Intravate Introduction to Balanced Scorecards Briefing Part 1

Intravate Balanced Scorecards Briefings

Part 1 Introduction to the Fundamentals

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Intravate Introduction to Balanced Scorecards Briefing Part 1

First, a few facts

Less than 10% of strategies effectively formulated are effectively executed

Fortune Magazine

Over 60% of Fortune 1000 either have, or are experimenting with,

Balanced Scorecards Fortune Magazine

But.estimated that less than 30% of organisations with Balanced Scorecards are
getting any business benefits, due in the main to poor construction Balanced Scorecard Collaborative Survey

There are numerous misconceptions & misunderstandings about balanced scorecards

Most are poorly constructed and poorly implemented

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Intravate Introduction to Balanced Scorecards Briefing Part 1

Less than 10% of strategies effectively formulated are effectively executed

In most organisations something is breaking down in the Performance Management Chain

Establishing Long Term Goals & Strategies

Planning
Establishing a Strategic Plan Translating into Annual Plans & Targets Internal Communication & Alignment Managing effective implementation

Reporting

Measurement & Reporting

Linked to Staff feedback & rewards

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The Performance Management Trap

More time is spent formulating strategies than setting up performance tracking to report on them Often the key strategic goals are intensively targeted and measured at the top level ..but not the key customer, operational and organisational drivers of these end results. Hence performance targets further down the organisation are only weakly aligned to key goals Also lower level operational and organisational performance is often poorly measured and not tracked and reported effectively However What gets targeted & measured.gets managed Meaning that personal activities and incentives are often locked into the wrong business priorities.

.hence, organisations are rarely fully focused or incentivised around key strategic goals
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Key principles of the balanced scorecard

Alignment of management focus and resource allocation to the achievement of key goals and strategic objectives:
the strategy focused organisation translating Vision into reality

Performance targeting & measurement of the key drivers of success

To drive the performance of ultimate goals by identifying and targeting the internal drivers of performance

To deliver long term performance while managing the tensions between different stakeholders
Shareholders, Customers, Suppliers, Staff

Feedback and learning

is the strategy working? - are we on track to reach our goals ?

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Intravate Introduction to Balanced Scorecards Briefing Part 1

A Good Balanced Scorecard should Tells the Story of your Strategy

Every measure is part of a chain of cause and effect linkages.

All measures eventually link back to organisational performance measures

It focuses on, and serves as an objective decision model (and hence priorities) to help manage the tensions and trade-offs
between differing stakeholders and timescales outcome measures (financial, customer) and performance drivers (value proposition, internal processes, core capabilities, learning & development characteristics)

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Intravate Introduction to Balanced Scorecards Briefing Part 1

Balanced Scorecard frameworks are a way of managing not just a reporting tool !

A management tool
used for both planning and performance reporting

Key factor being to agree the correct set of performance drivers,

measures & targets: relevant to an organisations vision and strategy, that identifies, targets & measures the drivers of end performance goals as well as the end goals themselves

brings together 4 core aspects which are necessary to deliver & sustain
success

Financial or End Goals

Customer & Market Goals

Internal Process Quality

Organisational Effectiveness & Learning

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Intravate Introduction to Balanced Scorecards Briefing Part 1

Balanced Scorecards manage the tensions between different stakeholder groups

Financial How do we look to our Shareholders

Customers How are we doing with our customers?

Process Quality To deliver customer & shareholder value, what must we excel at?

Organisational What competencies, culture & style do we need to sustain and improve performance?

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Intravate Introduction to Balanced Scorecards Briefing Part 1

At minimum Balanced Scorecards broaden your perspective of performance

Financial measures

Customer measures Also referred to as Development or Learning & Growth

Process Quality measures

Organisational measures

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Intravate Introduction to Balanced Scorecards Briefing Part 1

Butit is important to understand the dynamics between these performance measures

Financial measures

Customer measures

Process Quality measures

Organisational measures

Scorecards must identify critical drivers of performance, not static unrelated performance indicators
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Not a matter of.

.just dreaming up 4 sets of measures to fill 4 boxes

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Intravate Introduction to Balanced Scorecards Briefing Part 1

Identify, target & measure the correct internal drivers of performance

Financial or End Goals

External Impacts

Customer & Market Goals

Internal Process Quality

Internal Management

Organisational Effectiveness & Learning

Performance Drivers
End results reflect the quality of management of the internal performance drivers
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The real drivers of the desired end performance are rarely targeted, prioritised and reported effectively

Lag indicator

Outcomes (Effects

Lead Indicators

Final results are the outcome of internal activity

Drivers (Causes)

You need to measure and target the internal processes that contribute towards the achievement of Core Strategic Goals and not just measure & target the end goals alone

Service effectiveness

Productivity

Manpower efficiency

Competencies

Staff Attitudes

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Intravate Introduction to Balanced Scorecards Briefing Part 1

Strategy Mapping is the method of identifying Critical Success Factors via Cause & Effect analysis
Effect

Lag indicator

Lead Indicators

Final results are the outcome of internal activity

Causes

Service effectiveness

Productivity

Manpower efficiency

Competencies

Culture

Identify the Critical Success Factors in the organisation the drivers of desired end performance

Cause & Effect Strategy Mapping forces you to identify these Critical Success Factors

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Intravate Introduction to Balanced Scorecards Briefing Part 1

Managing or Monitoring???

Targeting & monitoring lag indicators alone lets you know how you have done Targeting & monitoring lead indicators enables you to manage performance, not just watch it

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Intravate Introduction to Balanced Scorecards Briefing Part 1

Key deliverables from an effective Balanced Scorecard framework

1. Aligns short - term targets to longer-term strategies 2. Assists in delivering ultimate strategic performance levels by explicitly targeting and managing the non-financial drivers of performance

3. Aligns departmental and personal objectives to ultimate goals & core strategies
4. Establishes a framework for Business Units, teams and individuals within the organisation to see and relate to the bigger picture and their role on delivering it 5. Provides regular monitoring and gives early warning of problems long before they impact on the ultimate outcomes results 6. Creates a feedback loop to learn about, and to improve, the effectiveness of current strategies

Building and utilising a Scorecard framework is strategic management process

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