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      
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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
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Setting Strategic Goals

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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 )
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Making Strategic Goals Actionable

SWOT Analysis Key Strengths, Weaknesses, Opportunities & Threats

Strategic Goals

Strategy Map
Visual simplification of Strategic Plan

Top-Level Balanced Scorecard

Operational framework to communicate, deploy and execute plan
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Prioritized Initiatives
Aligned improvement

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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

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Steps to Creating a Strategy Map

1. Prioritize SWOT outputs & convert to verb noun strategic objectives 2. Group objectives by perspective or highlevel focus area 3. Identify cause-and-effect relationships with arrows

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The Anatomy of a Strategy Map

Traditional Scorecard Perspectives Perspectives

High-level objectives (verb/noun)

Links showing relationships

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Example Strategy Map for Public Sector

Note: Perspective names and their cause & effect order change

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Next, Create a Balanced Scorecard

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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)

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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)

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Perspectives & Objectives on BSC

Perspective

Objective

Index Number
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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
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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)

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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

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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

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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

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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
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Top-Level Scorecard with Measures

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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.
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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

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A Prioritization Matrix

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An Example Completed Matrix

Column 1 Initiative Under Consideration 1. Improve margins Column 2 Desired Outcome of Initiative Improved profitability Column 3 How Outcome will be Measured Percent of products meeting margin goals
Degree of Alignment to BSC

Column 4 Prioritization Factors (Enter 1, 3, or 5 in each see instructions below )

Need to Improve Urgency Total Cost Organizational Readiness

Column 5 Priority Score/Departments

= product of factors from Column 4 (multiply all 5). Also list key dept. needed to achieve it

1875 Operations

2. Improve productivity in manufacturing

Improved throughout and reduced costs

Percent of 5 departments that meet productivity goals % of customers renewing annual service plans 3

675 Manufacturing

3. Implement new CRM system

4. Open new customer training facility

Improved relationships with key customers Improved knowledge of key customers

675 IT

% of customers 1 attending training

15 Customer Education & Facilities

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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

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What It Looks Like (Long-Term)

Top-Level Scorecard

Divisional or Business Unit Scorecards

Department or Functional Scorecards

Individual Employee Goals

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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

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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

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Cascading Objectives & Measures Using a Process Matrix Approach

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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

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Create a Matrix for Each Area

Outcome
List key processes of the area

Corporate Objectives 1.1 Grow Profitable Revenues 2.1 Improve Cust. Sat. 3.1 Integrate New Tech.

ITs Business Processes

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

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Identify Outcomes & Intersections

Identify processes that most strongly support the Objectives

Outcomes

Corporate Objectives 1.1 Grow Profitable Revenues 2.1 Improve Cust. Sat. 3.1 Integrate New Tech.

ITs Business Processes

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

Availability

Data Ctr. Rev. Cust. Sat.

Resolved calls

x
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Translate the Objectives

Describe Objective using that areas terms

Outcomes

Corporate Objectives 1.1 Grow Profitable Revenues 2.1 Improve Cust. Sat. 3.1 Integrate New Tech.
3.1.1 Improve network reliability 1.1.1 Maximize service revenues 2.1.1 Minimize customer complaints 2.1.2 Improve call resolution
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ITs Core Processes

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

Data Ctr. Rev. Cust. Sat.

Availability

3.1.2 Leverage ticket software

Resolved calls

Align Measures Using the Matrix

Align measures identified in the processes to the cascaded Objectives

Corporate Objectives
1.1 Grow Profitable Revenues 2.1 Improve Cust. Sat. 3.1 Integrate New Tech.
3.1.1 Update network speed

ITs Core Processes

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

1.1.1 Maximize ASP revenues 2.1.1 Minimize customer complaints

% full availability

$ service rev/month

# hours downtime
3.1.2 Leverage ticket software

% of calls resolved
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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

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Going From Strategy to Action Plan

An Example Drill Down from the City of Coral Springs Scorecards

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Police Scorecard

Click to drill down

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Drill down reveals Measure Details

Contributing lower-level measures

Aligned improvement Initiatives

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Additional Measure Details (trend charts & graphs, comparisons)

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Chart Detail Crime by Type

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Chart Detail Crime Rate Comparisons

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Initiative Detail

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

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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

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How Does This Fit Into the WASQ Criteria?

 What WASQ categories does this type of framework address?  Why?

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Questions?

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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

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