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Balanced Scorecard Performance Management
The Balanced Scorecard is a performance management approach that helps organizations translate their vision and strategy into objectives and measures across four perspectives: financial, customer, internal processes, and learning and growth. It provides a framework for organizations to plan, measure, and manage performance and progress toward strategic goals. The Balanced Scorecard uses a mix of lagging and leading performance indicators to help organizations monitor and improve performance.
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Introduction to Balanced Scorecard and its significance for performance management.
Definitions and importance of Balanced Scorecard by Kaplan & Norton and Olve et al.
Explanation of performance management and the role of quantified information in organizations.
Overview of business planning process and achieving desired outcomes with available resources.
Typical issues faced by organizations including unclear mission statements and weak strategies.
Clarification that Balanced Scorecard is a performance management approach, not just measurement.
Objectives, Mission, Measures, Targets, and Vision integral to the Balanced Scorecard.
Four perspectives of Balanced Scorecard: Financial, Customer, Process, Learning & Growth.
Definition of 'Balanced' in Balanced Scorecard including long/short term and objective/subjective measures.
Connection between enablers (Financial, Customers, Innovation, Internal Processes) and results.
Examples of strategy maps showing desired outcomes for both public and private sectors.
Emphasis on identifying key processes for customer delivery and organizational capability.
Two types of metrics: Strategic Measures (lagging) and Performance Drivers (leading).
Importance of measurable goals and the implications of measurement on management.
Discussion on the significance of leading vs lagging indicators for achieving strategic goals.
Contact information for Ian J. Seath and final remarks on continuous improvement skills.
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Balanced Scorecard Performance Management
- 1. Balanced Scorecard for PerformanceManagement Some introductory slides Ian J Seath
- 2. Balanced Scorecard “TheBalanced Scorecard (BS) provides managers with the instrumentation they need to navigate to future competitive success.” Kaplan and Norton “Wise executives know that their company must develop the capabilities which it will need to prosper in the future. But, doing so will produce no profits in the current year, only costs.” Olve, Roy & Wetter © 2016 Copyright ISC Ltd.2
- 3. Performance Management Involvingpeople in the use of quantified information to direct/handle the activities within the organisation to achieve higher levels of performance © 2016 Copyright ISC Ltd.3
- 4. Business Planning BusinessPlanning is the process of ensuring that the organisation knows what it is trying to achieve; understands what activities are necessary to achieve it; and can set it down in a manageable programme of actions that deliver its desired outcomes within its available resources. © 2016 Copyright ISC Ltd.4
- 5. Typical Problems MissionStatements are unclear and don’t “come off the wall” Vision and strategy are weak, or unclear Planning is done with inadequate data and analysis Daily activity gets in the way of working on “breakthrough plans” Progress is not reviewed & plans stay “in the bottom drawer”, so improvements don’t happen And… There is a whole load of confusing jargon! © 2016 Copyright ISC Ltd.5
- 6. Let’s be clear… A Balanced Scorecard (BS) is a performance management approach, not a performance measurement approach © 2016 Copyright ISC Ltd.6
- 7. Objectives Mission Measures Targets Vision 7 © 2016Copyright ISC Ltd.
- 8. Objectives Mission Measures Targets Vision Projects Processes Step 1Step 2 Step 3 Step 4 Step 5 Plans 8 © 2016 Copyright ISC Ltd. Deliver tomorrow Deliver today
- 9. Objectives Mission Measures Targets Vision Technology, Systems, Facilities,Infrastructure People: Leadership, Capability Projects Processes Step 1 Step 2 Step 3 Step 4 Step 5 Plans 9 © 2016 Copyright ISC Ltd.
- 10. Financial perspective Customer perspective Process perspective Learning & Growth perspective Objectives Mission Measures Targets Vision Technology, Systems,Facilities, Infrastructure People: Leadership, Capability Projects Processes Step 1 Step 2 Step 3 Step 4 Step 5 Plans 10 © 2016 Copyright ISC Ltd.
- 11. 11 Generic Balanced Scorecard Financial perspective Customer perspective Process perspective Learning& Growth perspective Vision & Strategy How should we look to our Shareholders? How should we look to our Customers? How should we develop our capability to improve? What processes must we excel at? © 2016 Copyright ISC Ltd.
- 12. “Balanced” means… Long-termand short-term view Financial and non-financial Leading and lagging indicators Internal and external perspectives Objective and subjective measures © 2016 Copyright ISC Ltd.12 Objectives Measures Targets Plans Strategy Action
- 13. Enablers and Results 13 FinancialCustomers Innovation and Learning Internal Business Processes Vision Results Enablers © 2016 Copyright ISC Ltd.
- 14. Strategy Map -example 14 Improve revenues & profitability by understanding customer needs and differentiating ourselves accordingly Financial Customer Process Learning ROI Growth Revenue Growth Margin Improvement Delight the Consumer Win-Win Partner Relations New Products & Services Best in Class Delivery On Spec On Time Leadership Skills New Technology Employee Alignment © 2016 Copyright ISC Ltd.
- 15. Public Sector Example ©2016 Copyright ISC Ltd.15 Health & Social Care Outcomes What outcomes do we have to deliver to patients, carers and the public? Organisational Capability What do we have to do to develop the capabilities of the organisation? Satisfied Government What do we have to do to satisfy our Government Stakeholders and those who fund us? Satisfied Delivery Partners What do we have to do to satisfy our delivery partners & customers? Business Processes At what processes must we excel?
- 16. Private Sector Example– Financial perspective © 2016 Copyright ISC Ltd.16
- 17. Private Sector Example– Financial perspective © 2016 Copyright ISC Ltd.17
- 18. Public Sector Example– Stakeholder perspective © 2016 Copyright ISC Ltd.18
- 19. Identifying Key Processes The BS challenges you to identify the processes at which you must excel These will (usually) be external-facing, customer-delivery processes; e.g. Design services Promote services Deliver services Provide post-delivery support © 2016 Copyright ISC Ltd.19
- 20. Objectives Mission Measures Targets Vision Technology, Systems, Facilities,Infrastructure People: Leadership, Capability Projects Processes Step 1 Step 2 Step 3 Step 4 Step 5 Plans Financial perspective Customer perspective Process perspective Learning & Growth perspective 20 © 2016 Copyright ISC Ltd.
- 21. Two types ofmeasurement (metrics) © 2016 Copyright ISC Ltd.21 Strategic Measures; e.g.: Profitability/ROI Customer Satisfaction Customer/Staff Retention Employee Skill Levels Are lagging indicators and tend to be “generic” for many organisations Performance Drivers; e.g.: Productivity Complaints Defect/Error rates Process cycle-times Are leading indicators of successful strategy implementation & often relate to critical processes
- 22. How will youmeasure success? “If you can’t measure it, you can’t manage it” “What gets measured, gets done” Or, “What gets measured badly, gets done badly” "Weighing the pig every day will not make it fatter“ “People do what you inspect (measure), not what you expect” “If you wait to develop the perfect set of measures, you will wait a very long time” 22 © 2016 Copyright ISC Ltd.
- 23. Leading and LaggingIndicators Lagging Indicators without Leading Indicators tell you nothing about how outcomes will be achieved, nor can you have any early warnings about being on track to achieve your strategic goals Leading Indicators without Lagging Indicators may enable you to focus on short-term performance, but you will not be able to confirm that broader organisational outcomes have been achieved Leading Indicators should enable you to take pre- emptive actions to improve your chances of achieving strategic goals 23 © 2016 Copyright ISC Ltd.
- 24. Leading and LaggingIndicators If you are measuring “activity” (i.e. at a process level), it is more likely that you are using Leading Indicators The closer you move to process inputs and activities, the closer you get to Leading Indicators of downstream, (Lagging) performance If you are measuring aggregated effects, or outcomes, at an organisational level, you are more likely to be using Lagging Indicators 24 © 2016 Copyright ISC Ltd.
- 25. Improvement Skills Consulting Ltd. ian.seath@improvement-skills.co.uk M:07850 728506 W: www.improvement-skills.co.uk © 2016 Copyright ISC Ltd.25