1. The Ten Essentials of Developing a Successful Balanced Scorecard
Presented by Paul Niven, Primerus Consulting, Inc.
September 12, 2002
© 2002 Primerus Consulting, Inc. All Rights Reserved

2. Agenda – Ten BSC Essentials
Two Fundamental Issues Leading to the Balanced Scorecard (BSC)
BSC fundamentals
Essential 1 – Objectives for the BSC
Essential 2 – Executive Sponsorship
Essential 3 – A Solid Implementation Team
Essential 4 – A Strong BSC Champion
Essential 5 – Training and Education
Essential 6 – Cause and Effect; “Strategy Maps”
Essential 7 – Reporting Results (and soon!)
Essential 8 – Cascading the BSC
Essential 9 – Linking the BSC to Key Management Processes
Essential 10 – Making the BSC Part of the Organization
© 2002 Primerus Consulting, Inc. All Rights Reserved

3. Only 10% of organizations execute their strategy
Two Fundamental Issues Facing Organizations
Not consistent with today’s business realities
Driving by rearview mirror
Tend to reinforce functional silos
May sacrifice long-term thinking
Not relevant to many levels of the organization
90% of organizations don’t implement their strategy
Only 10% of organizations execute their strategy
Barriers to Strategy Execution
Only 5% of the workforce understands the strategy
Vision Barrier
Only 25% of managers have incentives linked to strategy
People Barrier
85% of executive teams spend less than one hour per month discussing strategy
Management Barrier
60% of organizations don’t link budgets to strategy
Resource Barrier
Financial measures don’t tell the whole story
Chart adapted from material developed by Robert S. Kaplan and David P. Norton
© 2002 Primerus Consulting, Inc. All Rights Reserved

4. Balanced Scorecard Fundamentals
© 2002 Primerus Consulting, Inc. All Rights Reserved

5. Essential 1 - Objectives for the Scorecard
Why are you developing a Balanced Scorecard?
BSC alone will not transform the organization
Clear objectives are critical for communication, education, and guiding BSC evolution
Put the big rocks in first!
The beginning is the most important part of the work
-Plato, The Republic
© 2002 Primerus Consulting, Inc. All Rights Reserved

6. Objectives for the Balanced Scorecard
Aligning improvement initiatives
New leadership
Clarifying current strategy
FINANCIAL
CUSTOMER
INTERNAL
PROCESSES
EMPLOYEE
LEARNING
AND
GROWTH
New organizational strategy
Setting new targets
Aligning employee goals
Business crisis
Communication and education
© 2002 Primerus Consulting, Inc. All Rights Reserved

7. Essential 2 – Executive Sponsorship
“To make initiatives work it took passionate, all-consuming commitment from the top…Every leadership action must demonstrate total commitment to the initiative.”
-Jack Welch, Jack: Straight From the Gut
No BSC initiative will survive without active executive sponsorship
Executives hold key knowledge for BSC success
Everyone watches what the boss watches
You can influence executive sponsorship
© 2002 Primerus Consulting, Inc. All Rights Reserved

8. Essential 3 – A Solid Implementation Team
“A team is a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable.”
-Katzenbach & Smith, The Wisdom of Teams
No single person or group holds all the information necessary to build the BSC
Team members are crucial BSC ambassadors
Team members influence their own executives
Team participation is a wonderful learning opportunity
© 2002 Primerus Consulting, Inc. All Rights Reserved

9. Essential 4 – A Strong BSC Champion
“A recent review of our Balanced Scorecard Hall of Fame organizations demonstrates that virtually every successful CEO had a partner – a change agent who played the lead role in introducing the Balanced Scorecard program.”
- David P. Norton, The Balanced Scorecard Report (May-June, 2002)
Balanced Scorecard
Guides the BSC process
Provides thought leadership on the BSC
Must be a skilled communicator
Should be full-time role in the organization
© 2002 Primerus Consulting, Inc. All Rights Reserved

10. Essential 5 – Training and Education
Companies that don’t encourage employee education of all kinds are dumb!
The perceived simplicity of the BSC means training is often overlooked – that is a mistake!
BSC is simple, but not simplistic
Training “levels the playing field” and encourages involvement
Training leads to important questions
Provide background information, your objectives, success stories, your plan, etc.
© 2002 Primerus Consulting, Inc. All Rights Reserved

11. Essential 6 – Cause & Effect; “Strategy Maps”
Increase Profitability
Financial
A good Balanced Scorecard should “tell the story of your strategy”
Strategy Map specifies relationships and makes them testable
Also acts as a powerful diagnostic tool for your BSC
Great way to communicate your Scorecard
Serve customers on their terms
Deliver Customer Value Through Integrated Offerings
Customer
Continuously Improve Customer Experiences
Allocate Capital Resources Effectively
Develop New Products
Internal Processes
E.L. & G
Build an Environment where people maximize their personal potential
Improve Communications Through Technology
Create a Safe & Healthy workplace
© 2002 Primerus Consulting, Inc. All Rights Reserved

12. Essential 7 – Reporting Results (and soon!)
Don’t wait until you have 100% data to start reporting
It’s o.k. to start with simple reporting tools
Structure your Management review meetings around BSC results
Track action items and review progress
Use the BSC as a tool for “real-time strategic learning”
Is this what your Management Reporting feels like? If so, you need a Balanced Scorecard!
© 2002 Primerus Consulting, Inc. All Rights Reserved

13. Essential 8 – Cascading the Balanced Scorecard
Allow everyone to demonstrate how they contribute to overall goals
Create a consistent language through measurement
Achieve a laser- like focus on strategy
© 2002 Primerus Consulting, Inc. All Rights Reserved

14. Essential 9 – Link the BSC to Mgt. Processes
Budgets
Compensation
BSC has evolved from a measurement to a “strategic management” system
Initiatives on the BSC provide a natural link to the budgeting process
Using the BSC, budgets are based on strategy (less than 40% of organizations currently make this link)
Linking the BSC to compensation makes it “real” for many employees
Remember that you get what you measure
© 2002 Primerus Consulting, Inc. All Rights Reserved

15. Will your Balanced Scorecard stand the test of time?
Essential 10 – Making the BSC Part of the Organization
Don’t think of the Balanced Scorecard as a project to be “checked off”
Give the BSC a home in the organization
Assign accountability for the BSC (the BSC Champion??)
Develop BSC policies and procedures – but keep them simple!
Update the Scorecard’s core elements regularly
Will your Balanced Scorecard stand the test of time?
© 2002 Primerus Consulting, Inc. All Rights Reserved