Challenges of Building & Implementing a Balanced Scorecard. Kayode Sufianu CEO, Balanced Scorecard West Africa Limited

Transcription

1 Challenges of Building & Implementing a Balanced Scorecard Kayode Sufianu CEO, Balanced Scorecard West Africa Limited Lagos Business School Alumni Session 25 September 2014

2 Building a Balanced Scorecard Challenge #1: Appreciating what BSC really is Inappropriate or lack of, practical framework for building BSC 2

3 Balanced Scorecard Means Different Things to Different People Integrated Strategic Planning & Management System (BSI 1997) Holistically align an organization for high performance Strategic Management System (K&N 1995) Strategy focus, measurement & execution KPI (Key Performance Indicator) Scorecard (Kaplan & Norton 1992) A balanced set of measures Balanced Scorecard Institute, a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 3

4 KPI Scorecard Display the Organization s Metrics on a Dashboard Financial Customer Internal Earnings / Employee Earnings / Share Sales growth / year Profit / sales Cash on hand Sales / priority customer Return on equity % satisfied % repeat New accounts added New products added % of key demographic Average spend rate Time to purchase Quality rate Productivity Downtime Bottlenecks Time in queue Average inventory Hours lost to injury Missed deadlines Learning & Growth Employee satisfaction Employees trained % cross trained Training hours / employee Computer currency What is this organization s strategy? Balanced Scorecard Institute, a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 4

5 Integrated Balanced Scorecard Strategic Planning and Management Systems Tell a Story Mission: to provide quality lemonade to my neighborhood. Vision: to turn lemons into a new bicycle by the end of the summer Strategic Themes: Operational Excellence Build the Business Strategic Partnering Strategy Map / Objectives Measures Targets Initiatives Financial Profit Enough to buy a Increase bicycle by the end Profits of summer Get a piggy bank; hide from sibling Customer Repeat business 80% of target Improve market (parents) Customer Satisfaction Second glass half price campaign Internal Business Process Organizational Capacity Improve Lemonade Quality Improve Lemon- Squeezing Skills Improve Brand Image Increase Youthful Work Culture Quality: Sugar content Image: Awww Index: % of drivers that smile Skills: % Mom is angry due to wasted lemons Culture: Average age of lemonade stand workers 100% sugar content exceeds that of soda 80% smile 0% anger rate < 6 years old Balanced Scorecard Institute, a Strategy Management Group company. All Rights Reserved. Do not copy without permission. Ask Mom to make the Lemonade Have younger, cuter sibling wave sign by road Ask Mom to squeeze lemons Partner with younger, cuter sibling 5

6 Integrated Balanced Scorecard Strategic Planning and Management Systems Align the Organization with Strategy Mission: to provide quality lemonade to my neighborhood. Vision: to turn lemons into a new bicycle by the end of the summer Strategic Themes: Operational Excellence Build the Business Strategic Partnering Strategy Map / Objectives Measures Targets Initiatives Financial Profit Enough to buy a Increase bicycle by the end Profits of summer Get a piggy bank; hide from sibling Customer Repeat business 80% of target Improve market (parents) Customer Satisfaction Second glass half price campaign Internal Business Process Organizational Capacity Improve Lemonade Quality Improve Lemon- Squeezing Skills Improve Brand Image Increase Youthful Work Culture Quality: Sugar content Image: Awww Index: % of drivers that smile Skills: % Mom is angry due to wasted lemons Culture: Average age of lemonade stand workers 100% sugar content exceeds that of soda 80% smile 0% anger rate < 6 years old Balanced Scorecard Institute, a Strategy Management Group company. All Rights Reserved. Do not copy without permission. Ask Mom to make the Lemonade Have younger, cuter sibling wave sign by road Ask Mom to squeeze lemons Partner with younger, cuter sibling 6

7 Building a Balanced Scorecard Challenge #2: Alignment How do you ensure that what employees do on day-to-day basis are aligned with corporate strategy? The biggest gap between [high benefit] BSC users and low benefit BSC users is in the area of organizational alignment Kaplan & Norton, Alignment 7

8 Organizational Strategy Can Be Aligned by Cascading to Different Tiers Tier 2: Departments Tier 1: Organization Wide Tier 2: Business Units Tier 3: Teams & Individuals Tier 2: Support Units Cascade: To translate the organizationwide strategic plan (referred to as Tier 1) down to, first, business units, support units or departments (Tier 2) and then, second, to teams or individuals (Tier 3). The end result should be focus across all levels of the organization that is consistently aligned with the organization s strategy Balanced Scorecard Institute, a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 8

9 Cascading Balanced Scorecards Creates Organization Alignment How will we achieve our Vision? Tier 1: Corporate Scorecard How does my unit contribute to our Strategy? Tier 2: Department/Unit Scorecard How do I contribute to our Strategy? Tier 3: Team/Employee Scorecard Strategic Direction Tactical Execution Balanced Scorecard Institute, a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 9

10 Cascade Through Strategic Objectives to Align Strategy: LBS Generic Example Tier 1: Corporate Scorecard Promote Knowledge Sharing with Alumni PM 1: Alumni Satisfaction Rating of Knowledge Shared Tier 2: Department/Unit Scorecard Improve Alumni Engagement PM 1: # of Alumni Events/Qtr. PM 2: Events Diversity Tier 3: Team/Employee Scorecard Improve Alumni Events Scheduling PM 1: % of Events that Start as Scheduled. PM 2: Participation Rate Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 10

11 Building a Balanced Scorecard Challenge #3: Developing Performance Results & Designing Measures Confusing projects and actions for performance results Lack of disciplined process in designing measures 11

12 Right Sequence Strategic Objective Performance Result or Outcome Project/ Initiative Strategic Measures & Targets Project Measures & Targets 12

13 Problems with Traditional Approach to Measures Design Brainstorming Benchmarking Existing Data Template/cut & paste measures What the experts say 13

14 Logic Model & Types of Performance Measures Operational Measurements Strategic Impact Measurements Inputs (e.g. man hours, budgeted amount) Process (e.g., efficiency output/input, cycle time, cost per unit) Outputs (e.g., units produced) Intermediate Outcomes (e.g. sales revenues) End Outcomes (e.g., profitability) Project (e.g. completion timeliness, amount spent, etc.) Strategic Business Intelligence Increases Balanced Scorecard Institute, a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 14

15 Practical Methodology for Building & Implementing a Balanced Scorecard: Nine Steps To Success PROGRAM LAUNCH 1 Assessment 9 Evaluation 2 Strategy 8 Alignment 3 Objectives 7 Performance Analysis 4 Strategy Map SYSTEM ROLLOUT 5 6 Measures & Targets Strategic Initiatives Balanced Scorecard Institute, a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 15

16 Practical Framework for Developing Measures: The PuMP Performance Measure Blueprint Step 1 PuMP Diagnostic Fixing the focus firmly on continuous improvement. Step 2 Results Mapping Making the strategy clear, focused and measurable. Step 3 Measure Design Choosing meaningful measures that evidence results. Step 4 Measure Gallery Organically building buy-in beyond the team. Step 5 Measure Definition Defining and documenting how to implement the measures. Step 6 Performance Reporting Creating useful and usable performance reports that inspire action. Step 7 Measure Interpretation Responding to true signals in the measures. Step 8 Using Measures Improving business processes to improve performance. PuMP was developed by Stacey Barr, the Performance Measures Specialist 16

17 Implementing a Balanced Scorecard Challenge #1: Poor BSC design = poor execution, but right design does not guarantee successful execution In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored. Jamie Dimon, CEO, JP Morgan,

18 Effective Strategy Execution: 3 Pillars, 2 Supporting Tools Success Clear and realistic strategy aligned throughout organisation Robust discipline of regular monitoring keep on track Management behaviours that support successful execution SFO Strategy Focused Organisation BSC Balanced Scorecard 18

19 Management Behaviours that Support Successful BSC Implementation Engaged Leadership Communication Change Management Strong Project Management Discipline Performance Culture Incentivized Behaviors Adapted from Balanced Scorecard Institute, a Strategy Management Group company. 19

20 Communicating Strategy Graphic Communications BSC Launch 20

21 Change Management Sometimes Means Changing the Culture This is not in my Job Description. I draw lines; I don t remove trees Source: John Phatshwe, BSMP, Botswana National Productivity Centre. 21

22 Implementing a Balanced Scorecard Challenge #2: Measurement, keeping track & analysing performance 22

23 Measurement & Keeping Track Assigning responsibility for performance ( objective owner ) Assigning responsibility for measure definition owner Assigning responsibility for measurement and data collection ( measure owner ) Inputting measure data into performance information system 23

24 Objective Document Performance Measures Data Definition Table Measure Description: Objective Owner Measurement Type: Formula: Intended Result(s) Unit of Measure: Measure Location: Measure Owner: Data Source: Collection Frequency: Measurement Reporting Frequency: Verified by: Validated by: Presentation: Target & Thresholds Source: Performance Scorecard Toolkit, the Balanced Scorecard Institute 24

25 Performance analysis: Performance Analysis & Reporting Involves use of appropriate performance information software to: Get the right information to the right people at the right time Add structure and discipline to strategy management Help transform disparate data into information and knowledge, and, Help communicate information about organizational performance 25

26 There Are Many Steps to Turning Data Into Information and Knowledge Continuously Review Take Action Share / Create Dialog Interpret / Present Analyze Store Collect Source: Adapted from Performance Measurement Diagnosis PuMP Mind Map, by Stacey Barr and The Performance Measurement Cycle, Transforming Performance Measurement, Dean Spitzer. 26

27 Performance Reporting Performance Report must answer 3 and only 3 Questions* Question #1: What is Performance doing? Question #2: Why is it doing that? Question #3: How do we respond? 27

28 5 Visualizing Performance Trends Over Time How Do You Respond? 4 3 Green Threshold 2 Yellow Threshold 1 0 Launch Initiative Months Adapted from Balanced Scorecard Institute (BSI),BSP Boot Camp Workbook. All Rights Reserved. Do not copy without permission. 28

29 Implementing a Balanced Scorecard Challenge #3: Strategy & strategic management evaluation 29

30 Strategy & Strategic Management Evaluation Organization Strategic Elements & Assumptions Strategic Planning Loop Strategy Map / Strategy Objectives Map / Strategy Objectives Map / Objectives Customer Customer Customer Financial Financial Financial Process Process Process Organizational Organizational Capacity Organizational Capacity Capacity Budget Measures Targets Initiatives Measures Targets Initiatives Measures Targets Initiatives =N= Strategic Management Loop Operations Costing However beautiful the strategy, you should occasionally look at the result. Winston Churchill Strategic Planning and Management is a Double Loop Learning Process Input Process Output Outcomes Source: Adapted from The Strategy-Focused Organization, Kaplan & Norton, Harvard Business School Press, 2001, p 275, and based on Teaching Smart People How To Learn, Chris Argyris. 30

31 Thank You 31