Balanced Scorecard Workshop

Presented by:
Matt H. Evans, CPA, CMA, CFM

Public Sector Retreat on

Malcolm Baldrige Performance Excellence

1
 Purpose of the Workshop

• Introduce the Balanced Scorecard to the

Organization
• Make sure everyone understands how the
scorecard works
• Communicate how the Balanced
Scorecard fits with the Malcolm Baldrige
Model of performance excellence

2
 Table of Contents

I. Balanced Scorecard Basics

II. Creating the Strategy Map

III. Good Performance Measurements

IV. The Final Scorecard Components

V. Case Study Exercise

VI. Some Final Points

3
 Why the Balanced Scorecard?

• The Organization will become more “strategically focused”

over the next ten years given the recent policy directive
issued by BSP (Budget & Strategic Planning).
• People at all levels have relied heavily on tactical
performance measurements, such as number of maps
submitted, number of land structures in flow, and % of
supply vendor contracts in place.
• Need more balanced approach to looking at performance,
both tactical and strategic.
• Only 5% of a workforce tends to understand their company’s
strategy.
• 86% of executive teams spend less than one hour per month
discussing strategy.

4
 A Major Driver is . . .

• The Organization’s Information Resource Planning System

(IRPS):
- Enterprise wide system for how we will evaluate success –
division read outs, data turnarounds, global partnerships, etc.
- Must be integrated into all agency components (such as
region and global outlet offices)
- Designed around the Balanced Scorecard framework
• The Balanced Scorecard will be the strategic view of
performance for the agency, balancing out our current tactical
view of performance which is already in place.

5
 Government Performance Results Act

 Required to develop long-term Strategic Plans

("SP")
 Specify general Goals and Objectives
 Develop Annual Performance Plans ("APP")
 Specify measurable performance goals
 Annual Performance Report ("APR")
 Demonstrate actual results
 APP goals should show the expected progress
toward meeting the long-term goals of the SP
6
Public Sector Organizations –
More Strategic Focus

7
 Where it started . . .

Introduced in 1992, by Robert Kaplan and David

Norton, the Balanced Scorecard is the most
commonly used framework for ensuring that
agencies execute their strategies. Today, about 70%
of the Fortune 1,000 companies utilize the Balanced
Scorecard to help manage performance.

Balanced Scorecards are used as the roadmap for

creating the “Strategic Management System” or our
IRPS. And this will drive overall organizational
performance for our entire agency!

8
 Some Basic Principles

• Quantifies the Agency Strategy in measurable terms

• Strategy is summarized on a Strategy Map over four views
of performance (perspectives).
• Must capture a cause-effect relationship between strategic
objectives over the four perspectives on the Strategy Map.
• Critical Components include:
- Measurements
- Targets
- Initiatives
• Everything must be linked: Goals to Objectives, Objectives
to Measurements, Measurements to Targets.

9
 Four Views of Performance

Strategic Objectives

• Strategy can be described as Stakeholders

a series of cause and effect “If we succeed, how will we look

to our stakeholders?”
relationships.
• Provides a “line of sight” Internal Processes
from strategic to operational “To satisfy our customers, at
activity which processes must we excel?

– working on the “right”

Learning & Growth
things.
"To execute our processes, how
must our organization learn and
improve?"

Agency Investments
“In order to succeed, what
investments in people and
infrastructure must we make?”

10
 The Importance of Alignment

Complete Framework for IRPS

Strategy Objectives Measures

Agency

Department

Team/
Individual

11
 Alignment all the Way Through

Goal: Improve environmental health

Performance Gap: Less than Organization watershed water quality
Initiative: Data Mining Resource
Investment
Innovation Management
Improved "Cause Justified Initiatives to
and Effect" Business Improve Water Quality
Knowledge Processes
Improved Environmental Investments Available to
Assessment Reports be Allocated to Other
Critical Areas

Financial
Management
Decreased Litigation Environmental
Costs Health
Relationship Improved Water Quality
Management
Enhanced Public
Confidence

Increased
Investment
Accountability

12
 In order to be successful, the
Agency’s IRPS should . . .

• Be comprised of a balanced set of a limited vital few

measures;

• Produce timely and useful reports at a reasonable

cost;

• Display and make readily available information that is

shared, understood, and used by the Agency; and

• Supports the organization’s values and the

relationship the organization has with customers,
suppliers, and stakeholders.
13
 Before we can map your strategy . . .

• Get down to a set of quantifiable strategic

objectives:

Too vague Improve Customer Service

Reduce average customer wait times by

More precise 30% by year end

• Make sure your objectives have a direct

relationship to your goals and your goals have a
direct relationship to your mission and values.

14
 Table Of Contents

I. Balanced Scorecard Basics

II. Creating the Strategy Map

III. Good Performance Measurements

IV. The Final Scorecard Components

V. Case Study Exercise

VI. Some Final Points

15
 Strategy Map: Capture a Cause Effect
Relationship from the Bottom Up
Stakeholder

More rapid and

Improved Returns
accessible services
on Investments
Internal Process

Economic Reduce Re-Activities Establish Web

Model Process thru ABC/M Based Self Services
& Growth
Learning

Expand Global Leadership Knowledge

Facility Reach Development Management
Investments

Facilities and IT Infrastructure

Fixed Assets Human Capital

16
 Two Special Techniques
for Building Strategy Maps
General Rule of Thumb to ensure strategy map is developed both
vertically and horizontally
Weak Strong
The 4 to 5
Rule

Way of pulling out both drivers and outcomes that match up against the
core competencies of the business model
Splitting the Customer Perspective
Perspective Customer Growth Retention Rate Customer Satisfaction Outcomes

Timely Delivery Pricing Quality Service Reputation Drivers

17
 Key Benefits of Strategy Maps

• Articulates how the organization creates value for its constituents

and legitimizing authority
• Displays key priorities and relationships between outcomes (the
"what") and performance enablers or drivers (the "how")
• Provides a clear view of "how I fit in" for sub-organizations, teams,
and individuals
• "Cascading the scorecard throughout the organization, and
clearly mapping the various units and functions back to the
organization or agency-wide map is critical to leveraging and
ensuring alignment"

18
 Strategy Maps –
A Better Way to Communicate Strategy

Executive consensus and Educate and Communicate:

accountability:
Build awareness and
Building the map eliminates understanding of organization
ambiguity and clarifies strategy across the
responsibility. workforce.

Promote Transparency:
Ensure Alignment:
Communicate with and
Each sub-unit and individual educate constituents, partners,
link their objectives oversight bodies, and the
to the map. general public.

Source: "Using Balanced Scorecard Technology to Create Strategy-Focused Public Sector Organizations", Robert S.
Kaplan, April 21, 2004, pg. 20
19
 Multiple Choice Question –
Cause Effect on Strategy Map

The top perspective of the Balanced Scorecard is the final end

results or outcomes we want to achieve. This perspective is
called:
a. Internal Processes
b. Stakeholder / Customer
c. Learning & Growth
d. Agency Investments

20
 Multiple Choice Question –
and the answer is . . .

b – “Stakeholder / Customer” are those who we ultimately

serve and we must meet their needs and requirements. This
is our final end result within the scorecard model.

Balanced Scorecards tell you the knowledge, skills and systems that your
employees will need (learning and growth) to innovate and build the right
strategic capabilities and efficiencies (internal processes) that deliver
specific value to the market (customer) which will eventually lead to
higher shareholder value (financial).

– “Having Trouble with Your Strategy? Then Map It” by Robert S.

Kaplan and David P. Norton - Harvard Business Review

21
 Aligning the Scorecards

Once you have completed your strategy map, make sure it aligns with agencies or divisions you
report up to. This overall alignment of scorecards throughout the entire Organization forms the
Strategic Management System within IRPS.
IRPS

Best Business Expand Global Expand the

Organization
Practices Reach Skill Base
Scorecard

GOG Lean Processes

Improve Asian Develop the
Scorecard Footprint Workforce

Highly
Process Efficiency Grow Skilled
Agency Globally Workers
Scorecard

Outlet Streamline Continue to Improve

Scorecard Processes Expand Range Employee
Competencies

22
 Extend the Map into Measurements,
Targets and Initiatives
Stakeholder

Strategy Map
Detailed How success in The level of Key action
Faster Service Access statement of achieving the performance programs
what is critical to strategy will be or rate of required to
successfully measured and improvement achieve
achieving the tracked needed objectives
Self Service strategy
Internal Process

Applications

Objective
Measure Target Initiative
Lean Processes Description
Eliminate waste, Number of 2 per setup per Lean / Six
reworks, and Reworks month each Sigma
Process and Value other errors in Outlet Office
Map Analysis our processes
L&G

Web Enable
Technologies
Investments

Invest in IT

23
 Alignment of Scorecard Components

Make sure the components of your scorecard fit together. We want to

create a tight model for driving execution of your strategy.

Goal Objective Measurement Target Initiative

Achieve Reduce Cost per Outlet 5% - Year 1 Activity
Agency Operational Office, Cost per 10% - Year 2 Based
operational Service Costs by Region, Cost per 15% - Year 3 Costing /
efficiencies 50% over the FTE Management
with best next 5 years
practices in
the private Reduce identified Waste Volume Waste stream Lean / Six
sector re-activities Charts, Rework reductions of Sigma
within primary Tracking, Cycle 5% each year,
processes by Time End to End Reworks cut in
80% over the in S-LX (5 of 7 half for next 3
next 3 years Regions) years, cycle
time cut by 75%
24
 Multiple Choice Question –
Create a Tight Model

The Balanced Scorecard process captures a cause

and effect relationship based on having all parts
linked together. Strategic goals link down to
objectives, objectives link down to measurements,
and measurements link to:
a. Mission
b. Goals
c. Budgets
d. Targets

25
 Multiple Choice Question –
and the answer is . . .

d – Measurements should be linked to

targets. We want a one-to-one
relationship so that measurements are
actionable to the Agency.

26
 Table Of Contents

I. Balanced Scorecard Basics

II. Creating the Strategy Map

III. Good Performance Measurements

IV. The Final Scorecard Components

V. Case Study Exercise

VI. Some Final Points

27
 The Context of Measurement

Performance Measurement is a process by which

an agency / program / function / outlet office
objectively assesses and evaluates the extent to
which it is accomplishing a specific objective, goal,
or mission. Performance measurement alone is
incomplete.

Performance Management is a systemic link

between company strategy, Investments, and
processes. Performance Management is a
comprehensive management process.

28
 Why Measure Performance?

• Enables decision making

• Manage by results
• Promote accountability
• Distinguish between program success and failure
• Allow for organizational learning and improvement
• Justify budget requests
• Optimize Investments
• Provide means of performance comparison
• Fulfill mandates
• Establish catalysts for change
• And so on…

29
 Without Measuring, Decision Makers
Have No Basis For:

 Knowing what is going on in their enterprise

 Effectively making and supporting decisions regarding
Investments, plans, policies, schedules, and structure
 Specifically communicating performance expectations to
subordinates
 Identifying performance gaps that should be analyzed and
eliminated
 Providing feedback that compares performance to a
standard
 Identifying performance that should be rewarded

30
 Types of Measurements

Measure Type Definition Example

Intermediate outcomes that predicts or
Leading Employee turnover rate
drive bottom-line performance results

Bottom-line performance results resulting

Lagging Employee satisfaction rating
from actions taken

Amount of Investments, assets, equipment,

Input Number of cashiers
labor hours, or budget dollars used

Units of a product or service rendered - a

Output Number of Value Meal orders fulfilled
measure of yield

Resulting effect (benefit) of the use or

Outcome Customer satisfaction rating
application of an output

Objective / Empirical indicators of performance Wait time

Quantitative
Subjective / Perceptions and evaluations of major Customer complaints received as a % of
Qualitative customers and stakeholders total customers served

31
 Examples of Measurements by Perspective
Stakeholder / Customer
• Current customer satisfaction level
• Improvement in customer satisfaction
• Customer retention rate
• Frequency of customer contact by
customer service
• Average time to resolve a customer
inquiry
• Number of customer complaints
Learning and Growth
• Percentage employee absenteeism
• Hours of absenteeism
• Job posting response rate
• approved
Personnel turnover rate
• Ratio of acceptances to offers
• Time to fill vacancy
Internal Processes
• Number of unscheduled maintenance calls
• Production time lost because of maintenance
problems
• Percentage of equipment maintained on
schedule
• Average number of monthly unscheduled
outages
• Mean time between failures
Investments
• % of facility assets fully funded for
upgrading
• % of IT infrastructure investments
• # of new hire positions authorized for
filling
• % of required contracts awarded and in
place
32
 Multiple Choice Question –
Appropriate Measurement

The measurement, % of employees following a

supervisor approved competency model, would
most likely be placed in which perspective of the
Balanced Scorecard?
 
a. Stakeholder / Customer
b. Learning and Growth
c. Agency Investments
d. Internal Processes

33
 Multiple Choice Question –
and the answer is . . .

b – this measurement relates to helping

grow the workforce and this would most
likely fit with the Learning and Growth
perspective of the Balanced Scorecard.

34
 Some Basic Guidelines for
Good Performance Measures

• You should have at least one measurement for

each objective.
• Measurements define or explain objectives in
quantifiable terms:
Vague => We will improve customer
service
Precise => We will improve
customer service by reducing
response times by 30% by year end.
• Measurements should drive change and
encourage the right behavior.
• Should be able to influence the outcome.

35
 Selection Criteria for
Performance Measurements

 MEANINGFUL - related significantly and directly to organizations mission and

goal
 VALUABLE – measure the most important activities of the organization
 BALANCED – inclusive of several types of measures (i.e. quality, efficiency)
 LINKED - matched to a unit responsible for achieving the measure
 PRACTICAL – affordable price to retrieve and/or capture data
 COMPARABLE – used to make comparisons with other data over time
 CREDIBLE - based on accurate and reliable data
 TIMELY - use and report data in a usable timeframe
 SIMPLE -- easy to calculate and understand

36
 Three Criteria Used for Agency Scorecard

1. Relevant
– Addresses an operational or strategic performance issue
– Is results- or outcome-focused
– Provides useful information to enable decision making

2. Measurable
– Quantifiable and Objective
– Facilitates Analysis
– Can be done in a timely manner with high accuracy
– Data are available and collectable

3. Actionable
– Can be tracked to an appropriate person or team responsible for the
activity measured
– Measure relates to process inputs that can be controlled/adjusted
to address concerns

37
 Scoring Measurements Against
the Three Selection Criteria
A “0” or “1” in any column indicates that you need to revisit this
measurement before implementation.
Measurement Relevant Measurable Actionable
% of Global Outlets that follow the 3 1 2
end to end process defined in IRPS
Number of score studies completed 3 2 3

% of Region Centers using ABC 3 2 3

Models to manage 65% of their
allocation costs
% of eligible employees who are 3 2 2
participating in the Competency
Model Development Program
% of map points loaded and 3 2 2
operational in GPS Tracking

0 = Does not apply 1 = Poor 2 = Acceptable 3 = Good

38
 Multiple Choice Question –
Match the Objective to the Metric

Assume the Agency Plan has an objective: Improve

the productivity of docking services at all stations.
Which of the following measurements would be
most appropriate for this objective?
 
a. Number of reruns required to complete the
docking service
b. % of vendor contracts executed in 90 days
c. Number of people completing the off-shore
warranty training program
d. % of supervisors who submitted budget
action plans within 60 days of close-outs

39
 Multiple Choice Question –
and the answer is . . .

a – If we measure re-runs, this probably will

give us some benchmark by which we
can measure docking station efficiency
and productivity.

40
 A Closer Look at How Things Link

Transportation Safety Example

Mission:
Protect people and property

Strategic Goal #1:

Reduce damage caused by motor vehicle accidents

Annual performance goal 1A:

Reduce deaths per crashes to 1.10 per
100m miles traveled by 2005

Measure: Fatality rate per 100m miles traveled

41
 The Measurement Pyramid

Goal
Strategic/GPRA Goals
End-Outcomes Outcome
Performance
Measures
Longer-Term Intermediate Program
Outcomes
Program Performance Measures

Shorter-Term Program Components

Intermediate
Outcomes Program Component Performance Measures
& Outputs
Activities
Outputs
& Inputs
Activity Performance Measures
42
 Some Tools for Determining
What to Measure

Program Logic Model

Process/ Intermediate End

Inputs System Output Outcomes Outcome

Process Flow
Causal Analysis
Prototype
Product

Desired
Outcome Acceptable Not Acceptable
Results
Back to
To Market Of
Laboratory
Testing

43
 Top Ten Metrics in the Public Sector

1. Outputs/Product
2. Program Inputs
3. Financial Indicators
4. Work/Activities
5. Timeliness of Services
6. Internal Measures of Quality
7. Operating Ratios
8. Outcomes of Products or Services
9. External Customer Service
10. Equity of Services to Users

Source: GAO-GGD-92-65 “Agency Use of Performance Measures”

44
 Table Of Contents

I. Balanced Scorecard Basics

II. Creating the Strategy Map

III. Good Performance Measurements

IV. The Final Scorecard Components

V. Case Study Exercise

VI. Some Final Points

45
 How to Set Targets

• Past performance trends per historical data.

• Performance levels of similar organizational units
at a comparable level that facilitates
benchmarking.
• Best practices across the agency, the public
sector or the private sector. Must be at a pre-
existing high level of performance before you use
this approach.
• For newly launched services, may have to
establish a baseline per a prototype test and
extend out from this point forward.
• For major strategic shifts, may have to set
directly per the plan itself without regard for hard
data.
46
 Checklist for Setting Targets

• Targets match up with measurements, one to one.

• Targets require improving current levels of
performance.
• Targets are a stretch, but achievable: they may
require improvements to existing processes.
• Targets are quantifiable so that the target
communicates if the expected performance was
met.
• Long-term targets are established before short-term
targets.
• Financial/Budget related targets are established
before non-financial targets.

47
 Examples of Targets

Average Turnaround Times 8 days 7.5 days 6.8 days

at Docking Sites FY05 FY06 FY07
Utilization Rate for Self 10% FY05 18% FY06 25% FY07
Serve Web Portal
Rotation Internship 1,800 FY05 2,500 FY06 3,900 FY07
Participation Rates
Glider integration mapping Establish 8 per sets 10 per sets
tool used for geo-sets baseline

% of agency SES Levels 30% FY05 40% FY05 65% FY05

following IRPS from end to
end for the entire year
% funding through SEPCO 30% FY05 35% FY06 45% FY07
for space mapping

48
 Characteristics of Initiatives

• Leader Sponsored
• Requires Investments – people, funding, technology,
etc.
• Has designated owners
• Includes deliverables or milestones
• Usually has time deadlines
• May be difficult to launch – not resourced
• Could encounter obstacles – people are confused,
conflicts with other functions

49
 Initiatives should enable strategic execution

Initiatives Goals or Objectives

Value Mapping Project Improve identification and delivery of all
agency services across the full stakeholder
spectrum
Employee Rotation Program Improve the employee turnover and
satisfaction scores
Web Self Service Portal Reduce agency costs and streamline our
services for more direct service delivery
Common Knowledge Center Expand the overall knowledge base so that
inter-functions can learn from one another
Customer Survey and Develop a more systematic process across
Analysis Tool Program the entire agency to better connect to our
customers
Shared Service Center Reduce reworks and overlaps between our
Tracking System seven shared service centers
50
 Going from Output to Outcome
When you first launch your Initiative, you probably want to use an Output
Measurement. Once the Initiative is up and running, change your measurement to
an Outcome to see if the Initiative is really having strategic impact.

Initiative Output Outcome

Measurement Measurement
Lean Process / Six Number of Projects Overall reductions in errors,
Sigma Defined by Region reworks, and cycle times

Activity Based Costing % of Service Center Reductions in identified re-

/ Management Outlets with ABC Models activities per process study
(ABC/M) in place for Allocation
Costs
Employee % of Employees who Higher skill levels of
Competency Models have a Competency employees using the models
Model in place

51
 Strategic Themes
• Describes an overall strategic direction
• Can improve the communication effectiveness of the
Strategy Map
• Examples of themes:
– Innovative Services
– Lean Processes
– Adaptive Organization
– Realign our Core Competencies
– Reach the Stakeholder
• Group common set of objectives around a theme

52
 Multiple Choice Question –
Sequence Of Steps

The basic steps for creating a Balanced Scorecard include:

A = Align your strategy map to other organizational units
B = Create your strategic plan – including goals and objectives
C = Extend your strategy map into measurements and targets
D = Map your strategy over four perspectives

The sequence or order of these steps is (left to right):

   Step 1 Step 2 Step 3 Step 4

a. A C B D
b. C A D B
c. B D A C
d. C B A D

53
 Multiple Choice Question –
and the answer is . . .

c – Step 1 or B – Start with your strategic plan

Step 2 or D – Map your strategic plan
Step 3 or A – Align your strategy map
Step 4 or C – Extend the strategy map into
measurements and targets

54
 TABLE OF CONTENTS

I. Balanced Scorecard Basics

II. Creating the Strategy Map

III. Good Performance Measurements

IV. The Final Scorecard Components

V. Case Study Exercise

VI. Some Final Points

55
 Case Study Instructions

• The following handout is an example strategic plan for

the Western Agency Region Office (WARO).
• Your team has been assigned the responsibility of
mapping the WARO Plan into a single strategy map.
• Each team will be assigned to a breakout room – use
post it notes on the large white template sheets
• Try to limit your objective boxes on the strategy map to
no more than 20 per our 4 to 5 Rule.
• If you have time, you might want to consider arranging
or grouping certain objectives together around themes.
• Each team will provide a 10-minute brief.
• You have 90 minutes to complete the case study
exercise.
56
 TABLE OF CONTENTS

I. Balanced Scorecard Basics

II. Creating the Strategy Map

III. Good Performance Measurements

IV. The Final Scorecard Components

V. Case Study Exercise

VI. Some Final Points

57
 Making the connection to the
Baldrige Criteria

Malcolm
Malcolm Baldrige
Baldrige Balanced
Balanced Scorecard
Scorecard

Leadership
Leadership Learning
Learning && Growth
Growth Perspective
Perspective

Human
Human Resource
Resource Capital
Capital Learning
Learning && Growth
Growth Perspective
Perspective

Business
Business Results
Results Measurements
Measurements and
and Targets
Targets

Process
Process Management
Management Internal
Internal Process
Process Perspective
Perspective

Strategic
Strategic Planning
Planning Strategy
Strategy Map
Map

Customer
Customer Focus
Focus Stakeholder
Stakeholder // Customer
Customer Perspective
Perspective

58
 Automated System Overview - IRPS
• IRPS is the Organization’s “Strategic Management System”
for creating the Strategically Focused Organization (SFO).

• The Strategic Management System Module within IRPS:

– Cascades scorecards down by folders
– Includes a web based training component
– Analytical tools include unit trends, service costing
comparisons, strategy map gap analysis, alignment point
scoring, and executive dashboard views sent to PDA’s.

• IRPS Scorecard Module has the following features:

- Project / Initiative Tracking with milestones
- Automated Email Data Collection
- Automated Report Distribution
- Linking Capability to Agency Databases (such as SES,
G-PAC, and Shared Service Docking Databases)
59
 Highlight Important Steps

• Cascade and align strategy down to the Outlet level (and

beyond – personal scorecards) where execution takes place.
• Capture cause effect linkages as you cascade and align down.
This will ensure that all of the Agency is moving in the same
strategic direction.
• Identify and commit to projects and initiatives that will drive
strategic execution.
• Establish performance outcomes in the form of measurements
and targets.
• Review results on a regular basis within the Quarterly
Leadership Briefings using the Balanced Scorecard framework.

60
 Additional Information

• Training Slides (1)

• Performance Based Handbook (1)
• Performance Measurement Tool Kit (1)
• Formal Training:
– Offered Quarterly at the Central and Western Region Offices
– Annual Leadership Conference – 2 Hour Workshop
• Web Based Training:
– IRPS SMS – Option 6, self serve registration

(1) Posted on the internet at: www.exinfm.com/workshop.html

Contact Information: Matt Evans, matt@exinfm.com,877-689-4097

61