Balanced Scorecard Workshop

1
Balanced Scorecard Workshop Presented by Matt
H. Evans, CPA, CMA, CFM Public Sector Retreat
on Malcolm Baldrige Performance Excellence
2
Purpose of the Workshop

• Introduce the Balanced Scorecard to the
  Organization
• Make sure everyone understands how the scorecard
  works
• Communicate how the Balanced Scorecard fits with
  the Malcolm Baldrige Model of performance
  excellence

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Table of Contents

• Balanced Scorecard Basics
• Creating the Strategy Map
• Good Performance Measurements
• The Final Scorecard Components
• Case Study Exercise
• Some Final Points

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Why the Balanced Scorecard?

• The Organization will become more strategically
  focused over the next ten years given the recent
  policy directive issued by BSP (Budget
  Strategic Planning).
• People at all levels have relied heavily on
  tactical performance measurements, such as number
  of maps submitted, number of land structures in
  flow, and of supply vendor contracts in place.
  
• Need more balanced approach to looking at
  performance, both tactical and strategic.
• Only 5 of a workforce tends to understand their
  companys strategy.
• 86 of executive teams spend less than one hour
  per month discussing strategy.

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A Major Driver is . . .

• The Organizations Information Resource Planning
  System (IRPS)
• Enterprise wide system for how we will evaluate
  success division read outs, data turnarounds,
  global partnerships, etc.
• Must be integrated into all agency components
  (such as region and global outlet offices)
• Designed around the Balanced Scorecard framework
• The Balanced Scorecard will be the strategic
  view of performance for the agency, balancing out
  our current tactical view of performance which is
  already in place.

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Government Performance Results Act

• Required to develop long-term Strategic Plans
  ("SP")
• Specify general Goals and Objectives
• Develop Annual Performance Plans ("APP")
• Specify measurable performance goals
• Annual Performance Report ("APR")
• Demonstrate actual results
• APP goals should show the expected progress
  toward meeting the long-term goals of the SP

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Public Sector Organizations More Strategic Focus
8
Where it started . . .

• Introduced in 1992, by Robert Kaplan and David
  Norton, the Balanced Scorecard is the most
  commonly used framework for ensuring that
  agencies execute their strategies. Today, about
  70 of the Fortune 1,000 companies utilize the
  Balanced Scorecard to help manage performance.

Balanced Scorecards are used as the roadmap for
creating the Strategic Management System or our
IRPS. And this will drive overall organizational
performance for our entire agency!
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Some Basic Principles

• Quantifies the Agency Strategy in measurable
  terms
• Strategy is summarized on a Strategy Map over
  four views of performance (perspectives).
• Must capture a cause-effect relationship between
  strategic objectives over the four perspectives
  on the Strategy Map.
• Critical Components include
• - Measurements
• - Targets
• - Initiatives
• Everything must be linked Goals to Objectives,
  Objectives to Measurements, Measurements to
  Targets.

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Four Views of Performance
Strategic Objectives

• Strategy can be described as a series of cause
  and effect relationships.
• Provides a line of sight from strategic to
  operational activity
• working on the right things.

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The Importance of Alignment
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Alignment all the Way Through
Goal Improve environmental health
Performance Gap Less than Organization
watershed water quality
Initiative Data Mining
Resource
Investment
Management
Innovation
Justified Initiatives to
Improved "Cause
Business
Improve Water Quality
and Effect"
Processes
Knowledge
Investments Available to
Improved Environmental
Assessment Reports
be Allocated to Other
Critical Areas
Financial
Management
Environmental
Decreased Litigation
Health
Costs
Relationship
Improved Water Quality
Management
Enhanced Public
Confidence
Increased
Investment
Accountability
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In order to be successful, the Agencys IRPS
should . . .

• Be comprised of a balanced set of a limited vital
  few measures
• Produce timely and useful reports at a reasonable
  cost
• Display and make readily available information
  that is shared, understood, and used by the
  Agency and
• Supports the organizations values and the
  relationship the organization has with customers,
  suppliers, and stakeholders.

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Before we can map your strategy . . .

• Get down to a set of quantifiable strategic
  objectives
• Too vague
• More precise
• Make sure your objectives have a direct
  relationship to your goals and your goals have a
  direct relationship to your mission and values.

Improve Customer Service
Reduce average customer wait times by 30 by year
end
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Table Of Contents

• Balanced Scorecard Basics
• Creating the Strategy Map
• Good Performance Measurements
• The Final Scorecard Components
• Case Study Exercise
• Some Final Points

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Strategy Map Capture a Cause Effect Relationship
from the Bottom Up
More rapid and accessible services
Improved Returns on Investments
Stakeholder
Reduce Re-Activities thru ABC/M
Economic Model Process
Establish Web Based Self Services
Internal Process
Expand Global Facility Reach
Leadership Development
Knowledge Management
Learning Growth
IT Infrastructure
Human Capital
Facilities and Fixed Assets
Investments
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Two Special Techniquesfor Building Strategy Maps
General Rule of Thumb to ensure strategy map is
developed both vertically and horizontally
Weak
Strong
The 4 to 5 Rule
Way of pulling out both drivers and outcomes that
match up against the core competencies of the
business model
Splitting the Perspective
Customer Perspective
Customer Growth
Customer Satisfaction
Retention Rate
Outcomes
Drivers
Timely Delivery
Pricing
Quality
Service
Reputation
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Key Benefits of Strategy Maps

• Articulates how the organization creates value
  for its constituents and legitimizing authority
• Displays key priorities and relationships between
  outcomes (the "what") and performance enablers or
  drivers (the "how")
• Provides a clear view of "how I fit in" for
  sub-organizations, teams, and individuals
• "Cascading the scorecard throughout the
  organization, and clearly mapping the various
  units and functions back to the organization or
  agency-wide map is critical to leveraging and
  ensuring alignment"

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Strategy Maps A Better Way to Communicate
Strategy
Educate and Communicate Build awareness and
understanding of organization strategy across
the workforce.
Executive consensus and accountability
Building the map eliminates ambiguity and
clarifies responsibility.
Promote Transparency Communicate with and
educate constituents, partners, oversight
bodies, and the general public.
Ensure Alignment Each sub-unit and individual
link their objectives to the map.
Source "Using Balanced Scorecard Technology to
Create Strategy-Focused Public Sector
Organizations", Robert S. Kaplan, April 21, 2004,
pg. 20
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Multiple Choice Question Cause Effect on
Strategy Map

• The top perspective of the Balanced Scorecard is
  the final end results or outcomes we want to
  achieve. This perspective is called
• a. Internal Processes
• b. Stakeholder / Customer
• c. Learning Growth
• d. Agency Investments

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Multiple Choice Question and the answer is . .
.

• b Stakeholder / Customer are those who we
  ultimately serve and we must meet their needs and
  requirements. This is our final end result within
  the scorecard model.

Balanced Scorecards tell you the knowledge,
skills and systems that your employees will need
(learning and growth) to innovate and build the
right strategic capabilities and efficiencies
(internal processes) that deliver specific value
to the market (customer) which will eventually
lead to higher shareholder value (financial).
Having Trouble with Your Strategy? Then Map It
by Robert S. Kaplan and David P. Norton - Harvard
Business Review
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Aligning the Scorecards
Once you have completed your strategy map, make
sure it aligns with agencies or divisions you
report up to. This overall alignment of
scorecards throughout the entire Organization
forms the Strategic Management System within
IRPS.
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Extend the Map into Measurements, Targets and
Initiatives
Strategy Map
Detailed statement of what is critical to
successfully achieving the strategy
How success in achieving the strategy will be
measured and tracked
Key action programs required to achieve objectives
The level of performance or rate of improvement
needed
Stakeholder
Faster Service Access
Self Service Applications
Objective Description
Target
Initiative
Measure
Lean Processes
Internal Process
Lean / Six Sigma
Eliminate waste, reworks, and other errors in our
processes
2 per setup per month each Outlet Office
Number of Reworks
Process and Value Map Analysis
Web Enable Technologies
LG
Invest in IT
Investments
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Alignment of Scorecard Components
Make sure the components of your scorecard fit
together. We want to create a tight model for
driving execution of your strategy.
Goal Objective Measurement Target Initiative
Achieve Agency operational efficiencies with best practices in the private sector Reduce Operational Service Costs by 50 over the next 5 years Cost per Outlet Office, Cost per Region, Cost per FTE 5 - Year 1 10 - Year 2 15 - Year 3 Activity Based Costing / Management
Achieve Agency operational efficiencies with best practices in the private sector Reduce identified re-activities within primary processes by 80 over the next 3 years Waste Volume Charts, Rework Tracking, Cycle Time End to End in S-LX (5 of 7 Regions) Waste stream reductions of 5 each year, Reworks cut in half for next 3 years, cycle time cut by 75 Lean / Six Sigma
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Multiple Choice Question Create a Tight Model

• The Balanced Scorecard process captures a cause
  and effect relationship based on having all parts
  linked together. Strategic goals link down to
  objectives, objectives link down to measurements,
  and measurements link to
• Mission
• Goals
• Budgets
• Targets

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Multiple Choice Question and the answer is . .
.

• d Measurements should be linked to targets. We
  want a one-to-one relationship so that
  measurements are actionable to the Agency.

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Table Of Contents

• Balanced Scorecard Basics
• Creating the Strategy Map
• Good Performance Measurements
• The Final Scorecard Components
• Case Study Exercise
• Some Final Points

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The Context of Measurement
Performance Measurement is a process by which an
agency / program / function / outlet office
objectively assesses and evaluates the extent to
which it is accomplishing a specific objective,
goal, or mission. Performance measurement alone
is incomplete. Performance Management is a
systemic link between company strategy,
Investments, and processes. Performance
Management is a comprehensive management process.
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Why Measure Performance?

• Enables decision making
• Manage by results
• Promote accountability
• Distinguish between program success and failure
• Allow for organizational learning and improvement
• Justify budget requests
• Optimize Investments
• Provide means of performance comparison
• Fulfill mandates
• Establish catalysts for change
• And so on

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Without Measuring, Decision Makers Have No Basis
For

• Knowing what is going on in their enterprise
• Effectively making and supporting decisions
  regarding Investments, plans, policies,
  schedules, and structure
• Specifically communicating performance
  expectations to subordinates
• Identifying performance gaps that should be
  analyzed and eliminated
• Providing feedback that compares performance to a
  standard
• Identifying performance that should be rewarded

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Types of Measurements
Definition
Example
Measure Type
Intermediate outcomes that predicts or drive
bottom-line performance results
Leading
Employee turnover rate
Bottom-line performance results resulting from
actions taken
Lagging
Employee satisfaction rating
Amount of Investments, assets, equipment, labor
hours, or budget dollars used
Input
Number of cashiers
Units of a product or service rendered - a
measure of yield
Output
Number of Value Meal orders fulfilled
Resulting effect (benefit) of the use or
application of an output
Outcome
Customer satisfaction rating
Objective / Quantitative
Empirical indicators of performance
Wait time
Perceptions and evaluations of major customers
and stakeholders
Customer complaints received as a of total
customers served
Subjective / Qualitative
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Examples of Measurements by Perspective
Internal Processes
Stakeholder / Customer

• Current customer satisfaction level
• Improvement in customer satisfaction
• Customer retention rate
• Frequency of customer contact by customer service
• Average time to resolve a customer inquiry
• Number of customer complaints

• Number of unscheduled maintenance calls
• Production time lost because of maintenance
  problems
• Percentage of equipment maintained on schedule
• Average number of monthly unscheduled outages
• Mean time between failures

Learning and Growth
Investments

• of facility assets fully funded for upgrading
• of IT infrastructure investments approved
• of new hire positions authorized for filling
• of required contracts awarded and in place

• Percentage employee absenteeism
• Hours of absenteeism
• Job posting response rate
• Personnel turnover rate
• Ratio of acceptances to offers
• Time to fill vacancy

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Multiple Choice Question Appropriate
Measurement

• The measurement, of employees following a
  supervisor approved competency model, would most
  likely be placed in which perspective of the
  Balanced Scorecard?
•  
• a. Stakeholder / Customer
• b. Learning and Growth
• c. Agency Investments
• d. Internal Processes

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Multiple Choice Question and the answer is . .
.

• b this measurement relates to helping grow the
  workforce and this would most likely fit with the
  Learning and Growth perspective of the Balanced
  Scorecard.

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Some Basic Guidelines forGood Performance
Measures

• You should have at least one measurement for each
  objective.
• Measurements define or explain objectives in
  quantifiable terms
• Vague gt We will improve customer service
• Precise gt We will improve customer service by
  reducing response times by 30 by year end.
• Measurements should drive change and encourage
  the right behavior.
• Should be able to influence the outcome.

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Selection Criteria for Performance Measurements

• MEANINGFUL - related significantly and directly
  to organizations mission and goal
• VALUABLE measure the most important activities
  of the organization
• BALANCED inclusive of several types of measures
  (i.e. quality, efficiency)
• LINKED - matched to a unit responsible for
  achieving the measure
• PRACTICAL affordable price to retrieve and/or
  capture data
• COMPARABLE used to make comparisons with other
  data over time
• CREDIBLE - based on accurate and reliable data
• TIMELY - use and report data in a usable
  timeframe
• SIMPLE -- easy to calculate and understand

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Three Criteria Used for Agency Scorecard

• Relevant
• Addresses an operational or strategic performance
  issue
• Is results- or outcome-focused
• Provides useful information to enable decision
  making
• Measurable
• Quantifiable and Objective
• Facilitates Analysis
• Can be done in a timely manner with high accuracy
• Data are available and collectable
• Actionable
• Can be tracked to an appropriate person or team
  responsible for the activity measured
• Measure relates to process inputs that can be
  controlled/adjusted to address concerns

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Scoring Measurements Against the Three Selection
Criteria
A 0 or 1 in any column indicates that you
need to revisit this measurement before
implementation.
Measurement Relevant Measurable Actionable
of Global Outlets that follow the end to end process defined in IRPS 3 1 2
Number of score studies completed 3 2 3
of Region Centers using ABC Models to manage 65 of their allocation costs 3 2 3
of eligible employees who are participating in the Competency Model Development Program 3 2 2
of map points loaded and operational in GPS Tracking 3 2 2
0 Does not apply 1 Poor 2
Acceptable 3 Good
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Multiple Choice Question Match the Objective
to the Metric

• Assume the Agency Plan has an objective Improve
  the productivity of docking services at all
  stations. Which of the following measurements
  would be most appropriate for this objective?
•  
• a. Number of reruns required to complete the
  docking service
• b. of vendor contracts executed in 90 days
• c. Number of people completing the off-shore
  warranty training program
• d. of supervisors who submitted budget action
  plans within 60 days of close-outs

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Multiple Choice Question and the answer is . .
.

• a If we measure re-runs, this probably will
  give us some benchmark by which we can measure
  docking station efficiency and productivity.

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A Closer Look at How Things Link
Transportation Safety Example
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The Measurement Pyramid
Strategic/GPRA Goals End-Outcomes Longer-Term
Intermediate Outcomes Shorter-Term Intermediate
Outcomes Outputs Outputs Inputs
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Some Tools for Determining What to Measure
Program Logic Model
Process/ System
Intermediate Outcomes
End Outcome
Inputs
Output
Process Flow
Causal Analysis
Desired Outcome
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Top Ten Metrics in the Public Sector

1. Outputs/Product
2. Program Inputs
3. Financial Indicators
4. Work/Activities
5. Timeliness of Services
6. Internal Measures of Quality
7. Operating Ratios
8. Outcomes of Products or Services
9. External Customer Service
10. Equity of Services to Users

Source GAO-GGD-92-65 Agency Use of Performance
Measures
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Table Of Contents

• Balanced Scorecard Basics
• Creating the Strategy Map
• Good Performance Measurements
• The Final Scorecard Components
• Case Study Exercise
• Some Final Points

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How to Set Targets

• Past performance trends per historical data.
• Performance levels of similar organizational
  units at a comparable level that facilitates
  benchmarking.
• Best practices across the agency, the public
  sector or the private sector. Must be at a
  pre-existing high level of performance before you
  use this approach.
• For newly launched services, may have to
  establish a baseline per a prototype test and
  extend out from this point forward.
• For major strategic shifts, may have to set
  directly per the plan itself without regard for
  hard data.

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Checklist for Setting Targets

• Targets match up with measurements, one to one.
• Targets require improving current levels of
  performance.
• Targets are a stretch, but achievable they may
  require improvements to existing processes.
• Targets are quantifiable so that the target
  communicates if the expected performance was met.
• Long-term targets are established before
  short-term targets.
• Financial/Budget related targets are established
  before non-financial targets.

48
Examples of Targets
Average Turnaround Times at Docking Sites 8 days FY05 7.5 days FY06 6.8 days FY07
Utilization Rate for Self Serve Web Portal 10 FY05 18 FY06 25 FY07
Rotation Internship Participation Rates 1,800 FY05 2,500 FY06 3,900 FY07
Glider integration mapping tool used for geo-sets Establish baseline 8 per sets 10 per sets
of agency SES Levels following IRPS from end to end for the entire year 30 FY05 40 FY05 65 FY05
funding through SEPCO for space mapping 30 FY05 35 FY06 45 FY07
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Characteristics of Initiatives

• Leader Sponsored
• Requires Investments people, funding,
  technology, etc.
• Has designated owners
• Includes deliverables or milestones
• Usually has time deadlines
• May be difficult to launch not resourced
• Could encounter obstacles people are confused,
  conflicts with other functions

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Initiatives should enable strategic execution
Initiatives Goals or Objectives
Value Mapping Project Improve identification and delivery of all agency services across the full stakeholder spectrum
Employee Rotation Program Improve the employee turnover and satisfaction scores
Web Self Service Portal Reduce agency costs and streamline our services for more direct service delivery
Common Knowledge Center Expand the overall knowledge base so that inter-functions can learn from one another
Customer Survey and Analysis Tool Program Develop a more systematic process across the entire agency to better connect to our customers
Shared Service Center Tracking System Reduce reworks and overlaps between our seven shared service centers
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Going from Output to Outcome
When you first launch your Initiative, you
probably want to use an Output Measurement. Once
the Initiative is up and running, change your
measurement to an Outcome to see if the
Initiative is really having strategic impact.
Initiative Output Measurement Outcome Measurement
Lean Process / Six Sigma Number of Projects Defined by Region Overall reductions in errors, reworks, and cycle times
Activity Based Costing / Management (ABC/M) of Service Center Outlets with ABC Models in place for Allocation Costs Reductions in identified re-activities per process study
Employee Competency Models of Employees who have a Competency Model in place Higher skill levels of employees using the models
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Strategic Themes

• Describes an overall strategic direction
• Can improve the communication effectiveness of
  the Strategy Map
• Examples of themes
• Innovative Services
• Lean Processes
• Adaptive Organization
• Realign our Core Competencies
• Reach the Stakeholder
• Group common set of objectives around a theme

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Multiple Choice Question Sequence Of Steps

• The basic steps for creating a Balanced Scorecard
  include
• A Align your strategy map to other
  organizational units
• B Create your strategic plan including goals
  and objectives
• C Extend your strategy map into measurements
  and targets
• D Map your strategy over four perspectives
• The sequence or order of these steps is (left to
  right)
•    Step 1 Step 2 Step 3
  Step 4
• A C B D
• C A D B
• B D A C
• C B A D

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Multiple Choice Question and the answer is . .
.

• c Step 1 or B Start with your strategic plan
• Step 2 or D Map your strategic plan
• Step 3 or A Align your strategy map
• Step 4 or C Extend the strategy map into
  measurements and targets

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TABLE OF CONTENTS

• Balanced Scorecard Basics
• Creating the Strategy Map
• Good Performance Measurements
• The Final Scorecard Components
• Case Study Exercise
• Some Final Points

56
Case Study Instructions

• The following handout is an example strategic
  plan for the Western Agency Region Office (WARO).
  
• Your team has been assigned the responsibility of
  mapping the WARO Plan into a single strategy map.
• Each team will be assigned to a breakout room
  use post it notes on the large white template
  sheets
• Try to limit your objective boxes on the strategy
  map to no more than 20 per our 4 to 5 Rule.
• If you have time, you might want to consider
  arranging or grouping certain objectives together
  around themes.
• Each team will provide a 10-minute brief.
• You have 90 minutes to complete the case study
  exercise.

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TABLE OF CONTENTS

• Balanced Scorecard Basics
• Creating the Strategy Map
• Good Performance Measurements
• The Final Scorecard Components
• Case Study Exercise
• Some Final Points

58
Making the connection to the Baldrige Criteria
Malcolm Baldrige
Balanced Scorecard
Leadership
Learning Growth Perspective
Human Resource Capital
Learning Growth Perspective
Business Results
Measurements and Targets
Process Management
Internal Process Perspective
Strategic Planning
Strategy Map
Customer Focus
Stakeholder / Customer Perspective
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Automated System Overview - IRPS

• IRPS is the Organizations Strategic Management
  System for creating the Strategically Focused
  Organization (SFO).
• The Strategic Management System Module within
  IRPS
• Cascades scorecards down by folders
• Includes a web based training component
• Analytical tools include unit trends, service
  costing comparisons, strategy map gap analysis,
  alignment point scoring, and executive dashboard
  views sent to PDAs.
• IRPS Scorecard Module has the following features
• - Project / Initiative Tracking with milestones
• - Automated Email Data Collection
• - Automated Report Distribution
• - Linking Capability to Agency Databases (such
  as SES,
• G-PAC, and Shared Service Docking
  Databases)

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Highlight Important Steps

• Cascade and align strategy down to the Outlet
  level (and beyond personal scorecards) where
  execution takes place.
• Capture cause effect linkages as you cascade and
  align down. This will ensure that all of the
  Agency is moving in the same strategic direction.
• Identify and commit to projects and initiatives
  that will drive strategic execution.
• Establish performance outcomes in the form of
  measurements and targets.
• Review results on a regular basis within the
  Quarterly Leadership Briefings using the Balanced
  Scorecard framework.

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Additional Information

• Training Slides (1)
• Performance Based Handbook (1)
• Performance Measurement Tool Kit (1)
• Formal Training
• Offered Quarterly at the Central and Western
  Region Offices
• Annual Leadership Conference 2 Hour Workshop
• Web Based Training
• IRPS SMS Option 6, self serve registration
• (1) Posted on the internet at www.exinfm.com/work
  shop.html

Contact Information Matt Evans,
matt_at_exinfm.com,877-689-4097