How to Drive Organizational

Alignment to Strategy Using

Balanced Scorecards
Presented by Chris Heflin
© 2009 ActiveStrategy, Inc.
 Presentation Overview
 Strategic vs. Operational Goals
 Setting Strategic Goals
 Creating a Balanced Scorecard
 Deploying Scorecards to Execute Goals
 Aligning & Prioritizing Improvement Initiatives
 Linking Strategy to Action Plans via
Scorecards
 Best Practices
 Tying this back to WSQA Criteria
© 2009 ActiveStrategy, Inc. p. 2
Strategic vs. Operational Goals
Supervisor Manager Director Executive

Amount of time spent on

strategic efforts (typical)*

Increased time spent on

strategic efforts (ideal)

Operational
(Including operational measures &
incremental improvement plans)

* Includes critical few objectives & measures that need to be

improved plus key strategic improvement initiatives
© 2009 ActiveStrategy, Inc. p. 3
 Setting Strategic Goals

© 2009 ActiveStrategy, Inc. p. 4

 Defining Strategic Goals
Strategic Goals have the following components:
 Perspectives –high-level focus areas
 Objectives – verb-noun statements that reflect the
strategic plan (e.g., “Improve Customer
Satisfaction”)
 Measures/Metrics - #, $, or % that indicates
performance against an objective
 Targets – what the measure should attain
 Initiatives – improvement projects (e.g., “Improve
Cycle Time”)

© 2009 ActiveStrategy, Inc. p. 5

 Making Strategic Goals Actionable
SWOT
Analysis Key Strengths,
Weaknesses,
Opportunities &
Threats
Strategic Goals

Strategy Top-Level Prioritized

Map Balanced Initiatives
Scorecard
Visual simplification Aligned
of Strategic Plan Operational framework to improvement
communicate, deploy and
execute plan

© 2009 ActiveStrategy, Inc. p. 6

 Create a Strategy Map
What is a Strategy Map?
 Visual simplification of strategic objectives
 Shows cause and effect relationships
 Helps ensure you’re not missing any key
drivers

© 2009 ActiveStrategy, Inc. p. 7

 Steps to Creating a Strategy Map
1. Prioritize SWOT outputs & convert to
“verb noun” strategic objectives
2. Group objectives by “perspective” or high-
level focus area
3. Identify cause-and-effect relationships
with arrows

© 2009 ActiveStrategy, Inc. p. 8

The Anatomy of a Strategy Map
“Perspectives”

High-level
Perspectives

“objectives”
(verb/noun)
Traditional Scorecard

Links showing
relationships

© 2009 ActiveStrategy, Inc. p. 9

 Example Strategy Map for Public Sector

Note:
Perspective names
and their cause &
effect order change

© 2009 ActiveStrategy, Inc. p. 10

 Next, Create a Balanced
Scorecard

© 2009 ActiveStrategy, Inc. p. 11

 Creating a Balanced Scorecard
Step 1: Transfer from Strategy Map
 Transfer Perspectives and add Index numbers
(1.0, 2.0)
 Retain cause & effect hierarchy

 Transfer Objectives into proper Perspective

and add Index numbers (1.1, 2.1)

© 2009 ActiveStrategy, Inc. p. 12

 Keep in Mind
 Can use more or different perspectives
(if appropriate), BUT BALANCE IS CRITICAL
 Objectives must contain a verb (grow sales,
reduce complaints, etc.)
 Keep objectives focused (7-12 max per
scorecard)

© 2009 ActiveStrategy, Inc. p. 13

Perspectives & Objectives on BSC

Perspective

Objective

Index Number

© 2009 ActiveStrategy, Inc. p. 14

 Creating the Top-Level BSC
Step 2: Determine Measures
 Should represent the best indication that an
objective is being met
 Ask what outcomes your stakeholders desire
from the objective:
 Quality or defects
 Revenues
 Cost or productivity
 Responsiveness or Cycle Time
 Employee or Environmental Safety

© 2009 ActiveStrategy, Inc. p. 15

 Creating the Top-Level BSC
Step 2: Determine Measures
 Keep to 1-3 measures per objective
 One objective may be measured with two or
three dissimilar units of measures, e.g.
Customer Satisfaction may be measured by:
 Survey Results (Very Good)
 Number of Complaints (4 per quarter)
 Turnaround time (2 days)

© 2009 ActiveStrategy, Inc. p. 16

 Lagging Measures
 Lagging measures are reported
infrequently, too late to prevent a problem
 Examples are a company’s critical high-level
outcome measures:
 Sales
 Service Quality
 Expenses
 Customer Satisfaction

© 2009 ActiveStrategy, Inc. p. 17

 Breaking Down a Lagging Measure
 First Step – Dimensional Measures
 These break down a measure by its component
parts using the same units (e.g. Sales by
Division or Geography)
 Note: dimensional measures alone do not get
at the root causes of a problem

© 2009 ActiveStrategy, Inc. p. 18

 Leading Measures
 Leading Measures
 break down an important measure into what
drives it (e.g. # of quotes or size of pipeline)

 Also called Cause & Effect or Process

Measures

© 2009 ActiveStrategy, Inc. p. 19

 Leading Measure Examples
 Examples:
 Customer Satisfaction leads Revenues
 Service Response Time leads Customer
Satisfaction
 % Service Rep Availability leads Service
Response Time
 Leading/Lagging are relative terms
 A leading measure in one area is likely a
lagging measure to another area

© 2009 ActiveStrategy, Inc. p. 20

Top-Level Scorecard with Measures

p. 21
© 2008 ActiveStrategy, Inc.
 Creating the Top-Level BSC
Step 3: Align & Prioritize Initiatives
 Initiatives are time-bound projects
 They have defined resources
 Also called Projects, Action Plans
 Some are derived from the SWOT Analysis
 They should be prioritized based upon:
 alignment to an identified performance gap in a strategic
area
 size of the performance gap
 resources required to improve
 ROI, etc.

© 2009 ActiveStrategy, Inc. p. 22

 Prioritize and Align Initiatives
 Align current initiatives (time-bound
improvement projects) to measures
 Cease initiatives that do not align and any that
align to measures that are meeting goals
 Consider new initiatives to address
underperforming measures
 Aligned initiatives drive results by addressing
root causes

© 2009 ActiveStrategy, Inc. p. 23

 A Prioritization Matrix
Column 4 Column 5
Column 4 Column 5
Column 1 Column 2 Column 3 Prioritization Factors Priority
Column 1 Column 2 Column 3 Prioritization Factors Priority
(Enter 1, 3, or 5 in each – see instructions below ) Score/Departments
(Enter 1, 3, or 5 in each – see instructions below ) Score/Departments
Desired How Outcome = product of factors from
Desired How Outcome Organiza- = product of factors from
Initiative Under Outcome of Will be Degree of Need to Organiza- Column 4 (multiply all 5).
Initiative Under Outcome of Will be Degree of Need to Urgency Total Cost tional Column 4 (multiply all 5).
Consideration Initiative Measured Alignment Improve Urgency Total Cost tional
Readiness
Also list key dept.
Consideration Initiative Measured Alignment Improve
Readiness
Also list
needed key dept.
to achieve it
needed to achieve it
1.
1.

2.
2.

3.
3.

4.
4.

© 2009 ActiveStrategy, Inc. p. 24

 An Example Completed Matrix
Column 4 Column 5
Column 1 Column 2 Column 3 Prioritization Factors Priority
(Enter 1, 3, or 5 in each – see instructions below ) Score/Departments
Desired How Outcome = product of factors from
Degree of Organiza-
Initiative Under Need to Column 4 (multiply all 5).
Outcome of will be Alignment Urgency Total Cost tional
Consideration to BSC
Improve
Readiness
Also list key dept.
Initiative Measured needed to achieve it
1. Improve Improved Percent of 5 5 5 5 3 1875
margins profitability products meeting Operations
margin goals

2. Improve Improved Percent of 5 5 3 3 3 675

productivity in throughout and departments that Manufacturing
manufacturing reduced costs meet productivity
goals

3. Implement new Improved % of customers 3 5 3 5 3 675

CRM system relationships renewing annual IT
with key service plans
customers
4. Open new Improved % of customers 1 3 1 5 1 15
customer training knowledge of attending training Customer Education
facility key customers & Facilities

© 2009 ActiveStrategy, Inc. p. 25

 Great, the BSC is Finished!
 Well…actually, this is just the beginning
 The next step is to create a “cascaded”
framework of scorecards
 Create linked scorecards down & across the
organization
 This is where you really start to deploy your
strategy and make it actionable

© 2009 ActiveStrategy, Inc. p. 26

What It Looks Like (Long-Term)
Top-Level
Scorecard

Divisional or
Business Unit
Scorecards Department
or
Functional
Scorecards

Individual Employee Goals

© 2009 ActiveStrategy, Inc. p. 27
Why is Cascading Scorecards Critical?
 It results in a proactive performance system
 it communicates and translates the strategy to all
levels
 when a critical top-level lagging measure is
underperforming, lower level causes can be easily
identified
 allows you to fix important problems before they
become high-level issues

© 2009 ActiveStrategy, Inc. p. 28

 How to Cascade – an Overview
 Create linked, related (but not identical)
scorecards for next organizational level
 As you go, translate objectives to make them
meaningful to that area
 e.g., “Improve Customer Satisfaction” might
become “Reduce Wait Times for Customers”
 Align measures to the translated objectives
 e.g., % of Customers waiting more than 5 minutes

© 2009 ActiveStrategy, Inc. p. 29

 Cascading Objectives &
Measures Using a Process
Matrix Approach

© 2009 ActiveStrategy, Inc. p. 30

 Tips on Using a Process Matrix Approach

 Used to align business processes to strategic

objectives
 Helps to identify their translated objectives &
leading measures
 Works best for functional and support areas
 Process owners must be involved

© 2009 ActiveStrategy, Inc. p. 31

 Create a Matrix for Each Area
List key Corporate Objectives

Outcome
processes of
the area 1.1 Grow 2.1 3.1
Profitable Improve Integrate
Revenues Cust. Sat. New Tech.
IT’s Business Processes

Internal
Network
Mgmt.
Cust.
Data
Center
Mgmt.
Technical
Support

p. 32
© 2008 ActiveStrategy, Inc.
 Identify Outcomes & Intersections
Corporate Objectives

Outcomes
Identify
processes 1.1 Grow 2.1 3.1
that most Profitable Improve Integrate
strongly
Revenues Cust. Sat. New Tech.
support the
IT’s Business Processes

Objectives
Data Ctr. Rev. Availability

Internal
Network x
Mgmt.
Cust. Sat.

Cust.
Data Ctr. x x
Mgmt.
Technical
Resolved

x x
calls

Support

p. 33
© 2008 ActiveStrategy, Inc.
 Translate the Objectives
Corporate Objectives

Outcomes
Describe
1.1 Grow 2.1 3.1
Objective
using that Profitable Improve Integrate
area’s terms Revenues Cust. Sat. New Tech.

Internal 3.1.1
Data Ctr. Rev. Availability

Improve
Network
IT’s Core Processes

network
Mgmt. reliability

Cust. 2.1.1
Cust. Sat.

1.1.1 Maximize
Minimize
Data Ctr. service
customer
Mgmt. revenues
complaints

Technical 2.1.2
3.1.2
Resolved

Leverage
Support
calls

Improve call
ticket
resolution
software
p. 34
© 2008 ActiveStrategy, Inc.
Align Measures Using the Matrix
Align measures Corporate Objectives
identified in the
1.1 Grow 2.1 3.1
processes to
Profitable Improve Integrate
the cascaded
Revenues Cust. Sat. New Tech.
Objectives
IT’s Core Processes

Internal 3.1.1 Update

network speed
Network % full
Mgmt. availability

Cust. Data 1.1.1 Maximize

2.1.1 Minimize
customer
ASP revenues
Center $ service
complaints
# hours
Mgmt. rev/month downtime
Technical 3.1.2 Leverage
ticket software
Support % of calls
resolved

p. 35
© 2008 ActiveStrategy, Inc.
 Place On Appropriate Scorecard
 Place objectives & related measures on the
appropriate scorecard
 Assign an owner to each to ensure
accountability
 Finally, establish goals for each measure to
track progress
 Cascaded objectives & measures create
alignment to top-level strategy

© 2009 ActiveStrategy, Inc. p. 36

 Going From Strategy to
Action Plan
An Example “Drill Down” from
the City of Coral Springs Scorecards

© 2009 ActiveStrategy, Inc. p. 37

 Police Scorecard

Click to drill
down

© 2009 ActiveStrategy, Inc. p. 38

 Drill down reveals
Measure Details

Contributing
lower-level
measures

Aligned
improvement
Initiatives

© 2009 ActiveStrategy, Inc. p. 39

 Additional Measure
Details (trend charts &
graphs, comparisons)

© 2009 ActiveStrategy, Inc. p. 40

 Chart Detail –
Crime by Type

© 2009 ActiveStrategy, Inc. p. 41

 Chart Detail –
Crime Rate
Comparisons

© 2009 ActiveStrategy, Inc. p. 42

 Initiative Detail

Click to see
commentary from
Initiative Owner
about the initiative
and Action Plans

© 2009 ActiveStrategy, Inc. p. 43

 Best Practices to Remember
 Start with your strategy
 Keep objectives to the critical few
 Pick measures you can actually measure –
and those that drive the right behaviors
 Cascade & deploy (scorecards are NEVER
perfect, so don’t wait)
 Review performance of scorecards regularly

© 2009 ActiveStrategy, Inc. p. 44

How Does This Fit Into the WASQ Criteria?

 What WASQ categories does this type of

framework address?
 Why?

© 2009 ActiveStrategy, Inc. p. 45

 Questions?

© 2009 ActiveStrategy, Inc. p. 46

 Thank You for Participating

§“How to Drive Organizational Alignment to

Strategy Using Balanced Scorecards”
Presented by
Chris Heflin
cheflin@activestrategy.com

Please stop by the ActiveStrategy table

to learn more or visit www.activestrategy.com

© 2009 ActiveStrategy, Inc. p. 47