1. P e r f o r m a n c e Measuring Results of Organizational Performance Lesson 4 Performance Methodology: The Balanced Scorecard

2. P e r f o r m a n c e Measuring Results of Organizational Performance At its Simplest - Performance Management Actions Set Goals/ Objectives Plan Initiatives Implement Actions Analyze Results Against Expectations Report to Stakeholders Make Improvements

3. P e r f o r m a n c e Measuring Results of Organizational Performance Traditional Business Information Traditional financial measures tell the story of past events (lagging indicators) Financially-based measures tend to the focus of on the compliance purpose of measurement, Financial measures provided only limited insightful information for: – guiding and evaluating whether organizations are able to sustain their performance into the future; – Identifying opportunities to create future value for their customers and stakeholders, and – developing effective capabilities to sustain future performance aspirations

4. P e r f o r m a n c e Measuring Results of Organizational Performance What is a Balanced Scorecard? A tool that translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system.

5. P e r f o r m a n c e Measuring Results of Organizational Performance Translate a Strategy Into Operational Terms Ensure Clarity of the Strategy Across the Organization Communicate Through Measurement Create Consensus and Teamwork Through the Process of Developing a Scorecard Balanced Scorecard Framework

6. P e r f o r m a n c e Measuring Results of Organizational Performance Kaplan and Norton’s Balanced Scorecard for Industry Financial Customer Internal Business Processes Learning and Growth Mission Vision Strategy

7. P e r f o r m a n c e Measuring Results of Organizational Performance Financial To succeed financially, how should we appear to our shareholders? Customers To achieve our vision, how should we appear to our customers? Learning and Growth To achieve our vision, how will we sustain our ability to change and improve? Internal Processes To satisfy shareholders and customers, what business processes must we excel at? Mission Vision Strategy Kaplan and Norton’s Balanced Scorecard for Industry

8. P e r f o r m a n c e Measuring Results of Organizational Performance Asking the Right Questions Financial Are we meeting the expectations of our Shareholders? Customers Are we delighting (or at least satisfying) our Customers? Learning and Growth Are we prepared for the future? Internal Processes Are we doing the right things, and doing things right? Mission Vision Strategy

9. P e r f o r m a n c e Measuring Results of Organizational Performance “Score-Carding” the Perspectives Financial Objectives……………… Measures………………… Targets…………………… Initiatives………………. Customers Objectives……………….. Measures………………….. Targets…………………….. Initiatives…………………. Learning and Growth O bjectives……………… Measures………………… Targets…………………… Initiatives……………… Internal Processes Objectives……………… Measures………………… Targets…………………… Initiatives……………… Mission Vision Strategy

10. P e r f o r m a n c e Measuring Results of Organizational Performance Linkage among the Scorecard Perspectives Financial Customers Internal Processes Learning and Growth Profitability Revenue ROI Satisfaction Relationship Market Share Quality Efficiency Innovation Competencies Technology Culture

11. P e r f o r m a n c e Measuring Results of Organizational Performance Customers Internal Processes Learning and Growth Stakeholder ( Mission) Resources and Capabilities The Balanced Scorecard for Government

12. P e r f o r m a n c e Measuring Results of Organizational Performance Steps for Building a Balanced Scorecard 1. Customer Perspective : Differentiate your organization from competitors. 2. Internal Process perspective : Identify operational, customer-relationship, and innovation processes to support your customer and financial goals. 3. Learning and Growth perspective: Define the skills, technologies, and corporate culture needed to support your strategy. 4. Resource/Capabilities/Financial Perspective : Balance revenue growth and production improvement. 4 Scorecard Areas

13. P e r f o r m a n c e Measuring Results of Organizational Performance Steps for Building a Balanced Scorecard (cont.) The KEY steps to build Balanced Scorecard are: Step 1: Clarify the mission and vision

14. P e r f o r m a n c e Measuring Results of Organizational Performance Steps for Building a Balanced Scorecard (cont.) Step 2: Specify at least one goal to accomplish mission and realize vision Then, create objectives for accomplishing the goal in each one of the four scorecard perspectives

15. P e r f o r m a n c e Measuring Results of Organizational Performance Steps for Building a Balanced Scorecard (cont.) Step 3: Define performance measurements to measure the objectives

16. P e r f o r m a n c e Measuring Results of Organizational Performance 3 Principles of Performance Measurement Principle 1: Make Measurement Simple – Easy to understand - by everyone (well-defined) – Easy to collect – data accessible – Timely – hourly, daily or weekly, monthly – Visible – posted on the wall – Informative – no interpretation required Principle 2: Make Measurement Relevant – Linked to organizational strategy – encourage actions that will result in achieving strategy – Linked to the customers and their expectations Principle 3: Measure Outcomes – Intended Strategic Results/Benefits to the Customer – Predictors of the future