140202 balanced scorecard implementation

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This information is confidential and was prepared by Conjunct Consulting for trainingpurposes; it is not to be relied on by any 3rd Party without our prior written consent.

“A Balanced Scorecard system provides a basis for executing good strategy well and managing change.”

– Howard Rohm, CEO of Balanced Scorecard Institute

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Agenda

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1. Insights from Leadership Retreat

2. Why Balanced Scorecard

3. Introduction to Balanced Scorecard

4. Implementation overview and timeline

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Agenda

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We have already achieved broad alignment on most crew priorities

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Crew Goal A Goal B Goal C

External Affairs

Attract right people (students and profs) currently not in C2 through media channels

Attract right clients through media channels

Attract right donors (foundations, sustained giving, public)

Development Manage coherent training syllabus across all volunteers (consultants, leaders and professionals)

Develop content and experiential learning for both hard and soft skills

Manage and train all trainers (internal and external crew)

Partners Select right project partners and prep partner for success

Oversee and manage project teams to generate sound recommendations

Ensure long-term, win-win anchor relationships with partners

Finance & Impact

Plan budget, control costs and ensure financial documents are in order

Track, project and publish financials, impact and social return on investment

Ensure charity and IPC financial standards

Internal Affairs

Innovating by identifiying, building and refining systems to increase org effectiveness

Structuring and auditing cross-crew and in-crew processes for efficiency and complexity-reduction

Managing and simplifying logistics

Professionals Filter and match professionals to PA openings and Hub Leader openings

Engage and retain alumni and professional members through community events

Develop and maintain partnerships with corporate and government organizations

Sustainable Leadership

Unify, improve, and execute on selection criteria and chapter election processes based on org values and social impact

Coach, nurture and match future leaders through feedback loops and identification of upcoming and current hub leadership gaps

Communicate and align volunteers on org vision, strategy and values through retreats, community events and mentorships

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Insights from Leadership Retreat (Jan 2014)

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Desires expressed during Leadership Retreat:1. Effective communication of strategy and

strategic priorities across the organization2. Increased alignment of priorities across crews

to facilitate effective collaboration3. Improved communication and understanding

of how Conjunct is performing (e.g. financially, operationally)

Implementation of Balanced Scorecard methodology to address the above concerns

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Agenda

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Traditional financial-focused models of performance management are inadequate

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• Traditional financial measures report on what happened last period without indicating how managers can improve performance in the next.

• Financial measures are the result, not a driver, of performance

• “If you can’t measure it, you can’t manage it” Organizations often fail to look at the full range of activities that result in superior performance.

• Balanced scorecard functions as the cornerstone of a company’s current and future success

• Serves as the focal point for the organization’s efforts, defining and communicating priorities to managers, employees, financial supporters, even customers

Source: Harvard Business Review, Putting the Balanced Scorecard to Work (1993)

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More executives are focusing on leading rather than lagging indicators of growth

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80 percent of executives believe innovation is more important than cost reduction for long-term success.

68 percent of respondents believe that taking care of customers and employees should come before profitability.

Executives realize that growth depends on having happy, productive employees and

satisfied customers. Profits will be the natural by-product.

Source: Bain and Company, Management Tools and Trends (2011)

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Balanced Scorecard methodology (BSC) was created as a better alternative to traditional performance management tools

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Provides executives with a comprehensive framework to focus strategic vision

Translates a company’s strategic objectives into a coherent set of performance measures

• Aligns priorities across decentralized organizations

• Maintains focus on the key drivers of growth

Source: Harvard Business Review, Putting the Balanced Scorecard to Work (1993)

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BSC is a credible and well-researched strategy implementation tool

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• Drs. Kaplan and Norton (Harvard Business School) developed this approach to strategic management in the early 1990’s and its use has been tracked at hundreds of companies worldwide.

• Over 60% of companies in the Fortune 500 use BSC e.g. Sears, Citicorp, AT&T etc.

• Most widely adopted strategy implementation framework reported in the 2010 annual survey of management tools undertaken by Bain and Co: among 11,000 respondent companies, 65% of respondents use the tool

• Not-for-profits are the largest growth segment of companies beginning to adapt the approach

Source: McArdle Ramerman Center, The Balanced Scorecard Discipline

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Companies that use the BSC report higher effectiveness and better results

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• Organizations that use a Balanced Scorecard approach tend to outperform organizations without a formal approach to strategic performance measurement

• World-class companies are 159% more likely to have mature BSC in place than less successful organizations

• Among 164 publicly traded companies, those with well-deployed BSC outperformed the control group by nearly 30% (Advances in Accounting, 2008)

• Organizations using BSC outperform the other companies by about 100 percent in having everyone in the organization understand what the organization's strategy is (Norton, The Strategy-Focused Organization, 2000)

Source: Advanced Performance Institute: What is a Balanced Scorecard? (2014), The Advisory Board Company (2013), Norton, the Strategy-Focused Organization

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Agenda

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BSC focuses on 4 aspects: Financial, Customers, Learning & Growth, Internal processes

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Objectives

Measures

Targets

Initiatives

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2.

3.

4.

5.

6.

For each aspect, the following table is used to drive continuous improvement

Source: Kaplan and Norton, The Balanced Scorecard (1996)

How should we appear to our customers?

How should we appear to our financial supporters?

What business processes must we excel at?

How will we sustain our ability to change and improve?

Lagging

Leading

Leading

Leading

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The BSC Strategy Map outlines how the four perspectives support each other

14Source: Advanced Performance Institute: What is a Balanced Scorecard? (2014)

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BSC Strategy Map adapted for the nonprofit sector

15Source: Advanced Performance Institute: What is a Balanced Scorecard? (2014)

Format 1 Format 2

Format 3

1. BSC strategy map has found widespread use in the public and not-for-profit sector

2. It is important to make a few changes, esp. moving the financial perspective from top spot on the strategy map template since, while finance is important, it is usually not the overall reason why the organization exists

3. Instead, the main objective of public sector, government and not-for-profit organizations is to deliver services to their key stakeholders. This perspective usually sits at the top of the template to highlight the key stakeholder deliverables and outcomes

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Agenda

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To implement the BSC effectively, a structured approach must be taken

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1. Articulate the business’s vision and strategy2. Identify the performance categories that best link the

business’s vision and strategy to its results (such as financial performance, operations, innovation, employee performance)

3. Establish objectives that support the business’s vision and strategy

4. Develop effective measures and meaningful standards, establishing both short-term milestones and long-term targets

5. Ensure companywide acceptance of the measures6. Create appropriate budgeting, tracking, communication and

reward systems7. Collect and analyze performance data and compare

actual results with desired performance8. Take action to close unfavorable gaps


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A structured approach must be taken to ensure companywide acceptance of the measures

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1. Obtaining manager sponsorship and employee commitment at all levels

2. Involving a broad base of leaders, managers and employees in scorecard development

3. Agreeing on terminology and process for the organisation

4. Choosing influential balanced scorecard champions at each level

5. Starting with and maintaining good two-way communication

6. Working through vision, mission, values and strategy mapping before rushing to measures and initiatives

Source: Stellar leadership: Introduction to the Balanced Scorecard for the Nonprofit sector

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Benchmarking helps to put key performance metrics in context for strategic management

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1. Select a product, service or process to benchmark

2. Identify the key performance metrics (BSC) 3. Choose companies or internal areas to

benchmark 4. Collect data on performance and practices 5. Analyze the data and identify opportunities for

improvement 6. Adapt and implement the best practices,

setting reasonable goals and ensuring companywide acceptance


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Immediate action steps to effective implementation of the BSC Strategy Map

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1. Articulate the business’s vision and strategy – DONE?2. Agree on scope, terminology and ownership of processes – DONE? 3. Obtain management commitment to implementation of the BSC4. Identify an influential BSC sponsor in each crew. Together, these will form the BSC Steering

Committee who will champion and develop the Balanced Scorecard5. BSC SteerCo to develop the strategy map6. Obtain management commitment to the strategy map7. Communicate strategy map across the organization8. BSC SteerCo to develop objectives9. Obtain management commitment to objectives10. Communicate objectives across the organization11. BSC SteerCo to develop key performance measurements12. Obtain management commitment to key performance measurements13. Communicate key performance measurements across the organization14. BSC SteerCo to develop targets for key performance measures15. Obtain management commitment to targets for key performance measures16. Communicate targets for key performance measures acros sthe organization17. Gather data on current key performance measures18. Communicate data on key performance measures with management 19. Management to develop initiatives to close the gap between current performance and targets for

key performance measures20. Communicate initiatives across the organiztion


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Case Study: Apple Computer, Inc.

• Developed BSC to focus senior management on a strategy that would expand discussions beyond gross margin, return on equity, and market share

• Formed a small steering committee intimately familiar with the deliberations and strategic thinking of Apple’s Executive Management Team

• The five performance indicators at Apple are benchmarked against best-in-class organizations. Today they are used to build business plans

21Source: Harvard Business Review, Putting the Balanced Scorecard to Work (1993)

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Case Study: Apple Computer, Inc. – 5 Balanced Scorecard priorities, in order

22Source: Harvard Business Review, Putting the Balanced Scorecard to Work (1993)