The Balanced Scorecard & Strategy Mapping

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The Balanced Scorecard Strategy Mapping

• By
• Professor G. Richard French, Ph.D., CPA
• Indiana University Southeast

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What is the Balanced Scorecard(BSC)?

• The balanced scorecard is a carefully selected
  set of quantifiable measures derived from an
  organizations strategy. The measures selected
  for the Scorecard represent a tool for leaders to
  use in communicating to employees and external
  stakeholders the outcomes and performance drivers
  by which the organization will achieve its
  mission and strategic objectives. (Niven, 2006)

Communication Tool
Measurement System
Strategic Management System
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Barriers to Strategy Execution (Kaplan Norton)

• Only 10 of organizations execute their strategy,
  due to
• Vision Barrier only 5 of the workforce
  understands the strategy
• People Barrier only 25 of managers have
  incentives linked to strategy
• Management Barrier 85 of executive teams spend
  less than 1 hour/month discussing strategy.
• Resource Barrier 60 of organizations dont
  link budgets to strategy

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t
Kaplan and Nortons traditional balanced
scorecard.
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Reasons for Implementing a Scorecarding System

• Tracking progress towards achievement of
  organizational goals
• Need to communicate strategy to everyone
• Aligning employee behavior with strategic
  objectives
• Linking aligning the organization around
  strategy
• Being able to measure people, projects strategy
• Lawson, Stratton Hatch

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Three Key Issues For The Successful Scorecard
Implementation

• Establish the motivation for implementing the
  scorecarding system the right reason
• A supportive organizational environment
• A well-defined scorecarding system architecture
• Lawson, Stratton Hatch

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Rationale for Using the Balanced Scorecard
(Niven, 2006)

• Implementation of strategy
• Prioritizing initiatives
• Aligning organizational and employee goals
• Communication and education of strategy
• Business crisis
• New leadership

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Supportive Organizational Environment

• Buy-in from top management
• Clearly define and communicate the reasons for
  the scorecarding system
• Communicates benefits to employees and
  organization
• Employees accept and use the system

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Supportive Organizational Environment

• Measures are used and linked for compensation and
  reward systems
• Limited use of consultants to encourage employee
  ownership
• Adequate time
• Pervasive system, but implemented in phases

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Well-defined Scorecarding System Architecture

• Use a framework that represents the
  organizations vision and business model
• Formal ties exist between strategy and the
  scorecard
• Balanced measures financial non-financial,
  leading and lagging
• Flexibility in scorecarding automation software

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Well-defined Scorecarding System Architecture

• Update the scorecarding system as needed
• Fewer measures are better
• Other performance-management tools in place
• Integrated into the planning performance
  evaluation system

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Strategy Map
A strategy map is a one-page graphical representat
ion of what you must do well in each of the four
perspectives in order to execute your strategy
successfully or to achieve your
mission. Niven, 2008
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For-Profit Organization
Strategy
Financial How do we look to our shareholders?
Based on Kaplan and Nortons four
perspectives/Voelker, Rakich French.
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(No Transcript)
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Not-For-Profit Organization
Mission
Stakeholders How do our stakeholders perceive us?
Are we fulfilling our mission?
Based on Kaplan and Nortons four perspectives
and Barberg Webinar.
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Kaplan Norton, 2004
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Architecture of a Strategy Map
Themes
Build the Franchise
Increase Customer Value
Achieve Operational Excellence
Be a Good Corporate Citizen
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Benefits from Scorecarding Systems to Best
Practice Companies

• Greater ability to align employee behavior with
  strategy (gt 75)
• Greater ability to understand relationship
  between measures and strategy (gt 70)
• Greater ability to link performance with
  compensation (60)
• Greater ability to measure performance (gt80)
• Increased communication (gt80)
• Lawson, Hatch, Desroches, 2007

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Benefits from Scorecarding Systems to Best
Practice Companies

• Decreased costs (gt45)
• Increased revenues (gt30)
• Greater organizational alignment (100)
• Ability to make strategic decisions faster with
  better data (50)
• Lawson, Hatch, Desroches, 2007

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IMA Vision Statement

• The world's leading association for management
  accounting and finance professionals

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IMA Mission Statement

• To develop and advance the careers of management
  accounting and finance professionals through
  certification, research and practice development,
  education, networking, and the advocacy of the
  highest ethical and professional practices.
• Adapted from IMA Mission Statement
  www.imanet.org

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Selected Readings Websites

• Balanced Scorecard Step-By-Step Maximizing
  Performance and Maintaining Results , Paul Niven
  John Wiley Sons, Inc., 2006
• The Strategy-Focused Organization , R. Kaplan
  D.P. Norton Harvard Business School Publishing
  Corporation, 2001.
• Strategy Maps Converting Intangible Assets into
  Tangible Outcomes, R. Kaplan D.P.
  Norton,Harvard Business School Press, 2004.
• Scorecard Best Practices Design,
  Implementation, and Evaluation, R. Lawson, T.
  Hatch, D. Desroches John Wiley Sons, 2008.
• Balanced Scorecard Driving Strategy, Yielding
  Breakthrough Performance, IMA Webinar presented
  by Bill Barberg, 2006.
• The Balanced Scorecard in Healthcare
  Organizations A Performance Measurement and
  Strategic Planning Methodology, Kathleen
  Voelker, Jonahon Rakich, and G. Richard French,
  Hospital Topics, 2001,
• www.insightformation.com

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Perspectives South Central
Chapter
Stakeholderr Perspective
Financial/Support Perspective
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Strategy Map Themes IMA South Central Chapter
Professional Development
Member Involvement
Contribute to Business/Community
Sustainable
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Financial/Support Perspective
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Stakeholder Perspective
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Internal Process Perspective
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Learning Growth Perspective
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Members Achieve Their Professional/Personal Goals
Members regularly serve on board
Assess communications positively
Member dues support activities
Stakeholders satisfied and improved retention
Members engage in learning networking
activities
Generate reimbursement from National IMA
Sponsor Professional Certification Courses
Promote leadership programs for board members
Develop effective communications with stakeholders
Conduct excellent education programs
Provide successful chapter administration
Provide Professional Development
Develop Networking Opportunities
Communicate effectively
Develop an Effective Leadership Group