The Balanced Scorecard:: Best Practices For Success

The Balanced Scorecard:
Best Practices for Success
June 11, 2012
Presented By :
Paul R. Niven
Leading author and Management Consultant
Agenda
 How to Make the Balanced Scorecard Work

 Emerging Trends in Balanced Scorecard Use
 Ris Management
 R
© 2012 The Senalosa Group, Inc. All Rights Reserved 2

Making the Balanced Scorecard Work

Ensure the Scorecard is Right for our Organization
Put the big rocks in first!  Why are you developing a

Balanced Scorecard?
 BSC alone will not transform the
organization
 A clear rationale is critical for
communication, education, and
guiding BSC evolution
The beginning is the most important part of the work

- Plato, The Republic

Rochester Genesee Regional Transportation Authority
 Over 16 million riders annually

 255 buses
 Service area population of over
700,000
 New CEO Mark Aesch found the
organization full of ―Patrons of
mediocrity‖ and a mindset of
surviving and not succeeding
 His response: Accountability
through performance
measurement
 The case for change was clear

Ensure you Have Executive Sponsorship
―Whether you like it or not, your people follow your example;

they look to you for signals, and you have enormous
influence over them. If they see you fail to implement a policy
you disagree with, they may think they have a green light to
do the same. If they see you not telling the truth, they may
feel free to lie as well. Likewise, if they see you challenge
outdated business practices, they will follow suit. Doing so
will become ingrained in the culture.‖
- Captain D. Michael Abrashoff, ―It‘s Your Ship‖
 No BSC initiative will survive without active

executive sponsorship
 Executives hold key knowledge for BSC success
 Everyone watches what the boss watches

Create an Office of Strategy Management
 As business has evolved specific

disciplines have emerged (CFO,
CIO, etc.)
 Most organizations manage
strategy formation and strategy
execution separately
 The OSM combines these vital
organizational tasks

Office of Strategy Management
Today, strategy must be managed and

executed if organizations expect to succeed
Change
Management
Performance
Strategy formation
Review
& planning
Administration
Governance BSC
Coordination Coordination
OSM
Compensation Strategic
Communication
Initiative
Alignment
Management

The OSM at NB Power
Balanced First year priority

Core Scorecard
Management
Roles Administer
Performance
Organizational
Alignment
Reviews
Desirable
Strategy Best Practice
Roles Communication Sharing
OSM
Integrative Strategic
Planning and
Initiatives
Roles Management
Budgeting
Long-Term
NB Power Strategic
Workforce
Alignment
Planning
Core Role Coaching &
Change
Management
Mission:
To assist all NB Power groups in transforming their OSM owns the process
plans into reality using the methodology of the
Balanced Scorecard, ensuring every employee‘s OSM involved in the process
actions are aligned with, and focused on, the direction OSM not yet part of the process
set by our Executive team.
Avoid Complex Strategy Maps

Keep Your Strategy Map Simple

Focus on the Vital Few Measures
―Management attention is your

scarcest resource. As you add
metrics to your Scorecard, you incur
an opportunity cost, in that people
have less time to focus on what really
matters.‖
- Robert Simons, Harvard Business
Review, November, 2012

Create Alignment

Have We Reached the Ideal?
• In a poll of 23,000 U.S. workers:

• 37% said they had a clear understanding
of what their company was trying to do
and why
• 9% believed their work team had clear
measurable goals
• Watson Wyatt study
• 49% of employees said they understand
the steps their company is taking to
achieve goals (a 20% drop since 2000)
14
© 2012 The Senalosa Group, Inc. All Rights Reserved
The Sacred Obligations of Leadership
Soichiro Honda described the sacred

obligations of leadership as 3 things:
• Vision: What will we be?
• Goals: What four or five key things

must we do to get there?
•Alignment: Translate the work of

each person into an alignment with the
goals.
15
Cascading Example
Excerpt from a City Strategy Map and Scorecard

Perspective Objective Measure Target
Customer Provide safe, Increase in average 10%

convenient ridership of public
transportation transportation
Department of Transportation Map & Scorecard

Perspective Objective Measure Target
Customer Provide safe, Percentage of fleet 90%

convenient available
transportation
Operations Group Map and Scorecard Excerpt

Cascading refers to the process of
Perspective Objective Measure
developing lower level Scorecards that align
with the highest level Map and Scorecard Customer Provide safe, Percentage of 75%
convenient vehicle repairs
and allow departments and teams to transportation completed within
demonstrate how they contribute to overall 24 hours
results.
16
Cascading at NB Power

17
Discuss Results Regularly
 Most meetings suffer from serious faults*:

 Lack of drama
 Lack of contextual structure
* Based on ―Death by Meeting‖ by Patrick Lencioni

The Strategy Centered Meeting
 Hold meetings frequently – monthly if

possible
 Distribute materials in advance
 Balanced Scorecard champion may
facilitate

Setting the Right Tone
“Robust assessment capabilities alone do not drive impact for nonprofits…These capabilities must
exist within a „learning culture,‟ to derive the most value. Such a culture values honest appraisal, open
dissent, and constructive feedback. It promotes intelligent risk-taking in pursuit of both insight and
impact.”
-Mario Morino, ―Leap of Reason‖
“How you conduct the meeting, how you react to the reported numbers, is tremendously important. In
the past, the person reporting an unfavorable number was lonely and isolated. Now, I want people to
admit to shortfalls and have everyone else respond, How can we help? If an indicator is in the red
zone, we identify the people who can influence that indicator and ask them to come to the next
meeting with an action plan…We‟re sharing information and working together as a team to improve
operations and fix problems.”
-Bill Catucci, Former CEO of AT&T Canada (quoted in Kaplan and Norton‘s Execution
Premium)
The Power of Measuring and Discussing Results
 Youth Development Agency with

multiple locations in the Washington
DC area
 Added lessons to an existing
parenting program
 Results were very unexpected
 Changed the culture to one of
measurement and discussion
 Made necessary corrections because
of management reviews and
consultations
 Results now very positive

Emerging Trends

Information Boards Need
―Regardless of who was responsible for

the failures, the events clearly revealed
the essential point I made: Boards
need well-organized and accurate
information to be effective — which the
Balanced Scorecard can provide!‖
-Jay Lorsch, Corporate Governance
expert from Harvard Business School

Board Responsibilities
• Approve and monitor enterprise strategy
• Approve major financial decisions
• Select and evaluate executives
• Counsel and support the CEO
• Ensure compliance

Challenges
• Lack of time
• Insight into the ―value-creating

mechanisms‖ of the organization

A Strategy Map for the Board of Directors
Grow
shareholder
Financial
value
Deepen
Improve asset
Lower costs Grow revenue customer
utilization
relationships
Stakeholder
Approve strategy
Ensure Counsel CEO and
and monitor
compliance and monitor executive
corporate
accountability performance
performance
Monitor & Monitor

evaluate corporate Understand
compliance performance industry and
with laws & based on BSC environment
regulations results
Processes
Ensure
Internal
Approve
effective Evaluate and
funding for,
internal reward
and monitor
controls are in executive
strategic
place performance
initiatives
Improve Monitor and
Optimize
disclosure evaluate
Board
practices succession
functions
planning
& Growth
Learning
Align Board skills Ensure Board has Foster Board

with strategic access to strategic culture of advocacy
direction information and inquiry

Times of Great Risk

BSC and Risk Management Have Much in Common
 Focus on strategy: Both risks and the BSC must be ‗translated‘ from an
organization‘s strategy
 Both systems take a holistic approach; enterprise-wide
 Both focus on relationships (among risks and among objectives and measures)
 Both must be driven from the top to be effective
 Both focus on accountability
 Both are designed to be continuous processes, not one-time events

Using the Four Perspectives to Generate Risks
Interest Mergers & Foreign Capital Tax Laws

Financial Rates Acquisitions Exchange Markets
Customer Competitive Reputation

Customer Tastes Pressure/Action
Supply Product Customer Manufacturing

Internal Relationship Compliance Legislation
Chain Development Capacity
Processes Mgt.
Employee
Human Organizational Information
Learning & Capital Capital Capital
Growth

Benefits
 Fewer surprises
 More transparency regarding risks
 Better strategic initiatives (informed from risks and business objectives)
 Improved results

Strategy is Changing in Fundamental Ways
• Strategy is less about a detailed plan than a

general direction and a few critical initiatives
• Strategy is more about superiority at rapid

testing, learning, changing, and adapting, than
predicting the future
• Effective strategy is increasingly

indistinguishable from an effective organization
Source: Repeatability by Zook and Allen, HBR Press, 2012

Strategic Agility at Zara
• Realize they have no way of

predicting what the future holds
in terms of fashion
• Observe, measure, and react
• Utilize flexible manufacturing

and distribution capabilities

Role of the Balanced Scorecard
• Strategy is about a general direction and

a few key initiatives
• Ensure strategic initiatives align with

‗general direction‘
• Limit the ‗portfolio‘ of initiatives
• Develop a robust initiative
management system
• Justification
• Reporting and discussion
• Linkages to key BSC measures
• Ongoing management
• Post audits
• Measure testing and experimentation
• Measure capabilities
• Communicate constantly!

It Paid Off for RGRTA
 In a time of rising deficits, actually

had a fare decrease!
 From their CEO: ―Without question,

the success that the Authority enjoys
today is the result of the
comprehensive planning process and
the use of measurement systems.‖

And in Charlotte
 Focuses City Council‘s agenda on important

or strategic issues
 Measurement gives clarity to vague
concepts such as strategic goals
 Develops consensus and teamwork
 Enhances employees‘ understanding of
organizational goals
 Communicates strategic results to citizens
 BSC Hall of Fame 2002
―The Balanced Scorecard has helped me to communicate a

strategic vision for the city to my constituents, the citizens, and to
prospective businesses who are considering locating here. It helps
the City Manager focus on things that will have the biggest impact
on the city.‖
- Charlotte Mayor Pat McCrory

NB Power
BSC Hall of Fame 2008  Outcomes from using the BSC:

 Focus and alignment
 Clear accountability
 Having the right types of
discussions, at the right time,
and for the right reasons
Are you next???

Questions???
Thank you for your time. If you have any other questions, please feel free to
contact me at: (760) 789-2449 or pniven@senalosa.com
www.senalosa.com

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The Balanced Scorecard:

Best Practices for Success

June 11, 2012

 How to Make the Balanced Scorecard Work

© 2012 The Senalosa Group, Inc. All Rights Reserved 2

© 2012 The Senalosa Group, Inc. All Rights Reserved 3

Put the big rocks in first!  Why are you developing a

The beginning is the most important part of the work

© 2012 The Senalosa Group, Inc. All Rights Reserved 4

 Over 16 million riders annually

© 2012 The Senalosa Group, Inc. All Rights Reserved 5

―Whether you like it or not, your people follow your example;

 No BSC initiative will survive without active

© 2012 The Senalosa Group, Inc. All Rights Reserved 6

 As business has evolved specific

© 2012 The Senalosa Group, Inc. All Rights Reserved 7

Today, strategy must be managed and

© 2012 The Senalosa Group, Inc. All Rights Reserved 8

Balanced First year priority

© 2012 The Senalosa Group, Inc. All Rights Reserved 10

© 2012 The Senalosa Group, Inc. All Rights Reserved 11

―Management attention is your

© 2012 The Senalosa Group, Inc. All Rights Reserved 12

© 2012 The Senalosa Group, Inc. All Rights Reserved 13

• In a poll of 23,000 U.S. workers:

Soichiro Honda described the sacred

• Vision: What will we be?

• Goals: What four or five key things

•Alignment: Translate the work of

Excerpt from a City Strategy Map and Scorecard

Customer Provide safe, Increase in average 10%

Department of Transportation Map & Scorecard

Customer Provide safe, Percentage of fleet 90%

Operations Group Map and Scorecard Excerpt

© 2012 The Senalosa Group, Inc. All Rights Reserved

 Most meetings suffer from serious faults*:

* Based on ―Death by Meeting‖ by Patrick Lencioni

© 2012 The Senalosa Group, Inc. All Rights Reserved 18

 Hold meetings frequently – monthly if

© 2012 The Senalosa Group, Inc. All Rights Reserved 19

 Youth Development Agency with

© 2012 The Senalosa Group, Inc. All Rights Reserved 21

© 2012 The Senalosa Group, Inc. All Rights Reserved 22

―Regardless of who was responsible for

© 2012 The Senalosa Group, Inc. All Rights Reserved 23

• Approve and monitor enterprise strategy

• Approve major financial decisions

• Select and evaluate executives

• Counsel and support the CEO

© 2012 The Senalosa Group, Inc. All Rights Reserved 24

• Insight into the ―value-creating

© 2012 The Senalosa Group, Inc. All Rights Reserved 25

Monitor & Monitor

Align Board skills Ensure Board has Foster Board

© 2012 The Senalosa Group, Inc. All Rights Reserved 26

© 2012 The Senalosa Group, Inc. All Rights Reserved 27

 Both systems take a holistic approach; enterprise-wide

 Both must be driven from the top to be effective