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Mission

CONCEPT

Why the Balanced Scorecard and Why Now?

Performance Measures and Management have never been hotter.

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Three Factors:

Inability of Organizations to Execute Their Strategy.

Reliance on Financial Measures. Corporate Accounting Scandals: Enron once the 7th largest company in U.S. $63.4 Bn. bankruptcy.

WorldCom 107 billion dollar bankruptcy.

Tyco, Global Crossing, Adelphia and dozens of others.

Doing Business in Post-Enron Era

Sarbanes-Oxley Act:
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Section 906 Requires Certification by CEO & CFO Reports fully comply with the requirements of securities law and that the information in the report fairly presents, in all material respects, the financial condition and results of the operation of the company.

Wall Street:
They want broader reporting. Hewitt Associates:

Found evidence that companies highly aligned with traditional metrics tend to be the worst performers in shareholder return.

Origin of Balanced Scorecard

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Developed by Robert Kaplan Accounting Professor at Harvard and David Norton a Consultant in the Boston Area. They were looking to develop new methods of performance measurement. Kaplan & Norton found that a reliance on financial measures was affecting a companies ability to create value. What did they mean by this? Kaplan and Norton came up with this tool that captured performance measures on activities throughout the company: Customer Issues. Internal Business Processes. Employee Activities. Shareholder Concerns.

Origin of Balanced Scorecard

Over the Next Four Years Companies That Adopted the Balanced Scorecard saw immediate results.
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Kaplan and Norton wrote The Balanced Scorecard.

50% of the Fortune 1000 have adopted the Balanced Scorecard.

HBR hailed it as one of the 75 most influential ideas of the 20th century.

As companies around the world transform themselves for competition that is based on information, their ability to exploit intangible assets has become far more decisive than their ability to invest in and manage physical assets.

What is a Balanced Scorecard?

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Essentially the scorecard measures how well your organization did along 4 institutional measures: Financial. Internal processes. Customer. Innovation and learning. The scorecard essentially lines up your goals and helps the members of your organization go in the same direction to meet those goals.

What is a Balanced Scorecard?

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Where is the organization going?

Vision

Vision

How do we get there?

Strategy
Critical Success Factors
Financial Customer
Internal Business Process Organizational Learning

What do we need to do well to achieve these strategies?

How do we measure how well we are doing? What do we focus on to affect the KPIs?

KPIs

Strategic Initiatives

What is a Balanced Scorecard?

Mission

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Measures Expressed in a Matrix

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Financial Cost Reduction, Market Share, etc.

Internal Processes Cycle time Quality, etc.

External / Customers Satisfaction, Retention Rates, etc.

Innovation / Learning Hours Training, Quality, Attendance, etc.

Measures Expressed in Other Forms

External

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Measures performance against expectations

Measures employees skills, procedures, methods...

Balanced Objectives

Financial

Learning & Innovation

Internal

Measures the economic impact of actions taken

Measures effectiveness, ability to adapt

Steps in Implementing Balanced Scorecard

Identify Vision
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Identify Strategies
Identify CSFs & Perspectives

Identify Measures
Evaluate Create Action Plans Follow up & Manage

Considerations before You Start Implementing BSC Process

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What are your Mission? Goals? Core Competencies?

What are your critical success factors?

Variables, conditions, or characteristics which have a direct in influence on satisfaction OR If you dont succeed here your business is in trouble.

Considerations before You Start Implementing BSC Process

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What are your core processes? People? Materials? Methods? Equipment? Environment?

What is the relationship between the intended outcome and the process to get there? Whats the cause and effect?

How much are you doing that is necessary and because youve always done it that way? Look functionally and cross functionally

Considerations before You Start Implementing BSC Process

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What is private sector doing? People? Materials? Methods? Equipment? Environment?

How well do you compare to others doing the same thing?

What processes do others use to come to analogous outcomes? How much does it cost them? How long does it take? Could you be faster, better, or smarter about the way you do it?

Key Things to be Done Throughout

Communicate progress early and often. Develop a scorecard at the corporate level and then cascade it down to lower
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organizational levels. This will help focus the actions in one direction to help

your goals.
Teach your scorecard process. Support training to develop scorecards and try to use internal people to do it. Focus on your organizations scorecard. Involve as many people as early as you can. Encourage individuals to make their own scorecards for their own use. Communicate changes; refer to the scorecard often; make it a part of the organizations culture. Use the results of the scorecard to foster change; not to punish. Encourage trial and error.

ASA(FM&C) Strategy Map

Four Strategic Themes
Funding = Requirements
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Systems Integration

Cost Control

Resource Generation

Leverage/Innovate

Themes Promote Teamwork and Communication Across Organizational Lines

Balanced Scorecard - Strategy Map Objectives

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Cost Control

Objectives Help to Implement the Strategy for Each Theme and Perspective Statement of What Strategy Must Achieve

Objectives

Imbed a Cost Culture in Program/Budget Reviews, Decisions and Actions

Balanced Scorecard - Strategy Map

The Strategic Theme Story
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1. Funding = Requirements
Cost Control

2. Control and Reduce Program Costs

3. Maximize the Impact of Each Dollar Spent

3 4 5 6

4. Imbed Cost Culture in Program/ Budget Reviews, Decisions and Actions

5. Improve Output and Performance Measures/develop Full Costs by Program 6. Develop a Cost Culture

Balanced Scorecard - Strategy Map

Objectives Linked to Measures
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Cost Control Objectives

Measures

Number of Programs With

Integrated Performance Reviews Percent of Performance Reviews That Yield Cost Reductions
How Success Will Be Tracked

Balanced Scorecard - Strategy Map

Targets
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Cost Control

Objectives

Measures Targets Number of Programs With Integrated Performance Reviews Worst 0 Business As Usual 0 Planned 20 Benchmark 40 Best 100 Improvement Needed

Balanced Scorecard - Strategy Map

Initiatives
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Cost Control

Objectives

Key Action Programs Required

Measures

Targets Initiatives Link Output & Performance Measures to Army Cost & Performance Reviews Starting With the Initial OMB / OSD Programs for Performance Measures Integrated Into FY11 Budget

ASA(FM&C) Strategic Map

Theme Relationships
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Systems Integration

Cost Control

Themes Are Not Stovepipes & Are Resource Not Organizationally Organized Generation Leverage/Innovate Requires Cooperation / Teamwork More Time to Devote to Higher Leverage Activities

Provide Timely & Relevant Management Information Integrate Functional & Financial System Requirements

Imbed a Cost Culture in Program Budget Reviews

Improve Output Measures/full Cost by Program

Balanced Scorecard
An Example
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Strategic Theme: Cost Control Financial Control & Reduce Program Costs Customer

Objectives

Measurement in Program Costs per Year How Success Will Be Tracked

Target Than 2% per Year

Initiative

Control &
Reduce Program Costs Statement of What Strategy Must Achieve

% Change Less

Eliminate
Duplicate Contractor Payments Key Action Programs Required

Internal

Improvement Needed

Learning

Strategy
The Unique and Sustainable Ways by Which We Will Create Value for the Army
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Funding = Requirements
Improve Accountability of the Army Reduce Program Costs
More Funds for Army Programs Increase Investment Funds

Resource Generation

Systems Integration

Leverage /Innovate

Cost Control

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What processes have you experienced in developing a balanced scorecard? Can you share your successes in linking strategy, goals, and tactics?

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THANK YOU