input
Amount of Investments, assets, equipment,
labor hours, or budget dollars used
Output
Units of a product or service rendered
- a measure of yield
Number of Value Meal orders fulfilled
Outcome
Resulting effect (benefit) of the use or
application of an output
Customer satisfaction rating
Objective /
Quantitative
Empirical indicators of performance
Wait time
Subjective /
Qualitative
Perceptions and evaluations of major
customers and stakeholders
Customer complaints received as a %
of total customers served
Employee satisfaction rating
Number of cashiers
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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
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
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
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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Multiple Choice Question –
Appropriate Measurement
The measurement, % of employees following a
supervisor approved competency model, would
most likely be placed in which perspective of the
Balanced Scorecard?
a.
b.
c.
d.
Stakeholder / Customer
Learning and Growth
Agency Investments
Internal Processes
33
Multiple Choice Question –
and the answer is . . .
b – this measurement relates to helping
grow the workforce and this would most
likely fit with the Learning and Growth
perspective of the Balanced Scorecard.
34
Some Basic Guidelines for
Good Performance Measures
• You should have at least one measurement for
each objective.
• Measurements define or explain objectives in
quantifiable terms:
Vague => We will improve customer service
Precise => We will improve customer service
by reducing response times by 30%
by year end.
• Measurements should drive change and
encourage the right behavior.
• Should be able to influence the outcome.
35
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
36
Three Criteria Used for Agency Scorecard
1.
Relevant
– Addresses an operational or strategic performance issue
– Is results- or outcome-focused
– Provides useful information to enable decision making
2.
Measurable
– Quantifiable and Objective
– Facilitates Analysis
– Can be done in a timely manner with high accuracy
– Data are available and collectable
3.
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
37
Scoring Measurements Against
the Three Selection Criteria
A “0” or “1” in any column indicates that you need to revisit this
measurement before implementation.
Measurement
Relevant
Measurable
Actionable
% of Global Outlets that follow the
end to end process defined in IRPS
3
1
2
Number of score studies completed
3
2
3
% of Region Centers using ABC
Models to manage 65% of their
allocation costs
3
2
3
% of eligible employees who are
participating in the Competency
Model Development Program
3
2
2
% of map points loaded and
operational in GPS Tracking
3
2
2
0 = Does not apply
1 = Poor
2 = Acceptable
3 = Good
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Multiple Choice Question –
Match the Objective to the Metric
Assume the Agency Plan has an objective: Improve
the productivity of docking services at all stations.
Which of the following measurements would be
most appropriate for this objective?
a. Number of reruns required to complete the
docking service
b. % of vendor contracts executed in 90 days
c. Number of people completing the off-shore
warranty training program
d. % of supervisors who submitted budget
action plans within 60 days of close-outs
39
Multiple Choice Question –
and the answer is . . .
a – If we measure re-runs, this probably will
give us some benchmark by which we
can measure docking station efficiency
and productivity.
40
A Closer Look at How Things Link
Transportation Safety Example
Mission:
Protect people and property
Strategic Goal #1:
Reduce damage caused by motor vehicle accidents
Annual performance goal 1A:
Reduce deaths per crashes to 1.10 per
100m miles traveled by 2005
Measure: Fatality rate per 100m miles traveled
41
The Measurement Pyramid
Goal
Strategic/GPRA Goals
End-Outcomes
Outcome
Performance
Measures
Longer-Term Intermediate
Outcomes
Program
Program Performance Measures
Shorter-Term
Intermediate
Outcomes
& Outputs
Outputs
& Inputs
Program Components
Program Component Performance Measures
Activities
Activity Performance Measures
42
Some Tools for Determining
What to Measure
Program Logic Model
Inputs
Process/
System
Output
Intermediate
Outcomes
End
Outcome
Process Flow
Causal Analysis
Desired
Outcome
Prototype
Product
Acceptable
To Market
Not Acceptable
Results
Of
Testing
Back to
Laboratory
43
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 “Agency Use of Performance Measures”
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Table Of Contents
I.
Balanced Scorecard Basics
II.
Creating the Strategy Map
III.
Good Performance Measurements
IV.
The Final Scorecard Components
V.
Case Study Exercise
VI.
Some Final Points
45
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 agency, 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.
46
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.
47
Examples of Targets
Average Turnaround Times
at Docking Sites
8 days
FY05
7.5 days
FY06
6.8 days
FY07
Utilization Rate for Self
Serve Web Portal
10% FY05
18% FY06
25% FY07
Rotation Internship
Participation Rates
1,800 FY05
2,500 FY06
3,900 FY07
Glider integration mapping
tool used for geo-sets
Establish
baseline
8 per sets
10 per sets
% of agency SES Levels
following IRPS from end to
end for the entire year
30% FY05
40% FY05
65% FY05
% funding through SEPCO
for space mapping
30% FY05
35% FY06
45% FY07
48
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
49
Initiatives should enable strategic execution
Initiatives
Goals or Objectives
Value Mapping Project
Improve identification and delivery of all
agency services across the full stakeholder
spectrum
Employee Rotation Program
Improve the employee turnover and
satisfaction scores
Web Self Service Portal
Reduce agency costs and streamline our
services for more direct service delivery
Common Knowledge Center
Expand the overall knowledge base so that
inter-functions can learn from one another
Customer Survey and
Analysis Tool Program
Develop a more systematic process across
the entire agency to better connect to our
customers
Shared Service Center
Tracking System
Reduce reworks and overlaps between our
seven shared service centers
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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
Output
Measurement
Outcome
Measurement
Lean Process / Six
Sigma
Number of Projects
Defined by Region
Overall reductions in errors,
reworks, and cycle times
Activity Based Costing
/ Management
(ABC/M)
% of Service Center
Outlets with ABC Models
in place for Allocation
Costs
Reductions in identified reactivities per process study
Employee
Competency Models
% of Employees who
have a Competency
Model in place
Higher skill levels of
employees using the models
51
Strategic Themes
• Describes an overall strategic direction
• Can improve the communication effectiveness of the
Strategy Map
• Examples of themes:
– Innovative Services
– Lean Processes
– Adaptive Organization
– Realign our Core Competencies
– Reach the Stakeholder
• Group common set of objectives around a theme
52
Multiple Choice Question –
Sequence Of Steps
The basic steps for creating a Balanced Scorecard include:
A = Align your strategy map to other organizational units
B = Create your strategic plan – including goals and objectives
C = Extend your strategy map into measurements and targets
D = Map your strategy over four perspectives
The sequence or order of these steps is (left to right):
Step 1
a. A
b. C
c. B
d. C
Step 2
C
A
D
B
Step 3
B
D
A
A
Step 4
D
B
C
D
53
Multiple Choice Question –
and the answer is . . .
c – Step 1 or B – Start with your strategic
plan
Step 2 or D – Map your strategic plan
Step 3 or A – Align your strategy map
Step 4 or C – Extend the strategy map into
measurements and targets
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TABLE OF CONTENTS
I.
Balanced Scorecard Basics
II.
Creating the Strategy Map
III.
Good Performance Measurements
IV.
The Final Scorecard Components
V.
Case Study Exercise
VI.
Some Final Points
55
Case Study Instructions
• The following handout is an example strategic plan for
the Western Agency Region Office (WARO).
• Your team has been assigned the responsibility of
mapping the WARO Plan into a single strategy map.
• Each team will be assigned to a breakout room – use
post it notes on the large white template sheets
• Try to limit your objective boxes on the strategy map to
no more than 20 per our 4 to 5 Rule.
• If you have time, you might want to consider arranging
or grouping certain objectives together around themes.
• Each team will provide a 10-minute brief.
• You have 90 minutes to complete the case study
exercise.
56
TABLE OF CONTENTS
I.
Balanced Scorecard Basics
II.
Creating the Strategy Map
III.
Good Performance Measurements
IV.
The Final Scorecard Components
V.
Case Study Exercise
VI.
Some Final Points
57
Making the connection to the
Baldrige Criteria
Malcolm Baldrige
Balanced Scorecard
Leadership
Learning & Growth Perspective
Human Resource Capital
Learning & Growth Perspective
Business Results
Measurements and Targets
Process Management
Internal Process Perspective
Strategic Planning
Strategy Map
Customer Focus
Stakeholder / Customer Perspective
58
Automated System Overview - IRPS
• IRPS is the Organization’s “Strategic Management System”
for creating the Strategically Focused Organization (SFO).
• The Strategic Management System Module within IRPS:
– Cascades scorecards down by folders
– Includes a web based training component
– Analytical tools include unit trends, service costing
comparisons, strategy map gap analysis, alignment point
scoring, and executive dashboard views sent to PDA’s.
• IRPS Scorecard Module has the following features:
- Project / Initiative Tracking with milestones
- Automated Email Data Collection
- Automated Report Distribution
- Linking Capability to Agency Databases (such as SES,
G-PAC, and Shared Service Docking Databases)
59
Highlight Important Steps
• Cascade and align strategy down to the Outlet level (and
beyond – personal scorecards) where execution takes place.
• Capture cause effect linkages as you cascade and align down.
This will ensure that all of the Agency is moving in the same
strategic direction.
• Identify and commit to projects and initiatives that will drive
strategic execution.
• Establish performance outcomes in the form of measurements
and targets.
• Review results on a regular basis within the Quarterly
Leadership Briefings using the Balanced Scorecard framework.
60
Additional Information
•
•
•
•
Training Slides (1)
Performance Based Handbook (1)
Performance Measurement Tool Kit (1)
Formal Training:
– Offered Quarterly at the Central and Western Region Offices
– Annual Leadership Conference – 2 Hour Workshop
• Web Based Training:
– IRPS SMS – Option 6, self serve registration
(1)
Posted on the internet at: www.exinfm.com/workshop.html
Contact Information: Matt Evans, matt@exinfm.com,877-689-4097
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