Electric Utility, Inc.

Measures, Targets, & Initiatives

Customer Financial

Objectives

Measures (D=Drivers)

Maximize returns
Profitable growth
Manage operating costs

ROCE
Revenue growth
Operating costs / customer

Industry leading customer loyalty

Customer satisfaction rating

Optimize Core Business

Optimize core utilization

Internal

% revenue from deregulated products/services

% trading revenue
Max. return on resource allocation Revenue from new services
NPV product/service pipeline
Continued cost management
% R&D projects meeting protocol gates (D)

Yr 1

Yr 2

14%
6%
$150

14.5%
8%
$140

80%

85%

5%
10%
$500M
$500M
90%

7%
12%
$550M
$550M
95%

Yr 3

Initiatives

15%
12%
$125
90% Customer loyalty program

10% Telecom infrastructure

15% development
$600M Trading risk assessment (work
$600M support)
100% Research alliance program
Preventative maintenance

Continued Public Support

Proactively manage relationships
Ensure reliable service
Communicate/educate customers

Customer/partner satisfaction (5 point scale)

Reliability index
% communication/education plans executed (D)

Customer Service Excellence

Seamless cross-group delivery
Understand customer drivers
Effective customer services

Promised delivery %
New product uptake rate
On-time market research projects (D)

90%
20%
90%

95%
25%
95%

Customer satisfaction rating C.S. Center (see above)

Problem resolution cycle time Customer Service
Center (D)

85%
6hr

89%
4hr

97%
30%
100% Service dispatch automation
CIS upgrade
95% Call center software integration
3hr

80%

85%

90% Fossil maintenance benchmark

2%

3%

4%
+/15%
8 hr
65%
10
3.0

5%
+/10%
4 hr
75%
12
4.0

4.0

4.5

Business Growth
Capitalize on deregulation
opportunities
Optimize trading opportunities
Develop innovative services
Use alliances and joint ventures
Leverage cross-group R&D

Ensure market-driven skill

Learning &
Growth

Targets

Industry leading employee

satisfaction

2012
Palladium
Group, Inc.
World-class
leadership
effectiveness

% rated capacity attained

Employee productivity improvement
% cost reduction
Cost of disruption vs. plan
Time to recovery (D)
Strategic skill coverage ratio
Hours in strategic skills training (D)
Employee satisfaction rating (5 point scale)
Leadership effectiveness rating (upward appraisal5
point scale) 2-2

4.0
4.5
4.5
90/100 92/100 95/100
80%
85%
90% Community outreach program
Cross-selling marketing program

4%
Shared service
6% benchmark/outsourcing initiative
+/-5% ERP implementation
2 hr
85% Competency profiling
15
4.5 Performance compensation link
4.5 Leadership training program

BSC Terminology

Strategic Theme:

Diagram of the cause and effect

relationships between strategic
objectives

Strategic Theme:
Customer Service
Excellence
Financial

Max. Return
on Assets
Profitable
Growth

Custom
er
Intern
al

Measures

Statement of
what strategy
must achieve
and whats
critical to its
success

How success in
achieving the
strategy will be
measured and
tracked

Targets

Initiatives

The level of
performance or
rate of
improvement
needed

Key action
programs
required to
achieve
objectives

Industry
Leading
Customer
Loyalty
Seamless CrossGroup
Delivery of
Services

Understand
Drivers
of Customer
Value

Learning
&
Growth

Objectives

Effective
Customer
Service
Processes

Objectives
Seamless
CrossGroup Delivery
of
Services

Ensure MarketDriven
Skill
Development

2012 Palladium Group, Inc.

2-3

Measures
Promised
Delivery %

Targets
97%
(first time)

Initiatives
Service Dispatch
Automation

Two Types of Strategic Measures

Lag (Outcome)
Measures
Purpose

Lead (Driver) Measures

Purpose

Assess/evaluate the
performance results at
the
end of a time period or
activity

Measure intermediate
processes, activities, and
behaviors

Objectives

Examples

- Grow customer
confidence
- Maintain
strategic
workforce

Customer retention
Strategic skill
coverage

Strengths
Usually objective and
easily captured

Hours spent with

customers
Hours spent crosstraining

Strengths
More predictive in nature
Allows organizations to
adjust behaviors for
performance

Issues

Issues

Lag measures reflect

success of past, not
current, activities and
decisions

2012 Palladium Group, Inc.

Examples

Based on hypotheses of
strategic cause and effect
Often difficult to collect
supporting data
2-4

Lead Measures and Measures Guidelines

Lead measures
are more reflective of
a companys
Strategy

Lead measures
communicate how you
want to accomplish
the objective

Guidelines on the Number of Balanced Scorecard Measures

One lag measure for each strategic objective:
- Lead measures are assigned primarily to the Internal and
Learning & Growth perspectives; occasionally to the Customer
perspective.
- If more than one measure is applicable, use the one that best
communicates
the meaning of the objective.
- No more than 25 measures (or 1 measures per objective).
2012 Palladium Group, Inc.

2-5

Lag / Lead Measure Examples

Financial
Perspective

Increase
Revenues
Broaden
Revenue
Mix

Customer
Perspective

Internal
Perspective
Understa
nd
Customer
Segments

Learning &
Growth
Perspective

Broaden
Financial
Planning
Skills

Cross-Sell
the
Banks
Product
Line

Improve
Employee
Satisfaction
Improve
Customer
Informati
on

2012 Palladium Group, Inc.

Lead Measures

Revenue Growth
Revenue Mix

Increase
Customer
Confidence in
Banks
Financial
Advice

Develop
Bank
Services

Lag Measures

Reward
Employee
Performanc
e
2-6

Customer Satisfaction
Customer Retention

Number of Key
Customers Contacted

Share of Segment
New Product Revenue
Cross-Sell Ratio

Time Spent with

Customer

Employee
Satisfaction
Strategic Skills
Coverage

Number of Employees
who Achieve Bonus
Personal Goal
Alignment

Purpose of Targets
Targets:

Set / communicate the expected

performance level for the organization
Serve as links between the
department / individual and the
organizational strategy and goals
Focus the organization on improvement

Criteria for Targets

Targets Should:
Match a measure, one for one
Be quantifiable
Clearly communicate the
expected performance

2012 Palladium Group, Inc.

2-7

Stretch Targets

Set a LONG-TERM performance goal

Keep the organization focused on the long term strategy, while

working on shorter-term milestones

Place particular emphasis on where the organization may need to

change status quo (e.g., re-engineer product development process)
Stretch Target Example:
Increase revenue by 50% over Year 1 baseline

Milestones
Year

Year 1

Year 2

Year 3

Stretch
Target

% Increase

25%

12%

7%

50%

2012 Palladium Group, Inc.

2-8

Methods for Setting Targets

Target Setting
Methods
Derived from an overall
business goal

Measure

Revenue

Target
Year 1

Stretch

$39,774

$111,482

Benchmark industry leaders Call center response time 90% in 90

seconds`
Incremental improvement
based on historical
performance
Establish baseline and
define targets over time

2012 Palladium Group, Inc.

Employee retention

Satisfaction rating
To-dos:
Mystery caller program
in place baseline
established
Target set for future

2-9

90% in 60
seconds

85%

90%

Y/N on

90%
complianc
e rating

accomplishment
of to-dos

Process for Setting Targets

Review the challenge or

performance gap

Set targets for the Financial

Perspective measures first

Set remaining targets by theme

against measures in the Customer,
Internal, and Learning & Growth
Perspectives

2012 Palladium Group, Inc.

2-10

There Is a Relationship between Targets

Targets should be defined as a comprehensive set

Be sure the order of magnitude is appropriate to close the performance gap

When in doubt, look back to the strategy and the performance gap

Possible Difficulties/Consequences in Setting Targets

1.

No data exists to support a defined target

2.

Measure is brand-new no historical data exists

3.

Organizational issues of freedom/autonomy

4.

Fear and anxiety of targets/goals/measures

5.

Effects on possible future reward and compensation

2012 Palladium Group, Inc.

2-11

Purpose of Initiatives
Initiatives Are Defined to Help Close the Performance Gap
OBJECTIVE

Improve Order
Fulfillment

Objectives articulate the

components of our strategy

MEASURE / TARGET

Target

Time from
order to
shipment

INITIATIVE

18
Time (hours)

Measure

gap

12

12 hours
Actual

Target

Measures and targets track our progress toward

achieving and communicating the intent of the
objective
2012 Palladium Group, Inc.

2-12

Implement
automated
order
management
system

Initiatives help close the gap

between our current and
desired performance

Criteria for Initiative Definition

A Good Strategic Initiative Should Have:

Accountability at the Leadership Team level

Clearly defined start and stop dates and progress milestones
Clearly defined deliverables
A budget
Committed resource allocation (e.g., Real employee hours)
For Example: Reengineer Current R&D process; Implement Customer
Connectivity Technology for Point of Sale

An Initiative Is Not:
Business as usual
For Example: Meet Quarterly Sales Targets, Preventative Maintenance
Agreement; Implement Firewall Security Upgrades

2012 Palladium Group, Inc.

2-13