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Building the Balanced Scorecard

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From these themes, we will develop a strategic map. Four common strategic themes are: Operating Efficiencies, Customer Relations, ... – PowerPoint PPT presentation

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Title: Building the Balanced Scorecard


1
Building the Balanced Scorecard
2
Introduction
  • Balanced Scorecards provide a framework for
    communicating strategy in operating terms
    (measurements and targets).
  • You must communicate strategy in operating terms
    if you expect people to execute on your strategy.
  • When people are asked about strategy, they reach
    for their balanced scorecard.

3
Agenda
  • This slide presentation will outline the major
    steps for building a balanced scorecard.
  • How you execute these steps will depend upon many
    factors Company culture, tolerance for change,
    leadership, etc.
  • However, please try to follow the same sequence,
    focusing on the strategic maps.

4
Overview
  • Balanced Scorecards are constructed from
    strategic maps
  • Throughout the process, we will refer back to
    these maps, making sure everything is linked.
    This is very important since we want to capture a
    cause and effect relationship in building the
    scorecard.

5
Why the Balanced Scorecard
  • Improves how you communicate strategy
  • Superimposes a discipline whereby you capture
    cause-effect otherwise you create pockets of
    under-performance.
  • Also forces you to think about strategic
    measurement as opposed to tactical or operating
    type measurements

6
Start with Strategy
  • Begin with your strategic plan what things are
    critical to future success?
  • Focus on customers what values will we add to
    our customers
  • Define the processes how will we deliver these
    services to our customers
  • Build the organization what capabilities must
    we put in place

7
Strategic Goals
  • The first components of your strategy are goals.
  • Strategic goals establish direction in concrete
    terms.
  • Strategic goals anchor the rest of the process.
  • Strategic goals should fit with the vision and
    mission of the organization.

8
Goal Attributes
  • Very short statement
  • Directly relates to the mission
  • Broad in scope
  • Covers long time period (such as 3 years)
  • Examples
  • - Improve Customer Service
  • - Leverage Core Competencies
  • - Develop more innovative products

9
Strategic Objectives
  • Once we establish our first anchor (goals), we
    can develop a set of strategic objectives.
  • Strategic objectives define what actions must be
    taken to reach the strategic goals.
  • Objectives are critical to future success. For
    example, in order to grow revenues, we must
    introduce new products and expand our market
    share.

10
Objective Attributes
  • Longer statement than goal statement
  • More specific than goal statement
  • Indirect relationship to mission
  • Covers shorter time period than goal (such as 6
    months or 1 year)
  • Example
  • - We will expand call center services to include
    technical support

11
Strategic Themes
  • Based on strategic goals, three to five strategic
    themes should emerge.
  • From these themes, we will develop a strategic
    map.
  • Four common strategic themes are Operating
    Efficiencies, Customer Relations, Product
    Innovation, and Growing the Business.

12
Strategic Model
  • Strategic Models can emerge from four principles
  • 1. Translate strategies into operating terms.
  • 2. Link strategies throughout the entire
    organization.
  • 3. Commit everyone to implementing strategy.
  • 4. Make strategizing a continuous process of
    learning and adjusting to change.

13
Four Perspectives
  • Before we build strategic maps, we need to define
    four perspectives
  • Financial Top layer in the map, represents
    financial outcomes (profits, revenues, etc.)
  • Customer Next layer down, enables financial
    results (service, image, price, quality, etc.)
  • Internal Processes The values added to
    customers, such as delivery, production,
    distribution, etc.
  • Learning Growth The people, systems, and
    organization that enable processes.

14
Strategic Mapping
  • Strategic Maps are the foundation of the Balanced
    Scorecard.
  • You will need one strategic map for each
    strategic theme.
  • Maps are constructed over four perspectives.
  • Strategic objectives are mapped over the four
    perspectives, linked together.

15
Linking
  • Strategic objectives need to be placed in the
    Strategic Map according to which perspective fits
    with the objective.
  • Objectives may cross over more than one
    perspective.
  • We usually start at the top with outcomes and
    work our way down, looking at what enables
    (drives) the outcome.

16
Approval
  • Once you have completed the strategic maps, you
    will need to get approval from executive
    management. Does this map accurately tell the
    story of our strategy?
  • If management disagrees with the map, go back and
    redo the maps. We need to get this step right
    since it represents the foundation for the entire
    scorecard.

17
Measurements
  • For each strategic objective, you need one
    measurement.
  • Measurement provides us with feedback on meeting
    the strategic objective.
  • Most organizations will use many of their
    existing measurements.
  • Organizations requiring major change should
    include driver type measurements.

18
Measurement Criteria
  • Measurements should drive change, providing teeth
    to our strategy.
  • Measurements define objectives in specific terms.
    A good measurement should tell you what your
    objective is this is an indicator of good
    linkage.
  • Measurements should be repeatable, quantifiable,
    and verifiable.

19
Good Measurements
  • Customer satisfaction
  • - Response time to service customer
  • - Satisfaction survey scores
  • Process Efficiency
  • - Cycle time
  • - Downtime
  • - Number of Restarts

20
Lead and Lag Measurements
  • Leading measurements are drivers behind
    performance and provide some predictability
    (forward looking)
  • Lagging measurements are usually final outcomes
    that look back, such as customer satisfaction or
    return on investment
  • Balanced scorecards should include both leading
    and lagging type measurements

21
Targets
  • Once you establish measurements, you need to set
    a target for each measurement.
  • Targets push the organization to a required level
    of performance.
  • Targets put focus on the strategy, expressing the
    specifics of the strategy.
  • When an organization hits its targets, then it
    has successfully implemented its strategy.

22
Examples of Targets
  • Total Time to Recruit New Employees Less than 40
    days by year-end
  • Utilization of rental facilities Increase to 85
    during peak summer months
  • Growth in top line revenues 10 increase over
    last year
  • Improve overall customer satisfaction Total
    scores exceed 90

23
Initiatives
  • In order for things to happen in an organization,
    you must initiate major projects or programs. For
    example, improving customer service may require a
    new customer management system.
  • Once you launch appropriate initiatives, you
    should be able to meet your strategic objectives.
    This closes the loop, everything is now linked
    and away we go!

24
Initiative Attributes
  • Sponsored by senior management
  • Designated owners manage project(s)
  • Includes deliverables or milestones
  • Usually has some time deadlines
  • Could be difficult to launch lack of support,
    no funding, poorly defined, etc.

25
Templates
  • Throughout this process, we will use templates
    to capture, analyze and document data. Templates
    are used for strategic mapping, defining
    measurements, etc.

26
Other Important Steps
  • Scorecards are built around three teams
    Leadership Team (upper level management), Core
    Team (middle level management) and Measurement
    Team (lower level functional personnel).
  • Scorecards are built around at least four group
    meetings Kick Off Meeting followed by at least
    one meeting for each of the three teams.

27
Implementation
  • The minimum time for developing a balanced
    scorecard is three months.
  • Full deployment of scorecards throughout the
    entire organization can take more than one year.
  • The best place to start building a scorecard is
    where all components of the value chain are in
    place Customer, Innovation, Production,
    Delivery, Services, etc.

28
Summary
  • Balanced Scorecards are the best way of
    communicating strategy.
  • Scorecards rely on a fully integrated approach
    Goals, Objectives, Mapping, Measurements,
    Targets, and Initiatives.
  • The building of a balanced scorecard can be
    experimental, whereby you test your strategies,
    refine, and make changes as you get feedback and
    learn what works.

29
Where to Get More Information
  • Formal training in balanced scorecards is
    available through the Balanced Scorecard
    Collaborative (www.bscol.com)
  • Consulting services are available. My training in
    balanced scorecards comes directly from the
    Balanced Scorecard Collaborative. If you have
    questions, feel free to email me.
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