1. Balanced Scorecard 101 November 29th, 2010
Finance & Facilities
Metrics & Reporting
Instructors: LuAnn Stokke, Vincent Lau
The Balanced Scorecard (BSC) is an important tool that aligns business activities, improves communications, and measures organization performance against strategic goals. Attendees can expect to gain a good understanding of BSC principles and how BSC theory relates to real-life application in F2.   This course will provide definitions and help demystify the relationship among operation, strategy, dashboard, scorecard, strategy maps, initiatives, values, mission, vision, and other terms.

2. Agenda
Background and Quality Improvement Infrastructure What is Balanced Scorecard? Vision to Operation Operational Dashboards Exercise 1 BREAK Strategy Map, Objectives & Initiatives Strategic Scorecards Exercise 2 Targets & Benchmarks

3. Introduction
Welcome What have you heard? What would you like to know more about? - LEAN, QI, PI, PDCA, Deming, Strategy Map, BSC, Dashboard, Scorecards, Kaizen, Strategic Objectives, Initiatives, etc.

4. F2 QI Pyramid Vision Strategic Plans Quality Improvement System
Efficient
Processes
Strategic Plans
Quality Improvement System
Trained Staff Recognition Data Analysis
Customer Focus Empowered Staff Problem Solving
Teamwork Quality Processes Measurement Systems
Vision
Delighted
Customers
Leaders Staff
Trustworthy Trustworthy
Trusting of Others Trusting of Others
Approachable, Inspiring Collaborative, Committed

5. F2 9 Principles What are the goals? 1. Customer Focus
2. Continuous Improvement
How is it done?
3. Quality Definition
4. Work Process Focus
5. Prevention
6. Error-Free Attitude
7. Manage by Facts
Who does it?
8. Participation / Empowerment
9. Total Involvement

6. What is Balanced Scorecard?
More than a performance measurement tool:
Helps organizations effectively execute strategy.
Articulates strategy in actionable terms.
Serves as a roadmap for strategy execution.
Mobilizes and aligns leaders and staff to make strategy a continuous process.
Illustrates cause-and-effect relationships between actions and outcomes.

7. F2 Organization’s BSC JourneyFS
CPO FM
Treasury Group
University
Audit
F2 Admin
Top down
Management tool
Bottom up
Customer focused
Different organizations have different journeys. There is no right or wrong way to implement continuous improvement.
BSC QI
LEAN

8. Cascading Vision to Operation
Description
Conceptual
Factual
Is it real?
One day in the future
Not yet clearly attainable?
5 – 10 years
3 – 5 years
Present – 1 year
Timeframe
An ideal world
40,000 ft
point of view
20,000 ft
Strategic Scorecard
Ground level
Operational Dashboard
Also Known As
UW President
Board of Regents
Executives
Government
SVP / AVPs
Controller
Leaders
Managers
Supervisors
Staff
Owners
(F2 perspective)
Vision
Mission
Strategy
Operation
Ideal State. A lofty dream.
A common goal / future for the entire organization.
What does the organization do?
What type of business?
Often interchangeably used as Vision
Major Goals & Performance Objectives to achieve the Mission & Vision
Specific actions to achieve work-level targets aligned with strategic goals.

9. Rev. Dr. Martin Luther King
We All Play a Role
Rev. Dr. Martin Luther King
Vision
“I have a dream that all men will be judged by the merit of their character, not by the color of their skin.”
Dr. King’s vision/mission of equality is achievable with successful Strategy & Operations.
We all play a role/influence the success of an organization.
Successful Strategy is how to achieve Vision & Mission.
Successful Operation helps achieve Strategy (Strategic Objectives).
Mission
Eliminate racial injustice in American society
Strategy
Establish national-public attention to racial injustice
Educate people about racial injustice
Governments establish civil rights for all citizens
Operation
Speak at public events
March alongside civil-rights activists
Engage politicians at events
Object to and stand-up against racial injustice
Values
Utilize a passive/non-violent approach

10. We All Play a Role Vision / Mission / Values Strategy
Why we exist
What’s important to us
What we want to be
Our game plan
Translate, Focus and Align
What are the priorities?
What we must improve?
What do I need to do?
Vision / Mission / Values
Strategy
Operations / Tactics

11. Leaders Directors Supervisors Coordinators
We all Play a Role
VISION / MISSION
Set Direction
STRATEGY
Systems; Cross-functional
OPERATION
Execution/Feedback
Work Teams / Measure
Analysts
Leaders Directors Supervisors Coordinators
STEAM
Executives

12. Examples of F2 Key ProcessesFS
CPO FM
Treasury Group
UniversityAudit F2
Admin
Maintain grounds
Clean buildings
Service vehicles
Project- manage new construction
Manage or monitor design/con-struction vendors
Pay staff on time
Manage research budgets
Deliver mail
Steward Endowment
Lease buildings and space
Mitigate risk
Monitor regulatory compliance
Conduct audits
Deliver F2-wide training
Oversee LEAN implementa-tion
Value
Added Tasks
INPUT
OUTPUT

13. BSC’s Four Perspectives
According to Kaplan & Norton, long-term success is best gauged via a BALANCED perspective.
For example, financial statements will not display intangible assets:
cycle-time, knowledge management, staff capability, customer satisfaction, etc.
A fully functioning Dashboard may consist of measures, with a larger portion in Internal Process
Customer
(esp. important for Non-Profit)
20% of measures
Financial
20% of measures
Internal Process
40% of measures
Learning & Growth
20% of measures

14. Finance & Facilities Dashboard
CUSTOMER
PROCESS/THEME MEASURE (Strategy Map Objective) ACTUAL TARGET GAP
FINANCIAL
PROCESS/THEME MEASURE (Strategy Map Objective) ACTUAL TARGET GAP
Instill Customer Confidence
1 Percent of Financial Aid Disbursed Within 1st Week of Academic Quarter (C1, annual)
84% 
85%
-1%
Control Costs
14 Utilities Cost Avoidance, Seattle Campus (R1, annual)
$9.89M
$8.78M
No gap
Manage Business Growth
2 Number of Business Days to Set up New Budgets (C1, monthly) 21
days 12 -9
15 Cost of (Leased) Space per Sq. Ft. (R2, quarterly)
$32.44
$33.15
3 Transportation Modes to and from Campus - Environmentally friendly transportation (C2, annual). Reduce drive alone.
22%
2008
20%?
-2%
16 U.S. Postal Service Postage Cost Avoidance (R1, quarterly)
9.8%
8.5%
Synthesize Information and Inform Campus
4 Customer perception: “FS employees effectively communicate with me,“ 2009 Customer Survey (C3, biennial)
70% 
72%
17 Cost-per-Paycheck (R1, annual)
$1.00 
$2.25 
Monitor Client Satisfaction
5 CPO Client Advisory Committee Quarterly Survey Results (C1, quarterly)
HOLD FOR CUST. SURVEY
3.31
Jul2009
3.5
-0.19
18 eCommerce Utilization Rate (R3, monthly)
79%
100%
-21%
6 Student Overall Satisfaction with SFS Services (C3, annual)
80%
64%
19 Custodial Services--Cost Comparison per GSF (R2, annual)
 $1.29
$1.41
INTERNAL BUSINESS PROCESS
Manage Operational & Business Risk
20 DRAFT: Risk Management—Cost of Risk (R3, quarterly) $
Operational Excellence
7 Annual Productivity: Finance & Facilities vs. Department of Labor benchmark
0.8%
3.0%
-2.2%
Manage Investment Portfolios
21 Consolidated Endowment Fund and
Invested Fund Performance Returns, CEF; IF (R3, quarterly)
4.1%
0.0%
3.1%
-0.2%
Purchase Goods and Services
8 Number of Invoice Discrepancies Over 30 Days Old (O1, monthly)
122 50
-72
Manage Cost of
Capital
22. Cost of debt: ILP; Non-ILP (R3, quarterly)
4.3%
5.1%
5.0%
5.5%
9 Percent of Online Invoices Paid Within 45 Days of Invoice Date (O1, monthly)
76%
-9%
STAFF LEARNING & GROWTH
PROCESS/THEME MEASURE (Strategy Map Objective) ACTUAL TARGET GAP
Manage Workspace and Infrastructure Projects
10 Closed Projects Cost versus Budget (O1, annual)
-8.4%
-6.0%
+/-10%
Develop Staff
23 Percentage of staff highly satisfied with Collaboration (4, 5); 2009 Employee Survey, (S1, annual)
68%
70%
Operate and Maintain Buildings; Campus
11a Carbon Footprint Reduction, in MgCO2e, Scope 1 and 2 Emissions (O4, quarterly)
2.4%
2.0%
Lead People
24 Percentage of staff highly satisfied with Internal Communication (4, 5); 2009 Employee Survey (S1, annual)
62%
63%
11b Carbon Footprint Reduction, in MgCO2e, Scope 3 Emissions (O4, quarterly)
11.9%
25 Percentage of staff highly satisfied with Leadership (4, 5); 2009 Employee Survey (S2, annual)
-7%
12 Water and Energy Conservation, Seattle Campus (O4, quarterly)
1123gpd
510 btu 
1188gpd
538.5btu
No gap 
26 Percentage of staff highly satisfied with Development to Full Potential (4, 5); 2009 Employee Survey (S3, annual)
75%
69%
Advise & Consult
13 Percent of MWBE and SBA firms in eProcurement/Diverse Supplier Portal (O3, quarterly)
35%
25%
27 Percent of staff highly satisfied (4, 5); 2009 Employee Survey "overall satisfaction" question (S3, annual)
71%
Measures key processes
Operational in nature
Displays Day-to-day activities
Reinforces us doing our job well
Analyzes performance
Provides baseline for improvement efforts

15. Example: Restaurant Dashboard
Customer
Average wait time (in minutes) for customer to receive order
# of inaccurate orders per 1,000
Financial
Annual % growth in revenue
Average margin per order
Internal Process
# Days to develop new product
% of food wasted
Learning & Growth
% of Staff cross-trained
% of servers > 5 years with company
Measures key processes
Operational in nature
Displays Day-to-day activities
Reinforces us doing our job well
Analyzes performance
Provides baseline for improvement efforts

16. Exercise 1 - Operation Setting:
It is the year 2000, and you are the Blockbuster senior management team.
You are the industry leader in renting movies.
Your competitors include Hollywood Video, local video stores, and grocery stores.
Assignment:
Create the Blockbuster operational dashboard.
Using the four perspectives, what measures would you like to see that would show you know how well Blockbuster is doing?
Report out & debrief to class.
Dashboard attributes:
Measures key processes
Operational in nature
Displays day-to-day activities
Reinforces doing our job well
Analyzes performance
Provides baseline for improvement efforts
Break out into groups
Give ideas/facts as needed: revenues, sales, number of stores, margins, employee turnover/retention, customer satisfaction, cost per rental
Talk about targets later. Exercise to identify performance, not necessarily improvements. The baseline.
Financial
Customer
Internal Process
Learning &
Growth

17. Exercise 1 Report Out
Each team reports out on their measures / dashboard

18. Break
Each team reports out on their measures / dashboard

19. Intermission Trivia
“A New Hope” was sub-titled to help distinguish from its prequel and sequel.
But to this day, most remember the iconic movie as “Star Wars”
“A New Hope”
“Genesis”
“Anakin’s Vengeance”
Star Wars episodes 5 & 6 were titled “Empire Strikes Back” and “Return of the Jedi”
What was the title given to the original 1977 movie Star Wars?
“A New Hope”
“Genesis”
“Anakin’s Vengeance”

20. Intermission Trivia Which is the most expensive movie to date?
Avatar $237M
Pirates of the Caribbean: At World's End $300M
Titanic $200M
Which is the most expensive movie to date?
Avatar
Pirates of the Caribbean: At World's End
Titanic

21. Intermission Trivia Year is 2105 Earth is covered in trash
Guess this animated science fiction movie:
Year is 2105
Earth is covered in trash
Humans live on luxury Starliners
Trash compactor robot cleans Earth
Robot & movie titled “WALL• E”

22. We All Play a Role Strategy Vision / Mission / Values
Why we exist
What’s important to us
What we want to be
Our game plan
Translate, Focus and Align
What are the priorities
What we must improve?
What I need to do?
Vision / Mission / Values
Strategy
Operation / Tactics

23. Developing and Managing Strategy
Develop Strategy
Test and Adapt the Strategy
Monitor and Learn
Plan Operations
Translate the Strategy
Strategy Map
Balanced Scorecard
Dashboards

24. F2 Strategy Map
Review, mission, vision, and strategic objectives

25. Navigating a Strategy Map

26. Scorecard
Now that you have a Strategy Map and Strategic Objectives, how would you know you are making progress in achieving it?
A Scorecard tells the story of the strategy.
Reviewing the Scorecard is a way to assess progress towards the Strategic Objectives on the Map.
BSC scorecard vs. "metrics": BSC not a collection of measures, it's a description of the organization's strategy.

27. Strategy Scorecards versus Operational Dashboards
Purpose
Demonstrates an organization’s performance in delivering their core-processes today.
An organization’s roadmap of the future, and how every entity within the organization impacts success.
Themes
Day-to-day activities
Doing our job well
Management
Tasks
“Winning the fight”
Concrete
5-year plan
Moving the organization forward
Leadership
Projects
“Winning the war”
Perception
Examples of Measurements
# of days to process transactions
# of transactions
# of outstanding items
$ savings / costs
“lag measure” (after the fact)
Best indicator/proxy
Can be concrete; e.g. “utility costs avoided”
Milestones achieved
Index of several measures that connect to tell the story

28. Strategy Scorecards versus Operational Dashboards
Suggestions when starting to measure
Consider measurements that best refelct your core process.
Consider one Lead and one Lag measure. Lag measures may not be available in the beginning; rather, just lead indicators.
Review
Monthly or quarterly
Semi-annual / Annual
When is it Strategy vs. Operations?
Once a strategy is achieved and the process is stable, it can move to operations.
An operational measure may become strategically important and reviewed at a strategic level (e.g., Budget responsibility at UW, utility costs avoided, etc.)
Lead vs. Lag measures
Lag = Whether you met your desired results
Lead = A predictive driving metric that leads to achieving results, or early indicator/warning sign
Could be lead or lag
The ultimate strategic measure (“were desired results achieved?”) is often a lag indicator. Since strategy is usually cast at a 3-5 year horizon, lead measures are reviewed in the interim.

29. Sample Scorecard

30. Role of Initiatives
Draft and launch initiatives when target can’t be reached through current core processes or incremental process improvement. Initiatives, once achieved, introduce new capability or innovation that changes the operation or context of the strategy.
An initiative may impact several Strategic Objectives/Measures
Not all Strategic Objectives have an initiative
Initiatives are akin to projects and are not operational (e.g., project milestones, completion dates—not routine services or performance levels)
Examples of initiatives: Internal Lending Program, Global Support Project

31. Exercise 2—Strategy
It is the Year 2010, present time
Your table is the senior management team of one of these assigned companies: Blockbuster, Netflix or Redbox. You all provide entertainment products to consumers, but using different business models.
In the last 10 years, there have been significant changes within the industry
Internet technologies
Changing customer demographics
New business lines (e.g., game rentals, agreements with studios for exclusive movie release dates)
Hollywood Video bankrupt (formerly major Blockbuster rival)
Handout Strategic Analysis, year Redbox & Netflix has moved into the market cutting into sales. Hollywood video has gone bankrupt. Movies available via download.
Break out in two teams or three teams (Blockbuster, Redbox, Netflix)
Each team:
Create vision/mission
Create strategic objectives based on your understanding of the competitive environment
Provide a blank map (with financial at top since they are for-profit), followed by customer and next operation & staff (sticky notes on a blank strategy map outline/template). Provide blank scorecard 4 perspectives
Remember strategic objectives:
5 year horizon (approximately)
Aren’t specific actions,
- By 2010
As the senior management team, craft a Strategy Map for your firm. Where is your company heading in the next 5 years, given what you know? Draft at least one scorecard measure for each perspective to help you understand whether you’re achieving your strategic objectives.

32. STRATEGY MAP TEMPLATE MISSION Deliver quality entertainment VISION
Bringing quality of life anywhere, anytime
FINANCIAL
Double profits within 5 years.
CUSTOMER
INTERNAL PROCESS
LEARNING & GROWTH

33. Exercise 2 Report Out
Each team reports out on their measures / dashboard

34. Target Setting Target Types Description Usage Example CUSTOMER
Target based on Customer expectations of your process. Target set via customer input (survey, feedback, focus-groups).
Demonstrating client satisfaction or customer expectations.
Number of days UW officially closed on regular school days (Target=0)
One day response time for customer-inquiry
BENCHMARK
Target based on peer performance. How does your process rank relative to the industry? How does it rank relative to the industry’s best practices?
Demonstrating cost-effectiveness / value
Demonstrating rank among peers
Our performance compared to industry average
Gap between our performance and industry best-practices
STRETCH
Target based on projections from improving the process, rather than from incremental change over time.
Process Improvements
Target setting when other methods are not appropriate/available
Reduce process turnover time to 3 days within 1 year
Rate of return up 10% from previous year
COMPLIANCE / LAW
Target based on compliance or law requirements. These targets are prescribed, and are non-negotiable “red-rules.”
Complying with regulations
Common in industries dealing with regulatory issues (e.g. Grants/ Contracts, Construction, Payroll, Safety, etc.)
Meet emission standards for automobiles
Eliminate violation of civil rights in the workplace

35. Benchmarking Defined
“Benchmarking is the process of comparing one’s business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time, and cost. Improvements from learning mean doing things better, faster, and cheaper.” en.wikipedia.org/wiki/Benchmarking

36. How Benchmarking Works
LEAN, CPI, BSC
Remote Research/Analysis
“STEP 1”
“STEP 2”
“STEP 3”
BSC—either dashboard or scorecard

37. Developing and Managing Strategy
Develop Strategy
Test and Adapt the Strategy
Monitor and Learn
Plan Operations
Translate the Strategy
Strategy Map
Balanced Scorecard
Dashboards

38. Thank you
The Balanced Scorecard (BSC) aligns business activities, improves communications, and measures organization performance against strategic goals. What would you like to know more about? How to get involved? (classes, teams, dashboards & scorecards, etc.) FS
CPO FM
Treasury Group
University
Audit
Finance & Facilities
Strategy
Scorecard
Yes
(hybrid)
In process
Operation
Dashboard
Contact
Linda Tennant
Kelly Casey
Jeanne Semura
Susan Freccia
Patricia Durbin
LuAnn or Vincent

39. Time permitting
How does operational dashboard link to scorecard and strategy map