Description
Comprehensive presentation on Balanced Scorecard
Balanced Scorecard
1
Strategy Implementation
• Successful strategy formulation does not guarantee successful
• • • • • • • • • •
strategy implementation Formulation positions forces before the action Implementation manages forces during the action’ Formulation focuses on effectiveness Implementation focuses on efficiency Formulation is primarily an intellectual process Implementation is primarily an operational process Formulation requires good intuitive & analytical skills Implementation requires special motivational & leadership skills Formulation requires coordination among a few individuals Implementation requires coordination among many individuals
2
Nature of Strategy Implementation
Varies among different types & sizes of organizations
Implementation Activities
• • • • • • • Altering sales territories Adding new departments Closing facilities Hiring new employees Cost-control procedures Modifying advertising strategies Building new facilities
3
The Balanced Scorecard What is it?
The Balanced Scorecard:
• • • • • Balances financial and non-financial measures Balances short and long-term measures Balances performance drivers (leading indicators) with outcome measures (lagging indicators) Should contain just enough data to give a complete picture of organizational performance… and no more! Leads to strategic focus and organizational alignment.
4
The Balanced Scorecard Why do it?
• • • •
• • • •
To achieve strategic objectives. To provide quality with fewer resources. To eliminate non-value added efforts. To align customer priorities and expectations with the customer. To track progress. To evaluate process changes. To continually improve. To increase accountability.
5
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!
6
Ultimate Goal, to Become a: STRATEGY-FOCUSED ORGANIZATION
7
Start with Strategy
• Begin with your strategic plan – what things are critical to future success? • Focus on customers – what values will we add to our customers • Define the processes – how will we deliver these services to our customers • Build the organization – what capabilities must we put in place
8
Strategic Goals
• The first components of your strategy are goals. • Strategic goals establish direction in concrete terms. • Strategic goals anchor the rest of the process. • Strategic goals should fit with the vision and mission of the organization
9
Strategic Objectives
• Strategic objectives define what actions must be taken to reach the strategic goals. • Objectives are critical to future success. For example, in order to grow revenues, we must introduce new products and expand our market share.
10
Strategic Themes
• Based on strategic goals, three to five strategic themes should emerge. • From these themes, we will develop a strategic map. • Four common strategic themes are: Operating Efficiencies, Customer Relations, Product Innovation, and Growing the Business.
11
Strategic Model
• Strategic Models can emerge from four principles: 1. Translate strategies into operating terms. 2. Link strategies throughout the entire organization. 3. Commit everyone to implementing strategy. 4. Make strategizing a continuous process of learning and adjusting to change.
12
Four Perspectives
Before building strategic maps, there is a need to define four perspectives: • Financial: Top layer in the map, represents financial outcomes (profits, revenues, etc.) • Customer: Next layer down, enables financial results (service, image, price, quality, etc.) • Internal Processes: The values added to customers, such as delivery, production, distribution, etc. • Learning & Growth: The people, systems, and organization that enable processes.
13
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?”
14
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.
15
Strategic Mapping
• Strategic Maps are the foundation of the Balanced Scorecard. • You will need one strategic map for each strategic theme. • Maps are constructed over four perspectives. • Strategic objectives are mapped over the four perspectives, linked together.
16
Linking
• Strategic objectives need to be placed in the Strategic Map according to which perspective fits with the objective. • Objectives may cross over more than one perspective. • We usually start at the top with outcomes and work our way down, looking at what enables (drives) the outcome.
17
Strategy Map: Capture a Cause Effect Relationship from the Bottom Up
Stakeholder
Improved Returns on Investments
More rapid and accessible services
Internal Process
Economic Model Process
Reduce Re-Activities thru ABC/M
Establish Web Based Self Services
Learning & Growth
Expand Global Facility Reach
Leadership Development
Knowledge Management
Investments
Facilities and Fixed Assets
Human Capital
IT Infrastructure
18
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
Weak
Strong
Splitting the Perspective
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
19
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"
20
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. 21 Kaplan, April 21, 2004, pg. 20
Measurements
• For each strategic objective, you need one measurement. • Measurement provides us with feedback on meeting the strategic objective. • Most organizations will use many of their existing measurements. • Organizations requiring major change should include driver type measurements.
22
Measurement Criteria
• Measurements should drive change, providing teeth to our strategy. • Measurements define objectives in specific terms. A good measurement should tell you what your objective is – this is an indicator of good linkage. • Measurements should be repeatable, quantifiable, and verifiable.
23
Targets
• Once you establish measurements, you need to set a target for each measurement. • Targets push the organization to a required level of performance. • Targets put focus on the strategy, expressing the specifics of the strategy. • When an organization hits its targets, then it has successfully implemented its strategy.
24
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.
25
• •
Examples of Targets
• Total Time to Recruit New Employees: Less than 40 days by year-end • Utilization of rental facilities: Increase to 85% during peak summer months • Growth in top line revenues: 10% increase over last year • Improve overall customer satisfaction: Total scores exceed 90%
26
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.
27
Initiatives
• In order for things to happen in an organization, you must initiate major projects or programs. For example, improving customer service may require a new customer management system. • Once you launch appropriate initiatives, you should be able to meet your strategic objectives. This closes the loop, everything is now linked and away we go!
28
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
29
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 Organization Scorecard
Best Business Practices Expand Global Reach Expand the Skill Base
GOG Scorecard
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
30
Extend the Map into Measurements, Targets and Initiatives
Stakeholder
Strategy Map
Faster Service Access Detailed statement of what is critical to successfully achieving the strategy How success in achieving the strategy will be measured and tracked The level of performance or rate of improvement needed Key action programs required to achieve objectives
Internal Process
Self Service Applications
Lean Processes
Objective Description
Eliminate waste, reworks, and other errors in our processes
Measure
Number of Reworks
Target
2 per setup per month each Outlet Office
Initiative
Lean / Six Sigma
Process and Value Map Analysis
L&G
Web Enable Technologies
Investments
Invest in IT
31
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
Reduce Operational Service Costs by 50% over the next 5 years Reduce identified re-activities within primary processes by 80% over the next 3 years
Measurement
Cost per Outlet Office, Cost per Region, Cost per FTE
Target
5% - Year 1 10% - Year 2 15% - Year 3
Initiative
Activity Based Costing / Management
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
32
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.
33
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…
34
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
35
Types of Measurements
Measure Type
Leading Lagging Input
Definition
Intermediate outcomes that predicts or drive bottom-line performance results Bottom-line performance results resulting from actions taken Amount of Investments, assets, equipment, labor hours, or budget dollars used
Example
Employee turnover rate Employee satisfaction rating Number of cashiers
Output
Outcome
Units of a product or service rendered - a measure of yield
Resulting effect (benefit) of the use or application of an output Empirical indicators of performance Perceptions and evaluations of major customers and stakeholders
Number of Value Meal orders fulfilled
Customer satisfaction rating Wait time Customer complaints received as a % of total customers served
Objective / Quantitative
Subjective / Qualitative
36
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
37
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.
38
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
39
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 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.
40
Initiatives should enable strategic execution
Initiatives
Value Mapping Project
Goals or Objectives
Improve identification and delivery of all agency services across the full stakeholder spectrum Improve the employee turnover and satisfaction scores Reduce agency 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 agency to better connect to our customers Reduce reworks and overlaps between our seven shared service centers
41
Employee Rotation Program Web Self Service Portal Common Knowledge Center Customer Survey and Analysis Tool Program Shared Service Center Tracking System
#1
Principles of the Strategy Focused Organization: EXECUTIVE TEAM LEADERSHIP TO MOBILIZE STRATEGIC CHANGE
Leadership Roles
1. Creating the Climate for Change
• • Unfreeze the organization Show the need for change
A successful Balanced Scorecard program starts with a recognition that it is not a “metrics” project, it’s a “change” process.
2.
Creating the Leadership Team
• Breaking down functional bias
3.
Creating the Vision and Strategy
• • BSC as a “visioning process” BSC to clarify the strategy
4.
Creating Team Accountability
• Accountability for cross-functional strategic themes at Executive Team level
5.
Change the Culture
©2000 Balanced Scorecard Collaborative, Inc.
7
42
#2
Principles of the Strategy Focused Organization: TRANSLATE THE STRATEGY TO OPERATIONAL TERMS
The Strategy
? Measurement is the language that gives clarity to vague concepts. ? Measurement is used to communicate, not to control. ? Strategy can be described as a series of cause and effect relationships
Financial Perspective "If we succeed, how will we look to our shareholders?” Customer Perspective "To achieve my vision, how must I look to my customers?” Internal Perspective "To satisfy my customers, at which processes must I excel?” Organization Learning "To achieve my vision, how must my organization learn and improve?”
©2000 Balanced Scorecard Collaborative, Inc.
8
43
The Balanced Scorecard Adopted for a Government Organization
Stakeholder Perspective The Mission of the organization is to fulfill Public Policy expectations Customer Perspective “To achieve our mission, how must we look to our customers?” Budget / Financial Perspective “If we succeed, how will we look to our financial donors?”
Internal Perspective “To satisfy our customers, financial donors and mission, what business processes must we excel at?”
Learning & Growth Perspective “To achieve our mission, how must our people learn, communicate, and work together?”
Meeting the Expectations of Customers While Maintaining Financial Viability Constitutes Meeting Mission Objectives
©2000 Balanced Scorecard Collaborative, Inc. 9
44
Basic Scorecard Terminology (Southwest Airlines Example)
Strategy Map
Strategic Theme: Operating Efficiency
Financial Grow Revenues Customer Profits and RONA Fewer planes Attract & Retain More Customers Lowest prices
Objectives: What the strategy is trying to achieve
Measures: How success or failure (performance) against objectives is monitored
Targets: The level of performance or rate of improvement needed
Initiatives: Key action programs required to achieve targets
On-time Service Internal
Objectives
Fast ground turnaround
Measures
Targets
Initiatives
• Fast ground
turnaround
• On Ground Time • On-Time
Departure
• 30 Minutes • 90%
• Cycle time
optimization
Learning Ground crew alignment
©2000 Balanced Scorecard Collaborative, Inc.
10
45
A Complete Scorecard is a Program for Action
Strategy Map
Strategic Theme: Strategic Theme: Operations Excellence Operating Efficiency
Financial Grow Revenues Profits and RONA Fewer planes Attract & Retain More Customers Lowest prices
Objectives
Measures
Targets
Initiatives
• 30% CAGR • Profitability • Grow Revenues • 20% CAGR • Fewer planes • 5% CAGR • More Customers • # Customers • Flight is on -time • FAA On Time Arrival Rating • Lowest prices • Market Survey • Fast ground
turnaround
Customer
On-time Service Internal
• 12% growth • Ranked #1 • Ranked #1
•Customer
loyalty program • Quality management
Fast ground turnaround
• On Ground Time • 30 Minutes • Cycle time • On-Time • 90% optimization
Departure
Learning Ground crew alignment
• Ground crew
alignment
• % Ground crew • yr. 1
trained
• % Ground crew
stockholders
70% yr. 3 90% yr. 5 100%
• Ground crew
training
• ESOP
©2000 Balanced Scorecard Collaborative, Inc.
11
46
#3
Principles of the Strategy Focused Organization: LINK AND ALIGN THE ORGANIZATION AROUND ITS STRATEGY
#3. #1. A Corporate Scorecard defines overall strategic priorities on a Balanced Scorecard (BSC).
CORPORATE AMEDD
Each Support Unit develops a plan and BSC for “best practice” sharing to create synergies across Subordinate Commands.
CORPORATE SCORECARD (Shared Strategic Agenda)
Themes Measures
Major Subordinate Commands
SBU A SBU B SBU C SBU D
SUPPORT UNITS
EXTERNAL PARTNERS
1. Financial Growth 2. Delight the Consumer 3. Win-Win Relationships 4. Safe & Reliable 5. Competitive Supplier 6. Good Neighbor 7. Motivated & Prepared 8. Quality
xxx xxx xxx xxx xxx xxx xxx xxx xx xx xx xx
• • • • • • • •
Finance Marketing Distribution Procurement Purchasing Safety Human Resources Information Technology
• • • • • •
Customer Scorecards Distributor Scorecard Joint Venture Scorecard Vendor Scorecard New Venture Scorecard Outsourcer Scorecard
#2. Each Division develops a BSC consistent with corporate strategic BSC.
Strategies Are Executed Through Business Units. The Strategies of the Business Units Must Be Integrated If Organization Purpose and Synergies Are to Be Achieved.
©2000 Balanced Scorecard Collaborative, Inc. 12
47
#4
Principles of the Strategy Focused Organization: MAKE STRATEGY EVERYONE’S JOB
CORP SBU
Top-Down “Bridging Process” To Share the Strategy & Align the Workforce
• EDUCATION • PERSONAL GOAL ALIGNMENT • BALANCED PAYCHECKS
The Strategy Focused Workforce
Bottom-Up Process to Internalize & Execute the Strategy
©2000 Balanced Scorecard Collaborative, Inc.
13
48
#5
Principles of the Strategy Focused Organization: MAKE STRATEGY A CONTINUOUS PROCESS
STRATEGY
60% of organizations don’t link strategy & budgets
update the strategy
Strategic Learning Loop
BALANCED SCORECARD
test the hypotheses
85% of management teams spend less than one hour per month on strategy issues
BUDGET
78% of organizations lock budgets to an annual cycle 20% of organizations take more than 16 weeks to prepare a budget
funding
Management Control Loop
PERFORMANCE
reporting
92% of organizations do not report on lead indicators
Input (Resources)
Initiatives & Programs
Output (Results)
©2000 Balanced Scorecard Collaborative, Inc.
14
49
Thank you
R.Kannan [email protected] Indiaat10.blogspot.com 9820353825
50
doc_411262747.ppt
Comprehensive presentation on Balanced Scorecard
Balanced Scorecard
1
Strategy Implementation
• Successful strategy formulation does not guarantee successful
• • • • • • • • • •
strategy implementation Formulation positions forces before the action Implementation manages forces during the action’ Formulation focuses on effectiveness Implementation focuses on efficiency Formulation is primarily an intellectual process Implementation is primarily an operational process Formulation requires good intuitive & analytical skills Implementation requires special motivational & leadership skills Formulation requires coordination among a few individuals Implementation requires coordination among many individuals
2
Nature of Strategy Implementation
Varies among different types & sizes of organizations
Implementation Activities
• • • • • • • Altering sales territories Adding new departments Closing facilities Hiring new employees Cost-control procedures Modifying advertising strategies Building new facilities
3
The Balanced Scorecard What is it?
The Balanced Scorecard:
• • • • • Balances financial and non-financial measures Balances short and long-term measures Balances performance drivers (leading indicators) with outcome measures (lagging indicators) Should contain just enough data to give a complete picture of organizational performance… and no more! Leads to strategic focus and organizational alignment.
4
The Balanced Scorecard Why do it?
• • • •
• • • •
To achieve strategic objectives. To provide quality with fewer resources. To eliminate non-value added efforts. To align customer priorities and expectations with the customer. To track progress. To evaluate process changes. To continually improve. To increase accountability.
5
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!
6
Ultimate Goal, to Become a: STRATEGY-FOCUSED ORGANIZATION
7
Start with Strategy
• Begin with your strategic plan – what things are critical to future success? • Focus on customers – what values will we add to our customers • Define the processes – how will we deliver these services to our customers • Build the organization – what capabilities must we put in place
8
Strategic Goals
• The first components of your strategy are goals. • Strategic goals establish direction in concrete terms. • Strategic goals anchor the rest of the process. • Strategic goals should fit with the vision and mission of the organization
9
Strategic Objectives
• Strategic objectives define what actions must be taken to reach the strategic goals. • Objectives are critical to future success. For example, in order to grow revenues, we must introduce new products and expand our market share.
10
Strategic Themes
• Based on strategic goals, three to five strategic themes should emerge. • From these themes, we will develop a strategic map. • Four common strategic themes are: Operating Efficiencies, Customer Relations, Product Innovation, and Growing the Business.
11
Strategic Model
• Strategic Models can emerge from four principles: 1. Translate strategies into operating terms. 2. Link strategies throughout the entire organization. 3. Commit everyone to implementing strategy. 4. Make strategizing a continuous process of learning and adjusting to change.
12
Four Perspectives
Before building strategic maps, there is a need to define four perspectives: • Financial: Top layer in the map, represents financial outcomes (profits, revenues, etc.) • Customer: Next layer down, enables financial results (service, image, price, quality, etc.) • Internal Processes: The values added to customers, such as delivery, production, distribution, etc. • Learning & Growth: The people, systems, and organization that enable processes.
13
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?”
14
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.
15
Strategic Mapping
• Strategic Maps are the foundation of the Balanced Scorecard. • You will need one strategic map for each strategic theme. • Maps are constructed over four perspectives. • Strategic objectives are mapped over the four perspectives, linked together.
16
Linking
• Strategic objectives need to be placed in the Strategic Map according to which perspective fits with the objective. • Objectives may cross over more than one perspective. • We usually start at the top with outcomes and work our way down, looking at what enables (drives) the outcome.
17
Strategy Map: Capture a Cause Effect Relationship from the Bottom Up
Stakeholder
Improved Returns on Investments
More rapid and accessible services
Internal Process
Economic Model Process
Reduce Re-Activities thru ABC/M
Establish Web Based Self Services
Learning & Growth
Expand Global Facility Reach
Leadership Development
Knowledge Management
Investments
Facilities and Fixed Assets
Human Capital
IT Infrastructure
18
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
Weak
Strong
Splitting the Perspective
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
19
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"
20
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. 21 Kaplan, April 21, 2004, pg. 20
Measurements
• For each strategic objective, you need one measurement. • Measurement provides us with feedback on meeting the strategic objective. • Most organizations will use many of their existing measurements. • Organizations requiring major change should include driver type measurements.
22
Measurement Criteria
• Measurements should drive change, providing teeth to our strategy. • Measurements define objectives in specific terms. A good measurement should tell you what your objective is – this is an indicator of good linkage. • Measurements should be repeatable, quantifiable, and verifiable.
23
Targets
• Once you establish measurements, you need to set a target for each measurement. • Targets push the organization to a required level of performance. • Targets put focus on the strategy, expressing the specifics of the strategy. • When an organization hits its targets, then it has successfully implemented its strategy.
24
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.
25
• •
Examples of Targets
• Total Time to Recruit New Employees: Less than 40 days by year-end • Utilization of rental facilities: Increase to 85% during peak summer months • Growth in top line revenues: 10% increase over last year • Improve overall customer satisfaction: Total scores exceed 90%
26
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.
27
Initiatives
• In order for things to happen in an organization, you must initiate major projects or programs. For example, improving customer service may require a new customer management system. • Once you launch appropriate initiatives, you should be able to meet your strategic objectives. This closes the loop, everything is now linked and away we go!
28
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
29
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 Organization Scorecard
Best Business Practices Expand Global Reach Expand the Skill Base
GOG Scorecard
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
30
Extend the Map into Measurements, Targets and Initiatives
Stakeholder
Strategy Map
Faster Service Access Detailed statement of what is critical to successfully achieving the strategy How success in achieving the strategy will be measured and tracked The level of performance or rate of improvement needed Key action programs required to achieve objectives
Internal Process
Self Service Applications
Lean Processes
Objective Description
Eliminate waste, reworks, and other errors in our processes
Measure
Number of Reworks
Target
2 per setup per month each Outlet Office
Initiative
Lean / Six Sigma
Process and Value Map Analysis
L&G
Web Enable Technologies
Investments
Invest in IT
31
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
Reduce Operational Service Costs by 50% over the next 5 years Reduce identified re-activities within primary processes by 80% over the next 3 years
Measurement
Cost per Outlet Office, Cost per Region, Cost per FTE
Target
5% - Year 1 10% - Year 2 15% - Year 3
Initiative
Activity Based Costing / Management
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
32
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.
33
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…
34
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
35
Types of Measurements
Measure Type
Leading Lagging Input
Definition
Intermediate outcomes that predicts or drive bottom-line performance results Bottom-line performance results resulting from actions taken Amount of Investments, assets, equipment, labor hours, or budget dollars used
Example
Employee turnover rate Employee satisfaction rating Number of cashiers
Output
Outcome
Units of a product or service rendered - a measure of yield
Resulting effect (benefit) of the use or application of an output Empirical indicators of performance Perceptions and evaluations of major customers and stakeholders
Number of Value Meal orders fulfilled
Customer satisfaction rating Wait time Customer complaints received as a % of total customers served
Objective / Quantitative
Subjective / Qualitative
36
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
37
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.
38
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
39
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 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.
40
Initiatives should enable strategic execution
Initiatives
Value Mapping Project
Goals or Objectives
Improve identification and delivery of all agency services across the full stakeholder spectrum Improve the employee turnover and satisfaction scores Reduce agency 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 agency to better connect to our customers Reduce reworks and overlaps between our seven shared service centers
41
Employee Rotation Program Web Self Service Portal Common Knowledge Center Customer Survey and Analysis Tool Program Shared Service Center Tracking System
#1
Principles of the Strategy Focused Organization: EXECUTIVE TEAM LEADERSHIP TO MOBILIZE STRATEGIC CHANGE
Leadership Roles
1. Creating the Climate for Change
• • Unfreeze the organization Show the need for change
A successful Balanced Scorecard program starts with a recognition that it is not a “metrics” project, it’s a “change” process.
2.
Creating the Leadership Team
• Breaking down functional bias
3.
Creating the Vision and Strategy
• • BSC as a “visioning process” BSC to clarify the strategy
4.
Creating Team Accountability
• Accountability for cross-functional strategic themes at Executive Team level
5.
Change the Culture
©2000 Balanced Scorecard Collaborative, Inc.
7
42
#2
Principles of the Strategy Focused Organization: TRANSLATE THE STRATEGY TO OPERATIONAL TERMS
The Strategy
? Measurement is the language that gives clarity to vague concepts. ? Measurement is used to communicate, not to control. ? Strategy can be described as a series of cause and effect relationships
Financial Perspective "If we succeed, how will we look to our shareholders?” Customer Perspective "To achieve my vision, how must I look to my customers?” Internal Perspective "To satisfy my customers, at which processes must I excel?” Organization Learning "To achieve my vision, how must my organization learn and improve?”
©2000 Balanced Scorecard Collaborative, Inc.
8
43
The Balanced Scorecard Adopted for a Government Organization
Stakeholder Perspective The Mission of the organization is to fulfill Public Policy expectations Customer Perspective “To achieve our mission, how must we look to our customers?” Budget / Financial Perspective “If we succeed, how will we look to our financial donors?”
Internal Perspective “To satisfy our customers, financial donors and mission, what business processes must we excel at?”
Learning & Growth Perspective “To achieve our mission, how must our people learn, communicate, and work together?”
Meeting the Expectations of Customers While Maintaining Financial Viability Constitutes Meeting Mission Objectives
©2000 Balanced Scorecard Collaborative, Inc. 9
44
Basic Scorecard Terminology (Southwest Airlines Example)
Strategy Map
Strategic Theme: Operating Efficiency
Financial Grow Revenues Customer Profits and RONA Fewer planes Attract & Retain More Customers Lowest prices
Objectives: What the strategy is trying to achieve
Measures: How success or failure (performance) against objectives is monitored
Targets: The level of performance or rate of improvement needed
Initiatives: Key action programs required to achieve targets
On-time Service Internal
Objectives
Fast ground turnaround
Measures
Targets
Initiatives
• Fast ground
turnaround
• On Ground Time • On-Time
Departure
• 30 Minutes • 90%
• Cycle time
optimization
Learning Ground crew alignment
©2000 Balanced Scorecard Collaborative, Inc.
10
45
A Complete Scorecard is a Program for Action
Strategy Map
Strategic Theme: Strategic Theme: Operations Excellence Operating Efficiency
Financial Grow Revenues Profits and RONA Fewer planes Attract & Retain More Customers Lowest prices
Objectives
Measures
Targets
Initiatives
• 30% CAGR • Profitability • Grow Revenues • 20% CAGR • Fewer planes • 5% CAGR • More Customers • # Customers • Flight is on -time • FAA On Time Arrival Rating • Lowest prices • Market Survey • Fast ground
turnaround
Customer
On-time Service Internal
• 12% growth • Ranked #1 • Ranked #1
•Customer
loyalty program • Quality management
Fast ground turnaround
• On Ground Time • 30 Minutes • Cycle time • On-Time • 90% optimization
Departure
Learning Ground crew alignment
• Ground crew
alignment
• % Ground crew • yr. 1
trained
• % Ground crew
stockholders
70% yr. 3 90% yr. 5 100%
• Ground crew
training
• ESOP
©2000 Balanced Scorecard Collaborative, Inc.
11
46
#3
Principles of the Strategy Focused Organization: LINK AND ALIGN THE ORGANIZATION AROUND ITS STRATEGY
#3. #1. A Corporate Scorecard defines overall strategic priorities on a Balanced Scorecard (BSC).
CORPORATE AMEDD
Each Support Unit develops a plan and BSC for “best practice” sharing to create synergies across Subordinate Commands.
CORPORATE SCORECARD (Shared Strategic Agenda)
Themes Measures
Major Subordinate Commands
SBU A SBU B SBU C SBU D
SUPPORT UNITS
EXTERNAL PARTNERS
1. Financial Growth 2. Delight the Consumer 3. Win-Win Relationships 4. Safe & Reliable 5. Competitive Supplier 6. Good Neighbor 7. Motivated & Prepared 8. Quality
xxx xxx xxx xxx xxx xxx xxx xxx xx xx xx xx
• • • • • • • •
Finance Marketing Distribution Procurement Purchasing Safety Human Resources Information Technology
• • • • • •
Customer Scorecards Distributor Scorecard Joint Venture Scorecard Vendor Scorecard New Venture Scorecard Outsourcer Scorecard
#2. Each Division develops a BSC consistent with corporate strategic BSC.
Strategies Are Executed Through Business Units. The Strategies of the Business Units Must Be Integrated If Organization Purpose and Synergies Are to Be Achieved.
©2000 Balanced Scorecard Collaborative, Inc. 12
47
#4
Principles of the Strategy Focused Organization: MAKE STRATEGY EVERYONE’S JOB
CORP SBU
Top-Down “Bridging Process” To Share the Strategy & Align the Workforce
• EDUCATION • PERSONAL GOAL ALIGNMENT • BALANCED PAYCHECKS
The Strategy Focused Workforce
Bottom-Up Process to Internalize & Execute the Strategy
©2000 Balanced Scorecard Collaborative, Inc.
13
48
#5
Principles of the Strategy Focused Organization: MAKE STRATEGY A CONTINUOUS PROCESS
STRATEGY
60% of organizations don’t link strategy & budgets
update the strategy
Strategic Learning Loop
BALANCED SCORECARD
test the hypotheses
85% of management teams spend less than one hour per month on strategy issues
BUDGET
78% of organizations lock budgets to an annual cycle 20% of organizations take more than 16 weeks to prepare a budget
funding
Management Control Loop
PERFORMANCE
reporting
92% of organizations do not report on lead indicators
Input (Resources)
Initiatives & Programs
Output (Results)
©2000 Balanced Scorecard Collaborative, Inc.
14
49
Thank you
R.Kannan [email protected] Indiaat10.blogspot.com 9820353825
50
doc_411262747.ppt