Paul Arveson and Howard Rohm Balanced Scorecard Institute balancedscorecard
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www.balanced scorecard.org © 2002 by the Balanced Scorecard Institute and the U.S. Foundation for Performance Measurement. All rights reserved. 1
U.S. FoundationFor
PerformanceMeasurement
Balanced Scorecard Institute
Paul Arveson and Howard RohmBalanced Scorecard Institute
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Rolling it All Together: A Balanced Scorecard Approach
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Presentation Agenda
What is the Government Balanced
Scorecard?
What’s in it for Cities and Counties?
What does a Real BSC Look Like?
What are the Limitations of the BSC?
What is the Future of the BSC? BSC Implementation Workshop tomorrow!
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What is the Balanced Scorecard (BSC)?
The balanced scorecard is a management system
(not only a measurement system) that enables
organizations to clarify their vision and strategy and
translate them into action.
It provides feedback around both the internal
business processes and external outcomes in order
to continuously improve strategic performance and
results.
When fully deployed, the balanced scorecard
transforms strategic planning from an academic
exercise into the nerve center of an enterprise.
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Some Concepts in the Balanced Scorecard
Multiple PerspectivesBalanceFeedback of measurements“Cascading” ScorecardsCause-Effect FrameworkStrategic Mapping
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Source: Kaplan and Norton
Customers/CitizensMeasure Target InitiativeObjective Customers
Measure Target InitiativeObjectiveInternal BusinessProcesses
Measure Target InitiativeObjectiveLearning & Growth
Learning & Growth
Objective Measure Target InitiativeBudget
Financial
Four Perspectives of the Balanced Scorecard
StrategyStrategy
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Balances in the BSC
Lagging Indicators Leading Indicators
Diagnostic Measurements
Strategic Measurements
Cost & Risk Benefit & Value
Low risk / low benefit High risk / high benefit
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Operational and Strategic Feedback
MissionActivities
Strategic Initiatives
OperationalBudget
StrategicPlan Operations
Plan
StrategicBudget
Outputs Outcomes
Metrics
Metrics
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“Cascading” Scorecards
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Balanced Scorecard Cause-Effect Hypothesis
Financial
Customer
Internal Process
Learning & Growth
1. Knowledge & skills of employees is foundation for all
innovation and improvements.
2. Skilled, empoweredemployees will improve The ways they work.
3. Improved work processeswill lead to increased customer satisfaction.
4. Increased customer satisfaction will lead tobetter financial results.
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Reduce Costs
CitizensCitizens
BudgetBudget
Internal Business ProcessInternal Business Process
Learning and GrowthLearning and Growth
CitizensCitizens
BudgetBudget
Internal Business ProcessInternal Business Process
Learning and GrowthLearning and Growth
Strategy Map
IncreaseSatisfaction
IncreasedInvolvement
ImproveCycle Time
IncreaseNetwork
Capability
ImproveSkills
ReduceProcurement
Steps
IncreaseSafety
LowerWait Time
Grow TaxBase
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From Strategy to Budget
Strategy Map Metrics Targets Strategic Initiatives
% strategicskills available
Each Strategic Initiative Plan contains:• Sponsor• Schedule• Resources• Budget
Cycle time reduction
Customerapproval rating
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Tying the BSC to Resource Decisions
Corporate
Results
$
• Mission• Vision
• Strategic themes• Perspectives• Objectives• Measures
• Targets
• Initiatives
• Capital plan• Operating budget• Special projects
• Analysis
Fee
db
ack
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Popular Management Programs
Strategic Management SystemsBalanced Scorecard
Quality Certification ProgramsISO 9001, Baldrige, EFQM, CMM
Quality Improvement ProgramsSix Sigma, TQL, TQM, BPR, BPI
Financial Management ProgramsABC, ABB, ABM, EVM, ZBB
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What is the difference betweenprivate-sector and public-sectorbalanced scorecards?
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Comparing Private and Public Sector Organizations
Feature Private Sector Public Sector
General Strategic Goal
Competitiveness Mission value, effectiveness
Financial Goals Profit; growth; market share
Productivity; efficiency; value
Stakeholders Stockholders; buyers; managers
Taxpayers; recipients; legislators
Desired Outcome Customer satisfaction
Customer * satisfaction
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Public Sector Balanced Scorecard
Internal ProcessesInternal Processes
Learning:Skills, Knowledge,
Data, People
Learning:Skills, Knowledge,
Data, People
Value and BenefitValue and Benefit Customers and Constituents
Customers and Constituents
Financial and Social Cost
Financial and Social Cost
MissionMission
Source: Washington State Auditors
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Customer
Supplier
Products,ServicesFunds
Commercial Customer Relationships
Competitors
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Citizens
Representatives
Agency
Department
Mission Activities RecipientsSupport
Activities
Suppliers
Taxes
Appropriations
Budgets
CostsGrants,Products,Services
(No Competitors)
Government Customer Relationships
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What are the BSC’s Benefits for Local Governments?
BSC Places the Whole Organization in a Learning Process
Enables More Rational Budget Decisions Facilitates Performance Improvements Improves Communication to Stakeholders Provides Data for Benchmarking
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BSC Benefits: 1. Learning
BSC Places the Whole Organization in a Learning ProcessAligns everyone to strategy in a single
frameworkBSC improves itself over time:
Selection of initiatives and resource allocationCause-effect hypothesesMeasurement process
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BSC Benefits: 2. Planning
More rational budgeting in a world of rapid changeResource allocations based on performanceSystematic, fact-based management
displaces intuition and politics
Anticipate future outcomesLeading indicatorsCause-effect predictionsSimulations made possible
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BSC Benefits: 3. Facilitates Improvements
BSC Raises visibility of what’s going on
Identifies what most needs to be changed
Helps to identify best practicesBSC enables more opportunities for
Innovation
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BSC Benefits: 4. Stakeholders
Raises visibility of government activities
Facilitates feedbackSupports accountability
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Org. B
Process
Org. A
Process
BSC Benefits: 5. Benchmarking
Benchmarking Project:
1. Identify Process
2. Establish Partnership
3. Site Visit
4. Data Analysis
5. Implementation Plan
Performance measurement data collected for the BSC can also be used as a basis of comparison with data from other organizations.
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Why use the Balanced Scorecard in Government?
“Why should you as a government leader try to achievea balanced set of performance measures? …
Because you need to know what your customer’s expectations are and what your employee needs to have to meet these expectations. Because you cannotachieve your stated objectives without taking those expectations into account. More importantly, becauseit works, as can be seen from the success of our partners.” -- National Partnership for Reinventing Government, 1999
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Balanced Scorecard - Managing For Results Government Roster
Federal States Cities CountiesDefense Virginia San Diego MonroeEnergy Iowa Portland FairfaxCommerce Maryland Worcester Prince WilliamTransportation Puerto Rico Seattle MontgomeryCoast Guard Texas Austin Santa ClaraIRS Minnesota … …Veterans Affairs Oregon… Florida
Washington Utah Maine …
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1. Conduct an organizational assessment2. Define strategic themes or focus areas3. Develop objectives 4. Draw strategy maps5. Define performance measures6. Develop initiatives7. Visualize & communicate performance 8. Cascade to business units9. Evaluate performance and adjust
“Nine Steps to Success” Frameworkbeing Implemented in a County:
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What is our mission? What services and programs are required and need to be provided?
To prudently manage public resources, how should we allocate funds and control costs?
How will we sustain our ability to change and improve?
To satisfy taxpayers, elected officials, regulators, and other stakeholders, at what business processes must we excel?
How do we create value? What benefits do we need to provide?
MissionMission
Customers/CitizensMeasure Target InitiativeObjective Customers & Stakeholders
Measure Target InitiativeInternal Business Process
ObjectiveInternal BusinessProcesses
Measure Target InitiativeObjectiveLearning & GrowthEmployees
&Organization Capacity
Objective Measure Target InitiativeBudget
Financial StrategyStrategy
Key Questions
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BSC Implementation:First Steps
Strategic Leadership Team training &
workshops (Two workshops completed)
Corporate scorecard building (assessment,
strategy development, objectives, and mapping
– first draft completed)
Corporate scorecard development with
Executive Conference participants (October 17-
18)
Board of County Commissioners review
(October 29)
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BSC Implementation: Later Steps
Performance Measurement training (Early November)
BSC Implementation plan (Week of November 12)
Corporate scorecard complete (Week of November 26)
Performance reporting and communication plan (Week
of December 10)
“Train the Trainer” training (November - December)
Automation requirements and recommendations
(December)
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Example: Performance Views(top level)
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Example: Performance Views (detail)
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Common BSC Implementation Challenges
Mission, vision and strategies poorly defined or
understood, and not actionable
Strategies and goals not linked to performance drivers,
outcome measures, individual goals, and incentives
Budget and planning processes that are not linked
Treating performance measures as an “end”, rather than a
“means”
Performance targets set too high or too low
Feedback that is tactical, rather than strategic
Lack of meaningful employee involvement
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Limitations of Government BSC
Requires High Level of Organizational Commitment Change management issues
“What’s in it for me?” Takes sustained effort to implement fully
May create fear Raises visibility and accountability May lead to loss of data
Measurements don’t solve anything Must be accompanied by initiatives
Govt. BSC Implementations are scarce Few mature implementations Limited data published Lack of standardized metrics
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Future of the Balanced Scorecard
Increased SpecializationSector-based scorecards
E. g. Health Care BSC
Department-level scorecardsE. g. Human Resources BSC
Increased Sophistication of ToolsLinkage to Decision Support SystemsPerformance Simulation Systems
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Conclusions
BSC provides a framework needed for strategic alignment and org. learning.
Names may change, but some BSC features will continue: Performance measurements Results-based planning and management Increased use of information technology Increased sharing of data for benchmarking
BSC is not a “flavor of the month” but an evolving management concept.
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Resources
Balanced Scorecard Institute – www.balancedscorecard.org Foundation for Performance Measurement (US) - www.netmain.com/usfpm Building & Implementing A Balanced Scorecard: Nine Steps to Success,
Howard Rohm, U.S. Foundation for Performance Measurement Performance Drivers, Niles-Goram Olve, Jan Roy and Magnus Wetter, Wiley,
1999 The Strategy-Focused Organization, Robert Kaplan & David Norton, Harvard
Business School Press, 2001 The Balanced Scorecard, Robert Kaplan & David Norton, Harvard Business
School Press, 1996 Keeping Score, Mark Graham Brown, Quality Resources How To Measure Performance: A Handbook of Techniques and Tools,
Performance-Based Management Special Interest Group, U S Department of Energy
Benchmarking for Best Practices in the Public Sector, P. Keehley et al., Jossey-Bass, 1997.
Benchmarking Staff Performance, Jac Fitz-Enz, Jossey-Bass, 1993 Measuring, Managing, and Maximizing Performance, Will Kaydos,
Productivity Press Operational Performance Measurement: Increasing Total Productivity, Will
Kaydos, Saint Lucie Press