A Balanced Scorecard

Transcription

1 A Balaced Scorecard with VISION A Visio Iteratioal White Paper Visio Iteratioal A/S Aarhusgade 88, DK-2100 Copehage, Demark Phoe Fax

2 1. Itroductio Balaced Scorecard is curretly oe of the hottest subjects i maagemet. Everyday ew articles, viewpoits, semiars ad products occur i the media. I this paper we will share some of our views o ad experieces with the maagemet framework. Specifically we will focus o implemetig a Decisio Support System to support the Balaced Scorecard based o a flexible stadard applicatio. The term The Balaced Scorecard - referred to as BSC - was itroduced i 1991 by Robert S. Kapla ad David P. Norto ad is well documeted i their book of same ame, which has become the bible for successful orgaizatios all over the world. They itroduced the Balaced Scorecard as a maagemet tool, that coverts visios ad strategies to measurable targets, commuicats strategic itet ad measures performace i key areas of the busiess. Kapla & Norto s message is: Measures That Drive Performace What you measure is what you get. Seior executives uderstad that their orgaizatio s measuremet system strogly affects the behavior of maagers ad employees. Executives also uderstad that traditioal fiacial accoutig measures like retur-o-ivestmet ad earigs-per-share ca give misleadig sigals for cotiuous improvemet ad iovatio activities today s competitive eviromet demads. The traditioal fiacial performace measures worked well for the idustrial era, but they are out of step with the skills ad competecies compaies are tryig to master today. The BSC gives a much broader picture of orgaizatios performace tha traditioal fiacial systems. Most of all it looks forward rather tha to traditioal fiacial reportig that documets the past, a good BSC tells maagemet much more about what to expect of the future. Thaks to PC s, etworks, Itraets ad Iteret its ow possible to immediately idetify ay deviatio at ay level i the orgaizatio ad commuicate it istatly. This very efficiet combiatio is what makes BSC so valuable to maagemet i a broad sese ad a drivig force behid why so may orgaizatios ivest i developig a BSC. The idea behid the BSC cocept is really quite simple: No sigle fact or key idicator ca reveal where the orgaizatio is headed i relatio to the overall strategy. A orgaizatio must develop a balaced model, that focuses o the iteral ad exteral idicators as well as the related performace drivers ad outcome measures, which describe the cause-ad-effect relatioships behid the strategy. Critical success factors ca be persoel retetio, sickess rate, reveue growth, profits, customer service, product sales mix, customer loyalty, productio time ad may others. 2

3 The BSC icludes 4 perspectives that may be modified for the idividual orgaizatio. These perspectives give a balaced picture of the preset ad future reality. Fiacial Perspective Measure the ultimate results that the compay provides to its shareholders. Customer Perspective Focus o customer eeds ad satisfactio as well as market share. Iteral Perspective Focus attetio o the performace of the key iteral processes drivig the busiess. Learig ad Growth Direct attetio to the basis of all future success the orgaizatio s people ad ifrastructure. 2. Balaced Scorecard Based o our experieces, the followig requiremets must be met whe implemetig a Balaced Scorecard solutio: 1. Strategy Documetatio 2. Flexibility 3. Data Availability 4. Visibility 5. Adjustmet to Idividual Requiremets 6. Data security 7. Aalytical Facilities 8. Fast Implemetatio Let s take a closer look o these challeges, ad discuss some ideas about how a BSC could look i your compay. 2.1 Strategy Documetatio Oe of the mai purposes with the BSC is to commuicate the orgaizatios strategy to all employees. A BSC must documet how each measure o a lower level relates to the overall strategy. I figure 1 we illustrate how strategies ad measures are related. The orgaizatios overall strategy is broke dow to objectives which agai are broke dow to measures for e.g. busiess area, departmet, group or idividual level. 3

4 Orgaizatio level Strategy Busiess area level Objectives User level Measures Figure 1 This is a very geeric view, that i reality ca be implemeted i may ways. As a example from a BCS implemeted by Visio Iteratioal A/S, figure 2 is widely used withi the compay to visualize the coectio betwee a measure ad the overall strategy. Figure 2 4

5 2.2 Flexibility The work of breakig dow a strategy to useful measures is a complicated ad dyamic process that ever eds. It is a true challege to fid the right measures. Oe measure believed to be a importat oe might ed up beig a derived idicator. For example a strategic target such as employee satisfactio could the measure employee retetio could be a derived tred, while sickess ad absetee may be a much better measure. It is very importat to recogize that as the busiess eviromet costatly chages, so must the strategy ad the targets of the orgaizatio. The BSC solutio must be able to hadle this dyamic eviromet. This meas beig able to easily chage existig measures as well as addig ew oes. It should be equally easy to chage desig ad add ew aalysis ad reports. 2.3 Data Availability Ay BSC should be able to re-use existig data from the orgaizatios differet operatioal system, thus data eeds to be etered oly oce. It is importat to ote, that although reuse of data is importat, it should ot lead to limitatios for which measures are chose. There has to be a willigess to use resources o maual data iput ad maiteace of data like data from exteral sources or it will be almost impossible to desig a BCS that works. As a startig poit it is ecessary to collect, clease, ad maipulate relevat data from the operatioal systems ito a Data Warehouse. This task could ed up beig the by far largest resource load durig the implemetatio. We strogly recommed that as part of a BSC implemetatio, that a efficiet tool for Data Warehouse implemetatio ad admiistratio are beig used. Eve a well-desiged Data Warehouse will probably ot cover more tha 80% of the data eeded for the BSC. The missig data must be collected ad maitaied maually. 2.4 Visibility The BSC solutio must be very visible to esure the wated effect: I order to ifluece the employees the BSC must be commuicated as a itegral part of the orgaizatios idetity. To esure the eeded data disciplie ay employee that feeds data to the solutio must be able to see what the data is used for. 5

6 I priciple, a BSC must be available for all employees, hudreds or eve thousads of users. This meas the BSC must support: A cosistet ad easy to use user iterface Distributio methods that are easy to maitai like Iteret/Itraet 2.5 Adjustmet to Idividual Requiremet Obviously differet employees have differet focus areas. It must be possible to choose differet measures o the differet orgaizatioal levels. A top maager might be iterested i measures like Compay recogitio while a employee i the sales departmet might wat to follow Number of New customers. Ay employee should be allowed to compose his persoal BSC, oe that both holds overall orgaizatio measures as well as measures for the departmet, the fuctio or eve for the employee himself. It should also be possible to compose a BSC of measures from across the orgaizatio like New Customers i all divisios. As a illustratio figure 3 shows a BSC for a perso i top maagemet while figure 4 shows the BSC for a employee i the service departmet. Figure 3 6

7 Figure Data security Data i a BSC will ofte iclude cofidetial data ad there may be good reasos to limit access to employees oly to certai data. Potetially this ca cause coflicts i aalysis like bechmarkig across orgaizatioal levels, that demads for a flexible security system, where it is possible to set up idividual security profiles. A flexible security system is eeded so some employees have full access to all data, others have access to certai levels, certai measures or eve certai products. 2.7 Fast implemetatio. Flexibility i a chose Balaced Scorecard applicatio greatly ehaces the chace of success, e.g. A BSC implemetatio eeds to ivolve the whole orgaizatio from the start ad does ot leave time for experimets. Most time is spet defiig the idicators ad fidig the relevat data, which is more importat tha usig resources o desig ad test of the solutio. There is low tolerace for errors i. Loss of cofidece is dagerous ad adoptig a prove solutio is the best isurace agaist such failures. 7

8 2.8 Aalytical facilities. It is importat to the Learig Orgaizatio to have a feed-back system, providig a view of the actual results versus targets. This leads to eeds for a easy way to drill dow i the uderlyig data i order to uderstad the causes behid a result. Ituitive appreciatio of the situatio for each measure i the BSC is provided through a set of speedometers. I order to evaluate the status i depth, a umber of differet aalytical screes are provided: Tred aalysis. Aalyzig the measure over time, showig the tred idicatig whether it is a short or a log-term problem. Bechmarkig aalysis. Comparig differet orgaizatioal uits to each other, like busiess uits, productio uits, customer groups or sales teams. Deviatios aalysis. Idetifyig the largest deviatios i the differet structures. Ad hoc aalysis. Flexible reportig ad aalysis o ay data. These aalyses are all based o the power of the Pilot DSS ad offers uparalled flexibility, icludig a easy to use iterface. 8

9 2.8.1 Tred aalysis The tred aalysis show i figure 5 gives the user the optio to choose ay target ad compare it to the actual result. The target here is Retur Rate ad is see withi the orgaisatioal hierarchy like showig Visio, E-Commerce ad All Products. Drill dow is available withi each level The time period is aother choice ad by showig the movig average it is easy to spot the tred agaist the target. Figure 5 9

10 2.8.2 Bechmarkig A very useful supplemet to comparig results to targets. The user gets a better uderstadig of the data whe the results ca be compared with other departmets, busiess uits, projects etc., aswerig questios like: - how is my sales team performig compared to other teams? Bechmarkig is also very useful i coectio with auditig targets. Sice targets chage over time, this aalysis helps i settig ew targets, ad is a great help if targets are beig set for ew areas or ew levels i the orgaisatio. The example i figure 6 shows bechmarkig of Sickess target ad bechmarked o Sickess excl. logterm ad Both Geder. Ay level i the orgaizatio dimesio ad ay time period ca be selected. Figure 6 10

11 2.8.3 Deviatio Aalysis The purpose of the Deviatio Aalysis is to idetify uderlyig ad hidde problems. Fidig the largest deviatios betwee a result ad a target is a very useful feature ad helps the user to quickly focus o problem areas or very successful areas. Lookig at the target Retur Rate we are lookig at a measure that o the speedometer is i the yellow area ad with a eutral tred. Drillig dow i the orgaizatio Chael, shows deviatios withi each Busiess Area. The color code applies to boths the actual deviatio betwee result ad target, but also ad equaly importat betwee the target ad the calculated tred. Comparig actual results to targets shows great variatio betwee Busiess Areas while all targets are i the red compared the tred. To make it easier to go through the may differet views of data, the user ca drag ad drop his choices i the fuel area. Figure 7 11

12 2.8.4 Ad hoc aalysis. The more aalytical orieted staff will require tools to do Ad-hoc aalysis. They wat to build differet scearios ad aalyze exactly the data they eed i a give situatio. A stadard solutio will ot meet their requiremets. The Visio BSC solutio offers Ad hoc fuctioality is based o the tight itegratio betwee Pilot DSS ad Microsoft Excel esures that the data is exactly that is beig preseted i the stadard solutio. O top of the Excel facilities, the user also has access to a powerful OLAP egie. Ay kid of Drill-dow, roll-up, slice & dice, rakig ad sortig is at had. All this is available withi Excel ad the user will see Excel trasformed to a spreadsheet with full OLAP fuctioality. The example shows a aalysis where markets ad products are evaluated agaist each other ad the use of the graphical Excel fuctios. Figure 8 12