paul arveson and howard rohm balanced scorecard institute balancedscorecard

www.balanced scorecard.org © 2002 by the Balanced Scorecard Institute and the U.S. Foundation for Performance Measurement. All rights reserved. 1

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PerformanceMeasurement

Balanced Scorecard Institute

Paul Arveson and Howard RohmBalanced Scorecard Institute

www.balancedscorecard.org/

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

paul arveson and howard rohm balanced scorecard institute balancedscorecard

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