Balanced Scorecard Performance Management

Balanced Scorecard for Performance Management

Some introductory slides

Ian J Seath

Balanced Scorecard

“The Balanced Scorecard (BS) provides managers with the instrumentation they need to navigate to future competitive success.” Kaplan and Norton

“Wise executives know that their company must develop the capabilities which it will need to prosper in the future. But, doing so will produce no profits in the current year, only costs.”Olve, Roy & Wetter

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Performance Management

Involving people in the use of quantified information to direct/handle the activities within the organisation to achieve higher levels of performance


Business Planning

Business Planning is the process of ensuring that the organisation knows what it is trying to achieve; understands what activities are necessary to achieve it; and can set it down in a manageable programme of actions that deliver its desired outcomes within its available resources.


Typical Problems

Mission Statements are unclear and don’t “come off the wall”

Vision and strategy are weak, or unclear Planning is done with inadequate data and analysis Daily activity gets in the way of working on “breakthrough

plans” Progress is not reviewed & plans stay “in the bottom

drawer”, so improvements don’t happen And…

There is a whole load of confusing jargon!



Let’s be clear…

A Balanced Scorecard (BS) is a performance management approach, not a performance measurement approach

ObjectivesMission

MeasuresTargets

Vision

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ObjectivesMission

MeasuresTargets

Vision

Projects Processes

Step 1 Step 2

Step 3 Step 4

Step 5

Plans


Delivertomorrow

Delivertoday

ObjectivesMission

MeasuresTargets

Vision

Technology, Systems, Facilities, Infrastructure

People:Leadership, Capability

Projects Processes

Step 1 Step 2

Step 3 Step 4

Step 5

Plans


Financialperspectiv

e

Customerperspectiv

e

Processperspectiv

e

Learning & Growthperspectiv

e

ObjectivesMission

MeasuresTargets

Vision



Projects Processes

Step 1 Step 2

Step 3 Step 4

Step 5

Plans


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Generic Balanced Scorecard

Financialperspectiv

e

Customerperspectiv

e

Processperspectiv

e

Learning & Growth

perspective

Vision &Strategy

How shouldwe look to ourShareholders?

How shouldwe look to ourCustomers?

How shouldwe develop

our capabilityto improve?

What processesmust we excel

at?

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“Balanced” means…

Long-term and short-term view Financial and non-financial Leading and lagging indicators Internal and external perspectives Objective and subjective measures


Objectives Measures Targets Plans

Strategy Action

Enablers and Results

13

Financial Customers

Innovation and

Learning

Internal Business

Processes

Vision

Results

Enablers


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Strategy Map - exampleImprove revenues & profitability by understanding

customer needs and differentiating ourselves accordingly

Financial

Customer

Process

Learning

ROIGrowth

RevenueGrowth

MarginImprovement

Delight theConsumer

Win-WinPartner Relations

NewProducts &Services

Best in ClassDelivery

On SpecOn Time

LeadershipSkills

NewTechnology

EmployeeAlignment


Public Sector Example


Health & Social CareOutcomes

What outcomes do we have to deliver to

patients, carers and the public?

OrganisationalCapability

What do we have to do todevelop the

capabilities of theorganisation?

Satisfied GovernmentWhat do we have to do to satisfy our GovernmentStakeholders and those

who fund us?

Satisfied DeliveryPartners

What do we have to do tosatisfy our delivery partners

& customers?

Business Processes

At what processesmust we excel?

Private Sector Example – Financial perspective


Private Sector Example – Financial perspective


Public Sector Example – Stakeholder perspective


Identifying Key Processes

The BS challenges you to identify the processes at which you must excel

These will (usually) be external-facing, customer-delivery processes; e.g. Design services Promote services Deliver services Provide post-delivery support


ObjectivesMission

MeasuresTargets

Vision



Projects Processes

Step 1 Step 2

Step 3 Step 4

Step 5

Plans

Financialperspectiv

e

Customerperspectiv

e

Processperspectiv

e

Learning & Growthperspectiv

e


Two types of measurement (metrics)


Strategic Measures; e.g.: Profitability/ROI Customer Satisfaction Customer/Staff Retention Employee Skill Levels

Are lagging indicators and tend to be “generic” for many organisations

Performance Drivers;e.g.: Productivity Complaints Defect/Error rates Process cycle-times

Are leading indicators of successful strategy implementation & often relate to critical processes

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How will you measure success? “If you can’t measure it, you can’t manage it” “What gets measured, gets done”

Or, “What gets measured badly, gets done badly” "Weighing the pig every day will not make it

fatter“ “People do what you inspect (measure), not

what you expect” “If you wait to develop the perfect set of

measures, you will wait a very long time”


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Leading and Lagging Indicators Lagging Indicators without Leading Indicators tell you

nothing about how outcomes will be achieved, nor can you have any early warnings about being on track to achieve your strategic goals

Leading Indicators without Lagging Indicators may enable you to focus on short-term performance, but you will not be able to confirm that broader organisational outcomes have been achieved

Leading Indicators should enable you to take pre-emptive actions to improve your chances of achieving strategic goals


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Leading and Lagging Indicators If you are measuring “activity” (i.e. at a process level), it

is more likely that you are using Leading Indicators The closer you move to process inputs and activities, the

closer you get to Leading Indicators of downstream, (Lagging) performance

If you are measuring aggregated effects, or outcomes, at an organisational level, you are more likely to be using Lagging Indicators


Improvement Skills Consulting Ltd.

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