Balanced scorecard in 16 weeks not 16 months – the implementation lessons

Presented by David Parmenter

waymark solutions limited

May 2008 Website: www.waymark.co.nz

Blog: www.davidparmenter.com

Email: [email protected]

Do you have some form of “balanced” performance management system? (e.g. looking at more three or more perspectives)

  Yes No

If you have some form of balanced scorecard, how quick was the implementation across most of the organization?

    within 16 weeks between 16 weeks - 6 months about a year well over a year

The KPI book has reached #1 in performance management on www.amazon.com

www.waymark.co.nz to order, see link to www.amazon.com

This webcast is 5 th in a series on winning KPIs

1. introduction to winning KPIs 2. implementing KPIs - A 12-Step Process 3. implementing KPIs in Smaller Organizations (<200 Staff) 4. finding your organization’s critical success factors 5. balanced scorecard in 16 weeks not 16 months – the implementation lessons

History of 16 weeks => 16 months

   lack of commitment lack of finishing ability (Sir Edmund) lack of understanding of its importance (fitting it in, and often being put down)  over cooked BSC (many changes, SMT latest brain wave)  once BSC set up it is thrown out when new SMT members arrive  scorecard not delivered until very end if at all Vs K&N 60 days target for SMT to start using the BSC

11 implementation lessons #1

1. Appoint an external facilitator 2. SMT commitment and education 3. Start off with a six perspective scorecard 4. Focus on the critical success factors 5. Follow the 10/80/20 rule 6. Select a small team

11 implementation lessons #2

7. “Just do it” 8. Use existing systems for the first 12 months 9. Trap all performance measures in a database so they are available to all 10. BSC designs are an art form not a science 11. Maybe you need to rename

L1: Select a external facilitator – your role!

 Without this position being filled, dangers lurk everywhere.  It is important that the external project facilitator’s role takes a backseat, as a mentor would, as soon as possible as the project team gains confidence  Catch-up meeting once every two weeks, with key documentation being reviewed via e-mail in the intervening period.

Benefit 1: the SMT sold the concept and kept interested Benefit 2: project team has a mentor

The external project facilitator should be:

    free of any proprietary applications be well versed in performance measures have well-rounded consultancy skills have the credentials so that the SMT will listen and follow advice  be able to motivate those they come in contact with  their role will be full time for the first three weeks and then part time as the project team takes over

L2: SMT commitment & education

 SMT has to be totally dedicated to the BSC both during and after the project • sell BSC concept through a half day workshop (it is a daily not monthly involvement!) • regular feedback loops to ensure SMT involvement in development • weekly involvement during 16 weeks  Many projects fail due to lack of ongoing monitoring of KPIs by SMT or change of CEO!

Benefit 1: the SMT should get a buzz from being involved in such a dynamic project Benefit 2: and the BSC will help the SMT rethink strategies

“I think senior staff can simply view development of a BSC as an end in itself and do it 'to keep the boss happy'. They are not strategic in their perspective so don't see the BSC as a tool to help them better understand and manage their organization. This can be reflected in a loss of interest when the process of development gets tough, such as deciding on KPIs to use and the trade-offs to be made.

While SMT is important I think the CEO is critical. He/she must be the central driver and carry around the embryo BSC with them all the time, talk about it frequently etc.” A waymark client

“The scorecard development process should not be delegated to a middle management task force. For the BSC to be effective, it must reflect the strategic vision of the SMT. If the SMT are not leading the process they will continue to conduct operational reviews that emphasize meeting short term financial targets, thereby bypassing and undermining the fundamental rationale for developing a BSC in the first place.” Kaplan & Norton

L3: Start off with a six perspective balanced scorecard template

FINANCIAL

Utilisation of assets Optimisation of working capital Focus on top 10% of Customers, etc

CUSTOMER

Seamless service Increased customer satisfaction etc.

INTERNAL PROCESS

Delivery in full on time Effective relationship with key stakeholders

EMPLOYEE SATISFACTION

Positive company culture Retention of key staff Optimising technology Increased recognition

ENVIRONMENT/ COMMUNITY

Supporting local business Green globe 21 Community leadership

LEARNING AND GROWTH

Empowerment Increasing expertise Adaptability etc.



Benefits of a six perspective balanced scorecard

Employee satisfaction perspective emphasizes the importance of • the amount and regularity of recognition • regular staff satisfaction surveys - a rolling sample basis  The environment/community perspective will help the organization become an employer of choice • CEO of NZ Food manufacturer • “The hip bone is connected to the thigh bone.” Benefit: using the suggested six perspective names will be adopting a better practice and give you more time to focus on finding the CSFs

L4: Focus on the critical success factors

    Debating the "perspectives", their names and the design of the scorecards – Suggest 6 perspectives SMT should focus on providing the project team with CSFs When you have the right CSFs it easier to find the KRIs, PIs and KPIs) Have a moratorium on changing the perspective names - fine tune 6-12 months later (when more knowledge and experience gained) Benefit: The SMT will invest time scoring goals – not own goals

With 40 or so success factors there is confusion and a lack of focus

  too many measures strategic plans with too many diverse and contradictory initiatives  lack of communication and direction to operational and support staff

Most organizations know their success factors - however few orgs have:

  worded their success factors appropriately segregated out success factors from their strategic objectives  sifted through them to find their critical ones – their CSFs  communicated the CSFs to staff

Finding your critical success factors (step 6) is a three phase process

1. finding out the SFs that have been mentioned over the last ten years or so 2. holding a two day workshop 3. presentation to the SMT and Board to obtain agreement on the CSFs

Short listing the CSFs – by relationship mapping

Retention of key staff Increase repeat business Increased recognition 4 OUT

L5: Follow the 10/80/10 rule

Key result indicators 10

Tells you how you have done in a perspective

Performance indicators Result indicators

) ) )

80

Tells you what to do Tells you what you have done

Key performance indicators 10

Tells you what to do to increase performance dramatically

4 types of performance measures

KRIs peel the skin to find the PIs PIs&RIs peel to the core to find the KPIs KPIs

Reasoning for the 10/80/10 rule

 Kaplan and Norton recommend no more than 20 KPIs. Hope and Fraser suggest less than 10 KPIs  Often KRIs confused with KPIs e.g. return on capital employed  KRIs are more for the Board - management needs to get into more detail  Easier to limit measures rather than try and thin down over 300 measures Do not just consolidate measures for the SMT product ( the 10/80/10), and not trying to identify 80 KPIs in 200 odd performance measures.

L6: Select a small team

   Individuals with an in-depth understanding of the business  2 - 4 staff who need to be committed full time (presentation skills, innovation, completion, knowledge of org. & sector, ability to bring others on board etc ) Combine oracles with young ‘top guns’ Avoid having any SMT on the team Benefit: The project will be given a good start and will be protected against procrastination.

SMT

KPI team structure

CEO KPI project team (up to 4 members) External facilitators Business unit coordinators KPI team coordinators teams building their own performance measures Interested stakeholders

L7: “Just do it”

 The exact structure of result indicators, performance indicators and KPIs is rarely “right first time”  SMT and BSC team need to ensure there is a “just do it” culture   project team should not spend too much time on external research get access to a performance measures database Benefit: you probably have a better chance of getting a scorecard that works in 16 weeks than you have in 16 months

Use these books & material on www.bettermangement.com

www.waymark.co.nz to order, see link to www.amazon.com

L8: Use existing systems for the first

   

12 months

Much can be done with standard applications such as Excel, PowerPoint and Access The company’s intranet can hold the 24/7, daily KPIs Share ideas through SharePoint Team Services and the BSC web page purchases can be done more efficiently and effectively 12 months down the track (forecasting, reporting and BSCs can be jointly sourced) Benefit: by focusing on an immediate solution using existing in-house software the project time-scale of 16 weeks will not be compromised by delays in system development

L9: Trap all performance measures in a database so they are available to all

 all performance measures found could be relevant to other business units and teams.   improves consistency and completeness of team scorecards  use existing database allow access through KPI intranet home page database will need purging on a regular basis to eliminate duplication Benefit: creating a comprehensive and user-friendly resource for all.

Performance indicator database Name of Performance measure Calculation of measure

Number of initiatives implemented from the quarterly rolling client survey Number of referrals

from

key clients Number of initiatives implemented out of total arising from survey How many clients came from a referral basis from our key customers

Type of PM ( KRI,PI, RI, KPI) Person responsible System where data is going to be gathered

PI PI Pat Carruthers Pat Carruthers IT Team Sales Team Teams interested in using measure

BSC perspective Recommended display (e.g. type of graph) Frequency of measurement (24 by 7, daily, weekly, monthly) Linkage to success factors xx xx xx xx xx xx

Customer Focus Customer Focus Number Line graph over 12 months for 4 offices monthly monthly Maintain key customer satisfaction Maintain key customer satisfaction      

L10: KPI reporting formats are an art form not a science

    select a better practice template quickly have a moratorium on format changes - fine tune 6-12 months later (when more knowledge and experience gained) entrust the BSC team to finalize BSC template in the meantime record all SMT suggested modifications for future evaluation Benefit: Swift adoption of better practice reporting templates.

L11: Maybe you need to rename

     many failed balanced "garbage in, garbage out“ scorecards due “scorecard” may have negative connotations what about "navigator"; "compass"?

have a naming competition for all staff to enter to particularly important where SMT have prior negative experiences with balanced scorecards.

Benefit: A project name that galvanises the organisation

Tourist operation case study

     CEO knowledgeable on BSCs one day one-to-one with the CEO developed using excel scorecards project leader was the financial accountant progress slow due to process inefficiencies eating up project time  change of CEO delayed project implementation

Navy case study

    Used the standard 4 perspectives Controlled project themselves Involved all the forces Accepted that they would never get it 100% right first time   Accepted that they had too many measures Some measures causing problems as they did not vet enough

Financial sector organization case study

  CFO attended winning KPIs course Commenced project using a project manager from outside who did not attend the course   Team involvement is high Confusion over measures as the 10/80/10 not sold hard enough  Senior management commitment not evident

Suggested next steps

    read my paper on www.bettermanagement.com

– it is free to access acquire the book “Key Performance Indicators – developing, implementing and using winning KPIs”  ban further development of measures until the CSFs have been agreed  hold the two day CSFs workshop (may need a facilitator) listen to my other web casts attend my KPI master class if you are to be in the KPI project team (see www.davidparmenter.com)

These books came out in 07

www.waymark.co.nz to order, see link to www.amazon.com

Thank you for participating in this web seminar Hope to see you at a workshop see

www.davidparmenter.com

for venues

John Wiley & Sons have published

Amazon link on www.davidparmenter.com