Design an effective BSC

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Design an effective BSC

• David Spearritt
• Director,
• ORION Consulting Network

2
Outline

• Understanding principles, benefits/limitations
• Business case/ senior mgt support
• Chose simple/effective measures
• Align scorecard to strategy
• Prepare organisation for BSC
• Determine target info level
• Automate BSC

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Principles

• Organisational models
• Benefits
• Limitations

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Reporting focus of entities
 
COMMUNITY RETURNS    
Low Risk


High Risk
5
Public sector organisational management cycle
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Principles

• Monitor progress towards strategy
• Cause and effect relationships
• Feedback loop ongoing refinement
• Measures used
• Strategy
• Not just measures collated by perspective

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Strategy

• For
• BSC enables monitoring progress on strategy
• Against
• PS strategy often vague/motherhoods
• Boston strategic planning school
• PS more risk conscious

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Charlotte BSC
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Monitoring Tool

• For
• Simple/manageable monitoring tool
• Against
• Easy to miss something politically important
• Weakens areas not measured

10
Strategy Gap

• For
• Fills gap between Vision and Op Plans
• Against
• Highlights strategic gaps
• Limits scope for ambitious gap-fillers
• Works best for strategy focused orgs

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Performance

• For
• Improves performance in key areas
• Against
• Highlights poor performance
• Encourages manipulation of results

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Trend

• For
• BSC gt worldwide trend
• Against
• Just another fad
• Were different

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Integration

• For
• Integrated/holistic device
• Against
• Reductionism culture
• Detail, perfectionist culture

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CEO/Dept Head

• For
• Assists CEO and Board
• Helps monitor all aspects of organisation
• Against
• Exposes affected managers performance
• Accountabilitygtvulnerability

15
Alternatives

• Triple bottom line reporting
• KPIs
• Executive information systems

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Lame Excuses

• Lack of data/information
• Need new IT or BSC systems
• Too expensive
• Already have it
• Other priorities

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Other issues

• Responsibility who will manage BSC?
• Allocation of resources
• Staging implementation/expectations
• Monitoring progress
• Adapting to change

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Conclusion

• Balanced Scorecard
• Simple, but not easy
• Or
• Luck preparation opportunity

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Exercise

• Rate each item 1-5 in your org (5high concern)
• Strategy focus
• Strategy gap
• Performance management culture
• Monitoring issues
• Fad/trend
• Executive support
• Alternatives
• Integration
• Lame excuses
• Implementation/other issues
• Develop strategy to tackle top 2 concerns

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Business Case

• Drucker unless you have a case against, you
  dont have a case for

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Business Case Lessons

• Use Organisations language and style
• Cost/benefit analysis
• Identify WIIFMs
• Keep costs low until runs on the board
• Benefits mainly -
• Value of the strategy being measured
• Cost savings from focusing on strategy

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Exercise

• Identify wiifms for decision makers

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Choosing Effective Measures

• Identify corporate and organisational issues to
  achieve strategy
• Identify handles for each issue
• Identify measurement options for each
• Test/consult
• Examples

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Local Government generic BSC

• Community objectives  
• Delivery of promised activities (by exception).
• Customer or community satisfaction survey (if
  conducted).
• Service level measures (e.g. library borrowing
  levels, roadwork activity).
• Numbers of complaints.
• Other key performance measures based on the
  corporate plan
•         

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LG Generic BSC (contd)

• Financial Risk
• Liquidity (working capital or current ratio).
• Solvency (debt ratios).
• Revenue ratio.
• Overall budget variances (for operational
  revenue, operational expenditure, capital
  revenue, capital expenditure).
• Revenue sustainability (revenue forecasts
  compared to expenditure trends).
• Unrestricted reserve levels.

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LG Generic BSC (contd)

• Operating Capacity/Internal Processes
• Corporate overheads as of total expenditure.
• Rate arrears ratio.
• Percentage of bills paid on time.
• Percentage of funded depreciation.
• Internal and external auditor report issues.
• Operating expenditure per capita (excluding
  depreciation) compared to similar councils.

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LG Generic BSC (contd)

• Competencies, learning and innovation
• Employee indicators
•      average sick days per employee
•      absenteeism
• leave liability balances.
• Average training days per employee.
• Innovative changes in the organisation.
• Percent of revenue from innovative functions
  (special-purpose grants, private works, etc).

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Align BSC/Strategy

• Check each measure against strategy
• What if not achieved how would it affect the
  strategy?

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Exercise

• Identify one people/learning issue relevant to
  the strategy
• Develop measurement options

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Prepare Org for BSC

• Business case
• Executive support (champion)
• Target audience
• Data preparers
• Systems and collation

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Exercise

• Identify target audience and their current
  imperatives

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Determine Target Level

• Top down
• Bottom up (pilot study)
• Cascading BSCs
• Key considerations
• Executive support
• Data
• Resourcing
• Greatest need

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Exercise
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Automate BSC

• Data mapping
• Data warehousing/EIS
• Data capture-gtcolation-gtpresentation
• Focus on data/knowledge management
• Avoid gee-whiz stand alone systems
• Start manually if necessary
• Business driven not systems driven

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Exercise

• Identify one BSC measure and map data sources
• Outline process to obtain and collate that data

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Parting thought

• Its simple, but not easy!!

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Contact details

• David Spearritt,
• Director, Orion Consulting Network
• david_at_orionco.net
• Ph 1300 767 466