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									           The Balanced Scorecard
                   Mission
                   Mission




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                    Ref: ASMC Meeting FT Belvior VA & Army Senior Leaders Resource
                    Management Conference 02.
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                       Patrick Penfield
           • Assistant Professor & Director of Supply Chain
             Executive Education
           • 15 Years of Industry Experience – UTC,
             Raymond/Toyota, Johnson & Johnson and Philips
             Electronics
           • MBA, CPIM & CPM
           • Married, two kids and I live in Baldwinsville, N.Y
           • Buffalo Bills and Syracuse University Fan
           • Used the Balanced Scorecard Process at Philips


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                     Introductions
           • Introduce Yourself to Another
             Student
           • Tell them something about yourself
             that no one knows about
           • Make sure both of you have spoken
           • Each person will introduce the other
             person and tell everyone what they
             learned
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           What do you hope to get out of
              Today’s Seminar on the
               Balanced Scorecard?



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           Who is this Man?




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                     The Balanced Scorecard
           •   Why the Balanced Scorecard?
           •   Doing Business in the Post-Enron Era.
           •   Where did the Balanced Scorecard Come From?
           •   What is it?
           •   Why Use it?
           •   What considerations should I make before I start?
           •   What are the key things I should do throughout?
           •   Is there ever an end to it?
           •   Resources
           •   Discussion Questions


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           Why the Balanced Scorecard –
                 and Why Now?
           • Performance Measures and
             Management have never been hotter.
           • WHY?



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                                  Why
           • Three Factors
             – Inability of Organizations to Execute Their
               Strategy
             – Reliance on Financial Measures
             – Corporate Accounting Scandals
                • Enron – once the seventh largest company in the U.S.
                  – 63.4 billion dollar bankruptcy
                • WorldCom – 107 billion dollar bankruptcy
                • Tyco, Global Crossing, Adelphia and dozens of others

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PROGRAMS
             Doing Business in Post-Enron
              Era (For Profit Companies)
           • Sarbanes-Oxley Act
             – Section 906 – Requires Certification by CEO & CFO –
               Reports fully comply with the requirements of securities
               law and that the information in the report fairly
               presents, in all material respects, the financial condition
               and results of the operation of the company
           • Wall Street
             – They want broader reporting
           • Hewitt Associates
             – Found evidence that companies highly aligned with
               traditional metrics tend to be the worst performers in
               shareholder return
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               Doing Business in Post-Enron
                    Era (Government)
           •   1990 – Chief Financial Officers Act – Improve Federal Financial
               Management and Develop Performance Measures
           •   1993 - Government Performance and Results Act – (GPRA ) –
               Federally Funded Agencies develop and implement performance
               measurements, setting goals and objectives and measuring progress
               towards achieving them
           •   1994 – Government Reform Act & 1996 – Information Technology
               Reform Act
                – These acts required federal agencies to strategically plan how they
                  would deliver high quality goods and services to their customers and
                  specifically measure the programs and performance to goal
           •   George Bush – sent a budget plan to Congress that formally
               assessed the performance of government agencies and programs
               and to some extent link financing to their results
           •   Results less than encouraging – GAO determined that a majority of
               federal managers are largely ignoring performance information
               while allocating resources (2002)
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           Where did the Balanced
           Scorecard Come From?



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            Balanced Scorecard Origins
           • Developed by Robert Kaplan – Accounting
             Professor at Harvard and David Norton a
             Consultant in the Boston Area
           • They were looking to develop new methods
             of performance measurement
           • Kaplan & Norton found that a reliance on
             financial measures was affecting a
             companies ability to create value
           • What did they mean by this?
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            Balanced Scorecard Origins
           • Kaplan and Norton came up with this tool
             that captured performance measures on
             activities throughout the company
             – Customer Issues
             – Internal Business Processes
             – Employee Activities
             – Shareholder Concerns
             THE BALANCED SCORECARD WAS BORN!

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            Balanced Scorecard Origins
           • Over the Next Four Years Companies That
             Adopted the Balanced Scorecard saw
             immediate results
           • Kaplan and Norton wrote “The Balanced
             Scorecard”
           • 50% of the Fortune 1000 have adopted the
             Balanced Scorecard
           • HBR – hailed it as one of the 75 most
             influential ideas of the twentieth century
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           What is the Balanced Scorecard?
           • Essentially the scorecard (think baseball or football)
             measures how well your organization did along 4
             institutional measures (you get to pick the measure
             that exemplifies each)
              –   Financial
              –   Internal processes
              –   Customer
              –   Innovation and learning
           • The scorecard essentially lines up your goals and
             helps the members of your organization go in the
             same direction to meet those goals.
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           Mission
           Mission




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           The measures are often expressed
                     in a matrix
            Financial                   Internal/Processes
                 e.g., cost reduction       e.g. cycle time
                 market share               quality

                 time

                                        Innovation/
           External/Customer
                                             Learning
                e.g.,satisfaction
                                            e.g.,hours training
                retention rates
                                            quality
                                            attendance
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           Although they can be expressed in other
                          ways…




                                      External
         Measures performance                         Measures employees skills,
         against expectations                         procedures, methods...




                                Balanced Objectives            Learning &
           Financial                   Internal                Innovation



        Measures the
        economic impact of                            Measures effectiveness,
                                                      ability to adapt
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        actions taken

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            You’re a government entity;
           what can a balanced scorecard
                    do for you?




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                           Why use it?
           • The BSC ( Balanced Scorecard) links to your
             strategic performance--your goals and how
             you plan to meet them.
           • It gives you balance within your
             measurements
           • If you can measure it you can act in a more
             focused manner; be more disciplined in
             performing your mission.
           • Hopefully, that will results in a more efficient
             organization.
           • You can demonstrate that you’re a good
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             steward of the public’s trust and $.

PROGRAMS
                            Why use it?
           • We’re all pressed to provide higher quality at
             lower costs; it’s difficult, but not impossible, to
             demonstrate to the taxpayer.
           • The Army is using the BSC to measure the
             success of its ongoing transformation.
           • The BSC is part of the President’s
             Management Agenda

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PROGRAMS
           “ Government likes to begin things, to declare grand new
           programs and causes. But good beginnings are not the measure
           of success. What matters in the end is completion.
           Performance. Results. Not just making promises but making
           good on promises! - President Bush




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PROGRAMS
           What triggers (or triggered, or
           would trigger) your organization
            to begin a balanced scorecard
                       process?



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PROGRAMS
              What considerations should I
                 make before I start?
           • What are your                What are your
             – Mission?                   critical success
             – Goals?                     factors?
             – Core Competencies?


              Variables, conditions, or
              characteristics which have a direct
              in influence on satisfaction OR
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              If you don’t succeed here your
              business is in trouble.
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              What considerations should I
                  make before I start
                                                  What is the
           • What are your
                                                  relationship
            core processes?                       between the
             –   People?                          intended outcome
             –   Materials?                       and the process to
                                                  get there? What’s
             –   Methods?
                                                  the cause and
             –   Equipment?                       effect?
             –   Environment?
                    How much are you doing that is necessary
                    and because you’ve always done it that way?
                    Look functionally and cross functionally
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PROGRAMS
              What considerations should I
                  make before I start
                                             How well do you
           • What is private                 compare to others
           • sector doing?                   doing the same
             –   People?                     thing?
             –   Materials?
             –   Methods?
             –   Equipment?     What processes do others use to
                                come to analogous outcomes?
             –   Environment?
                                How much does it cost them?
                                How long does it take? Could
                                you be faster, better, or
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                                smarter about the way you do it?

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                 Federal Government
           • Half of all Federal Employees perform
             tasks that are readily available in the
             commercial marketplace.
           • OMB – Bid out the process to print the
             Federal Budget
             – Since 1860 the Government Printing Office has
               printed
             – In the end the GPO won the bid at a reduced
               price – 505k to 387k
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PROGRAMS
           What are the key things I should
                   do throughout?
           • Communicate progress early and often
           • Develop a scorecard at the corporate
             level and then cascade it down to lower
             organizational levels. This will help
             focus the actions in one direction to help
             your goals.
           • Teach your scorecard process.
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PROGRAMS
           What are the key things I should
                   do throughout
           • Support training to develop scorecards
             and try to use internal people to do it.
             Focus on your organization’s
             scorecard.
           • Involve as many people as early as you
             can.
           • Encourage individuals to make their
             own scorecards for their own use.
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PROGRAMS
           What are the key things I should
                   do throughout
           • Communicate changes; refer to the
             scorecard often; make it a part of the
             organization’s culture.
           • Use the results of the scorecard to
             foster change; not to punish
           • Encourage trial and error.

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PROGRAMS
                 ASA(FM&C) Strategy Map
                  Balanced Scorecard Mission
  Mission: ASA(FM&C) Exists to Resource the Army
  and Provide Accountability to the American People.




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PROGRAMS
                    ASA(FM&C) Strategy Map
              Four Balance Scorecard Perspectives

        • Perspectives Provide
           Balance to Strategy
           Development           Financial
        • Requires Teamwork


                                 Customer

                             Internal Processes


                           Learning and Growth
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PROGRAMS
                 ASA(FM&C) Strategy Map
                       Four Strategic Themes
                          Funding = Requirements
                                          Resource
 Systems Integration    Cost Control     Generation    Leverage/Innovate




                                       Themes Promote Teamwork and
                                          Communication Across
                                           Organizational Lines


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PROGRAMS
               Balanced Scorecard - Strategy
                      Map Objectives
                             • Objectives Help to Implement the
           Cost Control          Strategy for Each Theme and
                                 Perspective
                             • Statement of What Strategy Must
                                 Achieve



                                      Objectives



                              Imbed a Cost Culture in
                             Program/Budget Reviews,
                               Decisions and Actions
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PROGRAMS
            Balanced Scorecard - Strategy Map
                       The Strategic Theme Story

                              1. Funding = Requirements
           Cost Control
                              2. Control and Reduce Program Costs
                          1
           2                  3. Maximize the Impact of Each Dollar
                                 Spent
           3                  4. Imbed Cost Culture in Program/
                                 Budget Reviews, Decisions and
                   4             Actions
                              5. Improve Output and Performance
                   5             Measures/develop Full Costs by
                                 Program
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PROGRAMS
            Balanced Scorecard - Strategy Map
                   Objectives Linked to Measures


           Cost Control
                             Objectives




                                             Measures

                                  • Number of Programs With
                                   Integrated Performance Reviews
                                  • Percent of Performance Reviews
                                   That Yield Cost Reductions

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                                    How Success Will Be Tracked

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            Balanced Scorecard - Strategy Map
                          Targets

                          Objectives
           Cost Control



                          Measures


                                            Targets
                                    Number of Programs With
                                 Integrated Performance Reviews
                                   • Worst                 0
                                   • Business As Usual     0
                                   • Planned              20
                                   • Benchmark            40
                                   • Best                100
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                                       Improvement Needed
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            Balanced Scorecard - Strategy Map
                          Initiatives
                                           Key Action Programs
                          Objectives            Required
           Cost Control



                           Measures


                            Targets


                                          Initiatives

                             Link Output & Performance Measures to
                             Army Cost & Performance Reviews –
                             Starting With the Initial OMB / OSD
 ARMY                        Programs for Performance Measures
                             Integrated Into FY04 Budget
PROGRAMS
                 ASA(FM&C) Strategic Map
                         Theme Relationships
                                        • Themes Are Not Stovepipes & Are
                                           Resource
Systems Integration      Cost Control      Not Organizationally Organized
                                           Generation       Leverage/Innovate
                                        • Requires Cooperation / Teamwork
                                        • More Time to Devote to Higher
                                           Leverage Activities


        Provide Timely             Imbed a Cost
          & Relevant             Culture in Program
         Management               Budget Reviews
         Information


        Integrate
      Functional &                 Improve Output
    Financial System              Measures/full Cost
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     Requirements                    by Program

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                        Balanced Scorecard
                                An Example
     Strategic Theme:
                               Objectives   Measurement    Target      Initiative
       Cost Control
 Financial                    • Control &   • % Change • Less         • Eliminate
           Control & Reduce    Reduce       in Program     Than 2%     Duplicate
            Program Costs      Program      Costs per      per Year    Contractor
                               Costs        Year                       Payments
 Customer
                               Statement      How        Improve-        Key
                                of What     Success        ment        Action
 Internal                       Strategy     Will Be      Needed      Programs
                                 Must       Tracked                   Required
                                Achieve

 Learning
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PROGRAMS
                                                  Strategy
                The Unique and Sustainable Ways by Which
                     We Will Create Value for the Army

                                                     Funding =
                                                    Requirements

             Improve                     Reduce              More Funds                   Increase
           Accountability             Program Costs            for Army                  Investment
            of the Army                                       Programs                     Funds




                                                                   Resource Generation




                                                                                            Leverage /Innovate
                Systems Integration




                                          Cost Control




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PROGRAMS
              What processes have you
             experienced in developing a
            balanced scorecard? Can you
           share your successes in linking
            strategy, goals, and tactics?



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PROGRAMS
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           THE BALANCED SCORECARD
             Limitations of Government BSC
           • Requires High Level of Organizational Commitment
              – Change management issues
                 • “What’s in it for me?”
              – Takes sustained effort to implement fully
           • May create fear
              – Raises visibility and accountability
              – May lead to loss of data
           • Measurements don’t solve anything
              – Must be accompanied by initiatives
           • Govt. BSC Implementations are scarce
              – Few mature implementations
              – Limited data published
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              – Lack of standardized metrics
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           CASE STUDY




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           THE BALANCED SCORECARD
                         Conclusions
           • BSC provides a framework needed for strategic
             alignment and org. learning.
           • Names may change, but some BSC features will
             continue:
              – Performance measurements
              – Results-based planning and management
              – Increased use of information technology
              – Increased sharing of data for benchmarking
           • BSC is not a “flavor of the month” but an
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             evolving management concept.
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           Thank You!




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                                     Resources
           • Kaplan and Norton (both are HBR publications and a must
             read if you’re going down the BSC path.)
              – Balanced Scorecard: Translating Strategy into Action
              – The Strategy Focused Organization: How Balanced Scorecard
                 Companies Thrive in the New Business Environment.
           • Niven – Balanced Scorecard for Government
             and Nonprofit Agencies – Wiley,2003
           • Caterinicchia, Dan. (12 Aug. 2002.) Army Keeps Score.
             Federal Computer Week. 27.)
           • APQC http://www.apqc.org/portal/apqc/site?path=root A good
             information resource.
           • Check out ako comm.us.army.mil/srs
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