The Balanced ScorecardThe California State UniversityQuality Improvement ProgramsPresented ToJohn SandersPresented ByFinance and Administrative Services Division

Introduction to the Balanced ScorecardWhat is it? Why do it?

Balanced Scorecard FundamentalsThe Four Perspectives Measures, Targets and InitiativesRoles and Responsibilities

The CSUSM Finance & Administrative Services Strategy MapUsing the BSC as a Management SystemSeminar Outline

The Balanced ScorecardWhat 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 ScorecardWhat 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 ScorecardWhy do it?It works!

In just 90 days, Sandia Labs was able to redirect $190,000 in savings by dropping initiatives that didnt fit their overall strategy.

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 Balanced Scorecard and The CSU Campuses currently working on the BSCSan Luis ObispoPomonaSan JoseSan MarcosSonomaFullertonLong BeachChicoNorthridgeSan BernardinoChancellor's Office

Mission What we do

Vision What we aspire to be

Strategies How we accomplish our goals

Measures Indicators of our progressThe Strategy Focused Organization

Environmental ScanStrengths WeaknessesOpportunities ThreatsValuesMission &VisionStrategic IssuesStrategic PrioritiesObjectives, Initiatives, and EvaluationA Model forStrategicPlanning

The Five Principles

Translate the strategy to operational terms.

Align the organization to the strategy.The Strategy Focused OrganizationSource: The Strategy Focused Organization, Norton & Kaplan

The Five Principles (cont.)

Make strategy everyones job.

Make strategy a continual process.

Mobilize change through executive leadershipThe Strategy Focused OrganizationSource: The Strategy Focused Organization, Norton & Kaplan

The Balanced Scorecard and The Big PictureActivity Based CostingEconomic Value AddedForecastingBenchmarkingMarket ResearchBest PracticesSix SigmaStatistical Process ControlReengineeringISO 9000Total Quality ManagementEmpowermentLearning OrganizationSelf-Directed Work TeamsChange Management

Strategic DirectionCreate Environment For ChangeStrategic Performance Management SystemLinking it all together.Communicate StrategiesDefine ObjectivesImplement BSCBalanced ScorecardMeasure PerformanceImprove ProcessesEvaluate and AdjustContinuous ImprovementRedefine Initiatives

FINANCIAL/REGULATORYTo satisfy our constituents, what financial & regulatory objectives must we accomplish?

CUSTOMERTo achieve our vision, what customer needs must we serve?

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

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

THE BALANCED SCORECARD

Customer Perspective

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

Financial / Regulatory Perspective Cost / Unit Unfunded Requirements or Projects Cost of Service Budget Projections and TargetsPossible Performance MeasuresTo satisfy our constituents, what financial and regulatory objectives must we accomplish?

Internal Perspective Cycle Time Completion Rate Workload and Employee Utilization Transactions per employee Errors or ReworkPossible Performance MeasuresTo satisfy our customers, in which business processes must we excel?

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

Why Measure?To determine how effectively and efficiently the process or service satisfies the customer.

To identify improvement opportunities.

To make decisions based on FACT and DATA

Measurements Should:Translate customer expectations into goals.

Evaluate the quality of processes.

Track our improvement.

Focus our efforts on our customers.

Support our strategies.

Targets

If you dont know where youre going, youre probably not gonna get there.Forrest Gump

TargetsTargets need to be set for all measures

Should have a solid basis Give personnel something for which to aim

If achieved will transform the organization

Careful not to develop measures/targets in a fragmented approach:

i.e. Asking people to increase customer satisfaction has to be backed up with the knowledge, tools, and means to achieve that target.

InitiativesOnce measures and targets are established, it is the responsibility of management to determine HOW the organization will achieve its goals.

Measures are used to determine the effectiveness of strategic initiatives.

The Leadership TeamDevelops the divisions vision, strategy and goalsDevelops organizational objectives and targetsProvides leadership, endorsement and vision for the projectClears barriers to scorecard progress

The Core TeamDrafts the strategy map and scorecard

Works with employees to develop measures supporting strategic objectives

Works with the Leadership Team to plan and implement the Balanced Scorecard in the FAS Division

Finance and Administrative Services

Strategy Map

FINANCIAL

CUSTOMERINTERNAL PROCESSLEARNING & GROWTHHum. Rscrs.Univ. PoliceFacilitiesPoliceParkingLink it together.Measure: Satisfaction IndexCurrent: 3.0 Target: 4.0DIVISIONDEPT.FUNCTION

The Balanced Scorecard as a Management SystemBSC reviewed regularly to enhance operational decision-makingSuccess of initiatives assessed based on DATA not opinionsLeading 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?

Advantages to this Approach Simple to Use and Understand Based on Vision and Strategy Multidimensional Quantitative and Qualitative MeasuresCurrent and Future Provides Measurement of and Method for Improving our Services Ties QI initiatives together Serves as a Communication Tool

Kaplan, Robert and Norton, Edward. The Balanced Scorecard.Harvard Business Publishing, 1998

Kaplan, Robert and Norton, Edward. The Strategy-Focused Organization.Harvard Business Publishing, 2001

Buckingham, Marcus and Coffman, Curt. First, Break All the Rules The Gallup Organization, 1999

Brown, Mark. Keeping Score. Mark Graham Brown, 1996

http://www.afd.calpoly.edu/afd/Strategic_plan/

http://cqi.csusb.edu/

Suggested Readings

John SandersThe California State University(562) 951-4556jsanders@calstate.eduwww.calstate.edu/qiThank You

Welcome and IntroductionsvThe Balanced Scorecard, when focused on driving strategy, is the recipe for success, bringing together varying departments, all working to accomplish an overall mission. The Balanced scorecard will take your vision and translate that into terms and goals for all levels of the organization.

Use the Balanced Scorecard to assist in breaking down barriers between departments. Use of strategic themes link separate operational units.

It is important to communicate and educate everyone in the organization. Understanding of the strategy is key, as well as how each individual contributes to the achievement of the strategy.

Use regular management meetings to review status of measures and address the need to modify the strategic initiatives if performance is not improving. These meetings should be used as a learning opportunity, focused on team problem solving and adaptation to new situations.

Improvement is the ultimate goal, and cannot be attained without executive leadership. Effective leaders provide an environment that values creativity and accepts risk taking as an integral part of change management. Executives also need to use the Balanced Scorecard to communicate successes and opportunities for improvement.

Charts the strategic direction of the organizationGood strategic plan looks 3-5 years outThe BSC is strategic vs. operationalDevelops organizational objectives and targetsLinks objectives to the vision/mission statementsClears barriers to scorecard progressRunning interference when neededThe Core Team is ideally a cross-functional, mid-level management team that understands operational issues.

Should include subject matter experts as needed.