Rolling it All Together: A Balanced Scorecard Approach

1. Rolling it All Together: A Balanced Scorecard Approach

2. 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!

3. 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.

4. Some Concepts in the Balanced Scorecard • Multiple Perspectives • Balance • Feedback of measurements • “Cascading” Scorecards • Cause-Effect Framework • Strategic Mapping

5. Strategy Budget Measure Target Initiative Objective Customers Customers/Citizens Objective Measure Target Initiative Financial Learning & Growth Measure Target Initiative Objective Internal Business Processes Learning & Growth Objective Measure Target Initiative Four Perspectives of the Balanced Scorecard Source: Kaplan and Norton

6. Balances in the BSC

7. Operational and Strategic Feedback Metrics Strategic Plan Operations Plan Metrics Mission Activities Operational Budget Outputs Outcomes Strategic Budget Strategic Initiatives

8. “Cascading” Scorecards

9. Balanced Scorecard Cause-Effect Hypothesis 4. Increased customer satisfaction will lead to better financial results. Financial 3. Improved work processes will lead to increased customer satisfaction. Customer 2. Skilled, empowered employees will improve The ways they work. Internal Process 1. Knowledge & skills of employees is foundation for all innovation and improvements. Learning & Growth

10. Strategy Map Increased Involvement Increase Safety Increase Satisfaction Lower Wait Time Citizens Budget Internal Business Process Learning and Growth Reduce Costs Grow Tax Base Reduce Procurement Steps Improve Cycle Time Improve Skills Increase Network Capability

11. From Strategy to Budget Strategy Map Metrics Targets Strategic Initiatives Customer approval rating • Each Strategic Initiative • Plan contains: • Sponsor • Schedule • Resources • Budget Cycle time reduction % strategic skills available

12. $ Tying the BSC to Resource Decisions • Mission • Vision Corporate • Strategic themes • Perspectives • Objectives • Measures • Targets • Initiatives Feedback • Capital plan • Operating budget • Special projects Results • Analysis

13. Popular Management Programs • Strategic Management Systems • Balanced Scorecard • Quality Certification Programs • ISO 9001, Baldrige, EFQM, CMM • Quality Improvement Programs • Six Sigma, TQL, TQM, BPR, BPI • Financial Management Programs • ABC, ABB, ABM, EVM, ZBB

14. What is the difference between private-sector and public-sector balanced scorecards?

15. Comparing Private and Public Sector Organizations

16. Financial and Social Cost Customers and Constituents Value and Benefit Internal Processes Learning: Skills, Knowledge, Data, People Public Sector Balanced Scorecard Mission Source: Washington State Auditors

17. Commercial Customer Relationships Competitors Customer Products, Services Funds Supplier

18. Government Customer Relationships Citizens (No Competitors) Taxes Representatives Appropriations Agency Budgets Department Suppliers Grants, Products, Services Costs Support Activities Mission Activities Recipients

19. 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

20. BSC Benefits: 1. Learning • BSC Places the Whole Organization in a Learning Process • Aligns everyone to strategy in a single framework • BSC improves itself over time: • Selection of initiatives and resource allocation • Cause-effect hypotheses • Measurement process

21. BSC Benefits: 2. Planning • More rational budgeting in a world of rapid change • Resource allocations based on performance • Systematic, fact-based management displaces intuition and politics • Anticipate future outcomes • Leading indicators • Cause-effect predictions • Simulations made possible

22. BSC Benefits: 3. Facilitates Improvements • BSC Raises visibility of what’s going on • Identifies what most needs to be changed • Helps to identify best practices • BSC enables more opportunities for Innovation

23. BSC Benefits: 4. Stakeholders • Raises visibility of government activities • Facilitates feedback • Supports accountability

24. Org. B Org. A Process Process BSC Benefits: 5. Benchmarking • Benchmarking Project: • Identify Process • Establish Partnership • Site Visit • Data Analysis • Implementation Plan Performance measurement data collected for the BSC can also be used as a basis of comparison with data from other organizations.

25. Why use the Balanced Scorecard in Government? “Why should you as a government leader try to achieve a 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 cannot achieve your stated objectives without taking those expectations into account. More importantly, because it works, as can be seen from the success of our partners.” -- National Partnership for Reinventing Government, 1999

26. Balanced Scorecard - Managing For Results Government Roster Federal StatesCitiesCounties Defense Virginia San Diego Monroe Energy Iowa Portland Fairfax Commerce Maryland Worcester Prince William Transportation Puerto Rico Seattle Montgomery Coast Guard Texas Austin Santa Clara IRS Minnesota … … Veterans Affairs Oregon … Florida Washington Utah Maine …

27. “Nine Steps to Success” Framework being Implemented in a County: 1. Conduct an organizational assessment 2. Define strategic themes or focus areas 3. Develop objectives 4. Draw strategy maps 5. Define performance measures 6. Develop initiatives 7. Visualize & communicate performance 8. Cascade to business units 9. Evaluate performance and adjust

28. Mission Strategy Budget Measure Target Initiative Objective Customers & Stakeholders Customers/Citizens Objective Measure Target Initiative Financial Employees & Organization Capacity Internal Business Process Measure Target Initiative Objective Internal Business Processes Learning & Growth Objective Measure Target Initiative Key Questions What is our mission? What services and programs are required and need to be provided? How do we create value? What benefits do we need to provide? 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?

29. 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)

30. 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)

31. Example: Performance Views (top level)

32. Example: Performance Views (detail)

33. 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

34. 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

35. Future of the Balanced Scorecard • Increased Specialization • Sector-based scorecards • E. g. Health Care BSC • Department-level scorecards • E. g. Human Resources BSC • Increased Sophistication of Tools • Linkage to Decision Support Systems • Performance Simulation Systems

36. 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.

37. 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