© 2009 ActiveStrategy, Inc. How to Drive Organizational Alignment to Strategy Using Balanced Scorecards Presented by Chris Heflin

© 2009 ActiveStrategy, Inc. p. 2 Presentation Overview  Strategic vs. Operational Goals  Setting Strategic Goals  Creating a Balanced Scorecard  Deploying Scorecards to Execute Goals  Aligning & Prioritizing Improvement Initiatives  Linking Strategy to Action Plans via Scorecards  Best Practices  Tying this back to WSQA Criteria

p. 3 © 2009 ActiveStrategy, Inc. Strategic vs. Operational Goals Operational (Including operational measures & incremental improvement plans) Amount of time spent on strategic efforts (typical)* Supervisor DirectorExecutiveManager * Includes critical few objectives & measures that need to be improved plus key strategic improvement initiatives Increased time spent on strategic efforts (ideal)

© 2009 ActiveStrategy, Inc. p. 4 Setting Strategic Goals

© 2009 ActiveStrategy, Inc. p. 5 Defining Strategic Goals Strategic Goals have the following components:  Perspectives –high-level focus areas  Objectives – verb-noun statements that reflect the strategic plan (e.g., “Improve Customer Satisfaction”)  Measures/Metrics - #, $, or % that indicates performance against an objective  Targets – what the measure should attain  Initiatives – improvement projects (e.g., “Improve Cycle Time”)

p. 6 © 2009 ActiveStrategy, Inc. Making Strategic Goals Actionable Top-Level Balanced Scorecard Operational framework to communicate, deploy and execute plan Visual simplification of Strategic Plan Key Strengths, Weaknesses, Opportunities & Threats SWOT Analysis Prioritized Initiatives Strategic Goals Aligned improvement Strategy Map

© 2009 ActiveStrategy, Inc. p. 7 Create a Strategy Map What is a Strategy Map?  Visual simplification of strategic objectives  Shows cause and effect relationships  Helps ensure you’re not missing any key drivers

© 2009 ActiveStrategy, Inc. p. 8 Steps to Creating a Strategy Map 1.Prioritize SWOT outputs & convert to “verb noun” strategic objectives 2.Group objectives by “perspective” or high- level focus area 3.Identify cause-and-effect relationships with arrows

p. 9 © 2009 ActiveStrategy, Inc. The Anatomy of a Strategy Map High-level “objectives” (verb/noun) Links showing relationships Perspectives Traditional Scorecard “Perspectives”

p. 10 © 2009 ActiveStrategy, Inc. Example Strategy Map for Public Sector Note: Perspective names and their cause & effect order change

© 2009 ActiveStrategy, Inc. p. 11 Next, Create a Balanced Scorecard

© 2009 ActiveStrategy, Inc. p. 12 Creating a Balanced Scorecard Step 1: Transfer from Strategy Map  Transfer Perspectives and add Index numbers (1.0, 2.0)  Retain cause & effect hierarchy  Transfer Objectives into proper Perspective and add Index numbers (1.1, 2.1)

© 2009 ActiveStrategy, Inc. p. 13 Keep in Mind  Can use more or different perspectives (if appropriate), BUT BALANCE IS CRITICAL  Objectives must contain a verb (grow sales, reduce complaints, etc.)  Keep objectives focused (7-12 max per scorecard)

p. 14 © 2009 ActiveStrategy, Inc. Perspectives & Objectives on BSC Objective Perspective Index Number

© 2009 ActiveStrategy, Inc. p. 15 Creating the Top-Level BSC Step 2: Determine Measures  Should represent the best indication that an objective is being met  Ask what outcomes your stakeholders desire from the objective:  Quality or defects  Revenues  Cost or productivity  Responsiveness or Cycle Time  Employee or Environmental Safety

© 2009 ActiveStrategy, Inc. p. 16 Creating the Top-Level BSC Step 2: Determine Measures  Keep to 1-3 measures per objective  One objective may be measured with two or three dissimilar units of measures, e.g. Customer Satisfaction may be measured by:  Survey Results (Very Good)  Number of Complaints (4 per quarter)  Turnaround time (2 days)

© 2009 ActiveStrategy, Inc. p. 17 Lagging Measures  Lagging measures are reported infrequently, too late to prevent a problem  Examples are a company’s critical high-level outcome measures:  Sales  Service Quality  Expenses  Customer Satisfaction

© 2009 ActiveStrategy, Inc. p. 18 Breaking Down a Lagging Measure  First Step – Dimensional Measures  These break down a measure by its component parts using the same units (e.g. Sales by Division or Geography)  Note: dimensional measures alone do not get at the root causes of a problem

© 2009 ActiveStrategy, Inc. p. 19 Leading Measures  Leading Measures  break down an important measure into what drives it (e.g. # of quotes or size of pipeline)  Also called Cause & Effect or Process Measures

© 2009 ActiveStrategy, Inc. p. 20 Leading Measure Examples  Examples:  Customer Satisfaction leads Revenues  Service Response Time leads Customer Satisfaction  % Service Rep Availability leads Service Response Time  Leading/Lagging are relative terms  A leading measure in one area is likely a lagging measure to another area

© 2008 ActiveStrategy, Inc. Top-Level Scorecard with Measures p. 21

© 2009 ActiveStrategy, Inc. p. 22 Creating the Top-Level BSC Step 3: Align & Prioritize Initiatives  Initiatives are time-bound projects  They have defined resources  Also called Projects, Action Plans  Some are derived from the SWOT Analysis  They should be prioritized based upon:  alignment to an identified performance gap in a strategic area  size of the performance gap  resources required to improve  ROI, etc.

© 2009 ActiveStrategy, Inc. p. 23 Prioritize and Align Initiatives  Align current initiatives (time-bound improvement projects) to measures  Cease initiatives that do not align and any that align to measures that are meeting goals  Consider new initiatives to address underperforming measures  Aligned initiatives drive results by addressing root causes

p. 24 © 2009 ActiveStrategy, Inc. A Prioritization Matrix

p. 25 © 2009 ActiveStrategy, Inc. An Example Completed Matrix

© 2009 ActiveStrategy, Inc. p. 26 Great, the BSC is Finished!  Well…actually, this is just the beginning  The next step is to create a “cascaded” framework of scorecards  Create linked scorecards down & across the organization  This is where you really start to deploy your strategy and make it actionable

p. 27 © 2009 ActiveStrategy, Inc. What It Looks Like (Long-Term) Top-Level Scorecard Divisional or Business Unit Scorecards Department or Functional Scorecards Individual Employee Goals

© 2009 ActiveStrategy, Inc. p. 28 Why is Cascading Scorecards Critical?  It results in a proactive performance system  it communicates and translates the strategy to all levels  when a critical top-level lagging measure is underperforming, lower level causes can be easily identified  allows you to fix important problems before they become high-level issues

© 2009 ActiveStrategy, Inc. p. 29 How to Cascade – an Overview  Create linked, related (but not identical) scorecards for next organizational level  As you go, translate objectives to make them meaningful to that area  e.g., “Improve Customer Satisfaction” might become “Reduce Wait Times for Customers”  Align measures to the translated objectives  e.g., % of Customers waiting more than 5 minutes

© 2009 ActiveStrategy, Inc. p. 30 Cascading Objectives & Measures Using a Process Matrix Approach

© 2009 ActiveStrategy, Inc. p. 31 Tips on Using a Process Matrix Approach  Used to align business processes to strategic objectives  Helps to identify their translated objectives & leading measures  Works best for functional and support areas  Process owners must be involved

© 2008 ActiveStrategy, Inc. Create a Matrix for Each Area List key processes of the area Corporate Objectives 1.1 Grow Profitable Revenues 2.1 Improve Cust. Sat. 3.1 Integrate New Tech. Internal Network Mgmt. Cust. Data Center Mgmt. Technical Support IT’s Business Processes Outcome p. 32

© 2008 ActiveStrategy, Inc. Identify Outcomes & Intersections Identify processes that most strongly support the Objectives Corporate Objectives 1.1 Grow Profitable Revenues 2.1 Improve Cust. Sat. 3.1 Integrate New Tech. Internal Network Mgmt. x Cust. Data Ctr. Mgmt. xx Technical Support xx IT’s Business Processes Outcomes Availability Data Ctr. Rev. Cust. Sat. Resolved calls p. 33

© 2008 ActiveStrategy, Inc. Translate the Objectives Describe Objective using that area’s terms Corporate Objectives 1.1 Grow Profitable Revenues 2.1 Improve Cust. Sat. 3.1 Integrate New Tech. Internal Network Mgmt Improve network reliability Cust. Data Ctr. Mgmt Maximize service revenues Minimize customer complaints Technical Support Improve call resolution Leverage ticket software IT’s Core Processes Outcomes Availability Data Ctr. Rev. Cust. Sat. Resolved calls p. 34

© 2008 ActiveStrategy, Inc. Align Measures Using the Matrix Align measures identified in the processes to the cascaded Objectives Corporate Objectives 1.1 Grow Profitable Revenues 2.1 Improve Cust. Sat. 3.1 Integrate New Tech. Internal Network Mgmt Update network speed % full availability Cust. Data Center Mgmt Maximize ASP revenues $ service rev/month Minimize customer complaints # hours downtime Technical Support Leverage ticket software % of calls resolved IT’s Core Processes p. 35

© 2009 ActiveStrategy, Inc. p. 36 Place On Appropriate Scorecard  Place objectives & related measures on the appropriate scorecard  Assign an owner to each to ensure accountability  Finally, establish goals for each measure to track progress  Cascaded objectives & measures create alignment to top-level strategy

© 2009 ActiveStrategy, Inc. p. 37 Going From Strategy to Action Plan An Example “Drill Down” from the City of Coral Springs Scorecards

p. 38 © 2009 ActiveStrategy, Inc. Police Scorecard Click to drill down

p. 39 © 2009 ActiveStrategy, Inc. Drill down reveals Measure Details Contributing lower-level measures Aligned improvement Initiatives

p. 40 © 2009 ActiveStrategy, Inc. Additional Measure Details (trend charts & graphs, comparisons)

p. 41 © 2009 ActiveStrategy, Inc. Chart Detail – Crime by Type

© 2009 ActiveStrategy, Inc. p. 42 Chart Detail – Crime Rate Comparisons

p. 43 © 2009 ActiveStrategy, Inc. Initiative Detail Click to see commentary from Initiative Owner about the initiative and Action Plans

© 2009 ActiveStrategy, Inc. p. 44 Best Practices to Remember  Start with your strategy  Keep objectives to the critical few  Pick measures you can actually measure – and those that drive the right behaviors  Cascade & deploy (scorecards are NEVER perfect, so don’t wait)  Review performance of scorecards regularly

© 2009 ActiveStrategy, Inc. p. 45 How Does This Fit Into the WASQ Criteria?  What WASQ categories does this type of framework address?  Why?

© 2009 ActiveStrategy, Inc. p. 46 Questions?

© 2009 ActiveStrategy, Inc. p. 47 Thank You for Participating § “How to Drive Organizational Alignment to Strategy Using Balanced Scorecards” Presented by Chris Heflin Please stop by the ActiveStrategy table to learn more or visit