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Balanced ScoreCard
Linking Strategy and
Performance Measurement
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Agenda
Balanced ScoreCardWhere it Started
Why Balanced ScoreCard?
BSC Basics
The HCL way
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Balanced ScoreCardWhere it started
Introduced in 1992, by Robert Kaplan and David Norton, the Balanced
Scorecard (BSC) 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 and this will drive overall organizational
performance
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Why Balanced ScoreCard?
Its not what you can see
Its what you cant
Its not what you can see
Its what you cant
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Why Balanced ScoreCard?
The Organization will become more strategically focused over the
years
People at all levels rely heavily on tactical performance measurements,
such as number of requests submitted, % of supply vendor contracts
in place, etc.
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 monthdiscussing strategy.
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Quantifies the Organizational Strategy in measurable terms
Strategy is summarized on a Strategy Map over four views of
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.
BSC Basic Principles
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The BSC Framework
Objectives
Measures
Targets
Initiatives
FinancialTo SucceedFinancially, how
should we
appear to our
Stakeholders?
Vision
and
Strategy Objectives
Measures
Targets
Initiatives
Internal BusinessProcessTo satisfy our
Shareholders
and Customers
What business
processes must
we excel at?
Objectives
Measures
Targets
Initiatives
Learning andGrowthTo achieve our
Vision how will
we sustain our
ability to change
and improve?
Objectives
Measures
Targets
Initiatives
Customer
To achieve our
Vision how
Should we
appear to our
Customers?
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The Four Perspectives of BSC
FinancialThe ability to provide financial profitability and stability
(private) or cost-efficiency/effectiveness (public)
CustomerThe ability to provide quality goods and services, delivery
effectiveness, and customer satisfaction
Internal Business ProcessesInternal processes that lead tofinancial goals
Learning and GrowthThe ability of employees, technology tools and
effects of change to support organizational goals
Note: Each of the four perspectives is inter-dependent - improvement in just one area is not necessarily a recipe for
success in the other areas.
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HCLs Approach
Framework for BSC
Strategy Objectives Measures
Organization
Department
Team /
Individual
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Before we can map strategy
Get down to a set of quantifiable strategic objectives:
Too vague
More precise
Make sure your objectives have a direct relationship to your goals and
your goals have a direct relationship to your mission and values.
Improve Customer Service
Reduce average customer wait times by
20% by year end
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Strategy Map: Capture a Cause Effect Relationship
from the Bottom Up
InternalProcess
Stakeholder
Learning
&Growth
Reduce Re-Activities
thru ABC/MEstablish Web
Based Self Services
Knowledge
Management
Human Capital
Improved Returns
on Investments
More rapid and
accessible services
Leadership
Development
Investments
IT InfrastructureFacilities and
Fixed Assets
Economic
Model Process
Expand Global
Facility Reach
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Strategy Mapping
The 4 to 5
Rule
Splitting thePerspective
General Rule of Thumb to ensure strategy mapis developed both vertically and horizontally
Way of pulling out both drivers and outcomes
that match up against the core competencies of
the business model
Customer Growth Customer SatisfactionRetention Rate
Timely Delivery Pricing Quality Service Reputation
Custom er Perspective
Outcomes
Drivers
Weak Strong
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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 clearlymapping the various units and functions back to the organization
St t M
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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.
Ensure Alignment:
Each sub-unit and individual
link their objectives
to the map.
Promote Transparency:
Communicate with andeducate constituents, partners,
oversight bodies, and the
general public.
E t d th M i t M t
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Extend the Map into Measurement,
Targets and Initiatives
Detailed
statement of
what is critical to
successfully
achieving the
strategy
How success in
achieving the
strategy will be
measured and
tracked
Key action
programs
required to
achieve
objectives
The level of
performance
or rate of
improvement
needed
ObjectiveDescription
Target
2 per setup per
month each
Outlet Office
InitiativeMeasure
Number of
Reworks
Strategy Map
Stakeholder
InternalProcess
L&G
Faster Service Access
Self Service
Applications
Web EnableTechnologies
Process and Value
Map Analysis
Lean Processes
Investments
Invest in IT
Lean / Six
SigmaEliminate waste,
reworks, and
other errors in
our processes
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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 Objective Measurement Target Initiative
Achieve operational
efficiencies with
best practices
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
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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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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Measurement by Perspectives
Stakeholder / Customer Internal Processes
Learning and Growth 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
Percentage employee absenteeism
Hours of absenteeism
Job posting response rate
Personnel turnover rate
Ratio of acceptances to offers
Time to fill vacancy
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
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
Selection Criteria for Performance
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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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Tools to Determine Measure
InputsProcess/
SystemOutput
Intermediate
Outcomes
End
Outcome
Program Logic Model
Desired
Outcome
Causal Analysis
Process Flow
Product
Prototype
ResultsOf
Testing
To Market
Acceptable Not Acceptable
Back to Lab
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Target Setting
Past performance trends per historical data.
Performance levels of similar organizational units at a comparable
level that facilitates benchmarking.
Best practices across the organization, the public sector or the private
sector. Must be at a pre-existing 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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Initiatives
When yo u f i rs t launch yo ur In i t ia t ive, you probably w ant to use an Output
Measurement. Once the Ini tia t ive is u p and ru nning , change your measurement toan Outcome to see if the Init iat ive is real ly having s trategic 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 re-activities
per process study
Employee Competency
Models
% of Employees who have a
Competency Model in place
Higher skill levels of employees
using the models
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Initiatives should enable strategic execution
Initiatives Goals or ObjectivesValue 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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Thank you