Balanced Scorecard Deployment Process Training Module

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Balanced Scorecard Deployment Process
by Operational Excellence Consulting LLC

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Achieving Operational Excellence requires the successful implementation of a
integrated Business Execution System that effectively and seamlessly
integrates the following four building blocks: Strategy Deployment,
Performance Management, Process Excellence, and High Performance
Work Teams.
Strategy or Policy Deployment
is the process that aligns and
links business strategy and
execution.
Performance Management is
the process that translates
strategic initiatives into
measurable objectives and
goals.
Operational Excellence can
be achieved and sustained
with the right attitude, the
right mindset, and the right
competencies.
Well designed, efficient, and
effective Management, Value
Chain, and Support Processes
are necessary to deliver world-
class results.
Strategy
Deployment
Performance
Management
High Performance
Work Teams
Process
Excellence
Operational Excellence
Business Execution
System

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If you are not keeping score, you are only practicing.
Tom Malone

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There are three types of business leaders:
 Those who know the score and know they are winning;
 Those who know the score and know they are losing; and
 Those who don’t know the score.
Modern business managers thirst for information and
knowledge while drowning in a sea of data.

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Strategy Deployment & Balanced Scorecards
 Only 5% of the workforce understands their company
strategy.
 Only 25% of managers have incentives linked to
strategy.
 60% of organizations don’t link budgets to strategy.
 86% of executive teams spend less than one hour per
month discussing strategy.
– Source: Balanced Scorecard Collaborative
Strategy is an expression of what an organization intents to do to get from a
current state to a future state. Strategy is often expressed in terms of a vision
statement, initiatives, objectives and goals. It is usually developed at the top
levels of the organization, but executed by lower levels within the organization.

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Question: Most organizations tend to have good strategic plans, but they fail to
successfully implement them.
Task: Identify at least two reasons why organizations fail to implement their
strategic plans?

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According to the Balanced Scorecard Collaborative,
there are four barriers to strategic implementation:
1. Vision Barrier – No one in the organization
understands the strategies of the organization.
2. People Barrier – Most people have objectives that
are not linked to the strategy of the organization.
3. Resource Barrier – Time, energy, and money are not
allocated to those things that are critical to the
organization. For example, budgets are not linked to
strategy, resulting in wasted resources.
4. Management Barrier – Management spends too little
time on strategy and too much time on short-term
tactical decision-making.

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Strategy Implementation & Balanced Scorecards
Studies have shown that organizations which are leading in their
industry, stellar financial performers, and adept change leaders,
distinguish themselves by the following characteristics:
 Linking strategic objectives and measures to operational objectives and
measures;
 Having agreed-upon measures that managers understand;
 Balancing financial (lagging) and non-financial (real-time or leading)
measures;
 Updating and monitor their strategic key performance indicators
regularly; and
 Clearly communicate measures, progress and challenges to all
employees in the organization.

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“Tell me how you will measure me, and then I will tell
you how I will behave. If you measure me in an illogical
way, don’t complain about illogical behavior.”
Eli Goldratt – “The Goal”

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Balanced Scorecards – Vertical & Horizontal Linkage
Organization’s Strategic &
Operational Plan and Key
Performance Indicators
Functional or Work Groups’
Key Process Measures
Customers’
Requirements &
Satisfaction
Suppliers’
Capabilities &
Performance
Organization’s
Balanced
Scorecards
Balanced Scorecards are not just translating an organization’s strategic initiatives
into measurable objectives and goals (vertical linkage), they are also linked and
align horizontally to other balanced scorecards in an organization.

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Balanced Scorecards – Table of Content
 Strategy Deployment & Balanced Scorecards
 The History & Benefits of a Balanced Scorecard
 Terminology & Definitions
 The Balanced Scorecard Development Process
 Balanced Scorecard Deployment Challenges & Solutions
 Final Multiple Choice Questions & Answers

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Balanced Scorecard – History
 The first Balanced Scorecard was created by Art Schneiderman in 1987 at
Analog Devices.
 In 1990, Art Schneiderman participated in an unrelated research study by
Robert S. Kaplan and David P. Norton, and during this study described his
work on Balanced Scorecard. Subsequently, Kaplan and Norton included
anonymous details of this use of Balanced Scorecard in their 1992 article
"The Balanced Scorecard - Measures that Drive Performance", Harvard
Business Review, February 1992. The paper was a popular success and
led to the book “The Balanced Scorecard” published by Kaplan & Nolan in
1996.
 The article and the first book spread knowledge of the
concept of Balanced Scorecard widely, but perhaps
wrongly have lead to Kaplan & Norton being seen as the
creators of the Balanced Scorecard concept.

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Balanced Scorecards – An Integrated Approach
“Balanced Scorecards tell you the knowledge, skills and systems that your
employees will need (learning and growth) to innovate and build the right
strategic capabilities and efficiencies (internal processes) that deliver specific
value to the market (customer) which will eventually lead to higher shareholder
value (financial).”
“Having Trouble with Your Strategy? Then Map It.”
by Robert S. Kaplan and David P. Norton - Harvard Business Review

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Balanced Scorecard – Benefits
The implementation and ongoing refinement of the Balanced Scorecard
Development & Deployment Process described in the course will
 Help the management team focus on the execution of their business
strategy
 Focus and align an organization towards common goals and objectives
 Enable an organization to understand the relationship between measures
and performance
 Improve communication of organizational priorities across an organization
 Help employees to understand and focus on organizational priorities and
realize relevant results
 Reduce the number of metrics to the few vital key performance indicators
 Strengthen and formalizing the project selection process to focus on key
capabilities and enablers

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“People and their managers are working so hard to be sure
things are done right, that they hardly have time to decide if
they are doing the right things.”
Stephen R. Covey

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Balanced Scorecard vs. Dashboards
In the Performance Management discipline, we often hear people refer to the
terms “Dashboard” and “Scorecard” rather indiscriminately.
However, there exist some rather critical distinctions between the two which are
important to recognized.

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Balanced Scorecard vs. Dashboards
 Purpose: Dashboards are about helping you navigate the journey.
Scorecards are about how successful the journey was.
 Type of Indicators: Scorecards generally contain outcome results,
Dashboards are usually comprised of leading or predictive indicators.
 Timeframe: Scorecards are periodic and longer term (weekly, monthly,
annual trends) in the review horizon, while Dashboards are shorter term and
can even be real time.
 Reaction: Scorecards should provoke next steps that involve introspection
and analysis (drill downs, mining insights, etc.) where dashboards usually
are designed to “signal” or “provoke” immediate actions or course
corrections.
 Targets: Scorecards usually report against a target, threshold or benchmark
as a percentage gap and trend. Dashboards generally report metrics within
or against tolerance ranges, outside of which signal a required change.

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Balanced Scorecard – Terminology Part I
Strategy: An expression of what the organization intents to do to get from a current state
to a desired state. Strategy is often expressed in terms of a mission statement, vision,
goals, and objectives. Strategy is usually developed at the top levels of the organization,
but executed by lower levels within the organization.
Vision or Intent: An overall statement of how the organization wants to be perceived by
it’s stakeholders over the long-term (3 to 5 years).
Goal: An overall achievement that is considered critical to the future success of the
organization and to achieve its vision. Goals express broadly where the organization
wants to be.
Strategic Focus Area or Objective: What specifically must be done to execute the
strategy; i.e. what is critical to the future success of our strategy? What the organization
must do to reach its goals!
Strategic Model: The combination of all objectives over a strategic grid, well connected
and complete, providing one single model or structure for managing the strategic
objective or focus area.

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Strategic Planning: Vision, Goals & Objectives
Vision: Have the most advance and
successful Space Program in the world.
Goal #1: Land on the moon and return
safely to earth by the end of the decade.
Objective #1.1
Develop safe launch
and reentry vehicles
Objective #1.x
Maintain a ground
infrastructure…

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Balanced Scorecard – Terminology Part II
Strategic Grid - Strategy Map: A logical framework for organizing a collection of strategic
objectives over four or more dimensions. Everything is linked to capture a cause and effect
relationship. Strategic grids are the foundation for building the Balanced Scorecard.
Dimensions or Perspectives: Four or more different views of what drives the organization.
Perspectives provide a framework for measurement. The four most common perspectives
are: Financials (final outcomes), Customers, “Internal” Processes, and Learning & Growth.
Cause & Effect Relationship: The natural flow of business performance from a lower level
to an upper level within or between dimensions. For example, training employees on
customer relation’s leads to better customer service which in turn leads to improved
financial results. One side is the leader or driver, producing an end result or effect on the
other side.
Measurement or Metrics: A way of monitoring and tracking the progress of strategic
objectives. Measurements can be leading indicators of performance (leads to an end result)
or lagging indicators (the end results).
Target: An expected level of performance or improvement required in the future.
Initiatives, Programs & Projects: Major initiatives, programs or projects that must be
undertaken in order to meet one or more strategic objectives.

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Balanced Scorecard – Development & Deployment Process
Phase I - Strategic Foundation
Step 1: Strategic Alignment
Step 2: Key Strategic Focus Areas & Objectives
Step 3: Strategic Grid & Model
Phase II - Three Critical Components
Step 4: Key Performance Indicators
Step 5: Goals & Targets
Step 6: Initiatives & Programs
Phase III – Deployment Process
Step 7: Integrate
Step 8: Cascade
Step 9: Manage

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Balanced Scorecard – Development Process
Phase I - Strategic Foundation
Step 1: Strategic Alignment: Communicate and align the organization around
a clear and concise vision and strategy. The strategy is what “feeds”
the Balanced Scorecard.
Step 2: Key Strategic Focus Areas & Breakthrough Objectives: Determine
or review the strategic focus areas and objectives for getting the
organization focused on those things the organization MUST do to
execute it’s strategy and achieve it’s vision.
Step 3: Strategic Grid & Model: Build or review the strategic grid or map for
each strategic focus area and objective of the organization.
Out of all the steps in the entire process, this can be the most difficult
since you must take our entire strategy and transform it into specific
terms and initiatives that everyone can understand. And everything
must be linked to form one complete strategic model.

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Phase II - Three Critical Components
Step 4: Key Performance Indicators: For each strategic initiative on each strategic
grid, there needs to be at least one measurement. Measurements provide
the feedback on whether or not an organization meets its objective for this
strategic initiative.
Step 5: Goals & Targets: For each measurement in an organization’s scorecard,
establish a corresponding baseline, target and stretch goal.
Step 6: Initiatives, Programs & Projects: Things will not happen unless the
organization undertakes formal programs, initiatives or projects. Identifying,
defining and launching strategic initiatives, programs and projects effectively
closes the loop and links the process back to where it started – driving the
strategy formulated and mapped in Phase I.

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Phase III – Deployment Process
Step 7: Integrate: Action plans need to be developed and managed. Perform periodic
scorecard reviews to validate and verify that measurements are relevant and
targets are challenging, but achievable. Individual performance plans need to be
developed and the organization’s reward and recognition linked to the
scorecards. Establish a bi-annual and/or annual performance review process
and conduct individual performance review and coaching sessions.
Step 8: Cascade: Once the initial scorecard has been verified and validated, an
organization needs to push the entire process into other parts of the
organization until it constructs a single coherent performance management
system. Measurements and targets need to be established and linkage between
scorecards need to be verified at each level of the organization.
Step 9: Manage: Use Balanced Scorecards to manage Business
Performance. Prioritize and execute improvement opportunities
based on their impact on the Balanced Scorecards. Improve
your measurement systems and data sources. Renew your
Balanced Scorecard every 6 or 12 months to ensure that the
KPIs are still aligned with the strategic and business objectives.

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Balanced Scorecard – Phase I: Strategic Foundation
Inputs:
• Organization’s Vision
• Organization’s Strategic Focus Areas and
Breakthrough Objectives
• Organization’s existing Key Performance
Indicators (KPI), Baseline and Goals
• Customer Expectations & Feedback
• Supplier Requirements & Capabilities
• Competitor Analysis
• High-Level Process Flow for Core
Processes (e.g. Enterprise Process
Model)
• Organization’s SWOT Analysis
Activities:
• Build the Strategic Grids & Model
• Define Organization’s Strategic
Initiatives & Tactics
• Prepare Communication Material
• Organize Functional “Catchball”
and Alignment Workshops
Outputs:
• Strategic Grids & Model
• Organization’s Strategic
Initiatives & Tactics
• Strategy Communication
Plan
Preparation Phase
Strategic Foundation
Step 1: Strategic Alignment
Step 2: Strategic Focus Areas & Objectives
Step 3: Strategic Grids & Model

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Balanced Scorecard – Strategic Focus Areas & Objectives
Strategic Breakthrough (Hoshin) Objective Strategic Focus Area(s)
 By the year 2012, our organization will have the most
innovative product line of smart phones.
 Product Innovation
 By the year 2014, customer turnover will decline by 30%
through newly created customer service representatives
and pro-active customer maintenance procedures.
 Customer Satisfaction
 Customer Support Processes
 Operating downtimes will get cut in half by cross training
front line personnel and combining all four operating
departments into one single service center.
 Operational Efficiency
 Competence Development
 Organizational Design
 Over the next six months, delivery times will decrease by
15% through more localized distribution centers.
 Lead Time Reduction
 Operational Efficiency
 Distribution Management
Collectively, you want to limit our strategic objectives and focus areas to no more
than four to five. This helps ensure successful implementation of your organization’s
strategic vision. Some common strategic focus areas are: Customer Service, Shareholder
Value, Operational Efficiency, Product Innovation, and Social Responsibility.

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Balanced Scorecard – Four Perspectives or Dimensions
FINANCIALS
How do you want to look to your shareholders? -
Indicators focus on whether your strategic and
operational plan contributes to your top-line,
bottom-line and/or market share.
CUSTOMERS
How do you want to look to your Customers? -
Indicators focus on the specific measures that
matter the most to your Customers.
INTERNAL BUSINESS PROCESSES
At which internal processes and capabilities do
you want to excel? - Indicators focus on internal
operations that enable Customer satisfaction,
growth and profitability.
LEARNING AND GROWTH
What skills and competencies do you need to
implement your strategic and operational plan? -
Indicators focus on your organization’s ability to
innovate, improve and execute.
Objectives Indicators Targets Projects
Vision
&
Strategy

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Balanced Scorecard – Strategic Focus Areas & Dimensions
Basic Flow of a Strategic Focus Area across the Balanced Scorecard Dimensions
Notice how each lower perspective layer supports and enables the upper perspective
layer; such as “Acquire More Customers” will enable “Revenue Growth”.
Keep in mind that we are trying to link everything together. This is critical to building
an effective Balanced Scorecard; i.e. capturing the cause & effect relationship.
Strategic Focus Area: Increase Shareholder Value
Financials Revenue Growth of 20% by 2014
Customers Acquire More Customers
“Internal”
Processes
Customer Marketing & Service Program
Learning &
Growth
Develop Support Systems & Personnel
Perspectives

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Balanced Scorecard – Strategic Grid & Model
Basic Flow of a Strategic Focus Area within the “Financials” Dimension
We will flow our strategic objectives down each balanced scorecard perspective
within a grid of boxes, making sure everything is linked. This grid will serve as the
foundation for constructing the Balanced Scorecard.
Financials
Revenue Growth of 20% by 2014
Operating Cost Improvements of
15% by 2014
New Sources
of Revenue
Increase
Customer
Profitability
Lower
Operating
Costs
High Utilization
of Assets

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Balanced Scorecard – “Customers” Dimension
After the “Financials” dimension has been defined, we move down to the “Customers”
dimension. In order to construct the “Customers” dimension, an organization needs to
understand who their Customers could be and the value(s) it provides or could provide
to them.
Operational Excellence: Companies that emphasize operational
efficiency usually provide certain value attributes, such as
competitive pricing, on-time delivery, or superb quality.
Customer Intimacy: These companies create value for
Customers through their great relationship with the Customer, e.g.
through integration.
Product Leadership: Finally, these companies create value by
emphasizing innovative and unique products and services, e.g.
technology leaders in their industry.
It is extremely important to define your Customer and the values you provide; otherwise
you run the risk of building a Balanced Scorecard that does not match the capabilities
the organization needs to develop to compete in the future.

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Balanced Scorecard – Strategic Grid & Model
Strategic Objectives defined for all Four Balanced Scorecard Dimensions
Customers
Acquire More Customers
Become the Price Leader
“Internal”
Processes
Improve Operational Efficiency
Cost Reduction
Program
Knowledge Based
System
Reduce
Non-Core Activities
Learning &
Growth
Training – Lean
Six Sigma
Program
Database Network
on Operational
Performance
Re-Align
Organization with
Core Competencies
Once you have completed the strategic grid, go back and make sure everything fits with your overall
strategy. A set of strategic grids should provide the strategic model for running the business, outlining the
specifics of the strategy. All stakeholders should be able to look at the grids and follow the flow of the
organization’s strategy.
DimensionsorPerspectives

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Balanced Scorecard – Basic Communication Plan
“I sure wish I’d done a better job of
communicating with GM people. I’d do that
differently a second time around and make
sure they understand and shared my vision for
the company. Then they would know why I was
tearing the place up, taking out whole divisions, changing our whole
production structure . . . I never got this across.”
Roger Smith, CEO of General Motors (1981 - 1990)

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Balanced Scorecard – Basic Communication Plan
Stakeholder Group Form of Communication
 Senior Management Team  Presentation during next Monthly Meeting
 Department Management Teams
 One Day Off-site with Presentation and
Action Planning
 Operation Staff
 Presentation during next Monthly
Communication Meeting &
Communication Boards
 Customers  Personal Contact & Mailing
 Suppliers
 Personal Contact & Quarterly Business
Reviews

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Balanced Scorecard & Strategic Grids - Feedback
State of Michigan Department of the Treasury – A Case Study
Deputy Treasurer Julie Croll:
"Although the Department had been through a series of 'reengineering
projects' and 'quality initiatives', the strategy mapping session of the Balanced
Scorecard development process was the first time I had witnessed managers
from all parts of the Department really understand what it meant to identify
the core mission and functions of the Department. I think it made us all
realize that strategic planning for the big picture isn't so scary (or impossible
for Bureaucrats) once you understand that the big picture is made up of a lot
of little pictures that fit together in some logical way."

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Balanced Scorecard & Strategic Grids - Feedback
State of Michigan Department of Management and Budget (DMB) initiated
the Strategy Mapping and Balanced Scorecard concepts in the late 1990's.
Coordinator Kathe Carter:
"Our management team evaluates potential new programs/initiatives by seeing
how they fit in with our strategy. In the past we would continue stacking new
projects on everyone's plates, but now if it doesn't fit with our strategy we don't
do it." Just as important for the DMB is that "whenever a new project or
initiative is proposed, our people ask 'how does this fit in with our strategy map
/scorecard?' They feel that this connection attaches a higher level of
importance to the initiative."

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Balanced Scorecard – Phase II: Three Critical Components
Inputs:
• Organization’s Strategic Focus
Areas and Objectives
• Strategic Grids & Model
• Organization’s existing Key
Performance Indicators (KPI),
Baseline and Goals
• Strategy Communication Plan
Key Activities:
 Review Strategic Grids & Model
 Review existing Key Performance
Indicators (KPI), Baseline and Goals
 Brainstorm & Select KPIs – Financials,
Customers, Internal Processes &
Learning & Growth aligned with the
Strategic Grids & Model
 Establish Balanced Scorecard (KPIs,
Baseline, Targets, Stretch Goals,
Weights, …)
 Nominate Business Leader for each KPI
 Identify, Define & Launch Strategic
Initiatives, Programs and Projects
Outputs:
• Initial Draft of Organization’s
Balanced Scorecard including
KPI Name, Definition,
Business Leader,
Measurement Frequency,
Data Source, Baseline, Target,
Stretch Goal and Weight
• Launch of Strategic Programs,
Initiatives, and Projects
Development Phase
Three Critical Components
Step 4: Key Performance Indicators
Step 5: Goals and Targets
Step 6: Initiatives and Programs

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Why do we measure Performance?
The reason why we measure performance in organizations is often reduced to
simple homilies, such as ‘you can’t manage anything unless you measure it’ or
‘what gets measured gets done’.
The three main reasons for measuring performance are:
 To learn and improve
 To report externally and demonstrate compliance
 To control and monitor people
Of these three the first is the most important, the
second is something organizations just have to
do and the third one can cause major problems.
Learning &
Performance
Improvement
External Reporting &
Compliance
Controlling &
Monitoring People

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Performance Measures & Indicators – Feedback vs. Levers
Think of Performance Measures or Indicators as Feedback, NOT Levers
 A key to an effective Performance Measurement System is to think of
measures in terms of feedback, not as the traditional lever to motivate
behavior. This often devolves into keeping score, which is where the dark
side of measures starts — avoid it.
 Feedback is something you seek to improve your own performance.
Levers are used to influence others. The difference is more in how you use
the measure than the measure itself.
vs.

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Where do we measure Performance?
Input Process Output Outcome
Input – Information & Resources
Process – Activities & Workflow
Output – Products & Services
Outcome – Results & Impact
Performance Indicators
Are we Doing the Things Right?
Execution Planning – How?
Are we Doing the Right Things?
Strategic Planning – What?

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The Three Rights -
Doing the Right Things,
Doing them at the Right Time, and
Doing Them Right.

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How do we measure Performance?
Try to balance your Performance Indicators:
 Do it fast.
 Do it right.
 Do it on time.
 Keep doing it.

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Leading Indicators

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Balanced Scorecard – Leading & Lagging Indicators
 Some measurements will lead to change in your organization. These types of
measurements are called leading indicators since they drive final outcomes
within the organization. Examples include customer contracts executed,
service response time, and time spent with customers. A common place to use
leading measurements is within the “Internal Processes” and “Learning &
Growth” dimensions.
 The other side of measurement is looking back, historical type measurements
that show a final outcome or result. These measurements are referred to as
lagging indicators and they dominate most performance measurement
systems. Examples include most financial type measurements (return on
equity, sales growth, etc.) and many non-financial type measurements
(production breakeven, customer retention, employee productivity index, etc.).
Lagging type measurements are common within the “Customers” and
“Financials” dimensions since these are outcome related.

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Some Best-in-Class Criteria for Performance Metrics
An Organization’s Performance Indicators need to be:
 Robust
 Stable
 Understandable
 Accurate
 Cannot be manipulated
 Must be “intelligence”
 Have drill-down capability
 Know cause and effect (drivers)
 Must be accessible
 Metric guru not necessary to
obtain data
 Reports developed and published
with pertinent information
 Frequency of reporting must be
balanced with effort
 Single point of responsibility
 Don’t have to chase people to get
information
 Direct access to data and reports

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Balanced Scorecard – Key Performance Indicators
Customers
Acquire More Customers
Become the Price Leader
“Internal”
Processes
Improve Operational Efficiency
Cost Reduction
Program
Knowledge Based
System
Reduce
Non-Core Activities
Learning &
Growth
Training – Lean
Six Sigma
Program
Database Network
on Operational
Performance
Re-Align
Organization with
Core Competencies
For each objective on your strategic grids, you need at least one performance indicator.
Can you have an objective without a performance indicator? Yes, it is possible, but not
having a measurement makes it difficult to manage the objective. It’s best to revisit this
objective and ask the question: Why is this an objective?
DimensionsorPerspectives

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Balanced Scorecard – Software Application 1/2
Should you consider investing in a Balanced Scorecard software application, we
suggest considering at a minimum the following five selection criteria:
1. Total Cost of Ownership - that would be the costs ($) and work volume (e.g. in
man-days) required to configure the software, not just at the beginning, but along the
following years. Of such costs and work volume, how much would be required by (a)
external IT consultants and (b) your own IT department?
2. Ease of Use for your entire Organization - More than 2/3 of both initial Balanced
Scorecard implementation work volume and of the adaptation work during each
yearly cycle afterwards is taken by the alignment of the organizational Balanced
Scorecard at divisional and individual level. Is your software environment going to
facilitate this, or hinder it?
3. Integrated Software Environment - Integrated, from the point of
view of what is called 'the single version of truth' (central database
vs. the same data in multiple places), as well as regarding the ETL
(Extract-Transform-Load) integration with other IT systems
supplying your Balanced Scorecard data.

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Balanced Scorecard – Software Application 2/2
4. Use for both Scorecards (strategic) and Dashboards (operational) - Since
Balanced Scorecard is very often used in conjunction with Performance Management
at both strategic and operational levels, having a single integrated environment for both
levels will save you a lot of headaches along the way.
5. Collaborative Environment - The Balanced Scorecard operation is not a simple thing,
especially if you use it as an aligned management system throughout the entire
organization. Think of the top-down alignment of Strategy Maps, Scorecards and
Initiatives portfolios, as well as of the bottom-up Strategic Review process, where you
need to have your departmental Strategy Review Meetings each month and a couple of
days later the organizational Strategy Review Meeting, using the rolled-up status data
& decisions from the divisional level.

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Balanced Scorecard – A Template
From: January 2010
ORGANIZATION: TBD Until: December 2010
Current Month: TBD 2010
KPI
KPI Name
(Unit)
KPI First Name
Champion Last Name
10 STRETCH
9
8
7 GOAL
6
5
4
3 BASE
2
1
0 ZERO
WEIGHT 0
2010 TOTAL SCORE
JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
CURRENT SCORE 3 4 7 2 3 5 6 9
Stretch 2010 1000
Goal 2010 700
Base 2009 300
Actual 0
ORGANIZATION
OPERATIONAL EXCELLENCE BALANCED SCORECARD
FINANCIALS CUSTOMERS PROCESSES
RESULTS
1 2
5 7
4
12
11
8
9
3
6
10

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1
2
5
7
4
3
6
Name of the Organization
Scorecard Time Frame (e.g. 6 or 12 Months)
KPI Categories (e.g. Financials – Customers – Processes – Learning & Growth)
KPI Name and Unit (e.g. On-Time-Delivery in %)
KPI Champion or Business Leader
Each KPI on the scorecard is important. Otherwise, it should not be on the scorecard.
However, not every KPI is equally important. Define the weight (1 to 100) of each KPI
using this row. The sum of all the weights needs to add up to 100.
Define Level 3 = Baseline – Level 7 = Goal – Level 10 = Stretch Goal for each KPI. The
Baseline is usually the lowest acceptable performance level for a specific KPI or the
performance during the past 3, 6 or 12 months.

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12
11
9
10
Define KPI Performance Levels for the levels 0 - 2, 4 - 6, and 8 – 9, so that each level
represents an improvement in the KPI.
Track monthly performance for each Balanced Scorecard KPI and record actual
performance.
Enter the current Performance Level (0 to 10) for each KPI, based on last month’s
performance. Use the colors “red”, “yellow”, and “green” to visualize if the performance
improvement for the specific KPI is on track or not. Use the Markers (circles) to
visualize current performance level for each KPI in .
Automatic calculation of overall scorecard score for the current month, e.g.
All KPIs perform at Baseline Level -> Total Score 300 Points
All KPIs perform at Target Level -> Total Score 700 Points
All KPIs perform at Stretch Goal Level -> Total Score 1000 Points
Track Monthly Total Score, as calculated in . Use the colors “red”, “yellow”, and
“green” to visualize if overall performance improvements are on track.
8
8
11

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Balanced Scorecard – An Example
From: January 2015
ORGANIZATION: Company ABC (Americas Region) Until: December 2015
Current Month: January 2015
LEARNING & GROWTH
Product A Gross Margin EBITDA Net Promotor eCommerce Orderfulfillment Order-to-Cash Annualized # of Certified
KPI Market Share Score (NPS) Revenue Lead Time Lead Time Field Failure Rate Lean Six Sigma Belts
(%) (% YTD) (% YTD) (%) ($M YTD) (Hours) (Days) (%) (Points)
KPI Tim Smith Jen Meyer Klaus Adler Edgar Winter Jen Meyer Klaus Adler Ellen Grinder Tim Smith Helen Barns
Champion SVP Engineering SVP Sales SVP Operations CEO SVP Sales SVP Operations CFO SVP Engineering SVP HR
10 20.00% 60.0% 20.0% 38.0% $1,000 100 60 6.5% 150 STRETCH
9 18.00% 56.6% 18.0% 37.0% $900 110 70 7.0% 140
8 16.00% 53.3% 16.0% 36.0% $700 115 80 7.5% 120
7 14.00% 50.0% 14.0% 35.0% $500 120 90 8.0% 100 GOAL
6 12.00% 45.0% 13.0% 32.5% $450 150 110 9.0% 80
5 10.00% 40.0% 12.0% 30.0% $400 180 140 10.0% 60
4 8.00% 35.0% 11.0% 27.5% $350 210 170 11.0% 40
3 6.00% 30.0% 10.0% 25.0% $300 240 200 12.0% 20 BASE
2 4.00% 25.0% 9.0% 22.5% $200 260 225 13.0% 10
1 2.00% 20.0% 8.0% 20.0% $100 280 250 14.0% 5
0 ZERO
WEIGHT 10 10 20 15 10 10 15 5 5 100
2011 TOTAL SCORE
JANUARY 0.00% 42.1% 8.9% 31.50% $42 220 179 14.5% 12 230
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
CURRENT SCORE 0 5 1 5 0 3 3 0 2
Stretch 2014 1000
Goal 2014 700
Base 2014 300
Actual 230
RESULTS
FINANCIALS CUSTOMERS PROCESSES

54 2/11/2013 v8.0
Balanced Scorecard – Project Selection Matrix
Balanced Scorecard Project Selection Matrix
KPI#1
KPI#2
KPI#3
KPI#4
KPI#5
KPI#6
KPI#7
KPI#8
Weights 20 10 15 10 5 20 10 10 100 50 30 20 100 70 30 100
Project Definition
1 Project #1 10 0 5 0 0 3 0 0 3.4 5 0 5 3.5 0 5 1.5
2 Project #2 0 3 0 5 0 0 0 0 0.8 0 5 0 1.5 3 0 2.1
3 Project #3 5 5 10 10 3 3 8 8 6.4 3 8 5 4.9 5 8 5.9
4 Project #4 0 0 10 5 0 0 5 0 2.5 0 0 10 2.0 3 3 3.0
5 Project #5 5 10 0 0 1 0 0 3 2.4 10 5 3 7.1 3 5 3.6
Ranking 0 = none Not Started
3 = low On Track
5 = medium At Risk
8= high Behind Schedule
10= very high
CORRELATION MATRIX
MANAGEMENTRISK
TOTALRISK
PROJECTSTATUS
CAPITALRESOURCES
DURATIONOFPROJECT
TOTALEFFORT
TECHNICALRISK
EFFORT RISK
PEOPLERESOURCES
IMPACT
FINANCIALS
CUSTOMERS
PROCESSES
LEARNING&
GROWTH
TOTALIMPACT

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Balanced Scorecard – Project Ranking Matrix
10
9
8
7
6
5
4
3
2
1
0
0 1 2 3 4 5 6 7 8 9 10
EFFORT
IMPACT
Size of the Ball = Size of the Risk
1
2
3
4 5

56 2/11/2013 v8.0
Balanced Scorecard – Phase III: Deployment Process
Inputs:
 Initial Draft of Organization’s
Balanced Scorecard including KPI
Name, Definition, Business Leaders,
Measurement Frequency, Data
Source, Baseline, Target, Stretch
Goal, and Weight
 Definition & Launch of Strategic
Initiatives, Programs and Projects
Key Activities:
 Perform monthly Reviews.
 Validate and verify that KPIs are
relevant and Targets are challenging,
but achievable. Modify if necessary.
 Develop Balanced Scorecard for
each Department (next level)
 Establish and Verify Linkage
between Scorecards (KPIs and
Targets) at each Level of the
Organization
 Integrate Balanced Scorecard into
Incentive Programs
 Manage Strategy Deployment
Outputs:
 Minutes and Action Plan from
monthly Balanced Scorecard &
Strategy Deployment Review
Meetings
 Updated Project Selection Matrix
and prioritized Improvement
Opportunities
Deployment Phase
Deployment Process
Step 7: Integrate
Step 8: Cascade
Step 9: Manage

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Balanced Scorecard – Integrate, Cascade, Manage
Activities:
 Use Balanced Scorecards to Manage Your Business Performance
 Prioritize and Execute Improvement Opportunities based on their Impact on your Balanced Scorecards
 Improve your Measurement Systems and Data Sources
 Renew your Balanced Scorecard every 6 or 12 Months to ensure that the KPIs are still aligned with your
Strategic and Business Objectives
Manage
Activities:
 Develop Balanced Scorecard for each Department (next level)
 Establish and Verify Linkage between Scorecards (KPIs and Targets) at each Level of the Organization
 Define Process for Collecting, Reporting and Reviewing Scorecard Results and Strategic Initiatives
 Establish Individual Performance Plans & Link Reward and Recognition Process to Balanced Scorecards
Cascade
Activities:
 Conduct monthly Balanced Scorecard Performance & Strategy Deployment Reviews
 Establish Individual Performance Plans & Link Reward and Recognition Process to Balanced Scorecards
 Establish bi-annual and/or annual Individual Performance Review Process
Integrate

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Balanced Scorecard – Vertical Linkage of Performance Indicators
Organization’s
Customer Satisfaction measured
through the Net Promoter Score
Order Management
Customer Satisfaction
measured through Order
Confirmation Lead Time
Customer Service
measured through First
Call Resolution
Production
measured through Order
Fulfillment Lead Time
Purchasing
Performance measured
through Material
Replenishment Lead Time
Sales & Marketing
Performance measured
through 90-Days
Forecast Accuracy

59 2/11/2013 v8.0
Balanced Scorecard – Horizontal & Vertical Linkage
•
Performance Indicators vary according to the Organizational Level.
Task 1 Task 2 Task 3 Task 4 Task 5
Process
Outcome
Customer
M4 M4 M3M3
M2
M1
M1 – Organizational Level – Executive Scorecard Indicator
M2 – Process or Functional Level – VP/Director Scorecard Indicator
M3 – Sub-Process or Departmental Level – Manager Scorecard Indicator
M4 – Task or Activity Level – Work Group Scorecard Indicator

60 2/11/2013 v8.0

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Balanced Scorecard Deployment Challenges – 1/6
Fear
• Symptoms: Concern about how performance indicators are used to evaluate team and
individual performance, resulting in resistance to measurement
• Strategies: Involve individuals in setting targets – Invite the whole team to the first
scorecard reviews – Rotate team members through scorecard reviews - Implement a well
defined Performance Management Process - ...
Fudging
• Symptoms: Individuals are manipulating results to pretend that they achieve or
exceeded their target
• Strategies: Clearly define data source – Minimize need for data manipulation to obtain
performance indicator results – Rotate the assignment to collect scorecard data - Display
scorecards publicly on boards or the intranet – Have departments present their
scorecards to each other - ...

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Finger Pointing
• Symptoms: Individuals are blaming other departments for their ability to reach the target
• Strategies: Focus on understanding the processes that impact performance indicator
results – Provide training in process mapping, problem solving, and root cause analysis -
Have departments present their scorecards to each other asking for support where
needed - ...
Overreacting
• Symptoms: Individuals are acting on normal day-to-day or month-to-month variation
without understanding random variation, creating an unproductive spiral of actions,
investigation, and process tempering
• Strategies: Provide training in statistical thinking and the concept of assignable causes –
Define control limits and patterns that require investigations versus patter that may just
be caused by random variation - ...

63 2/11/2013 v8.0
Prima Donna Syndrome
• Symptoms: Individual insist that their particular activity is unique and cannot be
measured
• Strategies: Explain that if they produce a work output of any type, they can be measured
– Help them by listing their outputs, customer (internal or external) requirements, and
work processes – ...
Linus Syndrome
• Symptoms: Individuals are measuring things because they have always measure them,
independent of the relevance of these measures to the strategic objectives and goals
• Strategies: Reiterate business objectives and goals – Keep the number of performance
indicators to vital 6-10, eliminating irrelevant indicators – Question how a specific
performance indicators will support achieving the business objectives - ...

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Panacea Syndrome
• Symptoms: Individuals believe that measuring alone will ensure that things get done
and goals will be achieved, without analysis, planning and execution
• Strategies: Perform at least monthly scorecard reviews – Implement a well defined
Performance Management Process - ...
Big Stick Syndrome
• Symptoms: Individuals are using performance indicators to “beat up” on poorly
performing managers, instead of focusing on the underlying processes, systems and
policies that need to be improved
• Strategies: Focus on understanding the processes that impact performance indicator
results – Provide training in process mapping, problem solving, and root cause analysis
- ...

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Denial
• Symptoms: Individuals deny that the performance indicator represents actual
performance and refuse to act on facts
• Strategies: Implement a well defined Performance Management Process - Provide
training in process mapping, problem solving, and root cause analysis - ...
Hyperactivity
• Symptoms: Individuals measure activities that are unrelated and have no correlation
with the actual objectives and desired results
• Strategies: Reiterate business objectives and goals - Question how a specific
performance indicator will support achieving the business objectives - ...

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Fuzz Factor
• Symptoms: Measures are so complicated that no one actual understands what is being
measured and what causes results
• Strategies: Keep it Simple - Use performance indicators that are industry standards, as
this also enables you to benchmark your performance against other companies -
Explain that an indicator that is not understood cannot be act upon and thus not be
improved - ...
Measure Mania
• Symptoms: Individuals are measuring too many things, just in case, and are unable to
determine or focus on the vital few performance indicators
• Strategies: Reiterate business objectives and goals – Keep the number of performance
indicators to vital 6-10, eliminating irrelevant indicators – Question how a specific
indicator will support achieving the business objectives - Implement a well defined
Performance Management Process, focusing on the business objectives and goals - ...

67 2/11/2013 v8.0

68 2/11/2013 v8.0
Balanced Scorecard Process – Review Question #1
In order to get the most out of the Balanced Scorecard, it should not be
thought of as a:
a. Stand alone performance measurement program.
b. Framework for communicating and executing strategy.
c. Tool for shifting emphasis from short term thinking to strategic thinking.
d. Strategic management system.
Note: Answers will be available at the end of this section.

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The Balanced Scorecard process captures a cause and effect relationship
based on having all parts linked together. Strategic areas link down to
goals, strategic goals link down to strategic objectives, and strategic
objectives are linked to:
a. Mission
b. Goals
c. Budgets
d. Measurements

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Balanced scorecards consist of four inter-related perspectives. Which
perspective or layer will be the main driver or enabler for outcomes within
the financial perspective?
a. Learning & Growth
b. Customer
c. Programs
d. Templates

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There are two types of measurements: Leading Indicators (lead to end
results) and Lagging Indicators (the end results). Which perspective of the
Balanced Scorecard would most likely use leading type measurements?
a. Financial
b. Customer
c. Internal Business Processes
d. Learning & Growth

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Mason Corporation has developed the following three strategic objectives for its balanced
scorecard:
A = Employee involvement will be enhanced through a new matrix realignment of the
organization.
B = Customer confidence will be expanded through more personal approaches to service.
C = The product delivery system will be expanded to include all new product lines.
Where should Mason Corporation place these three objectives within its strategic grid?
Customer Internal Processes Learning & Growth
a. A C B
b. C B A
c. B C A
d. B A C

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Triple K Construction is developing a balanced scorecard. One of the goals
for Triple K Construction is: We will meet or exceed the expectation of our
customers by providing commercial construction projects that are on time
and on budget. Which of the following strategic areas fits with this goal?
a. Commitment to Community
b. Customer Satisfaction
c. Shareholder Value
d. Employee Productivity

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The very bottom dimension of the Balanced Scorecard is the ultimate "enabler"
for the three top layers. This bottom perspective is called:
a. Internal Processes
b. Market Share
c. Learning & Growth
d. Shareholder Value

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______________ are tools (usually spreadsheets) for capturing and
organizing much of the data that goes into building the Balanced
Scorecard.
a. Templates
b. Indexes
c. Goals
d. Ratios

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Balanced scorecards are appropriate for which type of organization?
a. Private sector businesses.
b. Non-profit organizations.
c. Government agencies.
d. Any organization concerned about the execution of its strategy.

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Balanced Scorecard Process – Answers to Question #1 to #9
Q #1
A
Q #2
D
Q #3
B
Q #4
C
Q #5
C
Q #6
B
Q #7
C
Q #8
A
Q #9
D

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The End …
“Perfection is not attainable, but if we chase perfection we can catch
excellence.” - Vince Lombardi

79 2/11/2013 v8.0
Terms & Conditions
After you have downloaded the training material to your own
computer, you can change any part of the course material and
remove all logos and references to Operational Excellence
Consulting. You can share the material with your colleagues and
re-use it as you need. The main restriction is that you cannot
distribute, sell, rent or license the material as though it is your
own. These training course materials are for your — and
your organization's — usage only. Thank you.

Balanced Scorecard Deployment Process Training Module

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