How to Drive Organizational Alignment to Strategy Using ...

p. 1 © 2009 ActiveStrategy, Inc.

How to Drive Organizational Alignment to Strategy Using Balanced Scorecards

p. 2

Presentation Overview

• Strategic vs. Operational Goals

• Setting Strategic Goals

• Creating a Balanced Scorecard

• Deploying Scorecards to Execute Goals

• Aligning & Prioritizing Improvement Initiatives

• Linking Strategy to Action Plans via Scorecards

• Best Practices

• Tying this back to WSQA Criteria

p. 3 p. 3 © 2009 ActiveStrategy, Inc.

Strategic vs. Operational Goals

Operational

(Including operational measures &

incremental improvement plans)

Amount of time spent on

strategic efforts (typical)*

Supervisor Director Executive Manager

* Includes critical few objectives & measures that need to be

improved plus key strategic improvement initiatives

Increased time spent on

strategic efforts (ideal)

p. 4

SETTING STRATEGIC GOALS

p. 5

Defining Strategic Goals

Strategic Goals have the following components:

• Perspectives –high-level focus areas

• Objectives – verb-noun statements that reflect the strategic plan (e.g., “Improve Customer Satisfaction”)

• Measures/Metrics - #, $, or % that indicates performance against an objective

• Targets – what the measure should attain

• Initiatives – improvement projects (e.g., “Improve Cycle Time”)


Making Strategic Goals Actionable

Top-Level Balanced Scorecard

Operational framework to communicate, deploy and

execute plan

Visual simplification of Strategic Plan

Key Strengths, Weaknesses,

Opportunities & Threats

SWOT Analysis

Prioritized Initiatives

Strategic Goals

Aligned improvement

Strategy Map

p. 7

Create a Strategy Map

What is a Strategy Map?

• Visual simplification of strategic objectives

• Shows cause and effect relationships

• Helps ensure you’re not missing any key drivers

p. 8

Steps to Creating a Strategy Map 1. Prioritize SWOT outputs & convert to

“verb noun” strategic objectives

2. Group objectives by “perspective” or high-level focus area

3. Identify cause-and-effect relationships with arrows


The Anatomy of a Strategy Map

High-level “objectives” (verb/noun)

Links showing relationships

Pers

pecti

ves

Trad

itio

nal S

co

recard

“P

ersp

ecti

ves”


Example Strategy Map for Public Sector

Note: Perspective names and their cause & effect order change

p. 11

NEXT, CREATE A BALANCED SCORECARD

p. 12

Creating a Balanced Scorecard Step 1: Transfer from Strategy Map

• Transfer Perspectives and add Index numbers (1.0, 2.0)

• Retain cause & effect hierarchy

• Transfer Objectives into proper Perspective and add Index numbers (1.1, 2.1)

p. 13

Keep in Mind

• Can use more or different perspectives (if appropriate), BUT BALANCE IS CRITICAL

• Objectives must contain a verb (grow sales, reduce complaints, etc.)

• Keep objectives focused (7-12 max per scorecard)


Perspectives & Objectives on BSC

Objective

Perspective

Index Number

p. 15

Creating the Top-Level BSC Step 2: Determine Measures

• Should represent the best indication that an objective is being met

• Ask what outcomes your stakeholders desire from the objective:

• Quality or defects

• Revenues

• Cost or productivity

• Responsiveness or Cycle Time

• Employee or Environmental Safety

p. 16

Creating the Top-Level BSC Step 2: Determine Measures

• Keep to 1-3 measures per objective

• One objective may be measured with two or three dissimilar

units of measures, e.g. Customer Satisfaction may be measured

by:

• Survey Results (Very Good)

• Number of Complaints (4 per quarter)

• Turnaround time (2 days)

p. 17

Lagging Measures

• Lagging measures are reported infrequently, too late to prevent a problem

• Examples are a company’s critical high-level outcome measures:

• Sales

• Service Quality

• Expenses

• Customer Satisfaction

p. 18

Breaking Down a Lagging Measure • First Step – Dimensional Measures

• These break down a measure by its component parts using the same units (e.g. Sales by Division or Geography)

• Note: dimensional measures alone do not get at the root causes of a problem

p. 19

Leading Measures

• Leading Measures

• break down an important measure into what drives it (e.g. # of quotes or size of pipeline)

• Also called Cause & Effect or Process Measures

p. 20

Leading Measure Examples

• Examples:

• Customer Satisfaction leads Revenues

• Service Response Time leads Customer Satisfaction

• % Service Rep Availability leads Service Response Time

• Leading/Lagging are relative terms

• A leading measure in one area is likely a lagging measure to another area

© 2008 ActiveStrategy, Inc.

Top-Level Scorecard with Measures

p. 21

p. 22

Creating the Top-Level BSC Step 3: Align & Prioritize Initiatives

• Initiatives are time-bound projects

• They have defined resources

• Also called Projects, Action Plans

• Some are derived from the SWOT Analysis

• They should be prioritized based upon: • alignment to an identified performance gap in a

strategic area

• size of the performance gap

• resources required to improve

• ROI, etc.

p. 23

Prioritize and Align Initiatives

• Align current initiatives (time-bound improvement projects) to measures

• Cease initiatives that do not align and any that align to measures that are meeting goals

• Consider new initiatives to address underperforming measures

• Aligned initiatives drive results by addressing root causes


A Prioritization Matrix

Column 4 Column 5 Column 1 Column 2 Column 3 Prioritization Factors

(Enter 1, 3, or 5 in each – see instructions below ) Priority

Score/Departments

Initiative Under Consideration

Desired Outcome of

Initiative

How Outcome Will be

Measured

Degree of Alignment

Need to Improve

Urgency Total Cost Organiza-

tional Readiness

= product of factors from Column 4 (multiply all 5).

Also list key dept. needed to achieve it

1.

2.

3.

4.


An Example Completed Matrix

Column 4 Column 5 Column 1 Column 2 Column 3 Prioritization Factors

(Enter 1, 3, or 5 in each – see instructions below ) Priority

Score/Departments

Initiative Under Consideration

Desired Outcome of

Initiative

How Outcome will be

Measured

Degree of Alignment

to BSC

Need to Improve

Urgency Total Cost Organiza-

tional Readiness

= product of factors from Column 4 (multiply all 5).

Also list key dept. needed to achieve it

1. Improve

margins Improved

profitability Percent of

products meeting

margin goals

5 5 5 5 3 1875 Operations

2. Improve

productivity in

manufacturing

Improved

throughout and

reduced costs

Percent of

departments that

meet productivity

goals

5 5 3 3 3 675 Manufacturing

3. Implement new

CRM system

Improved

relationships

with key

customers

% of customers

renewing annual

service plans

3 5 3 5 3 675 IT

4. Open new

customer training

facility

Improved

knowledge of

key customers

% of customers

attending training 1 3 1 5 1 15

Customer Education & Facilities

p. 26

Great, the BSC is Finished!

• Well…actually, this is just the beginning

• The next step is to create a “cascaded” framework of scorecards

• Create linked scorecards down & across the organization

• This is where you really start to deploy your strategy and make it actionable


What It Looks Like (Long-Term) Top-Level Scorecard

Divisional or Business Unit

Scorecards Department or

Functional Scorecards

Individual Employee Goals

p. 28

Why is Cascading Scorecards Critical?

• It results in a proactive performance system

• it communicates and translates the strategy to all levels

• when a critical top-level lagging measure is underperforming, lower level causes can be easily identified

• allows you to fix important problems before they become high-level issues

p. 29

How to Cascade – an Overview

• Create linked, related (but not identical) scorecards for next organizational level

• As you go, translate objectives to make them meaningful to that area

• e.g., “Improve Customer Satisfaction” might become “Reduce Wait Times for Customers”

• Align measures to the translated objectives

• e.g., % of Customers waiting more than 5 minutes

p. 30

CASCADING OBJECTIVES & MEASURES USING A PROCESS MATRIX APPROACH

p. 31

Tips on Using a Process Matrix Approach

• Used to align business processes to strategic objectives

• Helps to identify their translated objectives & leading measures

• Works best for functional and support areas

• Process owners must be involved


Create a Matrix for Each Area

List key processes of the area

Corporate Objectives

1.1 Grow Profitable Revenues

2.1 Improve Cust. Sat.

3.1 Integrate New Tech.

Internal Network Mgmt.

Cust. Data Center Mgmt.

Technical Support

IT’s

Busin

ess

Pro

cesses

Outc

om

e

p. 32


Identify Outcomes & Intersections

Identify processes that most strongly support the Objectives






x

Cust. Data Ctr. Mgmt.

x x

Technical Support x x IT

’s B

usin

ess P

rocesses Outc

om

es

Availability

Data

Ctr.

Rev.

Cust.

Sat.

Resolv

ed

calls

p. 33


Translate the Objectives

Describe Objective using that area’s terms






3.1.1 Improve network reliability

Cust. Data Ctr. Mgmt.

1.1.1 Maximize service

revenues

2.1.1 Minimize customer

complaints

Technical Support

2.1.2 Improve call

resolution

3.1.2 Leverage

ticket software IT

’s C

ore

Pro

cesses

Outc

om

es

Availability

Data

Ctr.

Rev.

Cust.

Sat.

Resolv

ed

calls

p. 34


Align Measures Using the Matrix

Align measures identified in the processes to the cascaded Objectives






3.1.1 Update

network speed

% full availability

Cust. Data Center Mgmt.

1.1.1 Maximize ASP revenues

$ service rev/month

2.1.1 Minimize customer

complaints

# hours downtime

Technical Support

3.1.2 Leverage ticket software

% of calls resolved

IT’s

Core

Pro

cesses

p. 35

p. 36

Place On Appropriate Scorecard • Place objectives & related measures on the appropriate

scorecard

• Assign an owner to each to ensure accountability

• Finally, establish goals for each measure to track progress

• Cascaded objectives & measures create alignment to top-level strategy

p. 37

GOING FROM STRATEGY TO ACTION PLAN

An Example “Drill Down” from the City of Coral Springs Scorecards


Police Scorecard

Click to drill

down


Drill down reveals

Measure Details

Contributing

lower-level

measures

Aligned

improvement

Initiatives


Additional Measure

Details (trend charts &

graphs, comparisons)


Chart Detail –

Crime by Type

p. 42

Chart Detail –

Crime Rate

Comparisons


Initiative Detail

Click to see

commentary from

Initiative Owner

about the initiative

and Action Plans

p. 44

Best Practices to Remember

• Start with your strategy

• Keep objectives to the critical few

• Pick measures you can actually measure – and those that drive the right behaviors

• Cascade & deploy (scorecards are NEVER perfect, so don’t wait)

• Review performance of scorecards regularly

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