building & managing the balanced scorecard

eLearning for Building & Managing the Balanced Scorecard

Course Manual

201622 – User Manual ©2008 Balanced Scorecard Collaborative, Inc., a Palladium Company • bscol.com

Contents

IntroductionCourse 1: Curriculum IntroductionCourse 2: Introduction to the Balanced ScorecardCourse 3: Getting StartedCourse 4: Conducting Leadership InterviewsCourse 5: Mapping the StrategyCourse 6: Workshop ICourse 7: Determining Strategic MeasuresCourse 8: Identifying TargetsCourse 9: Workshop IICourse 10: Aligning InitiativesCourse 11: Workshop IIICourse 12: Balanced Scorecard ReportingCourse 13: Curriculum SummaryCourse 14: Managing Change with the BSCCourse 15: Building Strategic AnalysisCourse 16: Preparing Strategy AnalysisCourse 17: Presenting Strategic AnalysisCourse 18: Using Measures and TargetsCourse 19: Alignment for Teams and IndividualsCourse 20: Strategy Refresh


Introduction

This student handbook is intended for use with the on-line Balanced Scorecard eLearning courses. It is not intended for use as standalone training material.

Each chapter contains an overview of the key learning points from the corresponding on-line course. Users should use this handbook as a reference guide and for note-taking while taking the courses.


The Strategy Focused Organization

Course 1: Curriculum Introduction

TRANSLATE STRATEGY INTOOPERATIONAL TERMS

ALIGN THE ORGANIZATION TOTHRE STRATEGY

MOTIVATE TO MAKESTRATEGY EVERYONEÕS JOB

MOBILIZE CHANGE THROUGHEXECUTIVE LEADERSHIP

GOVERN TO MAKE STRATEGYA CONTINUAL PROCESS

• Strategy – Focused Organizations (SFO) address three key dimensions:

– Strategy – establish strategy as central to an organization's agenda. – Focused – create focus. Align every resource and activity in an

organization with the organization's strategy. – Organization – assign all members of an organization independent roles

guided by the organization's strategy. Create linkages across "silo" business units, services, and individuals.

• Successful SFOs demonstrate a consistent pattern of achieving their strategic goals. They practice five common principles; they:

– Mobilize change through leadership. – Translate the strategy into operational terms. – Align the organization with the strategy. – Motivate to make strategy everyone's job. – Govern to make strategy a continual process.


Course 1 Curriculum Introduction

Successful Strategy – Focused Organizations

• MOBILIZE change through senior leadership. Transforming any organization into a Strategy-Focused Organization is a large-scale change that requires the active involvement of a Leadership Team.

– First, the organization's leadership must create the climate for change by demonstrating the need for change. Sometimes this need is obvious, as when an organization is clearly failing and must change to survive. In other cases, the reasons are less obvious. Effective leaders can motivate organizations to change by establishing stretch targets that break down complacency among organization members and provide inspiration. Throughout the scorecard development process, leadership must lead and participate in changing the culture of the organization.

• TRANSLATE the strategy to all members in their organization so that they can all understand it and implement it efficiently.

– You can't execute something you can't describe. The problem with traditional management methods is that they generally apply only to financial strategies. The BSC offers a way to describe an organization's overall strategy with the use of the Strategy Map. The Strategy Map is a visual representation of an organization's strategy and the processes and systems necessary to implement that strategy; it shows employees how their jobs are linked to the organization's overall objectives.

– The Strategy Map leads to a shared vision throughout an organization and creates a common language for describing an organization's strategy. In this way, the Strategy Map builds leadership team consensus; developing it is as important as developing the product.

• ALIGN with their strategy. This creates a line of sight from "flagpole to front line."– While a Balanced Scorecard provides a framework for organizations to describe and

implement their strategies, an SFO requires more than for each unit of the organization to use its own scorecard. To be effective, each unit should have its scorecard aligned with its parent scorecard and linked, where appropriate, with other units' scorecards; this process is known as "cascading.“

• MOTIVATE to make strategy everyone's job and empowering them with roles guided by the strategy.

– Ultimately, the people in an organization are responsible for implementing the strategy once it is defined. For an organization to achieve the objectives of its strategy, all of its participants must understand their independent roles in the successful implementation of the strategy and must also recognize how the success of the strategy will reward them.

• GOVERN to make strategy a continuous process through organization-wide learning and adjusting.

– An SFO must have the information and flexibility to update its strategy as the environment changes and as the strategy matures. Organizations monitor performance on their BSC against the data that is gathered and continually interpret performance data. They formulate new strategic direction, update their BSC as necessary, and reallocate resources as necessary.


Course 2: Introduction to the Balanced Scorecard

• Learning Objectives– Define what a BSC is and how it fits into an SFO. – Explain why the BSC approach is effective. – Identify what differentiates the BSC from other forms of organizational

measurement. – Identify what creates balance in the scorecard. – Define each of the components of the BSC. – Identify the purpose of strategic measures. – Identify the key benchmark of a good BSC. – Explain why the Army is implementing the BSC. – List the five basic BSC process steps.


The Balanced Scorecard

• The Balanced Scorecard (BSC) is a strategic management system that helps organizations translate their strategies into objectives that drive both behavior and performance.

– The scorecard illustrates an organization's strategy in terms that all members of an organization can understand.

– Objectives drive performance. They are action statements that create measurable results indicating the success level of executing the strategy.

• The BSC focuses on and aligns an organization to its strategy.

• The BSC works because it maximizes an organization's ability to execute strategy by clearly defining an organization's goals and objectives and by involving people, resources, and processes at every level of the organization.

Course 2 Introduction to the Balanced Scorecard


Four Barriers to Strategy Implementation

• There are four barriers to strategy implementation:– Vision– Resource– Management– People

• The BSC addresses all of these barriers through an integrated approach that accounts for strategy and success across multiple perspectives, rather than just the traditional "bottom line" perspective.

• The BSC helps an organization define the value of non-tangible assets, such as internal processes and learning and growth. These perspectives indicate the areas an organization needs to improve in order to achieve its goals.



Characteristics of a Good Balanced Scorecard

• Leadership Involvement– Strategic decision makers validate and own the strategy and the BSC.

• Cause-and-effect Relationships– Every assigned objective is a part of a chain of cause-and-effect

relationships that represents the strategy.

• Performance Drivers– A balance of outcome measures and leading measures facilitates

anticipatory management.

• Linkages to Stakeholder Perspective– Every objective ultimately relates to a desired outcome from the

stakeholder's perspective.

• Change Initiatives– Actions align with strategic objectives to achieve the objectives and,

hence, close the performance gap.



Cause and Effect Relationships

• The BSC process treats strategy as if it is a series of linked hypotheses that describe cause-and-effect relationships.

– For example, an “employee satisfaction" measurement may indicate improvement, but if “employee retention and employee productivity" measurements do not also indicate improvement, a hypothesis that links the two measures may be invalid.

• This type of linked measurement is what differentiates the BSC from other forms of organizational measurement. BSC measurements provide an ongoing account of the validity of projected cause-and effect relationships across perspectives and, therefore, are essential to making informed decisions about changing course direction.



Development Process Steps

• Developing a BSC involves five basic steps:– Getting Started– Mapping the Strategy– Defining Measures and Targets– Aligning Initiatives– Reporting

• Although it appears linear, the process is iterative; as you progress through the steps and learn more about your organization, you are likely to revisit previous steps and adjust your scorecard.



Balanced Scorecard Components

• The basic components of the Balanced Scorecard are:– Perspectives– Themes– Objectives– Measures– Targets– Initiatives




Balanced Scorecard Perspectives

• There is a standard four perspective framework:– Financial– Customer– Internal Business Process– Learning and Growth

• Perspectives form the basic architecture of the BSC, accounting for all relevant factors in an organization's execution of strategy and, thus, creating balance in the scorecard.

• Perspectives allow an organization to:– Balance long-term and short-term objectives – Link desired outcomes and the drivers of those outcomes

• Perspectives allow leaders to evaluate outcomes by accounting for the drivers of those outcomes.



Themes

• Themes are the major components of an organization's strategy, and provide an overview of how an organization will carry out its mission.

• An organization's mission will usually be broken down into three or four basic themes that may cross all perspectives.

• A theme consists of a collection of objectives that enables the execution of the theme.


Objectives, Measures, Targets and Initiatives

• Objectives are a statement of what an organization must achieve and what’s critical to its success.

• Measures allow an organization to determine whether it has been successful in executing its strategy. There are two fundamentalpurposes to strategic measures:

– Organizational motivation – Evaluation of the strategy and strategic learning

• Targets define the level of performance or rate of improvement needed

• Initiatives are key action programs required to achieve objectives



Course 3: Getting Started

• Learning Objectives– List the major activities that are necessary to launching the BSC project. – State the role, membership composition, and time commitment for each of

the three types of teams in the BSC. – Identify the attributes of the Project Manager and Core Team members. – List the information needed to identify the strategy. – State the purpose of the kick-off meeting. – List the critical success factors in launching the BSC process.


Development Teams

• To successfully launch the BSC process, an organization must employ the right people, prepare its people, and gather the resources required for the success of the project.

• Three teams are involved with scorecard development:– Leadership Team consists of the organization’s leaders and specific

functional leaders as assigned and provide strategic guidance for the process. Their time commitment includes a 90 minute interview and follow-up meetings as needed.

– Core Team consists of a project lead and two to five experienced mid-level staff and represent the organization as a whole. The Core team guides the development of the BSC, manages the process, scheduling, and all details of the scorecard components. They typically dedicate 50-100% of their time to scorecard development.

– Sub-Teams are lead by Core team members and typically have four to five members. Sub-Teams provide the Core Team with detailed input, especially on measures and targets. They typically spend 20-50% of their time over a four week period supporting the Core team.

Course 3 Getting Started


Core Team Members

• An organization's Project Manager and Leadership Team collaboratively select Core Team members. Core Team members are selected for their qualifications, rather than for their availability.

• Core Team members should have:– The ability to represent their organization as a whole. – A broad base of experience. – The ability to effectively interact with their organization's leaders. – Respect among peers.

• The Core Team is responsible for the execution of the entire BSCdesign process, specifically:

– Collect and analyze initial data. – Interview leaders.– Create a straw model strategy map for leadership approval.– Guide measurement and initiative gathering.– Lead Measurement Sub-teams.– Develop implementation plan.



Critical Success Factors and Project Kick-off

• The critical success factors are:– Involve the right people– Ensure that the leadership team truly understands and endorses the BSC– High level sponsorship to ensure the BSC project's sponsors are able to

effectively command the attention of everyone in the organization– Ensure the leadership team's time commitment to the BSC project

demonstrates high level sponsorship

• The development typically starts with a kick-off meeting to clearly define the projects intent and tasks and to establish organization-wide commitment to the project. Outcomes of the BSC kick-off meeting include:

– A better understanding among leaders and Core Team members of the BSC and its prospective benefits to their organization

– An overall agreement on a project plan – An assignment of resources to the BSC project – A BSC development agenda for the Core Team that ensures each Core

Team member understands and knows how to implement



Developing the Straw Model Strategy Map

• The information required to develop a BSC rarely exists in one document or source.

• Sources of information include:– Strategic Plan – Annual Budget – Annual Reports– Operational Plans

• The Core Team uses information in relevant documents to determine the organization's goals and objectives and to form hypotheses of the organization's strategy.

• The Core Team then creates a straw model strategy map, which is the first document developed from the strategic information collected by the core team.



Course 4: Conducting Leadership Interviews

• Learning Objectives– Recognize the purpose and importance of the leadership interview and

identify its chronological place in the BSC process. – Understand the importance of constructing a straw model strategy map to

use during leadership interviews. – List the purpose and components of an interview guide and recognize key

questions that should be asked during leadership interviews. – Identify the components and techniques of an effective interview and know

when to use them. – Identify how the Core Team synthesizes information from leadership

interviews.


Leadership Interviews

• Leadership interviews allow you to work one-on-one with key leaders to determine the strategy for your organization. You conduct these interviews to understand each leader's concept of the organization's mission and strategy. Then you use the information you obtain from the interviews to confirm your organization's overall strategic destination, refine the perspectives and themes within your BSC, and confirm potential objectives in your straw model strategy map.

• Leadership interviews are a part of the second step in the development of the BSC. These interviews provide the Core Team with the information it needs to begin mapping the strategy. Ideally, the Core Team completes leadership interviews within two weeks of the start of the BSC development process.

Course 4 Conducting Leadership Interviews


Drafting the Straw Model Strategy Map

• Draft a straw model of your organization's strategy map prior toconducting your interviews

– Interviews tend to move along and stay more focused with the aid of a straw model, which elicits discussion and comments from the interviewee.

• Drafting a Straw Model Strategy Map– Review Collected materials

• Collect and review all materials that describe your organization's vision, mission, strategies, and internal structure.

– Clarify Strategic Destination• Document your organization's three-to-five year vision and how your organization

should achieve this vision.

– Develop high-level architecture • Identify the major strategic themes that drive your organization and place them in

the appropriate perspectives.

– Draft a straw model• Add strategic objectives to your high-level architecture.



The Interview Guide

• After drafting the straw model, develop an interview guide that will help focus and lend consistency to each interview you conduct.

• The interview guide includes:– A meeting agenda – A project plan – A BSC overview – Interview questions

• Use your straw model to develop your interview questions. Begin with high level questions that address the strategic initiatives of your overall organization and then ask about each of the four perspectives in the BSC.




Interview Guidelines

• Schedule individual interviews – Interview only one person at a time. Individual interviews generally result in

more frank and open discussions than group interviews.

• Plan 90-minute interviews.– If an interviewee cannot commit to that amount of time, accept whatever

amount of time is offered. Often, once you begin the interview, the interviewee will see its value and extend its time.

• Use the aid of a peer during the interview.– This person may take notes documenting the interview, thereby enabling

you to focus on the interviewee and ask important follow-up questions to his or her responses and comments.

• Listen carefully during the interview.– Ask the leader to repeat or re-explain his or her comments and responses

when you need further clarification.

• Be consistent– Resist the temptation to revise your interview guide and/or your high-level

architecture between interviews. Your goal is to identify points of agreement and disagreement, and your consistent use of interviewmaterials will help you achieve this goal.

• Prioritize questions if your interviews must be less than 90 minutes in length.

– You may need to adapt your interview to fit a limited time frame by asking fewer questions.


Interview Techniques

"In your opinion, which one of these four objectives is the top priority?"

When the interviewee's idea of the strategy isn't clear to you and you are trying to narrow down the focus

Options interviewees may select their response from

Provide Options

After you present the straw model, you ask: "What do you think about this diagram?" Provide Options

When you want to receive the interviewee's feedback on something you've already created

Brief presentations or illustrations that elicit a response from the interviewee

Response Interview

"Do you agree that the main themes are readiness and transformation?"

When your time is limited; when you think you know what the interviewee's response to a question will be; when you need to focus the discussion

Questions or statements used to verify an interviewee's ideas or responses

Confirming questions or summary statements

"What process will accomplish that goal?"

When you want to encourage the interviewee to speak freely

Questions that require analysis; usually begin with words such as "who", "what," "where," "when," or "why"; cannot be answered by "yes" or "no"

Open-ended questions

ExampleWhen to UseWhat They AreInterview Techniques



Summarizing the Interview Information

• Collect, review, and synthesize the interview information to confirm strategic objectives and uncover any issues that need to be resolved in order for the scorecard process to move forward.

• To facilitate the process, look for information such as:– The strategic destination – Points of agreement and disagreement about the strategy – Where the organization will be in the short and long term – The organization's stretch goals – Threats to the organization – Opportunities for the organization – Points of general consensus among leaders

• After reviewing the interview information, create a document that summarizes all of the interview findings.



Course 5: Mapping the Strategy

• Learning Objectives– Identify the purpose of the strategy map. – Identify the components of a strategy map. – List perspectives on a strategy map. – Note strategic themes on a strategy map. – List objectives on a strategy map. – Identify cause-and-effect relationships on a strategy map.


The Strategy Map

• A strategy map is a one-page visual representation of an organization's strategy and the steps that must be taken to implement that strategy.

• The strategy map is based on the high-level architecture and straw model developed prior to the leadership interviews.

• A strategy map:– is an ideal way to communicate an organization's strategy– provides a framework for testing assumptions about the strategy

Course 5 Mapping the Strategy



Building the Strategy Map

• The strategy map is based on the high-level architecture and straw model developed prior to the leadership interviews.

• While there are many ways to build a strategy map, it is best to work from the high-level architecture and straw model you developed prior to your leadership interviews.

• First, use the information you collected from your leadership interviews to modify your perspectives and themes. Then incorporate objectives and cause-and-effect linkages to create the map.

• The four steps to building a strategy map are:– List perspectives– Define themes– Create objectives– Build linkages


Perspectives

• There is a standard four-perspective model:– Financial– Customer– Internal Business Process– Learning and Growth

• Collaboratively, the perspectives account for the various dimensions of a strategy and tell the story of a strategy in a concise and balanced framework.

• Begin building your strategy map with the BSC perspectives. Perspectives provide the architecture for the BSC; they expand an organization's strategic vision to account for more than stakeholder outcomes.

• BSC perspectives are placed on the far left of the strategy map.



Themes

• Themes provide a concise, big-picture overview of the steps that need to be taken to implement a strategy. Most strategies can berepresented in three to five themes.

• Themes typically appear in the internal process perspective. In some instances, however, themes cross two or more perspectives.

• This organization’s theme’s are: Technology Leadership, Strong Partnerships, and Operational Excellence.

• The theme illustrates how an organization plans to accomplish its mission. These themes are in the Internal Process perspective since it represents things that this organization must do to accomplish the theme.



Objectives

• After you identify your BSC themes, you incorporate objectives into your strategy map.

• Objectives are brief action statements that communicate what an organization must do to achieve its strategic goals. They represent what must be achieved in order to successfully realize its mission and reach its strategic destination.

• Objectives are measured; you assign these measures later in the BSC process.

• Objectives are typically written in a verb-adjective-noun format that describes an action, description, and result, respectively.



Linkages

• After adding your objectives to your strategy map, incorporate cause-and-effect linkages.

• Linkages connect objectives to show the primary cause and effectrelationships between objectives. The cause-and-effect linkages also illustrate connections between different aspects of the strategy.

• For example, they may show how different perspectives are related to one another and/or how different objectives are interlinked.



Course 6: Workshop I

• Learning Objectives– Recognize the purpose and importance of Workshop I – Identify where Workshop I falls within the BSC process – Identify activities and pre-work done in preparation for Workshop I – List BSC elements reviewed and validated during Workshop I – List the Workshop I deliverables


Preparing for Workshop I

• Best Practices: Setting the Ground Rules: Before the meeting, ask the Leadership Team to agree on the decision-making process they will use in Workshop I. Attendees should agree to work within the organizationally accepted process. Here are some questions you can ask to finalize the decision-making process:

– How will the Leadership Team deal with issues that surface?Ask the key decision-maker for direction on how to handle controversies that arise among members of the Leadership Team.

– Who will make the ultimate decision?Find out who the ultimate decision-maker is on the Leadership Team.

– Will it be a democratic or dictated process?Find out what the organizationally accepted process is: democratic or dictated. Use that method when the members of the Leadership Team cannot reach consensus.

• Finalize Inputs for Workshop I: Before Workshop I occurs, the Core Team completes several activities. The information gathered and synthesized during these efforts provides the input for Workshop I. The pre-workshop activities include:

– Reviewing strategic documentsCollect, analyze, and synthesize all strategic documents in preparation for the interviews.

– Conducting leadership interviewsAfter the interviews are done, summarize the results and integrate them with document review data.

– Drafting the straw model strategy mapUsing the data you've accumulated, narrow the strategic objectives down to the "critical few."

Course 6 Workshop I


Finalizing Logistics

• Recommended Supplies and Materials for Workshop– Flip charts/markers – LCD projector/screen – Hard copies of the presentation – Pens and notepads for all attendees – Tape (make sure it is OK to tape flip chart paper on walls) – Food/snacks and refreshments – Optional: some teams bring a placemat-sized, color version of their straw

model strategy map

Course 6 Workshop I


Conducting Workshop I

• Workshop I Agenda:– BSC concept review – BSC project plan – Mission and destination confirmation – Straw model review – Key issues – Objective statements – Next steps

• Review BSC Project Progress– The work that has been completed – The place where Workshop I fits in the project plan – The work that lies ahead

Course 6 Workshop I

• Review Mission and Strategic Destination– You may have to negotiate. – You may have to facilitate a discussion. – You may have to take a vote. – You may have to ask the head of the Leadership Team to make a

command decision.


Reviewing the Strategy Map

• Review Perspectives– Walk them through each perspective: financial, customer, internal, and

learning & growth. They will start to see how each perspective represents a different area of their strategy.

• Reviewing Themes– After walking through the perspectives, you will next explain the meaning

behind each theme. Emphasize that themes typically will run through the entire strategy map or just be in the internal perspective. Themes will help organize the strategy into several strategic thrusts.

• Reviewing Objectives and Cause-and-Effect Linkages– The first step is to read through each objective and make sure all

participants understand the meaning behind the objective. This is where the objective statements come in handy. They will provide clarification on what each objective means.

• Addressing Specific Issues– As the Leadership Team continues to validate and approve the strategy

map, certain issues will have to be addressed.

Course 6 Workshop I


Identifying Next Steps

• Assigning Sub-teams– The sub-teams finalize the objective statements, draft measures, and

suggest targets for their assigned objectives. The work they do forms the basis for the Workshop II discussion.

• Establish Accountability for Objectives– An important part of Workshop I is assigning responsibility for the

objectives. All objectives should be "owned" by a member of the Leadership Team. One way to assign objective owners is by theme. The owners would then be responsible for all of the objectives contained in their theme.

Course 6 Workshop I

• Identify Leadership Champions and Core Team Facilitators– The role of the Leadership Team Champion

Monitors and "owns" the work that is done within his/her theme. Presents the team's measure recommendations to the Leadership Team in Workshop II.

– The role of the Core Team FacilitatorGuides and manages the sub-team's deliverable for Workshop II.


Course 7: Determining Strategic Measures

• Learning Objectives– Describe what good strategic measures do for a BSC organization.– Identify good strategic measures. – Determine good lag measures. – Develop good lead measures that predict outcomes. – Identify best practices for measurement in the BSC.


Strategic Measures

• Measures allow organizations to test how well their BSC process is achieving their strategic objectives. Measures illustrate the relationship among strategic objectives and constantly test the validity of the strategy.

• Good strategic measures make the strategy "real" and impact the execution of the strategy by providing:

– Organizational motivation. – A means to evaluate the strategy and strategic learning.

• An organization has selected good strategic measures if they are:– Useful for strategic communication – Repeatable and reliable – Appropriate for update frequency – Useful for target setting – Useful for establishing accountability – Aligned with objectives on the parent organization's scorecard

Course 7 Determining Strategic Measures


Developing Measures

• Some organizations assemble a sub-team that creates BSC strategic measures with the materials provided by the Core Team. In some organizations, a sub-team is not a formal team, but rather a collection of individuals who help the Core Team determine appropriate measures, measure formula, and gather information.

• Whatever the makeup of your team, you should roughly follow the following procedure for developing measures:

– Start by reviewing the strategy map:• Strategic objectives • Key linkages between objectives • Potential measures

– Determine the types of measures that can support the cause-and-effect linkages and strategic objectives in your strategy map:

• If a core organizational process is not working, the existing measurement may be inadequate.

• The best measure may be one that the organization does not currently maintain.

– Identify and organize existing measures that are good strategic measures.– If your parent organization has a BSC, review its measures for ideas.– Clarify and finalize measures.



Measure Traps

• As you begin the process of determining measures, avoid these three traps:

– Determining a target before determining whether or not its measure is appropriate

– Limiting measurements to only those that already exist – Creating new measures for every objective when serviceable measures

are already in use; "better is the enemy of good enough"

• Realize that some existing measures may serve as a structure for the development of new measures. Also, you may need to revisit your strategic objectives for clarity and precision.



Measure Types

• Measures take on many forms. Each type of measure has its own advantages and disadvantages. Use the type of measure that best accommodates what you want to measure. Common types of measures are:

– Absolute Numbers– Indices– Rankings– Ratings– Ratios– Percentages

• One way to offset the various disadvantages is to make sure you have a mix of different types of measurement forms in your scorecard so that you get an accurate picture.



Outcome Measures

• Outcome measures:– Focus on the performance results at the end of a time period or activity;

examples include: • Year-end budget expenditures. • Employee satisfaction. • Net-Profit margin.

– Describe a success or failure of the past. – Are usually objective and easily captured; i.e. dollars, numbers, ratios, or

percentages.

• Every strategic objective in the BSC requires at least one outcome measure. If more than one outcome measure is applicable, use the one that best tracks and communicates the intent of the strategic objective.

• If two outcome measures seem absolutely necessary for the objective, re-evaluate the objective, to determine if it should be separated into two objectives instead of one.



Lead Measures

• Sometimes you need to do more than measure outcomes to focus on your organization's strategy. You should prescribe behaviors that support the strategic objectives in order to effectively lead future performance. This is accomplished with Lead Measures.

• Lead measures are used to predict future performance and have the following characteristics. They:

– Measure intermediate processes and activities – Provide insight on the ability to accomplish an objective – Predict future performance – Allow organizations to adjust behaviors for performance

• Lead Measures communicate how your unit aims to accomplish its strategy. Lead measures are powerful because they allow you to look into the future. They let you see well you are going to perform and can be used to drive behaviors.



Measure Best Practices

• To recap, as you determine your scorecard's measures, keep in mind these best practices:

– Use one outcome measure for every strategic objective (for all 18 to 25 objectives on your scorecard).

– Use lead measures to predict future performance where early intervention is needed in order to prevent undesirable outcomes. Lead measures are usually in the internal process and learning and growth perspectives.

– As a rule of thumb, a Balanced Scorecard typically has an average of 1.5 measures per objective. For example, if you have 18 objectives, you would have approximately 27 measures.

– Remember that these are best practices. Some organizations may need more lead or outcome measures than other organizations do.



Course 8: Identifying Targets

• Learning Objectives– Describe what makes a good target – List and offer examples of the sources of target levels – Apply the process of setting appropriate target levels – Evaluate relationships among targets – Identify best practices for target setting in the BSC


Targets

• Targets are crucial because they:– Set and communicate the expected performance level. Targets serve to

communicate the strategy's tangible goals to an organization's personnel.– Focus the organization on improvement. Measure allows an organization

to evaluate its performance, but does not indicate the level of performance that is required to achieve the objective. When you add targets to measures, you focus on specific improvements you aim to achieve.

Course 8 Identifying Targets


Good Targets

• A good target is a quantifiable performance level to be reached within a specific timeframe.

• Without a performance level, the objective is not very useful. How much improvement is required?

• Without a timeframe, there is no tangible incentive to begin, keep up or finish the process. By when? How fast?



Setting Targets

• Targets setting steps:– Determine a source for your targets– Establish stretch targets– Set intermediate targets– Ensure that your targets support status indicators for reporting purposes



Target Sources

• Derived from overall goal– Whenever the measures on a child scorecard are derived from measures

on their parent scorecard, the child units can derive their targets from the parent organization's overall target.

• Benchmark leaders– Benchmarking similar organizations can provide useful target information.

It is often hard to get good benchmark information and benchmarks may not represent what your organization can or needs to do.

• Incremental improvement based on historical performance– Targets are incremental improvements based on historical performance.

Most organizations use historical performance as the source of their targets.

• Establish baseline and define targets over time– When there is no basis for defining the performance level required, many

organizations monitor performance before identifying desired target levels. After collecting some data, the organization can begin to plot the required performance levels.



Target Sources



Establish Stretch Targets

• Establish your long-term goal, or "stretch target," for where you want your organization to be on the long-term planning horizon, usually 3-5 years out.

• The stretch target should be at a level that will ensure achievement of the strategic objective.

• There are two reasons to establish the stretch target before setting short-term targets. Doing so:

– Takes the focus off short term – Forces you to look at the intermediate goals and the stretch target as a

collective set



Set Intermediate Targets

• Once you have the long-term or stretch target established, you can work backward to figure out the intermediate targets. These mark the path to the long-term stretch goal and communicate to individuals in the organization what they need to do to stay on track.

• For example, a retail bank sets an intermediate target of 2 million customers converted to online. This translated into intermediate targets as follows:

– The Year 4 target meets their stretch target goal.– Years 1 – 3 determine how quickly they will improve performance.



Support Status Indicators

• For status purposes, you need a quick view of where you are at apoint in time in relationship to where you want to be.

• Organizations often use a color signifiers to denote "on track" and "off track" performance. The following are typical colors used by organizations:

– If the status of a measure is green, no time needs to be spent "managing it." It's where it is supposed to be and progress is "on target."

– If the status of a measure is yellow, it's below target level. It should be watched.

– If the status of a measure is red, it signals to leadership it needs to be reviewed and evaluated to determine the causes.



Status Indicator Traps

• The green, yellow, and red indicators (GAR) are useful to leadership in managing strategy. But be careful not to let these color signifiers influence your target setting negatively.

• Avoid setting targets so that the status is always "green." You should not set targets so that they will always be met. If you set all of the targets low, everything will always be green, and there will be no change within the organization.

• Avoid setting targets so that the status is always “yellow" or "red." You do not want to set targets at a level that causes wasted leadership and management time investigating a "red" status, merely becausethe target levels were set too high or inappropriately.



Target Relationships

• There are several ways targets relate to one another.– Child organizations often derive their targets from the targets of the parent

organization.• In these situations, review your targets to make sure they support the parent

organization's targets.

– Targets must work together.• Make sure the target's order of magnitude is appropriate to close the gap.

– Targets are a comprehensive set• Set each target in such a way to optimize overall outcome for the entire strategy.

• Tensions among Targets – If treated in isolation, instead of as part of a comprehensive set, targets

can send the organization in conflicting directions. So it is important to view all the targets in a Balanced Scorecard together as a comprehensive whole to see if any potential conflicts might surface. Keep in mind that sometimes the tension is "natural" and actually positive for theorganization. It is up to leadership to determine which target should be met to best achieve the organization’s strategic goals



Target Best Practices

• Be quantifiable.– Targets should be a number or an amount--a quantity. Targets that are not

quantifiable can lead to subjective evaluation later on in the BSC process. It must be clear whether or not the target was met within a specified timeframe.

• Communicate expected level of performance.– There must be no doubt in an organization as to what is expected of the

organization.

• Be limited to only one per measure, per reporting period.– More than one target may cause confusion in an organization and may

communicate an unfocused strategy.

• Set targets so that they relate to the other targets throughout the scorecard.

• Make sure that the target's order of magnitude is appropriate to close the performance gap.

• When in doubt, look back to your strategy and performance gap.



Course 9 Workshop II

• Learning Objectives– Recognize the purpose and importance of Workshop II – Identify where Workshop II falls in the BSC process – Identify activities and documents completed in preparation for Workshop II – List BSC elements reviewed and validated during Workshop II – List the Workshop II deliverables


Preparing for Workshop II

• Finalizing Inputs for Workshop II: In Workshop II the Core Team presents the Leadership Team with the following inputs:

– Revised strategy map with linked objectivesThis strategy map represents the most current version of the map that was created in Workshop I. The objectives should be connected with cause-and-effect linkages. The strategy map should be finalized as much aspossible before Workshop II so that the Leadership Team can start reviewing the measures.

– Refined set of objective statementsThese are the statements that further clarify the meaning behind each objective on the strategy map.

– List of draft measures and targetsThis is the list of measures and targets that the Measurement Sub-teams draft in preparation for this meeting.

• Preparing the Workshop II Document: The Workshop II presentation document contains the output from Workshop I as well as the measures and target work that has been completed since that first workshop.

• Pre-present to Key Leaders– Before Workshop II, you should again set up time to meet one-on-one with

the key leaders. Use these meetings to review changes to the strategic objectives, objectives statements, and the measures and targets that the Measurement Sub-teams recommended. Highlight areas of disagreement or inconsistency.



Preparing for Final Logistics

• Recommended Supplies and Materials for Workshop II– Flip charts/markers – LCD Projector/screen – Laptop – Hard copies of the presentation – Pens and notepads for all attendees – Food/snacks and refreshments – Tape (Make sure it is OK to tape flip chart paper on the walls.)



Conducting Workshop II

• Conducting Workshop II– Conducting Workshop II

Once you have taken care of the pre-work for the workshop, it's time to think about the agenda. One of the most important items is presenting the BSC project plan to the teams, showing them how far you have come in the BSC process. By the end of Workshop II you will be more than halfway through building your scorecard.


• Facilitation Tips– Review agenda/timing/ground rules – Engage attendees – Monitor the mood – Record comments/suggestions – Maintain momentum – Encourage leaders to take ownership of their measures

• Reviewing the Strategy Map– Go back through the strategy map from Workshop I and make sure the

Leadership Team agrees that the map still accurately represents their strategy. Validate the themes, strategic objectives, and cause-and-effect linkages. As you review each objective, read through the corresponding objective statement, making sure that the wording is accurate and concise. If necessary, make changes to get the wording right.


Course 10: Aligning Initiatives

• Learning Objectives– Distinguish between strategic initiatives and non-strategic projects. – Identify the purpose of initiatives. – Identify the steps in the process of collecting, taking an inventory of, and

mapping current initiatives. – Identify the correct use of the initiative map.


What Are Strategic Initiatives?

• Strategic initiatives are actions taken to close the gap between desired and actual levels of performance.

• A strategic initiative may be considered as an "intervention project." A strategic initiative represents change to an organization's normal operations. It addresses an organization's performance gap between one of the strategic objectives in the organization's BSC and the expected performance as defined in the measurement of that objective.

• A good strategic initiative should have:– Accountability at the senior leadership level– A timeline– A budget– Committed resource allocation– Expected benefits

Course 10 Aligning Initiatives


What's Not a Strategic Initiative?

• Not all projects or activities in an organization are strategic initiatives. A strategic initiative is an organization-sponsored project that bridges a gap between current and expected performance on a strategic objective. It's not a project that supports the normal, day-to-day activities of the organization. Examples of non-strategic initiatives often include:

– IntentionsThey are outcomes or operational objectives (not strategic objectives). Unlike strategic initiatives, intentions do not have scheduled start and stop dates or budgets.

– Pet ProjectsSome activities that are not organization-sponsored are often "pet projects." A leader may be investing resources in a favorite program that does not benefit the overall enterprise.

– Required ProjectsThere are projects that are required to be part of an organization's operations; these projects include preventive maintenance programs, safety programs, financial reporting to regulators, and building firewalls for IT systems. These projects may be necessary, but they are not strategic.

– Lower-level ActivityAnother type of project that falls into the "activity" category is a project that is being done deep within the organization and is not sponsored across the organization. A strategic initiative is broad-based; a lower- level activity does not affect more than one command within the organization.



The Purpose of Initiatives

• Objectives articulate the strategy's components.

• Measures communicate the information used to monitor performanceand drive behaviors.

• Targets set the expected level of performance.

• Initiatives are strategic projects that help close the gap between desired and actual levels of performance.



Linking Objectives and Initiatives

• Strategic initiatives link to strategic objectives because initiatives are intended to close performance gaps between where you are and where you need to be in achieving your strategic objectives.

• The initiative will close the gap between your target and actualperformance and will thus drive the achievement of your overall objective.



Managing Initiatives

• Organizations usually have more initiatives than they have resources to support, which is why they need a good initiative management program. They process steps are:

– Collect all initiatives. – Map initiatives to strategic objectives. – Prioritize initiatives. – Rationalize initiatives to meet the resources available.



Collect Initiatives

• The Core Team drives the process for inventorying and mapping initiatives.

• First, the Core Team collects the current initiatives within itsorganization.

• The Core Team then screens these initiatives for fit with the organization's strategy.

• The result of this screening is a shorter list of strategically aligned initiatives.



Mapping the Initiatives

• The Core Team maps or links initiatives to the objectives that these initiatives support. While examining initiatives and relating them to objectives, you may find the following questions helpful: "Will completing this initiative influence the measure for the objective?" or "Will this initiative help accomplish the objective?“

• On the Initiative Map, initiatives are listed across the top of the chart and objectives are listed down the left side. The circles in the chart represent points at which initiatives support particular objectives. Reviewing the initiative map to see how initiatives align with strategic objectives is the best way to determine which strategic objectives are supported by current initiatives. Aligning initiatives also allows you to assess how well initiatives fit with the strategy.



Prioritizing Initiatives

• The next step in managing initiatives is to prioritize them. Your organization may have more initiatives than resources, even after you've correctly mapped them to objectives. When this happens, you must prioritize these initiatives to match the resources available.

• Factors to consider when setting priorities include:– Completion time– Interdependencies – Strategic value – Overall size in resources and dollars



Rationalizing Initiatives

• After sifting through all of your organization's initiatives and prioritizing them according to value in supporting strategic objectives, you are ready for the final step of rationalizing the initiatives.

• Based on resources available and resources required for each initiative, you make the difficult decisions on which initiatives to keep. You should:

– Create the criteria (weighing/scoring) to be used in evaluating strategic initiatives.

– Create a common format to review the strategic initiatives. – Evaluate strategic initiatives using your stated criteria. – With the leadership team, select which initiatives to implement.



Initiative Management Benefits

• Initiative management helps you identify gaps in your strategy implementation. It also helps align your scarce resources with the efforts that are most important in achieving your strategy.

• Initiative management also clarifies accountability; as you proceed through the initiative management process, you identify a sponsor for each initiative.

• Finally, this process supports the implementation of the Strategic Readiness System (SRS). By participating in the initiative management process, you plan the efforts that directly contribute to your organization's strategy.



Course 11 Workshop III

• Learning Objectives– Recognize the purpose and importance of Workshop III – Identify where Workshop III falls within the Balanced Scorecard process – Identify activities and pre-work done in preparation for Workshop III – List Balanced Scorecard elements reviewed and validated during

Workshop III – Explain the Core Team and Leadership Team's role in Workshop III– List the Workshop III deliverables


Workshop III Preparation

• Examples of inconsistencies that may surface include:– Lack of agreement about where initiatives map on the Balanced

Scorecard. The influence that initiatives have on objectives will become clearer once you begin to measure against the objective and makeprogress on the initiatives.

– Conflicting opinions about measure calculation methods. There will be improvements to calculation methods once you begin to gather and report on data. Make a note about any points of contention and address these in the workshop. Remember, the measure should drive employees to make the right decisions that drive the strategy forward.

– Disagreement on targets. If past target data or a benchmark is not available, it is best to begin gathering data, and then establish a target based off that trend and overall strategic goal.

• The Presentation Document– The Workshop III presentation document identifies the initiatives the

organization is going to support to drive the strategic objectives forward and ultimately, achieve the vision. As part of this process, the document addresses the topic of how the organization will implement the scorecard.


• Pre-present Workshop III Document to Leaders– Workshop III may reveal initiatives in which members of the Leadership

Team are deeply vested. Some of these initiatives may not directly support the strategy. It is helpful to do a thirty to sixty minute pre-brief with each leader before the workshop. The pre-brief serves as a "test run" for the upcoming workshop and helps you predict the questions and concerns that will surface. Address these issues before Workshop III to increase your chance of reaching consensus during the meeting, and be prepared to handle the unresolved issues in the workshop. Pre-briefing the leaders will enable you to go into Workshop III with important allies.

• Pre-Brief Follow Up With Core Team– Following the pre-briefs you should share the results with the rest of the

Core Team. Based on the leaders' feedback and Core Team response, make the necessary edits to the Workshop III document. Highlight the outstanding or contentious issues the Leadership Team members raised in your sessions. Send revised copies of the Workshop III document to all Core Team and Leadership Team members before the meeting.


Workshop III Logistics

• Facilitation Tips– As in Workshop I and II, a member of the Core Team usually facilitates

Workshop III. This person is usually the Project Manager or someone who has been actively involved in the Balanced Scorecard process all along the way.

– Before the workshop the facilitator should become thoroughly familiar with the meeting agenda, the timing and the ground rules. During the workshop the facilitator is responsible for adhering to the timetable and the ground rules. In addition, it's up to the facilitator to ensure that someone records the proceedings.

– Most important of all, the facilitator must be able to engage attendees and monitor the mood of the group. There is a lot of information to cover in Workshop III. The facilitator needs to maintain the momentum to get through the meeting.

• Pre-Workshop Activities– A week prior to the workshop, confirm that the facility and materials are in

place. If you are located in a new room, make sure that it is big enough for the group. Be sure to make arrangements for the equipment you will need, such as flip charts and markers, an LCD projector and screen.



Conducting Workshop III

• Conducting Workshop III– To set expectations, the facilitator should structure the agenda over the

whole six hours. It is easier to finish early than it is to request additional time.

• Review BSC Concepts– By this stage in the Balanced Scorecard development process the

Leadership Team has become familiar with scorecard concepts. TheBalanced Scorecard concept review should briefly cover the placement of objectives, measures, targets, and initiatives on the Balanced Scorecard. You can include information on the basic components of the Balanced Scorecard in the workshop document and refer to it if needed.


• Review BSC Project Progress

• Discuss Missing Measure Details and Target Issues– After you review the Balanced Scorecard concepts and project plan, the

next step is to review the feedback you received in the pre-brief sessions. Your focus should be on points of contention with regard to measure definitions, methods of calculation, and targets.

• Review Prioritized Initiatives • Map Initiatives to Objectives


Workshop III Deliverables

• Workshop III Deliverables– Mapped and prioritized initiatives to strategic objectives – Accountability for initiatives and confirmation of Objective and Measure

Owners – Established implementation teams and accountability for implementation

planning areas relevant for your organization



Course 12 Balanced Scorecard Reporting

• Learning Objectives– Identify the purpose of reporting. – Identify the roles and responsibilities of team members in preparing a

report. – Create a report. – Manage and run reporting as an ongoing process in your organization.


Balanced Scorecard Report Purpose

• The BSC is your strategic management system. The BSC Report is the document you create in preparation for your reporting meeting, which you use to monitor your progress in executing your strategy. The ultimate goal of the BSC Report is to generate discussion, make course corrections, and determine the next steps in the implementation of the strategy.

• The reporting process enables your organization to focus on the key strategic objectives, measures, and initiatives that will drive strategy execution and lead to breakthrough results. The use of the BSC Report in reporting meetings helps team members establish their organization's strategy as the topic of discussion.



The Reporting Meeting Purpose

• The main purpose of the BSC reporting meeting is to establish anongoing process to discuss the execution of your strategy. The Organization should experience a cultural change as time spent discussing past performance becomes a second priority to the time spent on present and future strategic issues.

• In ongoing reporting meetings you should expect your team to:– Discuss the strategy map. – Report on strategic objectives.

Your organization should decide which Review initiatives that support your strategic objectives.

• The ultimate goal of ongoing reporting meetings is to make strategy execution the main topic of discussion in management meetings.



The First Reporting Meeting

• The structure of your first reporting meeting is different from that of subsequent meetings. Because it can be overwhelming to cover allaspects of your BSC in the first reporting meeting, a higher-level process is suggested.

• The goals of the first reporting meeting include:– Reviewing the strategy map by perspectives or themes. – Discussing all strategic objectives by perspective and/or theme.– Reviewing all measures and identifying missing measurement data.

• The first reporting meeting is also used to establish the reporting meeting format.



Balanced Scorecard Report

• A BSC Report has several key components, including:– A visual overview in the form of a strategy map and/or BSC of how their

organization is performing. – A performance analysis, with a Strategic Objective Owner identified for

each strategic objective. – Measure details, including Measure Owners, calculation methods, and

actual figures as compared to established targets. Initiative details, including accountability, milestones, completion status, and progress comments.



Reporting Roles and Responsibilities

• Scorecard Owner – is the highest level advocate for the BSC in your organization

• Strategic Objective Owner – is intimately familiar with the strategy map and reports on strategic objective performance

• Initiative Owner – is actively involved with initiative management and documents the initiative status for the Strategic Objective Owner

• Scorecard updater – oversees the data collection process and communicates the reporting meeting outcomes

• Measure Owner – helps set targets and takes responsibility for measure performance



Reporting Goals

• Reporting is a transformation management activity. It provides adisciplined approach to managing and executing your organization's strategy by maintaining commitment and support for your organization's BSC process. Over time, you should expect to achieve the following goals in reporting:

– Consensus around the strategy map and its relationship to other cascaded scorecards

– Movement towards collecting the right data to support your organization's BSC measures

– Continued dialogue and agreement on how initiatives are mapped to strategic objectives

– Reassessed strategic objectives, measures, targets, and initiatives--with proposals for edits or additions

• "Don't shoot the messenger." When an objective is off target, it is the entire team's responsibility to discuss how to get it back on track.



Example Report Preparation Steps

• Prior to the reporting meeting, Measure Owners must update theirmeasures with data and comments and submit these updates to the appropriate Strategic Objective Owners. Initiative Owners must also perform their status evaluations and provide comments on their supporting initiatives to the appropriate Strategic Objective Owners.

• The Strategic Objective Owners must establish a green, yellow, or red status for each of their strategic objectives and must incorporate supporting detail on the progress of the supporting initiatives for these objectives.

• The Scorecard Updater compiles information into a report and disseminates the report to the Scorecard Owner and the StrategicObjective Owners.



Reporting by Theme

• Reporting by Balanced Scorecard by theme is reviewing a select set of objectives, their measures, and supporting initiatives for a theme.

• Reviewing strategic objectives by theme, rather than by perspective, highlights cause-and-effect relationships between various strategic objectives.

• You should experiment to customize the review process so that it best fits your organization's culture.



Ongoing Reporting

• A reporting meeting should be regarded as a strategy problem-solving meeting among an organization's leaders. The ultimate goal of ongoing reporting meetings is to make strategy execution the main topic of discussion in management meetings. In ongoing reporting meetings, you should review a subset of your strategic objectives.

• The following guidelines will ensure that your ongoing meetings are productive:

– Report on BSC objectives on either an exception basis or on a rotating basis.

• Exception reporting involves working through off-target strategic objectives and reviewing their measures and supporting initiatives.

• Rotating reporting reviews a selected set of objectives on a periodic basis. Discuss those objectives in detail and review their measures and comments.

– Discuss the status of supporting initiatives and milestones. Establish new initiative milestones, as appropriate.

– Review cascaded strategic objectives and measures, as well as initiatives shared between units or departments.

– Allow time to review and define your next steps and assign accountability for follow-up work between meetings.



Course 13 Curriculum Summary

• The overall goal of the BSC process is to make strategy execution a core competency in your organization.

• Using this training, along with expert facilitation, you should be able to build a scorecard for your organization.

TRANSLATE STRATEGY INTOOPERATIONAL TERMS

ALIGN THE ORGANIZATION TOTHRE STRATEGY

MOTIVATE TO MAKESTRATEGY EVERYONEÕS JOB

MOBILIZE CHANGE THROUGHEXECUTIVE LEADERSHIP

GOVERN TO MAKE STRATEGYA CONTINUAL PROCESS

The Strategy Focused Organization


Balanced Scorecard Process

• Step 1: Getting Started– Getting Started introduced the SFO, the BSC, and the importance of

strategy in the BSC process.

• Step 2: Mapping the Strategy– Mapping the Strategy begins with leadership interviews. You use the

information from these leadership interviews to build your organization's strategy map.

• Step 3: Defining Measures and Targets– Defining Measures and Targets revealed that every strategic objective on

the scorecard should have at least one measure assigned to it. Measures communicate the information used to monitor performance on an objective. Targets are levels of expected performance; every measure has a target. Targets help individuals focus on their performance levels and help an entire organization focus on improvement.

• Step 4: Aligning Initiatives – Aligning Initiatives showed that a strategic initiative addresses the gap

between an organization's actual performance and expected performance on a strategic objective, as defined in the measurement of that objective.

• Step 5: Reporting– Reporting discussed the purpose and importance of reporting. BSC

reporting is part of a transformation management process that establishes strategy execution as the agenda of leadership meetings.



Additional Resources

• You will find a wealth of information about the BSC and the SFO on the Balanced Scorecard Collaborative's website, which you may access at www.bscol.com.

• Sign in and view multimedia presentations that explain the principles of the SFO in detail.

• These resources are free of charge.



Course 14 Managing Change with BSC

• Learning Objectives– Establish the Balanced Scorecard as a tool for strategic change.– Align your leadership team. – Define and communicate a compelling strategy for your organization. – Build your organization's consensus on the strategy and commitment to

the BSC process. – Generate short-term wins using the BSC. – Establish the BSC process as a standard part of your organization's

operations.


What is strategy?

• What is a sound Strategic Plan?– Objectives– Infrastructure– Tools

• A Sound Strategic Plan has the following Characteristics: – Competitive Position

• In the private sector, a unique competitive position is marked by the performance of activities that differ from those of competitors or are similar to those of competitors in unique ways. Jiffy Lube has established a unique competitive position by providing only autolubricants and serving customers through “drive-thru” oil-change bays.

– Trade-off’s • In the private sector, making trade-offs means choosing the activities

you will and will not do. Neutrogena has strategically positioned its soap as a medicinal product. The organization chooses not to emphasize the product's cleansing qualities. It sacrifices some sales in order to maintain the product's unique, profitable position in the market of medical products.



BSC: A tool for Strategic Change


• We organize the eight change-leadership steps into three phases: Unfreeze, Effect Change, and Breakthrough & Sustain; as shown inthe diagram.


Unfreezing the Organization


• To unfreeze your organization, follow the first three steps in the Kotterchange-leadership model:

– Create a case for change.• Assess where you’ve been• Assess where you are now

– Use the SWOT Analysis and compare to BSC– Align your leadership team.

• Building Consensus• Securing Commitment

– Develop your vision and strategy.• Express your vision in clear, compelling, and specific terms. The

best vision statements follow what are called the "AIM AT" criteria: They describe a vision that's Aspirational, Inspirational, Measurable, Attainable, and Time-based.


Effecting Change


• Communicate your strategy: To effectively communicate your organization’s strategy to everyone in your organization, follow these four success factors:

– Prepare a communication plan. Indicate how and when you’ll target specific personnel with messages about the BSC and your strategy.

– Make your organization’s strategy visible. Keep the strategy in the forefront of everyone’s mind through memorable visual displays.

– Convey a consistent message. Ensure that all of your communications about your strategy state the same overall message.

– Use the “ripple effect.” Enlist people to communicate the strategy down to all levels of the organization.

• Identifying Change Agents: To continue building momentum for change in your organization, you need to identify and enlist change agents. These individuals fill four key roles, serving as:

– Advocates: They “sell” change initiatives—such as the use of the BSC to drive strategic change—to everyone in their organization.

– Subject-matter experts: They educate and guide their organization members through implementing initiatives, and they lead BSC design efforts.

– Point persons: They serve as points of contact for questions and concerns, working to diffuse resistance.

– Coordinators: They orchestrate key strategic meetings and events, setting the leadership agenda and shaping key issues.


Breaking Through and Sustaining Change


• Generate Short Term Wins: Short-term wins are essential to any change effort. Why? Change is difficult, and early successes keep people motivated and on- board. Short-term wins demonstrate that:

– Change is possible. – The organization is capable of navigating even difficult change.– Minor successes, once they accumulate, can have major payoffs.

• View the BSC as an Ongoing Journey: Change takes time. Organizations that have achieved results using the Balanced Scorecard process may begin reaping the biggest benefits in as long as three-to-five years down the road.

• Integrate the BSC into the Management Process: To make strategic change “stick,” you need to institutionalize it, or embed it into your organization’s DNA. In other words, you must integrate the BSC into your management process.

• The BSC Journey: Two Directions: The BSC journey doesn’t consist of only a single path that you tread in a linear fashion. Rather, it’s a journey that unfolds in two dimensions/directions:

– Depth (vertical). You drive the BSC farther into the organization by cascading scorecards from major commands to increasingly lower-level commands.

– Breadth (horizontal). You broaden the BSC’s reach by integrating the Scorecard process into your organization’s key management processes.


Course 15 Building Strategic Alignment

• Learning Objectives– The definition of alignment. – How alignment benefits your organization. – How to design, implement, and sustain vertical and horizontal alignment in

your business unit. – How varied organizations have addressed the challenges of alignment.


What is Alignment?


• Alignment: In an aligned organization, each business unit supports the strategy of the unit above it, as well as the strategy of its peer units. For that reason, alignment is an activity that unfolds (often simultaneously) in two directions:

– You achieve vertical alignment by ensuring that your unit's scorecard supports the strategy of the unit above you, and that lower units' scorecards support your unit's strategy. This is also known as cascading.

– You achieve horizontal alignment by linking your unit's scorecard objectives with those of peer units. This is also known as integrating.

• Four Steps to Achieving Alignment– Define your organizational position: Clarify where your business unit fits

vertically and horizontally in your organization; what is your unit's relationship to the units that are above and below it? Which peer units do you need to collaborate with to create synergies and to fulfill your overall organization's vision?

– Create an alignment action plan: Decide how you'll carry out the actions necessary for cascading and/or integrating.

– Apply tools and techniques: Use appropriate tools and techniques to carry out your alignment action plan.

– Sustain and communicate: Take steps to communicate and sustain your alignment efforts.


Case Study: MarineCo


• Challenges: To understand the benefits of alignment, consider the story of MarineCo, an offshore engineering company that designs, builds, manages, and maintains oil-drilling rigs. Before creating a strategy map, MarineCo faced numerous management challenges:

– It consisted of six independent companies, each of which supplied a unique service for marine oil-rig construction.

– It operated in a "siloed" fashion, with each of its business units servicing customers independently.

– Often, several MarineCo companies didn't know that they shared customers.

• Cascading: To achieve vertical alignment, MarineCo leaders cascaded the corporate-level strategy map down to the six operating sub-companies.

• Integration Process


Case Study: MarineCo


• MarineCo: Alignment's Benefits– Through cascading and integrating, MarineCo scored some major

successes:– Profitable product: The sub-companies collaboratively developed a

profitable new product offering--Integrated Development Solutions--that began generating 30% of all of MarineCo's revenue.

– Cost and time savings: MarineCo completed one oil-field development project six months ahead of schedule and $150 million under budget; it also launched offshore drilling projects faster than its competitors did.

– New customers: MarineCo's rate of contract awards rose by 50%.


Cascading


• Step 1: Define Your Organizational Position– Organization Type– Higher Units– Lower Units– Similarity among units

• Step 2: Develop an Action plan for Cascading


Cascading


• Step 3: Apply Techniques and Tools to Cascading– Shared – Contributory– Hybrid

• Step 4: Communicate and Sustain Cascading– Common Objectives– Smoother Hand off’s– Periodic Approval Meetings


Integrating


• Step 1: Define Your Organizational Position: Below are the three types of relationships between peer units.

– Customer Supplier– Joint Process Owner– Similar Function

• Step 2: Develop an Action Plan for Integrating– Accountability– Sequence– Scope

• Step 3: Apply Techniques and Tools to Integrating• Step 4: Communicate and Sustain Integrating


Course 16 Preparing Strategic Analysis

• Learning Objectives– Why effective strategic performance analysis is powerful. – Who does what during the performance analysis process. – How to collect and analyze performance data. – What steps are necessary to take in order to collect data for a strategic

performance analysis. – What the three types of analysis are and when to use them. – How to assess whether the cause-and-effect relationships in your

organization's strategy are working. – How to determine why a measure is not performing to target. – How to write an effective quantitative and qualitative performance analysis.


What is Performance Analysis


• Why is Performance Analysis Important?– Continually assess the progress and success of their organization’s

strategy.– Identify weak areas. – Spot opportunities to make improvements.

• Double-Loop Learning• The bottom loop represents operational learning. Based on the

organization's strategic direction (Balanced Scorecard), leadership applies resources to areas requiring improved performance. Results are reported back to the leaders, who take corrective action if necessary.

• The top loop represents strategic learning. Assessing operational results, leaders decide whether the implemented strategy is working as planned and whether recent developments (new technologies, competitive shifts, new regulations) warrant modifications to the strategy.

• Who Manages Performance Analysis?– Objective Owner– Measures Updater– Strategic Review Coordinator


Performance Analysis Steps


1. Clarifying scorecard elements: checking the validity and logic of themes/perspectives, objectives, measures, and initiatives

2. Gathering internal data: collecting current and historical information on measures and initiatives, and ensuring that the most recent information is in place

3. Gathering external data: collecting information from regulatory,industry, and other outside sources

4. Updating objectives, measures, and initiatives 5. Analyzing trends and cause-and-effect relationships in the data 6. Summarizing your findings in qualitative and quantitative terms


Course 17 Presenting Strategic Analysis

• Learning Objectives– Why presenting strategic-performance analysis is important.– How to develop recommendations and action plans for improving strategic

performance.– How to develop the right reporting formats for presenting your findings.– How to populate your reports with meaningful data.– How to conduct a strategy review meeting.– How to communicate performance to the field.




• Step 1: Develop Recommendations and Action Items: the best recommendations and action items are clear and action-oriented. They also provide the following information:

– Reasons behind recommendations – Expected outcomes – Specific steps required to carry out the action plan – Persons/teams responsible for executing recommended changes – Specific dates for completion of execution




• Step 2: Identify Requirements and Develop FormatsEffective briefs encourage:

– Clear, focused analysis. – Ownership of the data by those viewing it. – Readability of the information. – Useful, strategic discussion and decision-making. – Your briefs should follow a consistent format. This consistency

• Step 3: Hold the Strategy Review MeetingTo ensure active participation and a productive discussion during a strategy review meeting, the meeting leader must manage the following logistical matters:

– Attendees: The meeting leader must ensure that all members of the unit’s leadership team know about and attend the strategy review meeting. Optional attendees may include additional individuals who have analyzed the unit’s scorecard data, as well as people who have valuable insights into a particular initiative.

– Frequency: The meeting leader must schedule strategy review meetings regularly—once every month or quarter.

– Meeting run time: The meeting leader must ensure that the meeting is scheduled for the proper run time to allow significant discussion of the strategy. Strategy review meetings can range from two to eight hours. Shorter meetings generally correspond to situations in which leadership meets monthly to discuss the scorecard. If leadership is only available quarterly, longer meetings are necessary.




• Step 4: Communicate Performance to the FieldWho is your audience when you’re communicating performance? Actually, you’ve got more than one audience – you’ve got internal and external audiences. The following are examples of each type of audience:

– Internal audiences: support staff, teams, individuals, managers and supervisors (of units, functions, and remote sites)

– External audiences: corporate headquarters, oversight boards, analysts, partners and vendors, customers, industry associations


Course 18 Using Measures and Targets to Drive Strategy

• Learning Objectives– Explain why well-developed measures and targets are important for

managing strategic performance – Identify measure development techniques – Develop measures for the strategic objectives on your organization’s

scorecard – Identify target development techniques – Craft targets for the measures you’ve developed


Testing Your Cause-and-Effect Assumptions


• During this process, you ask two key questions:– Are the drivers we’re measuring and setting targets for really generating

the outcomes we’re seeing? – Do the targets we’ve set for drivers and outcomes accurately represent the

performance we need to carry out our strategy?


Using Measures to Manage Strategic Performance


• The Dual Purpose of Measures: You select measures to evaluate your organization’s performance on strategic objectives. These measures serve two key purposes:

– Organizational motivation – Strategy evaluation and strategic learning

• The Importance of Cascading Measures– In most organizations, subordinate business units’ scorecards contain

many of the same measures that have been defined for strategic objectives in the higher-level scorecard. We call these cascading measures.

– Cascading measures create a measures hierarchy. They measure similar things—but at different levels of the organization.


Developing Measures


• Lead and Lag Measures: A Quick Review: In selecting measures for your scorecard, consider expected outcomes (lag) measures as well as outcome drivers (lead) measures. Remember:

– Lag measures focus on the performance results at the end of a time period or activity.

– Lead measures focus on intermediate processes, activities, or behaviors that drive those results.


Developing Measures


• Measures and Scorecard Perspectives

• Evolving from Process-Control Measures


Reviewing Targets


• How Targets Drive Resource Allocation• Leadership establishes targets to determine the level of resources

required to achieve them. Targets should reflect the actual performance required to successfully carry out the associated objective. If targets are set too high, leaders might devote resources to them that could have been better allocated to other objectives. And if huge amounts of resources are dedicated to small performance improvements, inefficiencies result.

• Targets focus leadership's attention on performance shortfalls. By highlighting performance shortfalls, targets help leaders decide whether to provide additional resources or accept the risks associated with the performance. In either case, leaders must still identify the causes behind performance shortfalls and consider corrective actions. Often, leaders use initiatives,specific projects or programs, to improve performance.


Setting Targets


• Types of TargetsThere are three main types of targets:

– Maintain. You set this type of target when you believe that current levels of performance are adequate.

– Improve. You set this type if you think improved performance is needed to achieve strategic objectives.

– Stretch. You set this type if you believe that significant improvements are needed and will be accomplished over time, so that performance improves gradually until the stretch target is met.

• Techniques for Setting TargetsThere are a number of ways to set targets. The technique you use depends on the strategic objective and measure. Consider these common methods:

– Derive targets from higher goals. – Define required improvement in overall performance. – Benchmark against other organizations. – Use a baseline performance setting.

• Benchmarking: With benchmarking, you identify outstanding results achieved by other organizations and use data about those results to set your targets.To benchmark, use these steps:

– Identify organizations that have processes similar to your own.Consider public sector as well as private companies. Don?t rule out organizations that perform a different mission from yours.

– Identify similar processes to benchmark. Processes might include assembling equipment, checking quality, hiring, procuring funds, etc.

– Collect results data. Find out what targets the comparison organizations use to improve their processes and achieve strategic objectives, and how they?ve obtained their results.

– Set your targets. Based on your analysis of the comparison organizations? targets and results, select appropriate targets for your organization.


Course 19 Alignment for Teams and Individuals

• Learning Objectives– Adapt the scorecard-development process to your team.– Select strategic objectives for your team’s scorecard.– Identify performance drivers that will enable your team to achieve its

strategic objectives.– Define measures and set targets for the strategic objectives on your

team’s scorecard.– Create scorecards for the individuals on your team.


Selecting a Scorecard Development Process


• Select one of the three Scorecard Development Processes:


Step 1 Understand the Parent Strategy Map


• Familiarizing yourself with the parent strategy mapOnce you’ve established the core team, you have some initial research to complete. The following guidelines can help:

– Gather all relevant documents from the parent scorecard. These documents might include the parent unit’s strategy map, strategic objectives, objective statements, measures, targets, and strategic initiatives. Copies of BSC performance reports would also be helpful.

– Schedule interviews. You’ll want to talk with two or three members of the leadership and core teams from the parent unit.

– Develop an interview guide. The guide should contain questions you’ll ask the interviewees, as well as any notes to yourself that you’d like to keep in mind as you conduct the interviews. (Later in this course, you’ll learn more about how to conduct these interviews.)

– Schedule core group meetings. In advance, book two or three meetings for the core team. You’ll need some time together to roll up your sleeves to build the content of your team scorecard.

• Preparing a Scorecard TemplateIn addition to familiarizing yourself with the parent scorecard, the core team should prepare an empty scorecard template. The graphic shows an example.


Step 2 Identify Relevant Objectives


• Interviewing GuidelinesThe following guidelines can help you conduct effective interviews. You can also learn more about interviewing by taking the BSC training course Conducting Leadership Interviews.

– Whom to interview. Meet with the leaders of parent business units who are best positioned to clearly describe the unit’s strategy to you. Ideally, you should interview one or two members of the parent unit’s leadership team. Also try to meet with someone from the parent unit’s core group. He or she can give you background information on the challenges andsurprises that emerged when the parent unit developed its scorecard.

– How much time to devote to the interviews. Plan on taking 60-90 minutes to interview each member of the parent unit’s leadership team. Count on longer stretches of time—about two hours—to interview the parent unit’s core group member.

– How to prepare. Your interviewees will likely be senior to you. Therefore, you’ll need careful preparation, tact, and resourcefulness to get the most useful information from the interviews. Developing an interview guide is also essential. Go to the next screen to learn more about the guide.


Step 3 Develop your Teams Performance Model


• Steps to Developing your Teams Performance Model– Convene your team to Brainstorm the “Performance Drivers” for

each parent objective you significantly impact.– Prioritize and Select the most relevant Performance Drivers– Add the final objectives to your Team Scorecard Template


Step 4 Define your Team’s Objectives


• Writing Definitions for your Team’s Objectives– What are we trying to achieve?– How do we intend to achieve it?

• Assigning Objective “Champions”– An objective champion or owner is the person on your team who will bear

primary responsibility for driving achievement of the assigned objective.

• Documenting Objective Definitions– Now that you’ve assigned a champion or owner to each objective,

document the objective definition in your team’s scorecard template.


Step 5 Develop Measures, Targets and Initiatives


• Developing measures: A measure is a phrase describing how you will assess performance on a particular strategic objective. Forexample, “Number of reliability issues due to improper maintenance”could be a helpful measure for the objective “Ensure total equipment reliability.” Each strategic objective on your team scorecard should have one measure. (See Course 06: Selecting Strategic Measures. Also see Advanced Course 5.)

• Setting targets: A target is the desired performance you've defined for a measure. For instance, "No more than 5 reliability issues per 1,000 site contacts" could be a target for the measure "Number of reliability issues due to improper maintenance." (See Course 07:"Identifying Targets" and Advanced Course 5.)

• Aligning initiatives: An initiative is a project or program launched to achieve a strategic objective. For example, a business unit might decide to establish new equipment maintenance routines in order to achieve greater equipment reliability. (See Course 08: "AligningInitiatives")

The graphic shows what a portion of the team’s completed scorecard might look:


Developing Personal Scorecards


• Identify the objectives from the team scorecard that you most influence. Ask: “Where do I strategically contribute the most?”

• Translate your contribution to each team objective into a personal objective. Use your organization’s existing performance-management framework, asking, “Is there a specific methodology I need to follow?”

• Determine the skills or knowledge you need to meet your personal objectives. This information will influence your personal-development efforts.

• Set measures, targets, and initiatives for your personal objectives. An individual’s manager/supervisor can help him or her determine how to measure performance on a personal objective, what targets to set for these measures, and which initiatives may help drive performance.


Course 20 Strategy Refresh

• Learning Objectives– Identify why and when you should refresh your strategy map and Balanced

Scorecard. – Perform the steps required to conduct a successful strategy refresh. – Coordinate changes with other business units’ strategy maps and

Balanced Scorecards. – Implement and disseminate refreshed strategy maps and Balanced

Scorecards.


Step 1 Identify Change


• Sub-Step 1.1: Document Background Information– To document background information, you and your core team take a day

to brainstorm events (including troubling performance trends) that suggest the need for refreshing your business unit's strategy.

• Sub-Step 1.2: Identify Strategic Priority Issues– Consider the events, performance concerns, and questions about your

business unit’s use of the BSC which you documented with your core team in sub-step 1.1. Now identify possible strategic priority issues. (Take about half a day—longer if time is both needed and available—to carry out this sub-step.)

• Sub-Step 1.3: Perform an Environmental Scan– Look again at the strategic priority issues you identified in sub-step 1.2.

For each issue, discuss with your core team how changes in each of the environmental areas, shown in the graphic at right, might impact your business unit’s ability to address the issue.


Step 2 Plan the Strategy-Refresh Process

• Sub-Step 2.1: Confirm the Scope of the Refresh– To confirm the scope of your strategy refresh, you need to determine

how many scorecards need refreshing. Is your parent business unit’s scorecard changing? If so, does your business unit’s scorecard need refreshing? What about scorecards cascaded down from your unit? What about peer-level business units’ scorecards?

• Sub-Step 2.2: Understand the Impact of Alignment on the Refresh Process: As you know, strategic alignment doesn’t come only from cascading scorecards in an organization. Alignment is a bi-directional activity:

– Alignment involves driving scorecards farther down into the organization through cascading (vertical alignment).

– Alignment also means fostering synergies across the organization through integrating (horizontal alignment).

• Sub-Step 2.3: Identify Key Contributors– You’ve thought through the impact of alignment on your strategy refresh.

Now decide whom you’re going to interview for information about your business unit strategy. List their names, along with the kind of questions you want to ask them.

• Sub-Step 2.3: Project Plan and Schedule



Step 3 Implement the Strategy-Refresh Process

• Sub-Step 3.1: Refresh Your Strategy Map– Has your parent business unit modified its strategy? If so, you’ll want to

review those changes to understand the implications for your business unit’s strategy.

• Sub-Step 3.2: Refresh Your Measures– Brainstorm possible new measures needed for your refreshed objectives. – Confirm existing measures for retained objectives. – Select final measures from the list of possibilities. – Determine measure-reporting roles and assignments. – Identify measures for which your business unit will need to gather data in

order to provide a contribution to a higher-level measure. – Check whether the final measures work with higher-level scorecards.

• Sub-Step 3.3: Revise the BSC Report– You’ll also need to set targets for any new measures you’ve defined. In

addition, you’ll want to revisit any targets for measures retained from the earlier scorecard. Revisiting targets is an important part of revising your business unit’s BSC report.

Sub-Step 2.3: Identify Key Contributors



Step 4 Implement the Updated Strategy

• Sub-Step 4.1: Validate and Update BSC Reports– Balanced Scorecard reports articulate strategic performance results in

ways that enable leadership to make sound decisions and take effective action to improve performance.

• Sub-Step 4.2: Communicate Results to Your Business Unit and Related Units

– For strategy to work, leaders must communicate performance to the people "on the front lines" who implement the strategy. Some of those individuals will be in your business unit; others will work in other units.

• Sub-Step 4.3: Develop Recommendations and Action ItemsPart of implementing your refreshed strategy involves recommending ways to improve your business unit’s strategic performance. As you know, the most useful recommendations are clear and action oriented. They should include:

– Reasons behind the recommendations. – Outcomes expected. – A specific action plan. – The persons or teams needed to do the job. – Specific dates for completion.


building & managing the balanced scorecard

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targets course

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