Balanced Scorecard:

Implementation
& Challenges

23rd July 2007

Organized
g by:
y SMR

1
 Program Schedule
» 9.00 am – 10.30am » 2.00pm – 3.30pm
> Introduction PMS > The Measurement System
> BSC Terminology & Principles > The Measure Characteristics
> Understanding BSC > Developing
p g Data Dictionary
y
> BSC Development Process > Setting Targets & Initiatives
> The Business Strategy > Constructing the Scorecard
> The Corporate Strategy Map & > Tips in the Implementation
Strategic Outcomes > Workshop Practice 2

» 11.00am – 12.30am
» 4.00pm
4 00pm – 5.00pm
5 00pm
> Developing Objective Statement
> Developing the Strategy Map > Reporting Process & Concerns
> The Number of Objectives > The Cascading Process
> Common Issues > Change Management
> Workshop Practice 1 > Q&A
 Workshop Map
The following graphic illustrates the structure for the workshop Sessions over
the next four days. Within this structure you will find:

> Breaks at logical interval

> Lectures, discussions and workshop
> Questions & Answers
> Test skills
> Relationship building

Session1 Session 2 Session 4

Session 3
Session 0 Introduction to Introduction BSC Strategic
Strategy Map
PMS To BSC Measures

Session 5 Session 6 Session 7

T
Targets/
t / U d
Understanding
t di Ch ll
Challenges &
Initiatives Cascading Issues
Session 0 - Purpose & Benefits of this Program
Self Assessment
Please list down the common objectives of You Participating in this
program:-
1.

2.

3.

4.

5.
 Session 1:
Introduction to PMS
 CORPORATE PERFORMANCE
MANAGEMENT
Traditional View

Monitoring Analyze
Budget Report

C
Corporate
t PPerformance
f
Management
Goal
Setting
Business Re - Focus
model
 PERFOFMANCE MEASUREMENT SYSTEM
Current View

Business
Ideas Vision /
Mi i
Mission

Business
Strategy

g
Business Planning
Objectives Balanced
& Measures Scorecard

Corporate Measurement Monitoring

and
Reporting System
Budget
 PERFORMANCE MEASUREMENT
SYSTEM
Why Measure?

– To track and Monitor Critical Indicators

– To focus Attention on key Targets and Initiatives

– To refocus our Resources

 PERFORMANCE MEASUREMENT
SYSTEM
I
Issues in
i PPerformance
f Management
M t

– Intangibles are not measured

– Measuring and Monitoring outcomes

– KPI’S d
does nott reflect
fl t th
the strategy
t t

– System to Track the Organization’s Strategic Initiatives

 Levels of Measurements
Level 1
STRATEGIC KEY PERF
PERF. STRATEGIC STRATEGIC
OBJECTIVES INDICATORS TARGETS INITIATIVES

OPERATIONAL KEY PERF. TARGETS STRATEGIC Level 2

OBJECTIVES INDICATORS ACTIONS
C O S

Level 3

INDIVIDUAL KEY PERF

PERF. TARGETS ACTIONS
OBJECTIVES INDICATORS
 PERFORMANCE MEASUREMENT
SYSTEM
St t
Strategy Execution
E ti Some
S Findings
Fi di

– “In majority
“I j it off failure
f il – 70% the
th reall problem
bl h
has b
been b
bad
d
execution of Strategy” Fortune

– Only one out of every ten companies that formulate strategy

can effectively implement it – Harvard Business School

– Corporate strategy is not well understood throughout the ranks, as a

result execution suffers
 Organizations need both strategy
and execution
Strategy Execution
Strateggy Forrmulation

Weak Strong

Doomed From At Risk

Weak
W

the Start

Missed Opportunity Strategic Success

Sttrong
S
A Gap
p Between Strategy
gy and Action
Strategy Is a Step In a Continuum
VISION

MISSION

VALUES

STRATEGY

STRATEGIC OUTCOMES

Satisfied Delight Efficient Motivated

SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
A Gap
p Between Strategy
gy and Action
Strategy Is a Step In a Continuum
VISION

MISSION

VALUES

STRATEGY
BALANCED SCORECARD
Implementation & Focus
STRATEGIC INITIATIVES
What we need to do
PERSONAL OBJECTIVES
What I need to do

STRATEGIC OUTCOMES

Satisfied Delight Efficient Motivated

SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
 S
Session
i 2 2:
Introduction To Balanced
Scorecard As A Tool to PMS
 The Balanced Scorecard
What is it?
Definition:
The Balanced Scorecard is a management
tool that provides stakeholders with a
comprehensive measure of how the
organization is progressing towards the
achievement off its strategic goals.
 KEY PERFORMANCE INDICATORS
What is it?
D fi iti
Definition:
Key Performance Indicators are key measures that
gauge success off the th organization
i ti or MMeasurementt
that reflect the success factors of an organization.
Th
These kkpi(s)
i( ) are:
• Quantifiable
• Measurable
M bl ttoday
d and d over ti
time
• Assessed regularly against preset corporate targets
• Tracked
T k db by ddecision
i i makers
k
• Key Initiatives
 BSC as a ‘Tool”

STRATEGIC
MEASUREMENT
MANAGEMENT
SYSTEM
SYSTEM

-Setting Targets
COMMUNICATION
-Prioritizing
g Initiatives TOOL
 BSC as a Tool
DASHBOARD
BALANCED
STRATEGIC PERSPECTIVES OBJECTIVES
DIRECTION

MEASURES

VISION/ MISSION
& STRATEGY
TARGETS

INITIATIVES
 SCORECARD METHODOLOGY

VISION / MISION / VALUES

STRATEGIC THEMES

BUILD A STRATEGY
MAP

DESIGN THE KEY PERFORMANCE INDICATORS

PERFORMACE
MONITORING
SET TARGETS & STRATEGIC INITIATIVES
&
ANALYSIS

AUTOMATE & IMPLEMENT THE SCORECARD

 The
e Balanced
a a ced Sco
Scorecard
eca d
How do we look
Financial Perspective to shareholders?

Objectives Measures

How do
customers What must we
see us? excel at?
Internal Business Process
Customer Perspective
Perspective
Objectives Measures Objectives Measures

Learning and Growth Perspective

Objectives Measures
Can we continue to
improve and create
value?
l ?

Source: Robert S. Kaplan and David P. Norton, 1994

 A Framework to Describe
St t
Strategy

BUSINESS
STRATEGY

DEFINE IDENTIFY
STRATEGIC OUTCOMES/
OBJECTIVES DRIVERS

WHAT ARE THE FACTORS THAT

CREATE THE STAKEHOLDERS
VALUE?
 Build A Measurement System

MEASUREMENT SYSTEM

CRITICAL
REPORTING/ INDICATORS
REVIEW

DATA SOURCE- KEY

METRICS
 The Balanced Scorecard
Customer Perspective Financial Perspective
How do the customers view How do the shareholders
the company? view the company?

Strategic Theme Strategic Theme

To deliver efficient service To Drive out cost
to internal & external customer Objectives
j
Objectives „ Min. Operating Cost
„ Service Level agreement
g „ Max. Revenue
„ Responsive Quality Service
Measures
Measures
„ T t l Revenue
Total R
„ Satisfaction Rating
„ Operating Margin
„ Average Time To Resolve
„ Profit
„ Revenue Per Employee
24
 The Balanced Scorecard
Internal Business Process Learning and Growth
Perspective Perspective
How can the company improve its
internal operations to improve the What should the company do to
service to the customers? remain successful in the future?

Strategic Theme Strategic Theme

Efficiently deliver of Services Innovate, improve and learn to the
Obj ti
Objectives maximum
„ Excellence in practices Objectives
„ Excellence in deliveries „ Talent Development
Measures „ Alignment

„ Compliance Rating Measures

„ average throughput time „ Competency Rating Score
for Clinical Services „ Alignment Index
„ B
Benchmarking
h ki ranking
ki „ Number of ideas / Employee

25
 MANAGING PERFORMANCE WITH SCORECARDS

PERFORMANCE DATA OUTPUT DASHBOARD

SOURCE

STRATEGY Strategy Model

Finance

Transfformation )
Strategic
Objectives BSC
T
CRM DATA MART
Web
Server

Strategic HRM
Measures
User
(Browser)

ASSET
Report
p on key
y
Metrics
 Session 3:
Design:
g the Strategy
Building gy Mapp
Performance Management in Corporate
Planning Cycle

STRATEGIC
PERFORMANCE
VISION/
MANAGEMENT
MISSION

BUSINESS
BUDGET
STRATEGY

1 YEAR PLANS
BUSINESS Goals &
PLAN Objectives
BSC Development Model

Step1 Step3 Step5

Define Build the Select Priority
Strategic Strategic Initiatives
Destination Linkages

Step4
Step2 Step 6
Determine
Identify Key Plan for
Measures
Themes Implementation
And Targets
 STRATEGY MAP
What is it?

Definition:
The Strategy Map provides the Visual
Framework for describing the Strategy in four
P
Perspectives
ti off a Balanced
B l dSScorecard.
d

– Helps to show cause and effect relationship

– Outcome measures & Performance drivers
 Strategy A Continuous Process
Strategy

Strategy Map

Li k
Link KPI’s BSC
Reporting
BSC
Business
Plan
Budget
g

Initiatives

Input
p Output
How the Organization Create Values?
Long Term
Stakeholder
Value

Vi i
Vision

Formulate
Strategy

Tangible Non
Assets Tangible

Revenue
Growth
How the Organization Create Values? …Contd

Long Term KPI……

Stakeholder
Value

3 Rules:
Vision
• Simplicity
• Focus
• Alignment

Strategy

What? How?

Measurement
System
 Corporate Level: Development of Objectives

Shareholder
Productivity
P d ti it Value Revenue
Strategy Growth
Strategy

comes
Strategy
Perspectiive

What? Outc
Exxecute sttrategy
Financial P
 Corporate Level: Development of objectives
Shareholder
Value
Productivity
P d ti it Revenue Growth
Strategy Strategy

Strategy
spective
ancial

at
Pers

Wha
Fina
spective
Customer
Pers
 Corporate Level: Developing Objectives
Shareholder
Value

Productivity Revenue Growth

Strategy Strategy
Strategy
Perspective
Financiial
spective

what
stomer
Pers
Cus
 Corporate Level: Developing Objectives
Shareholder
Value

Productivity Revenue Growth

Strategy Strategy
Strategy
ctive
al
Financia
Perrspective Perspec
stomer

what
Cus

w
L&G
G
 Developing the Strategy Map - Process

Develop the Objective

Assess the Review/
Objectives Statement
Risk and Cause Validate
In each Template
Effect
perspectives

Test the Relationship

Design
 Team Workshop 1 - Your Strategic Destination
& Developing the strategy map

• Team Discussion
– What is the strategic destination for your organization? Take a few
minutes here and think about the strategic destination within your own
organization

– Has it been clearly communicated to the organization?

– Do you know how to make it actionable within your own department?

– If You Achieve the Destination in Your Strategy Statement, what will your
organization look like to your:

– In each perspective develop objectives in terms of how it helps to execute

the strategy
– Assess the impact of the strategic objectives to the outcomes.
- Shareholder value
- Delight the customer
- Your job is to link the objectives in a manner that tells the cause and effect
relationship of the business – Strategy map
 Assess the strategic objectives
W i h the
Weigh h impact
i on the
h strategy map

Short Medium Long

H ƒ What are the right things to
M
Measure??

• What are the relevant KPI’s?

- KPI’s attributes
Impact on - Reach consensus
strategic - KPI documentation
outcomes - KPI’s aligned

L
L Important H
 Session 4:
Design:
g the Measures
Building
 BSC Development Model

Step1 Step3 Step5

Define Build the Select Priority
Strategic Strategic Initiatives
Destination Linkages

Step4
Step2 Step 6
Determine
Identify Key Plan for
Measures
Themes Implementation
And Targets
Execution Strategy
Vision

Strategic
S i
Themes / Focus areas

Strategic
St t i
Objectives

Identify
Id tif
Objectives
And KPIs

Each KPIs set

Target

Strategic
initiatives
Scorecard Reporting Process
Have we clearly define
Key drivers to
Success? MANAGING WITH KPI’S

Do we have Critical
Measures of
Success?

Do we have a system to
Track and Monitor
Indicators?

Are the data captured

Linking it all together…. Analyzed and Acted
Upon?
 BUILD THE MEASURES
Define what Define the level of Scorecards
To Tier 1 Corporate Scorecards
Measure 2 Strategic Business Units / Divisions
3 Personal Scorecards

Define
Measure
Template

Evaluate
&TTest
Indicators

Identify
Data
Source
Balanced Scorecard
 The Diagnostic Audit Framework –
….. Assessing the effectiveness of the Organization’s PMS

Are the right

Things being
Measured? Quality of
Measurement
Are they being practices
Measured in the
right way? Organization s
Organization’s
Performance

Are th
A the d
data
t
Captured and
analyzed? Quality of
Management
practices
Are the data
Acted upon?
 Purpose of Measures
Purpose of Strategic Measures:

1.

2.

3.

4.

5.
 Team Selecting Measures

Guidelines in Selecting Measures:

>
>
>
>
>
>
 Basic Measurement Process

Data
Develop
Select the Collection
Select the Measure
Relevant Plan –
Objectives Template
Measures Process

Test the Measure

Design
 Articulating Your Measures in a Data Dictionary

Perspective: Measure No./ Name Owner:

Strategy: Objective:

Description:

Lag / Lead: Frequency: Unit Type: Polarity:

Formula:

Data Source:

Data Quality: Data Collector:

Baseline: Target:

Target Rationale: Initiatives

 Validate the Measures
Self - Assessment:
1 Wh
1. Why did we
e choose this measure?
meas re?

2. Is it strategically
g y significant?
g

3. How to calculate the measure?

4. Who is responsible for the results?

5. Is it simple for a common understanding?

6. Is there data source to support the measure?

 Team Workshop 2
Assess the Effectiveness of the Measure
• Team Discussion
– Team briefly review the characteristics of good measurement
systems

• Are the right things being measured?

• Are they being measured in the right way?
• Are the necessary data captured, collected and sorted?
• Are the necessary data analyzed, interpreted and acted upon?

– Will mere awareness off organizational

i ti l strategies
t t i leadl d to
t change
h att
all levels of the organization
 Team Workshop 3
Constructing the Scorecard
• Team Discussion
– Team briefly review the strategy map of an Airline Organization’s –
the Theme is “ Operating Efficiency”
Financial

Utilization
Custtomer

Service Lowest
Level Price

Objective Measure Target Initiative

Prrocess

Turnaround
Quality
Time

Competency
L&G

gaps
 Session 5:
Setting Targets &
Prioritizing Initiatives:
 BSC Development Model

Step1 Step3 Step5

Define Build the Select Priority
Strategic Strategic Initiatives
Destination Linkages

Step4
Step2 Step 6
Determine
Identify Key Plan for
Measures
Themes Implementation
And Targets
 BSC as a ‘Tool”

STRATEGIC
MEASUREMENT
MANAGEMENT
SYSTEM
SYSTEM

-Setting Targets
COMMUNICATION
-Prioritizing
g Initiatives TOOL
 BUILDING SCORECARD
Link Measures To Business Strategy

OBJECTIVE MEASUREMENTS TARGET INITIATIVE

• To Monitor and improve

CTIVE

• Overdue A/C
• Current Value • Streamline
credit quality in the Loan credit process
• NPL
CESS PERSPEC

process
process. • Target
• Quality of Care
in approval

• Account
Relationship
PROC

• Central
processing
 PERFORMANCE
TRACKING SYSTEM

Objectives

Reporting Key Performance

Process Indicators

Balanced
Scorecard

Key
Set Targets
Initiatives

58
Session 6:
Cascading:
 Align the BSC to Strategy
Vision & Strategy
Corporate
Set the bearing
g to cascade
Strategy to next level
Map & Scorecard
Provide strategic view

Department Identify objectives

& measures that
Level 1 lay out strategic Strategy
St t Map
M
Contribute to
Objectives to execute with focus
Organizational goals
strategy Areas – Operational
Objectives,
j , measures,,
Targets & Initiatives

Individual
Initiatives drives to
Implement strategy With focus areas -
 DEPLOYMENT OF OBJECTIVES

CEO
OBJECTIVES
DIVISION
& MANAGER
KPIs OBJECTIVES
UNIT
& MANAGER
KPIs OBJECTIVES TEAMS
&
BALANCED KPIs OBJECTIVES
SCORECARD &
KPIs
BALANCED
SCORECARD
BALANCED
SCORECARD
BALANCED
SCORECARD

61
 CASCADING THE HIGH LEVEL KPI’S
ƒ Revenue
R
ƒ Operating Expenditure
Corp. Measurement ƒ Net development expenditure
Bank Wide ƒ Profit
Level 1

ƒ Revenue per Unit of Service

ƒ Complaints
ƒ Response Time
ƒ Compliance
Operations ƒ Facilities Utilization Rate
Level 2

Individual
L k
Linking it all
ll together….
h Level 3
 Session 7:

Implementation Success:
1. The Foundation Elements

2. The Process Issues

3. The Reporting & Effective

Data Analysis
 The Foundation Success
Self - Assessment: First Step
1. Why you have decided to build Scorecard?

2. Why Now?

3. Who will sponsor it?

4. Who will build it?

5. How will you communicate this change initiative?

- Communication Goals

- Communication Objectives

- The Training

6. Is it simple for a common understanding?

 Why are you developing a BSC?
• To monitor organizational performance

‰ Strategic Level
‰ Operational Level
‰ Individual Accountability

• To execute strategy
‰ Strategy Map
‰ Key Performance Indicators
‰ Target
‰ Initiatives

.
 Foundation: Implementation Success

• Have we made the realization that the BSC is

more than a measurement project and is in fact
a change initiative
- Executive Sponsorship
- BSC Champion
- Balanced Scorecard Team

• Was our guiding rationale for the BSC

communicated broadly to all levels in the
organization
 Issues in Developing Strategy Map?
• The Strategy Map

‰ Choice of Objectives to execute strategy

‰ The number of objectives each perspectives

‰ Identifying the ‘ Critical Processes’

that drive the customer perspective

‰ Individual Accountability for each objective

‰ Assess the risks in each objective

 Issues in Developing Measures?
• The Measures

‰ Each Measure is critically evaluated

- Measure criteria
‰ Each measure has a ‘Measure Lead’
‰ A Balance – Lag and lead measures
‰ A well defined process for data collection,
calculation and visual presentation
‰ Each measure is supported with a data
dictionary
‰ Validated and approved
 Issues in Target & Initiatives
• Setting Targets & Initiatives

‰ Clear guidelines from the CEO the ‘Standard

of Performance’
Performance
- Aim for best in class performance within
three years
- Industry benchmark
- Top ten in the industry
- World class in five years
 Issues in Target & Initiatives
• Setting Initiatives

‰ Clear screening process to eliminate

initiatives not contributing the strategy
‰ Prioritizing the initiatives – assess the impact
economic pay back
- Initiative template

‰ Clear accountability for each initiative

- Milestone,
Milestone deliverables and due dates
‰ At any one time the number of strategic
initiatives must be limited
 Objective Owner
Reporting Measure Lead

Source
Financial

Increase Rate of
Turnover Profitability Return
Frequency: Monthly

Issues
What issues have identified as a
Serve
S
Deliver
Customer Result of the performance of this
customer
Customer

Value
s on their Through
Integrated
Measure for the business?
terms Offerings

Implications
What are the implications of the
Internal Processes

Drive Develop
Operational
Excellence
Customer
Manageme New
Product
Issues with details and timeframes
In nt
Processes s And potential impacts?

Actions
Build an
Environmen Create a
What do the Topp Team need to
E.L. & G

t where Improve
people
maximize
Communication
s Through
Safe &
Healthy
Consider at the next management
workplac
their
personal
Technology
e Meeting?
potential

Accountabilities
Who should be accountable for
© 2002 Primerus Consulting, Inc. All Rights Reserved Implementing these actions?
 A Road Map – First Level Scorecard

Build the Set the

Strategy Map/ Targets Implementation
Planning
a g
M
Measures I iti ti
Initiatives/
/ / Review
R i

12 to 16 Weeks