The Balanced Scorecard

OutlineIntroduction to the Balanced Scorecard What is it? Why do it? Balanced Scorecard Fundamentals The Four Perspectives Measures, Targets and Initiatives Roles and Responsibilities Using the BSC as a Management System

The Balanced Scorecard What is it?Definition: The Balanced Scorecard is a management tool that provides stakeholders with a comprehensive measure of how the organization is progressing towards the achievement of its strategic goals.

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.

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.

The Balanced Scorecard Why do it?It works!The BSC has forced our management team to focus beyond financial measures too often in the past we would get sucked into short-term thinking. The BSC dramatically improved our data analysis we dont overreact nearly as much as we used to.

The Strategy Focused OrganizationMission Vision What we do What we aspire to be

Strategies How we accomplish our goals Measures progress Indicators of our

Environmental Scan

Strengths Opportunities

Weaknesses Threats

A Model for Strategic Planning

Values

Mission & Vision

Strategic Issues Strategic Priorities Objectives, Initiatives, and Evaluation

The Strategy Focused OrganizationThe Five Principles1. Translate the strategy to operational terms. 2. Align the organization to the strategy. 3. Make strategy everyones job 4. Make strategy a continual process 5. Mobilize change through executive leadership

Source: The Strategy Focused Organization, Norton & Kaplan

The Balanced Scorecard and The Big PictureS trategic P lanning M ission and V ision B alanced S corecard

Activity Based Costing Economic Value Added Forecasting Benchmarking Market Research Best Practices Six Sigma Statistical Process Control Reengineering ISO 9000 Total Quality Management Empowerment Learning Organization Self-Directed Work Teams Change Management

THE BALANCED SCORECARDFINANCIAL/REGULATORY To satisfy our constituents, what financial & regulatory objectives must we accomplish? CUSTOMER To achieve our vision, what customer needs must we serve?

INTERNAL To satisfy our customers and stakeholders, in which business processes must we excel?

LEARNING & GROWTH To achieve our goals, how must we learn, communicate and grow?

Customer PerspectiveTo achieve our vision, what customer needs must we serve?Possible Performance Measureso Customer Satisfaction (Average) o Satisfaction Gap Analysis (Satisfaction vs. Level of Importance) o Satisfaction Distribution (% of each area scored)

Financial / Regulatory PerspectiveTo satisfy our constituents, what financial and regulatory objectives must we accomplish?Possible Performance Measureso Cost / Unit o Unfunded Requirements or Projects o Cost of Service o Budget Projections and Targets

Internal PerspectiveTo satisfy our customers, in which business processes must we excel?Possible Performance Measureso Cycle Time o Completion Rate o Workload and Employee Utilization o Transactions per employee o Errors or Rework

Learning and GrowthTo achieve our goals and accomplish core activities, how must we learn, communicate and work together?Possible Performance Measureso Employee Satisfaction o Retention and Turnover o Training Hours and Resources o Technology Investment

Financial / Regulatory PerspectiveObjectives Initiatives Measures Targets

Customer PerspectiveObjectives Initiatives Measures Targets

Internal PerspectiveObjectives Initiatives Measures Targets

Learning and GrowthObjectives Initiatives Measures Targets

Strategy Map

The Balanced Scorecard as a Management SystemBSC reviewed regularly to enhance operational decision-making Success of initiatives assessed based on DATA not opinions Leading indicators evaluated to confirm accuracy of assumptions

The Balanced Scorecard as a Management SystemThe BSC is a Living Document that requires regular revision of objectives, measures and initiatives: How are we doing? Are we measuring the right things? What initiatives do we need to get us where we want to go? Have our organizational goals changed?