in trav ate scorecard briefings 1
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Copyright Intravate 2005
IntravateIntroduction toBalanced Scorecards
Briefing Part 1
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IntravateBalanced Scorecards
Briefings
Part 1
Introduction to the
Fundamentals
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First, a few facts
Less than 10% of strategies effectively formulated are effectively executed
Fortune Magazine
Over 60% of Fortune 1000 either have, or are experimenting with,
Balanced Scorecards
Fortune Magazine
But.estimated that less than 30% of organisations with Balanced Scorecards aregetting any business benefits, due in the main to poor construction
Balanced Scorecard Collaborative Survey
There are numerousmisconceptions & misunderstandings about
balanced scorecardsMost are poorly constructed and
poorly implemented
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Less than 10% of strategies effectively formulated
are effectively executed
In most organisations something is breaking down in thePerformance Management Chain
Establishing Long TermGoals & Strategies
Establishing a StrategicPlan
Translating into AnnualPlans & Targets
Internal Communication &Alignment
Managing effectiveimplementation
Measurement & Reporting
Linked to Staff feedback &rewards
Planning
Reporting
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The Performance Management Trap
More time is spent formulating strategies than setting up performance tracking to report onthem
Often the key strategic goals are intensively targeted and measured at the top level
..but not the key customer, operational and organisational drivers of these endresults.
Hence performance targets further down the organisation are only weakly aligned to key
goals
Also lower level operational and organisational performance is often poorly measured andnot tracked and reported effectively
However What gets targeted & measured.gets managed
Meaning that personal activities and incentives are often locked into the wrong businesspriorities.
.hence, organisations are rarely fully focused or incentivised
around key strategic goals
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Key principles of the balanced scorecard
Alignment of management focus and resource allocation to the
achievement of key goals and strategic objectives:
the strategy focused organisation translating Vision into reality
Performance targeting & measurement of the key drivers of success
To drive the performance of ultimate goals by identifying and targeting theinternal drivers of performance
To deliver long term performance while managing the tensions between
different stakeholders
Shareholders, Customers, Suppliers, Staff
Feedback and learning
is the strategy working? - are we on track to reach our goals ?
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Balanced Scorecard frameworks are away of managing not just a reporting tool !
A management tool used for both planning and performance reporting
Key factor being to agree the correct set of performance drivers,
measures & targets:-
relevant to an organisations vision and strategy, that identifies, targets &measures the drivers of end performance goals as well as the end goals
themselves
brings together 4 core aspects which are necessary to deliver & sustainsuccess
Financial orEnd Goals
Customer &Market Goals
InternalProcess Quality
OrganisationalEffectiveness &
Learning
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Balanced Scorecards manage the tensions between
different stakeholder groups
FinancialHow do we look to our
Shareholders
CustomersHow are we doing with our
customers?
Process QualityTo deliver customer &
shareholder value, what
must we excel at?
OrganisationalWhat competencies,
culture & style do we needto sustain and improve
performance?
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At minimum Balanced Scorecards
broaden your perspective of performance
Financial measures Customer measures
Process Quality
measures
Organisational
measures
Also referred to asDevelopment or
Learning & Growth
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Butit is important to understand the dynamics
between these performance measures
Financial measures Customer measures
Process Qualitymeasures
Organisationalmeasures
Scorecards must identify
critical drivers of performance,not static unrelated performance indicators
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Not a matter of.
.just dreaming up
4 sets of measures
to fill 4 boxes
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Strategy Mapping is the method of identifying Critical
Success Factors via Cause & Effect analysis
Final results are theoutcome of internal activity
ProductivityService effectiveness
Manpower efficiency Competencies Culture
Lag indicator
Lead Indicators
Effect
Causes
Identify the Critical Success
Factors in the organisation -the drivers of desired endperformance
Cause & Effect Strategy
Mapping forces you to identifythese Critical Success
Factors
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Key deliverables from an effectiveBalanced Scorecard framework
1. Aligns short - term targets to longer-term strategies
2. Assists in delivering ultimate strategic performance levels by explicitly targetingand managing the non-financial drivers of performance
3. Aligns departmental and personal objectives to ultimate goals & core strategies
4. Establishes a framework for Business Units, teams and individuals within theorganisation to see and relate to the bigger picture and their role on delivering it
5. Provides regular monitoring and gives early warning of problems long beforetheyimpact on the ultimate outcomes results
6. Creates a feedback loop to learn about, and to improve, the effectiveness ofcurrent strategies
Building and utilising a Scorecard frameworkis strategic management process
I
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