Cascading the Balanced Scorecard to Build Organizational Alignment Presented to: Prof. Dr. Ahmad Galal Prepared by: Tarek Abd El Latif 1

Agenda Lower level BSC. How to develop an aligned BSC? Shared Service BSC. Personal BSC. Evaluation of the cascaded BSC. Conclusion. 2

Chinese President The Chinese President was once asked “How will you be able to feed one million mouths?” His answer was simply: “why don’t we put it as “how I will plan to benefit out from two million working hands”.

Criteria of the Lower-Level SC Most likely it contains a greater number of measures. It specifies the necessary details required to achieve success on the corporate measures filled in as part of the business unit, department, and team SC (in other words filling the gap). In contrast to the corporate BSC that s all about abstraction (as brand awareness, employee satisfaction..etc) the lower level BSC they dig down for details. Determination of the no. of measures to be added is a challenge but can be solved by using the measures discussed earlier in chapter 6 4

The lower-level SC at Nova Scotia Power Inc. Here you will mention that each step is dependent on the previous step The measures in each of the three Scorecard excerpts of are not identical, but they are aligned. 5

Assisting the Development of Aligned BSC Provide clear accountabilities, guidelines, even up to personal assistance; share the expertise that resides on your BSC team across your organization, the BSC team may act as a facilitator as well. Use business plans: As these plans contain information on key processes, objectives, initiatives, and costs so they can be refined until they are replaced with the BSC. Orally you will state that within any organizations; employees are either will be accepting the BSC & willing to adapt it & others are just obliged to implement for all these are the steps to assist in implementation of BSC Step 1: Discuss the Scorecard whenever possible, distribute it to all employees, share articles and books that provide useful information, and, most importantly, develop templates they can use to guide them through the process of developing their own Balanced Scorecard. They must know exactly what is expected of them and when. But the single most critical thing you must do is provide personal assistance. Share the expertise that resides on your Balanced Scorecard team across your organization. Your team can lead training sessions on Scorecard concepts and then act as facilitators during the development of Balanced Scorecards. The Scorecard and functional knowledge they possess will be an unbeatable combination. 6

Shared Service BSC Shared service groups are sometimes called corporate resources or corporate staff. Human resources, accounting and finance, and information technology are all examples of shared service units housed in virtually all organizations. These departments provide specialized services to the business units and corporate entity they serve, and should do so at a cost and level of quality superior to external vendors. 7

Shared Service BSC (Cont.) Common problem facing the shared service units is the lack of specific strategy or difficulty in initiating the process of BSC, but instead focus on meeting the needs of their internal customers. How to overcome this problem? Through the service-level agreements (SLAs). These documents should contain the details of the specific processes and products supplied by the shared service unit as well as the costs, objectives, and key indicators of desired performance Organizations often negotiate SLA between business units and shared service groups. Some organization may provide a FORMAL SLAs Orally: Here we can negotiate that the shared service unit must be included as early as the step of choosing the measures within the BSC. EXAMPLE:if a goal of improving employee turnover appeared on the Corporate Scorecard, the human resources group would be expected to develop cascaded performance measures to make this a reality. 8

Here arises 2 important questions Which is better having our own shared service units or should we outsource? How to get he commitment & involvement of this unit within the BSC? YOU MAY NOT INCLUDE THIS SLIDE & JUST STATE VERBALLY. 1st question my personal opinion if we have these functions within the organization; I think it will be better not to outsource instead invest in the organizational resources. This will answer a part of the 2nd question & moreover; the cascading issue will also provide the commitment shared units must believe that the BSC is an ideal method for shared service units to demonstrate the unique value they contribute to the organization & to get connected to the organizational strategy. 9

Performance Appraisal Vs Personal BSC In fact, the annual performance appraisal process represents a burden for both management and employees alike. There are 2 problems in the performance appraisal process: There is no follow up for these appraisals & the employee get a feedback infrequently. There is always a suspicion regarding this process; the performance ratings are completely subjective and based purely on a manager’s or supervisor’s limited view of employee performance. Alternatively; organizations have to develop (Personal Balanced Scorecards) Companies will expend significant energy in promoting a formal appraisal process, issuing memos, providing templates with information on the competencies and behaviors they desire to see, and training employees on how to develop an effective plan. YET there is NO FOLLOW UP for such appraisals. Throughout the performance period there is infrequent feedback to employees, and when they get feedback it concerns outcomes and results, not behaviors. 10

Benefits of the Personal BSC Builds awareness of the BSC: an opportunity to apply the BSC concept on a personal level. Generates commitment to the SC: as the employees develop their own series of linked objectives & measures this will certainly boost their support. Increases comprehension of aligned SC: employees will review the whole BSC in order to develop their own. Thus, cascading supplies an outstanding training opportunity 11

Benefits of the Personal BSC (Cont.) Offers a clear line of sight from employee goals to organizational strategy: through allowing every employee to demonstrate how their specific actions are making a difference and leading to improved overall results. Builds support for the goal-setting process: through sorting the employees’ goals by their relevance. 12

Personal BSC Template In the document three key areas are merged—cascaded Scorecards, incentive compensation, and personal development plans. To maximize educational and practical value, the document is split into two pages. Page 1 serves the important purpose of outlining mission, vision, and strategies and establishing a line of sight for the employee. The remainder of the page illustrates the cascading Scorecards relevant to that individual. Summarized versions of the organizational, business unit, and departmental Balanced Scorecards are provided. 13

Personal BSC Template (Cont.) Displaying this individualized cascading demonstrates the cascading that has led to this point and greatly facilitates the completion of the personal Balanced Scorecard on page 2. While we might consider page 1 a learning page, page 2 has a more specific purpose—allowing the individual employee to define the specific objectives and measures they will pursue to help their department reach its objectives, supply potential incentive awards, and outline the action steps they will take to achieve success. 14

Steps for completing page 2 The individual must develop the objectives, measures, and targets that comprise his or her individual Scorecard. By displaying all linked SC on page 1, with discussion and coaching the development of personal goals should flow quite smoothly. TAREK: READ & THEN DELETE U HAVE TO STATE IT VERBALLY 15

Steps for completing page 2 The individual must then select the appropriate weights for each measure when determining his or her incentive possibilities. The manager or supervisor will have final approval on the weights and associated targets, ensuring that they appear reasonable and challenging but attainable. The perspectives are also weighted to denote the areas in which the employee is able to exert the most influence. In this example, perspective weights are equal. Employee targets are discussed further in the review of the Balanced Scorecard’s role in compensation (Chapter Ten). TAREK: READ & THEN DELETE U HAVE TO STATE IT VERBALLY 16

Steps for completing page 2 Finally, the employee may begin to construct a personal development plan (PDP) based on the goals established of their Scorecard. This document may or may not replace the need for a formal PDP, but it will certainly facilitate the development of that document by identifying the key areas of focus for the individual. TAREK: READ & THEN DELETE U HAVE TO STATE IT VERBALLY 17

Why it is important to cascade the BSC? Driving the Scorecard to every level of the company signals to each employee what the key drivers of success are at your company and provides them with the opportunity to define how they contribute to that success. Cascading may create dozens of BSCs within your company. Their value is enormous, provided they align with overall goals and tell a consistent story. 18

Reviewing and Evaluating Cascaded BSC This step is crucial to avoid unrealistic targets, missing measures, and departments working against each other & to ensure truly aligned BSC. Part of the responsibility of this task goes to the BSC team as they have the requisite knowledge to effectively critique objectives and measures, ensuring consistency in form and approach across the organization. Conduct Scorecard sharing sessions. Invite employees to review the SCs of their peers and offer their suggestions for clarification and improvement. Once business units and departments have distributed their Scorecards, the Balanced Scorecard team can review them and later hold sessions with the submitting departments to discuss refinements and improvements. Then a meeting can be held; Invite employees to review the Scorecards of their peers and offer their suggestions for clarification and improvement. 19

Evaluations of cascaded BSC These are some points to consider in reviewing the BSC: Linkage to related SCs: Each SC should contain objectives and measures that influence the next SC in the chain. Linkage to strategy Appropriate targets Target setting can be a difficult exercise requiring significant professional judgment. Ensure that cascaded targets will lead to the fulfillment of higher-level targets throughout the chain of linked Balanced Scorecards. 20

Evaluations of cascaded BSC (Cont.) Coverage of key objectives: The chief rule of cascading is that of influence. Lag and lead indicators: Cascaded SCs should contain an appropriate mix of lagging and leading indicators of performance. Not every group will influence every high-level objective, but across the company the complete population of highest-level objectives should receive adequate coverage. 21

In conclusion “The key benefit of cascading is allowing everyone to know of their importance in the overall strategy of the company and that they are an active and critical part, and it’s not just lip service, it’s real.” McCord Senior Vice President; Ed Berkman 22

Thank you 23