Business Balanced Scorecard BBS

8/20/2019 Business Balanced Scorecard BBS

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The Business Balanced Scorecard andKey Performance Indicators

The principles and approach to build


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Some relevant quotes

• “Business performance measurement is as necessary as the

scorecard of sports”

• “What gets measured, gets done”

• “What gets measured gets noticed”

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How to run your business?

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The Business Balanced Scorecard is a framework fordescribing, implementing and managing strategy atall levels by linking objectives, initiatives andmeasures to the organisation’s strategy.

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strategy

objectives

initiatives

measures


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What is a balanced scorecard?• The business balanced scorecard is

one of several tools for performance

measurement and management.

• The emphasis is on balance across

multiple dimensions of performance;

ensuring that good performance in

one area is not o! set by poor

performance elsewhere.

• The strategy drives the choice of

performance measures. A failure to

meet targets could be because the

strategy is wrong.

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Robert S. Kaplan and David P. Norton have developed what isconsidered to be the standard Balanced Scorecard template

Source: Robert S. Kaplan and David P. Norton, “Using the BalancedScorecard as a Strategic Management System,” Harvard Business Review(January-February 1996)

CustomerPerspective

How docustomers see

us?

Internal BusinessProcess

Perspective

What must we

excel at?

FinancialPerspective

How do welook to

shareholders?

Innovation &LearningPerspective

Can we continue toimprove our

employees’ skills andcreate value for our

clients?

Visionand

Strategy


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Balance your key business objectives…

The diagram illustrates anexample of a client’sorganizational objectives.In the balanced scorecarddevelopment process, theorganizational objectivesshould provide a balanceacross the four dimensionsof performance.

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—Objectives—

1. Improve Shareholder Value2. Drive rapid revenue growth3. Manage operating costs and pro"tability4. Achieve pro"tability5. E! ectively utilize assets6. Manage risk

Financial Perspective

1. Improve quality2. Improve e#ciency3. Build brand awareness4. Expand distribution5. Drive operational excellence6. Measure performance of entire value

chain7. Maintain technological leadership

Financial Perspective

1. Sustain employee satisfaction2. Maintain employee productivity3. Retain employees4. Innovate operationally5. Measure training quantities6. Measure training e! ectiveness7. Measure and evaluate innovations

Innovation & Learning Perspective

1. Rapidly penetrate market segments

2 Sustain signi"cant customer growth

3. Retain customers4. Achieve high customer satisfaction

5. Provide extremely positive customer on-line

experience

6. Related to Product, customer & Image

Customer Perspective

Visionand

Strategy


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Key PerformanceIndicators

… and measure where you are

Key Performane Indicators are the indicators wich measure the performance of the

Critical Success factors, on the road to achieving the strategic goals

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Time to marketContribution of new

products to reveneactors

CompanyGoals

Critical SuccessFactors

Rapid product innovations

Market Leadership

UtilizationStocksWaste

Process e#ciency

Cost Leadership

Translation from strategic choices


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Example of a strategy map

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Customer perspective

Financial Accountabilityperspective

Internal processperspective

Learning and growthperspective

Secure funding Maximizebenefit / cost

Grow tax base Maintain AAA Rating

Strategic

themes

Reducecrime

Increaseperceptionof safety

Strenghtenneighborhoods

Improve servicequality

Maintaincompetitive

tax rates

Promoteeconomic

opportunity

Increase positivecontracts

Promote communitybased problem

solving

Imporve productivity Streamlinecustomer

interactions

Increaseinfrastructure

capacity

Enhance Knowledgemanagement capabilities

Closeskillsgap

Achieve positiveemployee

climate

Community

Safety

City within a city Restructuring

Government

Transportation Economic

Development

The corporate level Strategy map

Customer perspective

Financial Accountabilityperspective

Internal processperspective

Learning and growthperspective





Strategic

themes

Reducecrime




Maintaincompetitive

tax rates

Promoteeconomic

opportunity

Reducecrime




Maintaincompetitive

tax rates

Reducecrime




Maintaincompetitive

tax rates

Promoteeconomic

opportunity



solving


interactions


capacity



solving


interactions


capacity


Closeskillsgap


climate


Closeskillsgap


climate

Community

Safety


Government


Development

Community

Safety


Government


Development

The corporate level Strategy map

For each of the boxes one ore more Key Performance Indicators

need to be de"ned


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The structure and the KPI’s form the basis for thereporting

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Monthly reports:

1. Dashboard cockpit+ Analysis

(Annex: dashboardsheets)

2. Financials + Specials

Complementinginformation

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Dashboardreport

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Quarterly reports:

XXX-speci"cinformation

YYY-speci"cinformation


Management notes /Management summary


Dashboardreport

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Reporting is done per KPI

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NUMBERS

Observations

Explanations

Conclusions

Actions


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And in one presentation the total overview for thecompany

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Drill downs per area, department and per KPI are possible


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Day in the life of studyCo-Constructing the KPI tree

• Pick a top level objective and get a relevant multi-disciplinary group together

(di! erent departments, di! erent companies).• This creates collective insight, mutual understanding and ownership.

• Work form the highest level to next levels down and determine the Critical

Success Factors.

• Ensure that you are explicitly addressing all relevant business processes

and map them parallel to eachother. Prevent a mix up.

• Don’t just jot down the answers, always ask why they feel it is a CSF, test

this and challenge based on your knowledge.

• Determine per Critical Success Factor the appropriate (set of) Key Performance

Indicators.

• Go down in levels till you touch on the process control parameters which should

managed with Standard Operating Procedures and Out of Control Action Plans.• Repeat this for all the top level objectives and ensure addressing all 4

dimensions of the Business Balanced Scorecard.

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Example

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• Top level objective is Delivery Reliability. Relevant KPI’s could be Con"rmed Line

Item Performance, Requested Line Item Performance.• CSF’s for this top level objective are: the performance of Planning, Production,

Stock Management and Logistics

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For Production a relevant KPI is Production Plan Attainment

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CSF’s for Production Plan Attainment are:

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The performance of the equipment, availability of raw material,

availability of operators.

• KPI’s for these CSF’s are the next level down KPI’s.

• Etc.

• Such a KPI-tree will be a combination of technical (buisness process related)

indicators and organisational indicators (people, skills, etc) and eventually alsomoney related.


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Some remarks

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• Make sure that it is a genuine KPI-tree:

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Not too many KPI’s at top level, but su#cient to enable top management to“control” the business.

• Focus on the real Critical Success Factors.

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Ideally you have done process maps for the relevant business processes prior to

starting this workshop (and have the maps on the wall during the session).

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The interrelations between the KPI’s of the four dimensions of the Business Balanced

Scorecard must be well understood!!

• Work with a large brown paper and large size “Post-Its” and clearly indicate the

levels on the paper:

• The whole group can maintain overview this way.

• Wait with drawing lines on the brown paper till you are sure that this is it.

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If you want to turn a KPI in to a real KPI (in line with its formal de"nition) then youneed to determine the current level and agree the target level. This is a separate

activity outside the work session described above. But must be done.


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Next steps

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• Next steps would be around using the KPI tree to understand and drive

performance:• Roles & Responsibilities in the organisation need to be clear

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Across the organisation the Responsibilities, Accountabilities need to

be de"ned as well as who to Report to and who to Inform: A “RACI”

needs to be created.

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This allows KPI’s to be connected to Roles in the organisation.

• To really manage the performance by using the KPI-tree an Organisation

Management System needs to be designed:

• Meeting structure with Terms of References.

• Reporting structure that "ts the meeting structure and connects KPI’s to

meetings.• Some KPI’s need to be managed on shift/day frequency; others on

weekly/monthly/quarterly frequency


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Contact Details

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W www.axistoconsulting.comE [email protected] +31 20 3120 413

Axisto B.V.Atlas ArenaHoogoorddreef 9

1101 BA AmsterdamThe Netherlands

Business Balanced Scorecard BBS

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