balanced scorecard performance management
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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
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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.
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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!
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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
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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
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Financialperspectiv
e
Customerperspectiv
e
Processperspectiv
e
Learning & Growthperspectiv
e
ObjectivesMission
MeasuresTargets
Vision
Technology, Systems, Facilities, Infrastructure
People:Leadership, Capability
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
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Objectives Measures Targets Plans
Strategy Action
Enablers and Results
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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
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Public Sector Example
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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
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Private Sector Example – Financial perspective
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Public Sector Example – Stakeholder perspective
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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
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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
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Two types of measurement (metrics)
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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
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Improvement Skills Consulting Ltd.
ian.seath@improvement-skills.co.ukM: 07850 728506W: www.improvement-skills.co.uk
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