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Developing a Balanced Scorecard

Developing a Balanced Scorecard. CIPD Norfolk Group, 17 October 2006. Richard Barnes Culturetracker.com. What is a “Balanced” Scorecard. A strategic and operational tool Owned by the Executive Shared by everyone Balances:- Long and short term Hard and soft measures

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Developing a Balanced Scorecard

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  1. Developing a Balanced Scorecard CIPD Norfolk Group, 17 October 2006 Richard Barnes Culturetracker.com

  2. What is a “Balanced” Scorecard • A strategic and operational tool • Owned by the Executive • Shared by everyone • Balances:- • Long and short term • Hard and soft measures • Leading and trailing indicators • Internal/external perspectives • Like writing a novel, not writing a list • Measures support change, not monitoring

  3. It is NOT • A new idea • An end in itself • A playing field for internal politics • An “initiative” of Finance, HR, Marketing etc. • Boardroom art • A make-work exercise

  4. Its origins • Nolan-Norton Consultants 1990 • 12 client “Organisation of the Future” study group • Based on premise that financial measures were insufficient for a modern business • Principles espoused previously by:- • Rensis Likert (The Human Organisation, 1960) • TQM “gurus” (Deming, Crosby, Juran etc.)* • European Foundation for Quality Management (1985) • Maisel and McNair parallel models * Original K&N source was part of a TQ programme

  5. The EFQM Excellence Model 9% 9% 10% 14% 8% 20% 15% 9% 6% (percentages show how each elements is scored for importance)

  6. Kaplan and Norton model (1996) Customer Financials Balanced Scorecard BusinessProcesses Learning& growth

  7. A question of balance? Customer perspective Corrective activity Developmental activity Balancing compliancewith added value Financial Measures Key performance ratios Financial health Balancing leading withtrailing indicators Balanced Scorecard Business Processes Drumbeat Time, cost, quality Balancing inputsand outputs Learning and growth People measures Knowledge measures Balancing soft and hard indicators

  8. How do you create value? Building the Balanced Scorecard The key question

  9. A strategic tool • Starts with strategy • Continuous process • Needs to become culturally embedded

  10. The story of a scorecard To be successful for our shareholders, we must be (position in market), which means that we must return superior financial results in ....... Our customers are the people who will secure these results for us so we must offer our customers superior value by ......... To deliver this superior value we must excel in the way we manage the processes for ....... These processes are operated by our people. We must provide our people with ....... to achieve excellent performance.

  11. Cause and effect chain Strategic Objective What May be reversed Financial Measure How Customer Value Measure How Process Measure How Employee Measure

  12. Market share F Service span offer C Services delivered per customer P Availability of data E Cause and effect chain example Become No 2 player What How How How

  13. The Balanced Scorecard Where does it fit?

  14. Building Using Balanced Scorecard Where does it fit? Vision Mission and CSFs Strategic Objectives Targets Measures Projects Rewards Alliances Systems Structure Culture and values (leadership/style/relationships etc.)

  15. Themes Broadening the offer Focus on Health and Beauty Friendly and Fun Destination of Choice Projects Pharmacy store expansion New store opening process Living the Mission Category management Example Retail Strategic themes Measures • Pharmacy store sales growth • Brand Penetration (Market Research) • Mystery Shopper • Footfall and basket size

  16. Sample retail scorecard Customer perspective Basket Size Mystery Shopper index Footfall Complaints Financial Measures Sales Revenue growth Return on Turnover Cost of sales Shrinkage Balanced Scorecard Business Processes Stock Outs New store plan vs. actual Strategic Projects delivery Supply chain process time Learning and growth Absence level Stability index Mission involvement index Starfish.net ideas

  17. Joined up thinking?

  18. Using the Balanced Scorecard Drill-down into HR systems

  19. Performance management

  20. Learning and growth • Employee satisfaction • Employee capability • Information availability • Knowledge growth • Performance and reward management systems • Cultural measures from surveys – e.g. leadership, communication, recognition (enablers)

  21. Success factors • Drill-down into Systems • Planning and objective setting • Operational targets • Budgeting • Internal audit • Continuous improvement • Project management • Performance management/appraisal • Reporting and meeting regimes • Reward and recognition.......

  22. “Unfortunately, this year’s low score on morale in the employee survey means our balanced scorecard index is below the threshold for the bonus award” …with grateful thanks to Catbert

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