HR Balanced Scorecard

Why? The balanced scorecard is for everyone in the organization. This means that the balanced scorecard should be cascaded to all departments/business units and teams – both operating and support units.

The Balanced Scorecard and the Strategic Management system Establishing the linking between Balanced Scorecard and the Strategic Management system BSC not linked to the Strategic management turns from the fundamental system into just the collection of the isolated indicators which do not have any influence on the strategic development of the company The important tool of the strategic management system is the strategic planning. The result of planning gives the information that is used as a basis of strategy map creation and the indicators forming. But many companies all over the world do not pay enough attention to the strategic planning. It happens that even those few companies that have such activity as strategic plan making sometimes no not use it at all. A lot of documents related to the strategy (including the strategic plan) usually contain just some not exact wordings that sure are unclear for everybody except for the creators of those papers. It sure is not possible to translate such terms as “stable position on the market”, “increase of profitability” or “cost-saving” into operational goals. That is why the problem of unclear strategy might ruin all the benefit from the implementation of BSC because it simply ties the system up.

What are the Key Benefits of using Balanced Scorecards? Better Strategic Planning –powerful framework for building and communicating strategy Improved Strategy Communication & Execution –strategy with all its interrelated objectives is mapped on one piece of paper allows companies to easily communicate strategy internally and externally Better Management Information –forces organisations to design key performance indicators for their various strategic objectives Research shows that companies with a BSC approach tend to report higher quality management information Improved Performance Reporting –create meaningful management reports and dashboards to communicate performance both internally and externally Better Strategic Alignment –align their organisation with the strategic objectives Better Organisational Alignment –help to align organisational processes such as budgeting, risk management and analytics with the strategic priorities Better Strategic Planning – The Balanced Scorecard provides a powerful framework for building and communicating strategy. The business model is visualised in a Strategy Map which forces managers to think about cause-and-effect relationships. The process of creating a Strategy Map ensures that consensus is reached over a set of interrelated strategic objectives. It means that performance outcomes as well as key enablers or drivers of future performance (such as the intangibles) are identified to create a complete picture of the strategy. Improved Strategy Communication & Execution – The fact that the strategy with all its interrelated objectives is mapped on one piece of paper allows companies to easily communicate strategy internally and externally. We have known for a long time that a picture is worth a thousand words. This ‘plan on a page’ facilities the understanding of the strategy and helps to engage staff and external stakeholders in the delivery and review of strategy. In the end it is impossible to execute a strategy that is not understood by everybody. Better Management Information – The Balanced Scorecard approach forces organisations to design key performance indicators for their various strategic objectives. This ensures that companies are measuring what actually matters. Research shows that companies with a BSC approach tend to report higher quality management information and gain increasing benefits from the way this information is used to guide management and decision making. Improved Performance Reporting – companies using a Balanced Scorecard approach tend to produce better performance reports than organisations without such a structured approach to performance management. Increasing needs and requirements for transparency can be met if companies create meaningful management reports and dashboards to communicate performance both internally and externally. Better Strategic Alignment – organisations with a Balanced Scorecard are able to better align their organisation with the strategic objectives. In order to execute a plan well, organisations need to ensure that all business and support units are working towards the same goals. Cascading the Balanced Scorecard into those units will help to achieve that and link strategy to operations. Better Organisational Alignment – well implemented Balanced Scorecards also help to align organisational processes such as budgeting, risk management and analytics with the strategic priorities. This will help to create a truly strategy focused organisation.

The components of the management system are shown in the figure above The components of the management system are shown in the figure above. Starting at “high altitude”, Mission, Vision, and Core Values are translated into desired Strategic Results. The organization’s “Pillars of Excellence”, or Strategic Themes, are selected to focus effort on the strategies that matter the most to success. Strategic Objectives are used to decompose strategy into actionable components that can be monitored using Performance Measures. Measures allow the organization to track results against targets, and to celebrate success and identify potential problems early enough to fix them. Finally, Strategic Initiatives translate strategy into a set of high-priority projects that need to be implemented to ensure the success of strategy. Engaged leadership and interactive, two-way communication are the cornerstones of a successful management system. Once the strategic thinking and necessary actions are determined, annual program plans, projects and service level agreements can be developed and translated into budget requests.

Building & Implementing a Balanced Scorecard: Nine Steps to SuccessTM Developed by the Balanced Scorecard Institute Step One: Assessment Step Two: Strategy Step Three: Objectives Step Four: Strategy Map Step Five: Performance Measures Step Six: Initiatives Step Seven: Automation Step Eight: Cascade Step Nine: Evaluation Step One -- BSC Development Plan - Strategic Elements - Change Management of the scorecard building process starts with an assessment of the organization’s Mission and Vision, challenges (pains), enablers, and values. Step One also includes preparing a change management plan for the organization, and conducting a focused communications workshop to identify key messages, media outlets, timing, and messengers. In Step Two, - Customer Value - Strategic Themes - Strategic Results elements of the organization’s strategy, including Strategic Results, Strategic Themes, and Perspectives, are developed by workshop participants to focus attention on customer needs and the organization’s value proposition Step Three: Objectives Strategy Action Components In Step Three, the strategic elements developed in Steps One and Two are decomposed into Strategic Objectives, which are the basic building blocks of strategy and define the organization's strategic intent. Objectives are first initiated and categorized on the Strategic Theme level, categorized by Perspective, linked in cause-effect linkages (Strategy Maps) for each Strategic Theme, and then later merged together to produce one set of Strategic Objectives for the entire organization Step Four: Strategy Map - Cause-and-Effect Links In Step Four, the cause and effect linkages between the enterprise-wide Strategic Objectives are formalized in an enterprise-wide Strategy Map. The previously constructed theme Strategy Maps are merged into an overall enterprise-wide Strategy Map that shows how the organization creates value for its customers and stakeholders. Step Five: Performance Measures - Performance Measures - Targets - Baselines In Step Five, Performance Measures are developed for each of the enterprise-wide Strategic Objectives. Leading and lagging measures are identified, expected targets and thresholds are established, and baseline and benchmarking data is developed. Step Six: Initiatives - Strategic Projects In Step Six, Strategic Initiatives are developed that support the Strategic Objectives. To build accountability throughout the organization, ownership of Performance Measures and Strategic Initiatives is assigned to the appropriate staff and documented in data definition tables Step Seven: Automation - Software - Performance Reporting - Knowledge Sharing  In Step Seven, the implementation process begins by applying performance measurement software to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information. In short, automation helps people make better decisions because it offers quick access to actual performance data. Step Eight: Cascade - Alignment - Unit & Individual Scorecards In Step Eight, the enterprise-level scorecard is ‘cascaded’ down into business and support unit scorecards, meaning the organizational level scorecard (the first Tier) is translated into business unit or support unit scorecards (the second Tier) and then later to team and individual scorecards (the third Tier). Cascading translates high-level strategy into lower-level objectives, measures, and operational details. Cascading is the key to organization alignment around strategy. Team and individual scorecards link day-to-day work with department goals and corporate vision. Cascading is the key to organization alignment around strategy. Performance measures are developed for all objectives at all organization levels. As the scorecard management system is cascaded down through the organization, objectives become more operational and tactical, as do the performance measures. Accountability follows the objectives and measures, as ownership is defined at each level. An emphasis on results and the strategies needed to produce results is communicated throughout the organization. Cascading a balanced scorecard means to translate the corporate-wide scorecard (referred to as Tier 1) down to first business units, support units or departments (Tier 2) and then teams or individuals (Tier 3).  The end result should be focus across all levels of the organization that is consistent.  The organization alignment should be clearly visible through strategy, using the strategy map, performance measures and targets, and initiatives. Scorecards are used to improve accountability through objective and performance measure ownership, and desired employee behaviors are incentivized with recognition and rewards. Step Nine: Evaluation - Strategy Results - Revised Strategies  In Step Nine, an Evaluation of the completed scorecard is done. During this evaluation, the organization tries to answer questions such as, ‘Are our strategies working?’, ‘Are we measuring the right things?’, ‘Has our environment changed?’ and ‘Are we budgeting our money strategically?’.

Building & Implementing a Balanced Scorecard: Nine Steps to SuccessTM Developed by the Balanced Scorecard Institute Step One: Assessment- BSC Development Plan assessment of the organization’s Mission and Vision, challenges (pains), enablers, and values Preparation of a change management plan for the organization conducting a focused communications workshop to identify key messages, media outlets, timing, and messengers Step Two: Strategy - Customer Value Strategic Results, Strategic Themes, and Perspectives, are developed -focus attention on customer needs and the organization’s value proposition Step Three: Objectives- Strategy Action Components Strategic Objectives are first initiated and categorized on the Strategic Theme level, categorized by Perspective, linked in cause-effect linkages (Strategy Maps) Step One -- BSC Development Plan - Strategic Elements - Change Management of the scorecard building process starts with an assessment of the organization’s Mission and Vision, challenges (pains), enablers, and values. Step One also includes preparing a change management plan for the organization, and conducting a focused communications workshop to identify key messages, media outlets, timing, and messengers. In Step Two, - Customer Value - Strategic Themes - Strategic Results elements of the organization’s strategy, including Strategic Results, Strategic Themes, and Perspectives, are developed by workshop participants to focus attention on customer needs and the organization’s value proposition Step Three: Objectives Strategy Action Components In Step Three, the strategic elements developed in Steps One and Two are decomposed into Strategic Objectives, which are the basic building blocks of strategy and define the organization's strategic intent. Objectives are first initiated and categorized on the Strategic Theme level, categorized by Perspective, linked in cause-effect linkages (Strategy Maps) for each Strategic Theme, and then later merged together to produce one set of Strategic Objectives for the entire organization Step Four: Strategy Map - Cause-and-Effect Links In Step Four, the cause and effect linkages between the enterprise-wide Strategic Objectives are formalized in an enterprise-wide Strategy Map. The previously constructed theme Strategy Maps are merged into an overall enterprise-wide Strategy Map that shows how the organization creates value for its customers and stakeholders. Step Five: Performance Measures - Performance Measures - Targets - Baselines In Step Five, Performance Measures are developed for each of the enterprise-wide Strategic Objectives. Leading and lagging measures are identified, expected targets and thresholds are established, and baseline and benchmarking data is developed. Step Six: Initiatives - Strategic Projects In Step Six, Strategic Initiatives are developed that support the Strategic Objectives. To build accountability throughout the organization, ownership of Performance Measures and Strategic Initiatives is assigned to the appropriate staff and documented in data definition tables Step Seven: Automation - Software - Performance Reporting - Knowledge Sharing  In Step Seven, the implementation process begins by applying performance measurement software to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information. In short, automation helps people make better decisions because it offers quick access to actual performance data. Step Eight: Cascade - Alignment - Unit & Individual Scorecards In Step Eight, the enterprise-level scorecard is ‘cascaded’ down into business and support unit scorecards, meaning the organizational level scorecard (the first Tier) is translated into business unit or support unit scorecards (the second Tier) and then later to team and individual scorecards (the third Tier). Cascading translates high-level strategy into lower-level objectives, measures, and operational details. Cascading is the key to organization alignment around strategy. Team and individual scorecards link day-to-day work with department goals and corporate vision. Cascading is the key to organization alignment around strategy. Performance measures are developed for all objectives at all organization levels. As the scorecard management system is cascaded down through the organization, objectives become more operational and tactical, as do the performance measures. Accountability follows the objectives and measures, as ownership is defined at each level. An emphasis on results and the strategies needed to produce results is communicated throughout the organization. Cascading a balanced scorecard means to translate the corporate-wide scorecard (referred to as Tier 1) down to first business units, support units or departments (Tier 2) and then teams or individuals (Tier 3).  The end result should be focus across all levels of the organization that is consistent.  The organization alignment should be clearly visible through strategy, using the strategy map, performance measures and targets, and initiatives. Scorecards are used to improve accountability through objective and performance measure ownership, and desired employee behaviors are incentivized with recognition and rewards. Step Nine: Evaluation - Strategy Results - Revised Strategies  In Step Nine, an Evaluation of the completed scorecard is done. During this evaluation, the organization tries to answer questions such as, ‘Are our strategies working?’, ‘Are we measuring the right things?’, ‘Has our environment changed?’ and ‘Are we budgeting our money strategically?’.

Building & Implementing a Balanced Scorecard: Nine Steps to SuccessTM Developed by the Balanced Scorecard Institute Step Four: Strategy Map-Cause-and-Effect Links the cause and effect linkages between the enterprise-wide Strategic Objectives are formalized in an enterprise-wide Strategy Map Step Five: Performance Measures Develop Performance Measures are for each of the enterprise-wide Strategic Objectives Lead and lag measures are identified Determine targets and thresholds, and Develop baseline and benchmarking data Step Six: Initiatives Strategic Initiatives are developed that support the Strategic Objectives Step One -- BSC Development Plan - Strategic Elements - Change Management of the scorecard building process starts with an assessment of the organization’s Mission and Vision, challenges (pains), enablers, and values. Step One also includes preparing a change management plan for the organization, and conducting a focused communications workshop to identify key messages, media outlets, timing, and messengers. In Step Two, - Customer Value - Strategic Themes - Strategic Results elements of the organization’s strategy, including Strategic Results, Strategic Themes, and Perspectives, are developed by workshop participants to focus attention on customer needs and the organization’s value proposition Step Three: Objectives Strategy Action Components In Step Three, the strategic elements developed in Steps One and Two are decomposed into Strategic Objectives, which are the basic building blocks of strategy and define the organization's strategic intent. Objectives are first initiated and categorized on the Strategic Theme level, categorized by Perspective, linked in cause-effect linkages (Strategy Maps) for each Strategic Theme, and then later merged together to produce one set of Strategic Objectives for the entire organization Step Four: Strategy Map - Cause-and-Effect Links In Step Four, the cause and effect linkages between the enterprise-wide Strategic Objectives are formalized in an enterprise-wide Strategy Map. The previously constructed theme Strategy Maps are merged into an overall enterprise-wide Strategy Map that shows how the organization creates value for its customers and stakeholders. Step Five: Performance Measures - Performance Measures - Targets - Baselines In Step Five, Performance Measures are developed for each of the enterprise-wide Strategic Objectives. Leading and lagging measures are identified, expected targets and thresholds are established, and baseline and benchmarking data is developed. Step Six: Initiatives - Strategic Projects In Step Six, Strategic Initiatives are developed that support the Strategic Objectives. To build accountability throughout the organization, ownership of Performance Measures and Strategic Initiatives is assigned to the appropriate staff and documented in data definition tables Step Seven: Automation - Software - Performance Reporting - Knowledge Sharing  In Step Seven, the implementation process begins by applying performance measurement software to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information. In short, automation helps people make better decisions because it offers quick access to actual performance data. Step Eight: Cascade - Alignment - Unit & Individual Scorecards In Step Eight, the enterprise-level scorecard is ‘cascaded’ down into business and support unit scorecards, meaning the organizational level scorecard (the first Tier) is translated into business unit or support unit scorecards (the second Tier) and then later to team and individual scorecards (the third Tier). Cascading translates high-level strategy into lower-level objectives, measures, and operational details. Cascading is the key to organization alignment around strategy. Team and individual scorecards link day-to-day work with department goals and corporate vision. Cascading is the key to organization alignment around strategy. Performance measures are developed for all objectives at all organization levels. As the scorecard management system is cascaded down through the organization, objectives become more operational and tactical, as do the performance measures. Accountability follows the objectives and measures, as ownership is defined at each level. An emphasis on results and the strategies needed to produce results is communicated throughout the organization. Cascading a balanced scorecard means to translate the corporate-wide scorecard (referred to as Tier 1) down to first business units, support units or departments (Tier 2) and then teams or individuals (Tier 3).  The end result should be focus across all levels of the organization that is consistent.  The organization alignment should be clearly visible through strategy, using the strategy map, performance measures and targets, and initiatives. Scorecards are used to improve accountability through objective and performance measure ownership, and desired employee behaviors are incentivized with recognition and rewards. Step Nine: Evaluation - Strategy Results - Revised Strategies  In Step Nine, an Evaluation of the completed scorecard is done. During this evaluation, the organization tries to answer questions such as, ‘Are our strategies working?’, ‘Are we measuring the right things?’, ‘Has our environment changed?’ and ‘Are we budgeting our money strategically?’.

Building & Implementing a Balanced Scorecard: Nine Steps to SuccessTM Developed by the Balanced Scorecard Institute Step Seven: Automation Software Performance Reporting Knowledge Sharing Step Eight: Cascade-key to organization alignment Cascading a balanced scorecard means to translate the corporate-wide scorecard (referred to as Tier 1) down to first business units, support units or departments (Tier 2) and then teams or individuals (Tier 3) Cascading translates high-level strategy into lower-level objectives, measures, and operational details Determine performance measures at each level – more operational and tactical Step Nine: Evaluation Strategy Results Revised Strategies Step One -- BSC Development Plan - Strategic Elements - Change Management of the scorecard building process starts with an assessment of the organization’s Mission and Vision, challenges (pains), enablers, and values. Step One also includes preparing a change management plan for the organization, and conducting a focused communications workshop to identify key messages, media outlets, timing, and messengers. In Step Two, - Customer Value - Strategic Themes - Strategic Results elements of the organization’s strategy, including Strategic Results, Strategic Themes, and Perspectives, are developed by workshop participants to focus attention on customer needs and the organization’s value proposition Step Three: Objectives Strategy Action Components In Step Three, the strategic elements developed in Steps One and Two are decomposed into Strategic Objectives, which are the basic building blocks of strategy and define the organization's strategic intent. Objectives are first initiated and categorized on the Strategic Theme level, categorized by Perspective, linked in cause-effect linkages (Strategy Maps) for each Strategic Theme, and then later merged together to produce one set of Strategic Objectives for the entire organization Step Four: Strategy Map - Cause-and-Effect Links In Step Four, the cause and effect linkages between the enterprise-wide Strategic Objectives are formalized in an enterprise-wide Strategy Map. The previously constructed theme Strategy Maps are merged into an overall enterprise-wide Strategy Map that shows how the organization creates value for its customers and stakeholders. Step Five: Performance Measures - Performance Measures - Targets - Baselines In Step Five, Performance Measures are developed for each of the enterprise-wide Strategic Objectives. Leading and lagging measures are identified, expected targets and thresholds are established, and baseline and benchmarking data is developed. Step Six: Initiatives - Strategic Projects In Step Six, Strategic Initiatives are developed that support the Strategic Objectives. To build accountability throughout the organization, ownership of Performance Measures and Strategic Initiatives is assigned to the appropriate staff and documented in data definition tables Step Seven: Automation - Software - Performance Reporting - Knowledge Sharing  In Step Seven, the implementation process begins by applying performance measurement software to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information. In short, automation helps people make better decisions because it offers quick access to actual performance data. Step Eight: Cascade - Alignment - Unit & Individual Scorecards In Step Eight, the enterprise-level scorecard is ‘cascaded’ down into business and support unit scorecards, meaning the organizational level scorecard (the first Tier) is translated into business unit or support unit scorecards (the second Tier) and then later to team and individual scorecards (the third Tier). Cascading translates high-level strategy into lower-level objectives, measures, and operational details. Cascading is the key to organization alignment around strategy. Team and individual scorecards link day-to-day work with department goals and corporate vision. Cascading is the key to organization alignment around strategy. Performance measures are developed for all objectives at all organization levels. As the scorecard management system is cascaded down through the organization, objectives become more operational and tactical, as do the performance measures. Accountability follows the objectives and measures, as ownership is defined at each level. An emphasis on results and the strategies needed to produce results is communicated throughout the organization. Cascading a balanced scorecard means to translate the corporate-wide scorecard (referred to as Tier 1) down to first business units, support units or departments (Tier 2) and then teams or individuals (Tier 3).  The end result should be focus across all levels of the organization that is consistent.  The organization alignment should be clearly visible through strategy, using the strategy map, performance measures and targets, and initiatives. Scorecards are used to improve accountability through objective and performance measure ownership, and desired employee behaviors are incentivized with recognition and rewards. Step Nine: Evaluation - Strategy Results - Revised Strategies  In Step Nine, an Evaluation of the completed scorecard is done. During this evaluation, the organization tries to answer questions such as, ‘Are our strategies working?’, ‘Are we measuring the right things?’, ‘Has our environment changed?’ and ‘Are we budgeting our money strategically?’.

Business Management Process The Balanced Scorecard is just one of three levels in the business management process: Top level: Company-wide Strategy maps Middle Level: Balanced Scorecard Bottom Level: Initiatives

The Balanced Scorecard: From Strategy to Performance Measures Exh. 10-11 Financial Has our financial performance improved? Customer Do customers recognize that we are delivering more value? Internal Business Processes Have we improved key business processes so that we can deliver more value to customers? Learning and Growth Are we maintaining our ability to change and improve? Performance Measures What are our financial goals? What internal busi- ness processes are critical to providing value to customers? Vision and Strategy What customers do we want to serve and how are we going to win and retain them? The premise of these four groups of measures is that learning is necessary to improve internal business processes, which in turn improves the level of customer satisfaction, which in turn improves financial results. Note the emphasis on improvement, not just attaining some specific objective. The Balanced Scorecard: From Strategy to Performance Measures

The Balanced Scorecard Translates a company’s mission and strategy into a comprehensive set of performance measures Financial and nonfinancial aspects

How to define strategic goals Who are your stakeholders? What do your stakeholders need? What are their strategic goals?  Create a Strategy Map-identify your priorities Consider the four perspectives-Business Processes, Customer Relationship, Education and Growth, and Finance Who are your stakeholders? Typically, when you need to define your priorities, you need to start with your stakeholders.  These might be the investors in your company, or the owners of your project.  Who are you working for? What do your stakeholders need? What are their strategic goals?  Typically, investors want to make a profit on their investment.  Sometimes they may have other priorities, but they always expect some sort of results.  You need to understand what results your stakeholders expect, and you need to research your topic to understand what you need to do to achieve those results.  In the process, you will define the strategic goals for your company Create a Strategy Map. Once you have defined your goals, you need to identify your priorities.  What should be done first?  What results can you expect?  This information is enough to start creating your Strategy Map. Consider the four perspectives. Look at your company’s situation from all four of the basic perspectives on the Balanced Scorecard: Business Processes, Customer Relationship, Education and Growth, and Finance.  Do your strategic goals include something related to each of these perspectives?  If not, you are probably missing something

Elements strategy map view scorecard view articulates the strategy in a series of linked objectives representing the most important priorities for the organization scorecard view Gives specific measures and targets represent the yardstick and expected level of success the strategic initiatives or action programs that are the ways to achieve targets outside of current capabilities. strategy map view, which articulates the strategy in a series of linked objectives representing the most important priorities for the organization. The second is the scorecard view, which holds the specific measures, and targets that represent the yardstick and expected level of success as well as the strategic initiatives or action programs that are the ways to achieve targets outside of current capabilities. Strategic initiatives in the context of marketing can be investments into marketing programs or activities, with specific ROI targets, and eventually, ROI results. Strategic objectives are numerical measurements that are commonly referred to as Key Performance Indicators or “KPIs”. In the case of Balanced Scorecard, the founders, Kaplan and Norton recommend the name strategic objective to highlight the importance of naming the measurement with the goal in mind, e.g. “Increase Market Share”, “Reduce Cost of Sales”. The creation of a strategy map and scorecard for each major organizational unit allows the goals of the organization to be explicitly and visually aligned. Cause and effect arrows link the upstream measurements across time to the downstream measurements. These key measurements are used to represent strategic objectives that highlight specific goals that lead to increased shareholder value. The strategic objectives are color-coded green, red, or yellow to indicate their relative success or failure when actual values are compared against target values within the balanced scorecard tool.

Perspectives The Learning & Growth Perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement The Business Process Perspective refers to internal business processes The Customer Perspective the importance of customer focus and customer satisfaction in any business Lead indicators The Financial Perspective The Learning & Growth Perspective This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization. Kaplan and Norton emphasize that that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems." The Business Process Perspective This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants. The Customer Perspective Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups. The Financial Perspective Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.  There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category. Strategy Mapping Strategy maps are communication tools used to tell a story of how value is created for the organization.  They show a logical, step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a cause-and-effect chain.  Generally speaking, improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up), which in turn enables the organization to create desirable results in the Customer and Financial perspectives (the top two rows).

Early BSC

Perspectives of BSC Organization & Learning: people, teams, training and recruiting Internal Process: business process, automation, technology & plant infrastructure Customer: marketing, value proposition, and product/service in the eyes of the customer Financial: revenue, growth, earnings, corporate governance, shareholder value

Modern BSC http://www.ap-institute.com/resources_whitepapers.asp

http://www. torontospin http://www.torontospin.com/torontospin/events/doc/presentations/20041124-MarkKozak-Holland.pdf

http://www. torontospin http://www.torontospin.com/torontospin/events/doc/presentations/20041124-MarkKozak-Holland.pdf

http://www. torontospin http://www.torontospin.com/torontospin/events/doc/presentations/20041124-MarkKozak-Holland.pdf

Data historical internal (company) data (from operational systems) historical external data (from third parties) forecast external data (from third parties) forecast company internal data (financial and non-financial) target values (eg EPS targets, Sales Quotas, etc) Data availability – existing vs. to be collected Strategic objectives will typically have actual historical data pulled from internal IT databases. Some will be from external data sets, pulled from service and data providers, or government statistics. The color coding of the strategic objective (or KPI) will be red, green, yellow, determined by numerical thresholds derived from the difference between the current actual value and the target value set during the planning stage. A typical example is sales quota for year end. That is the target value, whereas the actual value of sales maybe more or less than that target value. This target value can have different origins but is usually entered by the scorecard owner or administrator, or integrated from the planning source.

Target values Decreed by executive management Negotiated between the operational and line management Selected from an industry benchmark Selected from competitors known (or assumed) values Selected as % change over last years historical value Each of these target-value origins will have different effects on the commitment and reaction to those who use that target and are rewarded or punished according to its achievement. These choices are a clear indication as to the culture of decision making within any one particular firm. Methodology experts, such as those at Balanced Scorecard Collaborative (www.BSCOL.com), are very valuable in managing the political ramifications of the choice of strategic objectives, target value and cause-and-effect linkage that make up a scorecard design. The target values are goals for specific strategic objectives, sometimes called “plan values”. Forecast values by contrast are what we expect to happen, regardless of the target value. Typically, every strategic objective will have a target value to allow the color alarm to appear. Only certain strategic objectives will have forecast value, the best example being sales volume and sales revenue. One common source of confusion is the different interpretations and use of actual data, vs. forecast data, vs. target data. There are different ways to drive the color alert combinations for a strategic objective (R/G/Y): the variances between (actual vs. forecast), (actual vs. target), and (target vs. forecast). Depending on the recency of the forecast data amongst other factors, the use of each variance is an import choice when designing the scorecard and achieving acceptance from the user community.

Key Performance Indicators reflect the critical success factors of an organization must be quantifiable stay with the same definition from year to year set targets for each Key Performance Indicator identify everything that is easy to measure and count collect and report the data on everything that is easy to measure and count

Key Performance Indicators (KPIs) help organizations understand how well they are performing in relation to their strategic goals and objectives Show whether the organization is on track or not serve to reduce the complex nature of organisational performance to a small number of key indicators

Example KPI Good Key Performance Indicators vs. Bad Bad: Good: Good: Title of KPI: Increase Sales Defined: Change in Sales volume from month to month Measured: Total of Sales By Region for all region Target: Increase each month What needs to be corrected? Good: Title of KPI: Employee Turnover Defined: no of employees resigned + no of employees terminated due to performance number of employees at the beginning of the year Measured: information available at human resources Target: Reduce Employee Turnover by 5% per year What's missing? Does this measure increases in sales volume by dollars or units? If by dollars, does it measure list price or sales price? Are returns considered and if so do the appear as an adjustment to the KPI for the month of the sale or are they counted in the month the return happens? How do we make sure each sales office's volume numbers are counted in one region, i.e. that none are skipped or double counted? How much, by percentage or dollars or units, do we want to increase sales volumes each month?(Note: Some of these questions may be answered by standard company procedures. Good: Title of KPI: Employee Turnover Defined: The total of the number of employees who resign for whatever reason, plus the number of employees terminated for performance reasons, and that total divided by the number of employees at the beginning of the year. Employees lost due to Reductions in Force (RIF) will not be included in this calculation. Measured: The HRIS contains records of each employee. The separation section lists reason and date of separation for each employee. Monthly, or when requested by the SVP, the HRIS group will query the database and provide Department Heads with Turnover Reports. HRIS will post graphs of each report on the Intranet. Target: Reduce Employee Turnover by 5% per year

Key performance indicators and BSC Who should design your indicators? Strategist and a line manager Do you have good indicators? indicators should not repeat each other, but taken together, they should describe 90% of your company or business unit Are your indicators easy to measure? should be easy to understand and measure How many indicators? three or four indicators in each category.  If you have more, you are overloading your scorecard Who should design your indicators? You should involve at least two people: a top manager, who understands the company’s strategy and goals; and a line-level manager, who knows what can and should be done to achieve those goals. 2)      Do you have good indicators? There are two rules to remember.  Your indicators should not repeat each other, but taken together, they should describe 90% of your company or business unit. 3)      Are your indicators easy to measure? Your indicators should be easy to understand and measure, or your employees will not use them.  So first, try measuring each indicator yourself.  Then, ask a colleague for an independent opinion.  If your colleague needs a significant amount of time to understand the indicator, then it is not a good indicator.  Either remove it from your scorecard, or clarify its description. 4)      How many indicators? Keep the number of indicators low.  Ideally, you should have three or four indicators in each category.  If you have more, you are overloading your scorecard.  Either add sub-categories, or create a Cascading Balanced Scorecard.

Marr, B. (2010) How to design Key Performance Indicators, Management Case Study, The Advanced Performance Institute (www.ap-institute.com). http://www.ap-institute.com/downloads/100608%20How%20to%20design%20Key%20Performance%20Indicators.pdf

KPI Type of data Source of data Frequency of data Target performance Raw Progress Change Source of data Frequency of data Target performance graphs

http://www. enterprise-dashboard http://www.enterprise-dashboard.com/2007/04/05/difference-between-balanced-scorecard-and-enterprise-dashboard/

Effect on the organization Culture change Human resources tasks, responsibilities Performance appraisal, bonuses Measurement and data collection Information management