Balanced Business Scorecard & Performance Management: Best Practice process and principles

BALANCED BUSINESS SCORECARDS AND
PERFORMANCE MANAGEMENT - BEST
PRACTICE PROCESS AND PRINCIPLES
CHARLES COTTER PhD, MBA, B.A (Hons), B.A
www.slideshare.net/CharlesCotter
NAMIBIA
6-8 MARCH 2019

3-DAY, TRAINING
PROGRAMME
OVERVIEW
• Introduction and Background
• Defining the fundamental PM concepts
• Performance Management principles
• Performance Management process
• Performance Development, PPS and Performance Matrix
• Reading article and video clip
• Defining the 4 perspectives of the Balanced Scorecard
(BBS)
• Building a business case for BBS
• Diagnosis of BBS Best Practice guidelines
• Applying and sustaining the 9-step, BBS building and
implementing process

DEFINING THE FUNDAMENTAL
PERFORMANCE
MANAGEMENT CONCEPTS
• Performance
Management
• Key Performance
Areas (KPA’s)
• Key Performance
Indicators (KPI’s)

DEFINING PERFORMANCE MANAGEMENT
(PM)
• PM can be seen as a comprehensive management system aimed at constantly
improving and monitoring the performance of others.
• PM concerns itself with improving productivity, delivering a better quality
service/product and is aimed at achieving the goals of both the institution and the
employee.
• PM is a strategic and integrated approach to delivering sustained success to
organizations by improving the performance of people who work in them and by
developing the capabilities of teams and individual contributors.
• PM entails three (3) important components/dimensions, namely:
❑ Evaluation (i.e. appraisal and measurement)
❑ Development (i.e. improving performance through the acquisition of skills)
❑ Relationships (between team leaders and team members)

KPA’s and KPI’s
• Key Performance Areas (KPA) may be
defined as the primary responsibilities
of an individual or the core area(s) which
each employee is accountable.
• KPA’s originate from the organization’s
mission and represent the specific areas
where the organization expects results.
• Key Performance Indicators (KPI’s)
define unit of measure used to assess
whether or not Key Performance Area
have been achieved.
• KPI’s clarify how performance will be
judged against each KPA. They provide
the framework for generating targets
and are the core of all performance
management systems.

BALANCED SCORECARD
• The Balanced Scorecard (BSC) is a strategy performance
management tool - a semi-standard structured report,
supported by design methods and automation tools that can
be used by managers to keep track of the execution of
activities by the staff within their control and to monitor the
consequences arising from these actions.
• The critical characteristics that define a Balanced Scorecard
are:
❑Its focus on the strategic agenda of the organization concerned
❑The selection of a small number of data items to monitor
❑A mix of financial and non-financial data items

Balanced Business Scorecard & Performance Management: Best Practice process and principles

INTRODUCTORY ACTIVITY
• Individual activity:
❑ Complete the following statement by inserting one word only. In
your capacity as a Performance Management Committee
member, in order to effectively manage organizational
performance, I need to/to be
………………………………………………………
❑ Jot this word down and find other learners who have written
down the same word.
❑ Write this word down on the flip-chart.
❑ You’ll be given the opportunity to substantiate your choice of
word.

THE NEED FOR PERFORMANCE
MANAGEMENT
• To identify possible management talent which should be further
developed.
• To give recognition to employees’ achievements thereby
motivating them to work towards even higher achievements
leading to promotion, salary increases or merit award.
• To identify possible shortcomings in the employee’s work
performance and to correct them either through remedial
measures such as training and development or through
disciplinary action if really necessary.
• To identify training and developmental needs; even when
employees are not underperforming it might be that they still
need training on certain issues.

THE NEED FOR PERFORMANCE
MANAGEMENT
• To make the horizontal placement of employees possible
when they are not performing well in a certain job or when
they have capabilities which can be better utilized in other
positions.
• To determine the skills of an employee in a specific job.
• To inform employees how well they are performing and how
management is rating their performance. There is usually a
curiosity on the part of employees about their performance.
• To encourage good behaviour on the job and ensure that
standards are maintained or to discourage below-standard
performance.

PERFORMANCE
MANAGEMENT BEST
PRACTICES
• https://www.surveymonkey.com/r/3GXW72Z
• #1: The Performance Management System (PMS) of
your organization is directly linked to the strategic
goals of the institution.
• #2: The PMS of your organization is (horizontally)
integrated with the other HRM functions and also the
core business processes (finance, customer &
operations) of the institution.
• #3: The PMS of your organization adapts from only
management performance expectations to
management, customer and other (internal and
external) stakeholder expectations and is agile and
responsive to environmental change, global best
practices and future trends.
• #4: The PMS of your organization is balanced in terms
of focusing on improving both short-term outputs or
results and also in the medium to long-term future
i.e. future-proofing the business/operating model.
• #5: The PMS of your organization encourages full
participation and wide engagement and extensive
consultation, focused on measuring quality
standards.

PERFORMANCE
MANAGEMENT BEST
PRACTICES
• https://www.surveymonkey.com/r/3GXW72Z
• #6: The PMS of your organization is user-friendly,
simple and understandable for all users.
• #7: The PMS of your organization provides an
opportunity to recognize performance excellence.
• #8: The PMS of your organization is vigilant and
efficient in identifying and correcting poor
performance levels and under achievement of
performance goals and standards.
• #9: The PMS of your organization is line
management-driven with active support and
business partnering from the human resources
department.
• #10: The PMS is a continuous process that
accurately identifies multi-level (individual, team
and organizational) performance and skills gaps i.e.
generates crowd-sourced (360-degree) performance
intelligence and –analytics, which is effectively
leveraged as a performance development and -
improvement management tool.

LEARNING ACTIVITY 1
• Individual diagnosis:
• In your capacity as a Performance
Management Committee Member,
review and rate the efficiency and
effectiveness of the current performance
management process in your
organization. Refer to the above Best
Practice criteria checklist (pages 18-19).
Refer to the SurveyMonkey link for the
online survey:
https://www.surveymonkey.com/r/325B
7H7
• Group discussion:
• Identify gaps and recommend
improvement strategies.

STEP 1: PERFORMANCE MANAGEMENT CYCLE

STEP 1: PERFORMANCE
PLANNING
Clarifying
expectations
1
Setting of
goal/objectives,
performance
standards and
criteria
2
Action Planning
3
Contracting
Performance
Agreements
4

PERFORMANCE
REVIEW/APPRAISAL
• Monitoring,
Measuring/Evaluati
ng performance
against the pre-
determined
performance
goals/objectives
and standards and
criteria.

PERFORMANCE
FEEDBACK/INTERVIEW
• Conducting of the 8 step,
Human Touch
interview/discussion –
formally/informally
• Implementing Positive and
Corrective performance
feedback.

8-STEP HUMAN TOUCH
PERFORMANCE
INTERVIEW
• Step 1: Control the environment
• Step 2: State the purpose of the
discussion
• Step 3: Ask for the employee’s opinion
• Step 4: Present your assessment
• Step 5: Build on employee’s strengths
• Step 6: Ask for employee’s reaction to
your assessment
• Step 7: Set specific goals
• Step 8: Close the discussion

PERFORMANCE DEVELOPMENT
❑ Implementing training
and development and
other people
performance
improvement initiatives
❑ The adoption of the 5
pivotal roles of people
development-focused
managers (people
capitalism).

ASSUMING THE ROLE OF A
PERFORMANCE COACH
• Identify performance problems that may be affecting performance and
where improvement is required
• Generate possible solutions and map a plan to improve performance.
• Identify those performance areas where the team member is performing
well
• Communicate future performance expectations and requirements
• Managers should adopt a balanced approach to performance management
i.e. focus on both good and poor areas of performance.
• This balanced approach suggests that performance management is both
evaluative and developmental.

PERFORMANCE EQUATION
COMPUTING THE PERFORMANCE POTENTIAL SCORE
(PPS)

PERFORMANCE MATRIX – APPLYING
COTTER’S 4 C’s (2018)
CAREER
DEVELOPING
COUNSELING
CAPITALIZING
COACHING

CAUSES OF POOR
PERFORMANCE
❑#1: Skills/competence
❑#2: Personal problems
❑#3: Lack of resources
❑#4: Organizational
factors

CAUSES OF POOR PERFORMANCE
• Refer to the reading
article, 7 Causes of
Poor Employee
Performance - And
How to Address Them
(Bernard Marr) on
pages 30-32

7 CAUSES OF POOR EMPLOYEE PERFORMANCE - AND
HOW TO ADDRESS THEM (BERNARD MARR)
• Lack of ability:
❑Resources
❑Obstacles
❑Skills
❑Expectations
• Lack of Motivation
❑No carrots
❑No sticks
❑Burnout

❑Accenture
❑Microsoft
❑Adobe
❑Deloitte
❑Medtronic
❑Gap
❑General Electric
• To date nearly 10% of Fortune 500 companies have
abolished their annual ratings, according to Cliff
Stevenson, a senior research analyst for the Institute
for Corporate Productivity, a research network that
studies management practices.
WHAT DO FOLLOWING COMPANIES HAVE IN
COMMON?

VIDEO CLIP
• Reinventing Performance
Management at Deloitte
(HBR)
• https://hbr.org/video/512
2969232001/reinventing-
performance-
management

THE CHANGING FACE OF PMS
(COTTER, 2017)
• #1: RE-ENGINEERING THE ANNUAL REVIEW CYCLE
• #2: SHIFT FROM PERFORMANCE RATINGS TO
STRENGTHS-BASED PERFORMANCE COACHING
• #3: CONTINUOUS PERFORMANCE MANAGEMENT
SOFTWARE OVER APPRAISAL SOFTWARE
• #4: AUTOMATION, APPS, SIMPLICITY AND AGILITY
• #5: PERFORMANCE DISCUSSION AND FEEDBACK TO
PERFORMANCE DIALOGUE

THE CHANGING FACE OF PMS
(COTTER, 2017)
• #6: CROWD-SOURCED PERFORMANCE DATA, PEOPLE
ANALYTICS AND SNAPSHOTS
• #7: PERSONALIZATION AND EMPLOYEE EXPERIENCE (EX)
• #8: PERFORMANCE DIFFERENTIATION
• #9: SHIFT FROM PERFORMANCE MANAGEMENT TO
PERFORMANCE IMPROVEMENT
• #10: DE-COUPLING PERFORMANCE AND COMPENSATION

LEARNING ACTIVITY 2
• Group discussion
• By referring to the performance equation,
compute the PPS of your organization.
Develop strategies to improve any of the
deficient variables.
• Identify the most common causes of poor
performance in your organization.
Develop pro-active strategies to prevent
poor performance.
• Apply Cotter’s 4 C’s (2018) performance
management principles to the four (4)
quadrants of the Performance Matrix.

LEARNING ACTIVITY 2
• As a Performance Management
Committee Member, extract and
apply the learning lessons from the
Reading Article, 7 Causes of Poor
Employee Performance - And How to
Address Them (Marr).
Committee Member, measured
against the Deloitte video clip and
Cotter’s (2017) ten criteria, critically
evaluate your organization’s state of
readiness for the changing face of
performance.

PERFORMANCE
REWARD
• Offering of host of
customized and
personalized intrinsic and
extrinsic performance
reward options and
recognition.
• Ensure compliance with
best practice principles

PERFORMANCE REWARD PRINCIPLES AND
-OPTIONS
• Performance reward principles:
❑ Reward must be principle-driven
❑ A systematic, holistic approach must be followed in managing reward
❑ Reward must be focused on business performance improvement
(realization of business strategy)
• Performance reward options:
❑ Fixed reward vs. Variable or temporary reward
❑ Incentive reward and Recognition reward
❑ Monetary reward vs. Non-monetary reward
❑ Intrinsic (spiritual) reward vs. Extrinsic reward
❑ Individual reward vs. Group/team reward
❑ Skills-based pay plans

LEARNING ACTIVITY 3
Committee Member, discuss the
key line management actions in the
following 4 stages:
❑ Performance planning
❑ Performance appraisal
❑ Performance feedback
❑ Performance reward

• It was originated by Drs. Robert Kaplan & David Norton (Harvard Business
School) as a performance measurement framework that added strategic non-
financial performance measures to traditional financial metrics to give
managers and executives a more 'balanced' view of organizational
performance.
• These non-financial metrics are so valuable mainly because they predict future
financial performance rather than simply report what’s already happened.
• Their article (1996), describes how the balanced scorecard can help senior
managers systematically link current actions with tomorrow’s goals, focusing
on that place where, in the words of the authors, “the rubber meets the sky.”
• Predecessors to the BSC:
❖ Tableau de Bord (Dashboard)
❖ Early Metric-Driven Incentives (MDIs)
ORIGIN AND HISTORY OF THE BBS

• The “new” balanced scorecard transforms an organization’s strategic plan from an
attractive, but passive document into the "marching orders" for the organization
on a daily basis.
• It provides a framework that not only provides performance measurements, but
helps planners identify what should be done and measured. It enables executives
to truly execute their strategies.
• Given the insight and wisdom provided by Kaplan & Norton, the balanced
scorecard is a management system (not only a measurement system) that enables
organizations to clarify their vision and strategy and translate them into action.
• It provides feedback around both the internal business processes and external
outcomes in order to continuously improve strategic performance and results.
• When fully deployed, the balanced scorecard transforms strategic planning from
an academic exercise into the nerve center of an enterprise.
MODERN APPLICATION OF THE BBS

• The balanced scorecard suggests that we view the
organization from four (4) perspectives, and to develop
metrics, collect data and analyze it relative to each of
these perspectives:
❑Learning, Innovation and Growth
❑Business (Internal) Processes
❑Customer
❑Financial
BBS PERSPECTIVES/DIMENSIONS

ILLUSTRATION: BSC
PERSPECTIVES/DIMENSIONS

LEARNING, INNOVATION
AND GROWTH
PERSPECTIVE
• Strategic question:
❖ “To achieve our vision, how will sustain our ability
to change and improve?”
• Examples (measurable indicators):
❖ Time to develop new generation of products
❖ Life cycle to product maturity
❖ Time to market versus competition
❖ Is there the correct level of expertise for the job?
❖ Employee turnover
❖ Job satisfaction
❖ Training/Learning opportunities
• Value Outcome:
❖ Organizational knowledge and growth capacity

COMPONENTS OF LEARNING,
INNOVATION AND GROWTH

BUSINESS (INTERNAL)
PROCESS PERSPECTIVE
❖ “To satisfy our shareholders and customers,
what business processes must we excel at?”
❖ Cycle time
❖ Unit cost
❖ Yield
❖ New product introductions
❖ Number of activities per function
❖ Duplicate activities across functions
❖ Process alignment (is the right process in the
right department?)
❖ Process bottlenecks
❖ Process automation
• Value Outcome:
❖ Efficiency

CUSTOMER
PERSPECTIVE
❖ “To achieve our vision, how should we
appear to our customers?”
❖ Percent of sales from new products
❖ On time delivery
❖ Share of important customers’ purchases
❖ Ranking by important customers
❖ Delivery performance to customer
❖ Quality performance for customer
❖ Customer satisfaction rate
❖ Customer percentage of market
❖ Customer retention rate
• Value Outcome:
❖ Customer satisfaction

FINANCIAL PERSPECTIVE
❖ “To succeed financially, how should we appear to our
shareholders?”
❖ Cash flow
❖ Sales growth
❖ Operating income
❖ Return on Equity (RoE)
❖ Return On Investment (ROI)
❖ Return on Capital Employed (RoCE)
❖ Financial Results (Quarterly/Yearly)
• Value Outcome:
❖ Financial performance/profitability

• Articulate the business's vision and strategy
• Identify the performance categories that best link the business's vision and strategy to its
results (e.g., financial performance, operations, innovation, employee performance)
• Establish objectives that support the business's vision and strategy
• Develop effective measures and meaningful standards, establishing both short-term
milestones and long-term targets
• Ensure company-wide acceptance (ownership) of the measures
• Create appropriate budgeting, tracking, communication, and reward systems
• Collect and analyze performance data and compare actual results with desired performance
• Take action to close unfavourable gaps
PURPOSES OF THE BBS

• Clarify or update a business's strategy
• Link strategic objectives to long-term targets and annual budgets
• Track the key elements of the business strategy
• Incorporate strategic objectives into resource allocation processes
• Facilitate organizational change
• Compare performance of geographically diverse business units
• Increase company-wide understanding of the corporate vision and
strategy
STRATEGIC UTILITY AND FUNCTIONAL VALUE
OF BBS’s

STRATEGIC PLANNING
• Strategic planning is an organizational management activity that is used to
set priorities, focus energy and resources, strengthen operations, ensure
that employees and other stakeholders are working toward common
goals, establish agreement around intended outcomes/results and assess
and adjust the organization's direction in response to a changing
environment.
• It is a disciplined effort that produces fundamental decisions and actions
that shape and guide what an organization is, who it serves, what it does,
and why it does it, with a focus on the future.
• Effective strategic planning articulates not only where an organization is
going and the actions needed to make progress, but also how it will know
if it is successful.
• A strategic plan is a document used to communicate with the organization
the organizations goals, the actions needed to achieve those goals and all
of the other critical elements developed during the planning exercise.

STRATEGIC MANAGEMENT AND
EXECUTION
• Strategic management is the comprehensive collection
of ongoing activities and processes that organizations use to
systematically coordinate and align resources and actions
with mission, vision and strategy throughout
an organization.
• Strategic management activities transform the static plan
into a system that provides strategic performance feedback
to decision making and enables the plan to evolve and grow
as requirements and other circumstances change.
• Strategy Execution is basically synonymous with Strategy
Management and amounts to the systematic
implementation of a strategy.

4-STEP STRATEGIC MANAGEMENT
PROCESS

• Strategy maps are communication tools used to tell a story of how
value is created for the organization.
• They show a logical, step-by-step connection between strategic
objectives (shown as ovals on the map) in the form of a cause-
and-effect chain.
• Improving performance in the objectives found in the Learning &
Growth perspective (the bottom row) enables the organization to
improve its Internal Process perspective Objectives (the next row
up).
• This in turn enables the organization to create desirable results in
the Customer and Financial perspectives (the top two rows).
STRATEGY MAPPING

SUSTAINABILITY -
THE 3 P’s OF THE TRIPLE BOTTOM LINE

LEARNING ACTIVITY 4
Committee Member, by means of a
cost-benefit analysis, build a
business case for the strategic
utility and functional value of
Balanced Business Scorecards at
your organization.
• Concentrate on the following key
dimensions:
❑ Viability (can it work?)
❑ Feasibility (is it cost-effective?)
❑ Sustainable (can it last?)

• #1: BBS is aligned with organization’s strategic business plans
• #2: BBS is future-focused, adopting a strategic, medium to long-term approach
• #3: BBS is pro-active, sensitive and responsive to (internal and external)
environmental change and trends
• #4: BBS enjoys company-wide acceptance (ownership) of the measures and
processes
• #5: BBS is organized, well-coordinated and systematic approach
• #6: BBS is a collaborative and partnering effort (managers have co-opted business
partners to the process)
• #7: BBS is integrated (with other business management and administrative) and
cohesive process
BEST PRACTICE GUIDELINES FOR BBS

• #8: BBS generates meaningful business intelligence which informs business
planning and supports strategic decision-making
• #9: BBS integrates both scientific (metrics and analytics) and artistic (planning)
principles
• #10: BBS utilizes cutting-edge and innovative technology and software
• #11: BBS is continuously monitored, reviewed, evaluated and adapted
• #12: BBS yields a positive business ROI, with tangible/demonstrable outcomes
and impact – creates sustainable competitive advantages and organizational
change
• #13: BBS incorporates strategic objectives into resource allocation processes e.g.
financing/budgeting
• #14: BBS is a logical and rational process making use of cause-effect logic
BEST PRACTICE GUIDELINES FOR BBS

LEARNING ACTIVITY 5
• Individual diagnosis:
• As a Performance
Management Committee
Member, critically evaluate
your organization’s current
Balanced Business Scorecard
processes and systems against
the best practice criteria.
• Group discussion:
• Identify gaps and recommend
improvement strategies.

• The balanced scorecard is a strategic planning and management system that helps
everyone in an organization understand and work towards a shared vision.
• Starting at high “strategic altitude”, Mission, Vision, and other planning elements
are translated into desired Strategic Results.
• The organization’s “Pillars of Excellence”, or Strategic Themes, are selected to focus
effort on the strategies that matter the most to success.
• Strategic Objectives are used to decompose strategy into actionable components
that can be monitored using Performance Measures.
• Finally, Strategic Initiatives translate strategy into a set of high-priority projects
that need to be implemented to ensure the success of strategy.
• Once the strategic thinking and necessary actions are determined, annual program
plans and projects can be developed and translated into budget requests.
HIERARCHY OF BALANCED SCORECARD
COMPONENTS

ILLUSTRATION: HIERARCHY OF BALANCED
SCORECARD COMPONENTS

THE 9-STEP BSC BUILDING AND
IMPLEMENTING PROCESS

• Step one of the scorecard building process starts with an assessment of the
organization’s Mission and Vision, challenges (pains), enablers and values.
• The following strategically-relevant items form the scope to be scrutinized
by business managers:
❖ The company's mission statement
❖ The company's strategic plan/vision
❖ The financial status of the organization
❖ How the organization is currently structured and operating
❖ The level of expertise of their employees
❖ Customer satisfaction level
• Tools:
❖ SWOT Analysis
❖ PESTEL Analysis
STEP 1: ASSESSMENT - INTERNAL AND
EXTERNAL STRATEGIC ASSESSMENT

A WINNING
STRATEGY
• CAPITALIZE ON STRENGTHS
• MINIMIZE/NEUTRALIZE WEAKNESSES
• EXPLOIT OPPORTUNITIES
• COUNTERACT/MITIGATE THREATS

THE NATURE OF THE BUSINESS
ENVIRONMENT – V-U-C-A

LEARNING ACTIVITY 6
• Group Discussion:
• As a Performance Management Committee
Member, by utilizing a SWOT Analysis Matrix
and PESTEL analysis, perform an environmental
scan/analysis of both the internal and external
environments for your organization. Internally,
identify organizational strengths and
weaknesses and externally identify
opportunities and threats.
• In particular, focus on the following key
organizational factors:
❑ Strategy (plan, vision and mission)
❑ Finances
❑ Customer
❑ Internal business processes
❑ Learning and growth (people and skills)

STEP 2:
STRATEGY -
CUSTOMER
VALUE,
STRATEGIC
THEMES AND
RESULTS
• In Step Two, elements of the organization’s
strategy, including Strategic Results,
Strategic Themes and Perspectives, are
developed by managers to focus attention
on customer needs and the organization’s
value proposition.

• Strategic themes are the main, high-level business strategies that form the basis for the
organization’s business model.
• Reference to themes as “pillars of excellence”.
• The strategic themes are very broad in scope.
• They apply to every part of the organization and define what major strategic thrusts the
organization will pursue to achieve its vision.
• A strategic theme is an area in which your organization must excel in order to achieve your
vision.
• Themes also represent deliberate strategic directional decisions made by the leadership
team.
• Taken together, one can look at the proposed set of strategic themes and ask this question:
“If we excel in these 3-4 areas, will we achieve our vision?” and receive a resounding
answer of “Yes!”
STRATEGIC THEMES

STRATEGIC
RESULTS
• Each theme has a “strategic result” associated with it - this is a statement of a
desired end-state.
• The result is stated in such a way that you will clearly recognize success when
you see it.
• Strategic results are measurable and explicitly defined using outcome
language.
• Examples include:
❖ Business Growth
❖ Operational Excellence
❖ Customer Service Excellence
❖ Innovation
❖ Sustainability
• The strategic differentiator lies in the strategic result - the specificity of the
result gives guidance to organizational transformation.
• Can be measured by compound measures of current and future-looking
indicators.

• The strategic elements developed in Steps one and
two are decomposed into Strategic Objectives,
which are the basic building blocks of strategy and
define the organization's strategic intent.
• Metrics must also be aligned with the company's
strategic plan.
• The metrics set up also must be S-M-A-R-T
STEP 3: OBJECTIVES - STRATEGY ACTION
COMPONENTS

LEARNING ACTIVITY 7
• Refer to the preceding learning
activities. As a Performance
Management Committee Member,
apply step 2 of the BBS Building
and Implementing process by
developing a strategic value
proposition for your organization.
•
• Concentrate on the following key
dimensions:
• Strategic Themes
• Associated strategic results

LEARNING ACTIVITY 7
• Refer to the preceding
learning activities. As a
Performance
Member, apply step 3 of
the BBS Building and
Implementing process by
formulating strategic
objectives for your
organization. Ensure that
these objectives comply
with the SMART criteria.

TRANSLATING THEMES INTO STRATEGY
MAPS
• A strategy-based balanced scorecard system involves the collaborative
development of an organization’s “Story of the Strategy” and identifies the
connection between capacity, processes, customer value and financial
outcomes.
• In order to map this “story of strategy”, we assemble a team of subject
matter experts for the theme and use their expertise to systematically
decompose each theme into a set of strategic objectives, mapped in a story
of value creation, to achieve the desired strategic result.
• Once all the theme maps are developed, they are combined to create a
powerful, mutually reinforcing business strategy.
• We are often asked “why” we go to all the trouble of building theme maps
when we are just going to combine them in the end. That is like asking why
we go to the trouble of installing the load-bearing walls when we are just
going to plaster over them and they’ll disappear into the woodwork
anyway.

• In Step Four, the cause and effect linkages between the enterprise-wide
Strategic Objectives are formalized in an enterprise-wide Strategy Map.
• The previously constructed theme Strategy Maps are merged into an overall
enterprise-wide Strategy Map that shows how the organization creates
value for its customers and stakeholders.
• Apply cause-effect logic
• A Strategy Map highlights that delivering the right performance in the one
perspective (e.g. financial success) can only be achieved by delivering the
objectives in the other perspectives (e.g. delivering what customers want) -
basically creating a map of interlinked objectives
• It allows companies to create a truly integrated set of strategic objectives
on a single page.
STEP 4: STRATEGY MAP - CAUSE-EFFECT
LINKS

LEARNING ACTIVITY 8
• Refer to the preceding learning
activities. As a Performance
Member, apply step 4 of the
BBS Building and Implementing
process by crafting a 1-page
strategy map for your
organization.
• Ensure that the strategy map
uses cause-effect logic and
establishes interdependent
linkages.

• Leading and lagging measures are identified
❑Lagging indicators are typically “output” oriented, easy to
measure but hard to improve or influence
❑Leading indicators are typically input oriented, hard to measure
and easy to influence
• Expected targets and thresholds are established
• Baseline and benchmarking data is developed
• Key Performance Indicator (KPI) and Performance Measure
Development
STEP 5: PERFORMANCE MEASURES -
MEASURES AND TARGETS

• Provide a way to see if our strategy is working
• Focus employees' attention on what matters most to success
• Allow measurement of accomplishments, not just of the work that is
performed
• Provide a common language for communication
• Are explicitly defined in terms of owner, unit of measure, collection
frequency, data quality, expected value (targets), and thresholds
• Are valid, to ensure measurement of the right things
• Are verifiable, to ensure data collection accuracy
GOOD PERFORMANCE MEASURES

5 STEPS TO FIND THE RIGHT MEASURES

DEVELOPING KEY PERFORMANCE
INDICATORS
• Developing KPI’s is a straightforward process.
• Simply translate KPA’s into measurable values.
• The values may be numerical or qualitative.
• Refer to examples of KPI’s, as set out in tables 5.1 -
5-3

PERFORMANCE TARGETS
• Target setting is the key ingredient to success.
• Without target setting, huge amounts of energy can be lost,
unharnessed, unused. By working consistently toward the
attainment of certain clearly defined, specific targets, energy can
be tightly focused and the results astounding.
• Targets are set to steer the organization/team/individual during
the short-term.
• Targets are needed to drive performance and to measure
performance; to improve performance and to control
performance.
• Refer to the standards for target setting

STANDARDS FOR TARGET SETTING
• Targets must relate to a single output
• Targets must be measurable
• Targets must have deadlines
• Targets must be realistic and attainable, yet challenging
• Targets must be under the control of the person/team setting them
• Focus on high-impact targets
• Participation in target setting
• Targets must be uncomplicated
• Targets must be accompanied by a comprehensive action plan
• Targets must be systematically reviewed

LEARNING ACTIVITY 9
Performance Management
Committee Member, apply
step 5 of the BBS Building
and Implementing process
by developing performance
measures for your
these performance
measures comply with the
criteria for good measures.

• Strategic Initiatives are developed that support the
Strategic Objectives.
• To build accountability throughout the
organization, ownership of Performance Measures
and Strategic Initiatives is assigned to the
appropriate staff and documented in data
definition tables.
• Development of strategic project plans
STEP 6: INITIATIVES - STRATEGIC PROJECTS

LEARNING ACTIVITY 10
Performance Management
Committee Member, apply
step 5 of the BBS Building
and Implementing process
by developing performance
measures for your
these performance
measures comply with the
criteria for good measures.

STEP 7: PERFORMANCE ANALYSIS -
SOFTWARE, PERFORMANCE REPORTING AND
ANALYSIS
• The implementation process begins
by applying performance
measurement software to get the
right performance information to
the right people at the right time.
• Automation adds structure and
discipline to the system and helps
people make better business
decisions.

• The organizational level scorecard (the first Tier) is translated into
business unit or support unit scorecards (the second Tier) and
then later to team and individual scorecards (the third Tier).
• Cascading translates high-level strategy into lower-level
objectives, measures and operational details and is the key to
organization alignment around strategy.
• The organization alignment should be clearly visible through
strategy, using the strategy map, performance measures and
targets, and initiatives.
• Scorecards are used to improve accountability through objective
and performance measure ownership and desired employee
behaviours are incentivized with recognition and rewards.
STEP 8: ALIGNMENT - CASCADING TO UNIT
AND INDIVIDUAL SCORECARDS

3-TIER BALANCED SCORECARD
CASCADING

Performance
Member, apply steps 7-8
of the BBS Building and
Implementing process by
cascading Tier 1
strategies to Tiers 2 and
3 for your organization.

• During this evaluation, the organization tries to
answer questions such as:
❑Are our strategies working?
❑Are we measuring the right things?
❑Has our environment changed?
❑Are we budgeting our money strategically?
STEP 9: EVALUATION - STRATEGY RESULTS AND
REVISED STRATEGIES

STRATEGY EVALUATION – BSC
FRAMEWORK

SUSTAINING THE BBS
• Critical implementation
success factors
• Applying the control process

• #1: Balanced Scorecard is a transformation journey and change initiative,
not a once off project - ensure that you have designed a Change
Management plan which should run parallel to the Balanced Scorecard.
• #2: Maintain a committed and engaged leadership - change should be
driven from the top
• #3: Develop an organizational culture based on results by establishing a
strategy management office
• #4: Focus the organization on strategy by holding review meetings
organized around strategy
• #5: Enhance individual accountability for results through objective
ownership
10 CRITICAL IMPLEMENTATION SUCCESS
FACTORS

• #6: Align the organization, systems and employee
performance around strategy through a rewards and
recognition programme
• #7: Create a performance, results oriented culture
• #8: Link budget formation, cost accounting and performance
results
• #9: Emphasize continual improvement
• #10: Link key organization initiatives to the balanced
scorecard development process
10 CRITICAL IMPLEMENTATION SUCCESS
FACTORS

• Refer to the preceding learning activities. As
a Performance Management Committee
Member, apply step 9 of the BBS Building
and Implementing process by evaluating the
Balance Scorecard for your organization.
Ensure that the fundamental evaluation
questions are addressed.
• Refer to the preceding learning activities. As
a Performance Management Committee
Member, describe how you will ensure
sustainability and continuous improvement
of the BBS Building and Implementing
process for your organization. Ensure that
you include the 10 critical success factors
and the control methods and process that
will be followed.

SELECTED LIST OF SOURCES
• Cotter, C.A (2004-2019). Various Performance Management and Strategic Management
Learner Manuals. Pretoria.
• Kaplan, Robert S; Norton, D. P. (1996). The Balanced Scorecard: Translating Strategy into
Action. Boston, MA.: Harvard Business School Press. ISBN 978-0875846514
• Kaplan, R. S. and D. P. Norton. (1992). The balanced scorecard - Measures that drive
performance. Harvard Business Review (January-February): 71-79.
• http://balancedscorecard.org/Portals/0/PDF/BalancedScorecard9StepsToSuccess.pdf
(accessed 26 October 2014)
• https://www.slideshare.net/CharlesCotter/balanced-scorecard-41321389 (accessed 21
February 2019)
• https://www.slideshare.net/CharlesCotter/hrm-innovation-in-reinventing-performance-
management-and-compensation (accessed 21 February 2019)
• https://www.slideshare.net/CharlesCotter/performance-management-best-practice-
process-and-principles (accessed 21 February 2019)

CONCLUSION
• Key points
• Summary
• Questions
• Training Administration
• Certification

Balanced Business Scorecard & Performance Management: Best Practice process and principles

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