This document provides an overview of a training session on introducing the balanced scorecard. It discusses: - The objectives of understanding the motivation for and core elements of a balanced scorecard, and identifying the mission and vision in scorecard terms. - Some key terms related to performance measurement, management, and scorecards. - Why organizations implement balanced scorecards, including better strategy understanding and improved processes. - How to develop a balanced scorecard, including translating mission and vision into strategies and identifying metrics, objectives, and initiatives.

1. Niwot Ridge, LLC
INTRODUCTION TO BALANCED
SCORECARD
LARGE GROUP ORIENTATION
Tuesday, September 13, 2011
10:00 – 3:00

2. Day One Learning Objectives
 Understand the motivation for Balanced
Scorecard.
 Recognize the core elements of a Balanced
Scorecard Strategy Map.
 Identify Mission and Vision for the BCPS IT
Department in Balanced Scorecard terms.
2
Introduction

3. We can use
Balanced
Scorecard as a
powerful tool for
change,
improvement and

4. Some Useful Terms Before We Start
 Performance Measurement
provides a mechanism to monitor
and report key performance
indicators and critical success
factors
 Performance Management
creates a structure to capture
business strategies and the
objectives and goals that follow
 Balanced Scorecard is a
performance management tool
 Dashboards represent KPI’s in
variety of ways
 Scorecards link and group KPI’s
according to strategy and
objectives
 Strategy Maps and Metric Trees
show the relationship between
objectives and the metrics that
support them
IT Performance Management applies these concepts to the
strategic, tactical and operational aspects of IT
BSC has many confusing and sometimes conflicting
definitions

5. Motivators for the Balanced Scorecard
 Better management understanding of the
linkages between specific organizational
decisions and actions, and the chosen
strategic goals.
 A redefinition of relationships with
customers.
 Improvements of fundamental business
processes.
 With the emergence of a new business
culture, emphasizing team effort among
functions to implement the organizations
5
† “The Balanced Scorecard: To Adopt or not to adopt?” Kevin Hendricks, Larry Menor
and Christine Wiedman, Ivey Business Journal, Nov/Dec 2004
Introduction

6. Positioning the Balanced Scorecard
Approach
 Identifying the need for IT to focus on
 Managing intangible assets
 Software based value generation
 Process focused operational excellence
 Improving the performance, driven by the need to
…
 Do more with less
 Integrate external processes
 Identify sources of improvement
 Oversight management
 Governance
6
Introduction

7. Where does Balanced Scorecard Fit?
7
Balanced
Scorecard
Capabilities
Based
Planning
Real Options
Based
Portfolio
Management
Enterprise
Program &
Project
Management
Business and Technology Governance
Enterprise Class Tools and Work Processes
Sustained
CompetitiveAdvantage
 Readiness Assessment
 Mobilization
 Alignment
 Sustainment
Balanced Scorecard Is 1 Of 4 Needed Capabilities For Success
Introduction

8. Most Textbook Examples
Of Balanced Scorecard
Start With Complex
Examples

10. If we start with a
Manager’s Toolbox
approach, the
Balanced Scorecard
will be simple

12. A scorecard practice should move the client toward the 3rd generation. They’ll have to get
there eventually in order to impact their organization – might as well start out headed in
that direction on day one.
Three Generations of the Balanced
Scorecard
12
First Generation Second Generation Third Generation
BSC as a framework for
organizational change
BSC as a
management
system
BSC as a
performance
evaluation system
 Performance measures
 Breakdown of strategy
 Four perspectives
 Strategic objectives,
performance indicators, key
performance parameters
 Performance linked to
compensation
 Organizational
learning
 Identifying and
solving operational
problems
 Feedback for
planning
 Organizational
 Organizational
change
 Strategy maps
 Strategy patterns
 Integration of budget
and personnel plans
 Changing the
organizational
Introduction

13. A Successful
Manager’s Toolbox
turns these
perspectivesupsidedown

14. 14

15. Ultimately all causal paths
start from
learning perspective

16. Balanced Scorecard is a
Management
System

17. 17
Not Just a Measurement System

18. You do not just measure
your heart beat

19. You use the
heart rate monitor
to manage your exercise

20. In order to
Ride longer
Feel good
Improve performance
Stay healthy, …

21. … and to improve learning
Rule #1:
Exercise boosts
brain power
Dr. John Medina
Brain Rules

22. Textbooks say
“The strategy map helps
to communicate strategy.”

23. Does This Communicate the Strategy? Not so much.
At Least Not Yet, We’ll Get To This Tomorrow

24. First we
need to go
back to
the basics

25. Mission statement
tells you what the organization
does now

26. Vision statement
outlines what a organization
wants to be

27. Strategy
is a long term plan of action
designed to achieve a particular
goal, most often "winning"

28. Translating Mission and Vision
28
Strategy Differentiating activities
Vision
Values
Mission
Picture of the Future
Guiding Principles
Why We Exist
BalancedScorecard
Mission and Vision are starting points for developing a Balanced
Scorecard from the “top down.” Without a Mission and Vision, the
underlying performance measures have no foundation on which to rest.

29. What do we do?
Why is it important?
What results do we want?
How will we know when we’ve
achieved these results?
What specific actions do we
believe will lead to these results?
Connecting specific actions with the strategy of the
firm is the role of a Balanced Scorecard
Identifying the strategic initiatives that support the organization strategies is key
beneficial outcome of deploying a Balanced Scorecard in IT
General Mission
Strategic Themes
Desired Outcomes
Metrics
Strategic
Initiatives

30. Balanced Score Maturity Process
Mobilization
 Mobilize change
through executive
leadership
 Achieve
commitment from
the top
 Build the executive
team
 Build the case for
change
 Identify initial KPIs,
CSFs, Goals and
Initiatives
 Identify target
strategies
Missionary
Alignment
 Translate the
strategy
 Align the
organization
 Define and clarify
the strategy
connections
 Establish long term
targets
 Communicate the
strategy
 Connect measures
with strategies
Change Agent
Sustainment
 Motivate the staff
 Govern the
organization
 Focus the staff
 Align accountability
and rewards
 Develop human
capital
 Re–define
governance
 Get results
Strategy Focused
Readiness
 Assess readiness
for BSC initiative
 Identify gaps &
closure plans
 Conduct Readiness
Assessments
• Cultural
• Operational
• Data
• Governance
 Identify and close
gaps
 Prepare for
deployment
Discovery
The four phases of the Balanced Scorecard deployment are broad and general
purpose, focused on increasing maturity. The details of the deployment must be
developed in order to achieve success

31. Our Wrap Before Lunch
 We are going to use the Balanced Scorecard
to connect the Bridge to Excellence Master
Plan and Information Technology Plan 2011‒
2014
 We’ll look at the next level down in the
construction of the Scorecard.
 We’ll catch up on any learning objective gaps
31

32. Lunch

33. Why Strategies Fail
33
 It’s not about “vision”
 It’s about …
 Commitment to
perform
 Failure to link money
to a strategic outcome
 EXECUTION
Introduction

34. Why Strategies Fail
 Vision Barrier
 Only 5% of the workforce
understands the strategy.
 Informed action is virtually
impossible without sound
knowledge of the
organizations strategy.
 People Barrier
 Only 25% of managers
have incentives linked to
strategy.
 Incentives linked to short-
term financial targets,
leads to less than rational
decision making at the
expense of long term
 Management Barrier
 85% of executive teams
spend less than one hour
per month discussing
strategy.
 Without a clear and
concise blueprint for
success – the strategy –
manage will focus on
financial and operational
details.
 Resource Barrier
 60% of organizations don’t
link budget to strategy.
 Based on strategy, what
initiatives distinguish us
34
Only 10% of organizations successfully execute their strategies
The four primary barriers that lay the seeds of strategy failure …
Introduction

35. Why Change Fails
Change Is Painful
 Organizational change is
unexpectedly difficult because
it provokes sensations of
physiological discomfort
 Behaviorism doesn’t work.
Change efforts based on
incentive and threat (the carrot
and the stick) rarely succeed
in the long run
 Humanism is overrated. In
practice, the conventional
empathic approach of
connection and persuasion
Focus Is Power
 The act of paying attention
creates chemical and physical
changes in the brain
 Expectation shapes reality –
People’s preconceptions have
a significant impact on what
they perceive
 Attention density shapes
identity – Repeated,
purposeful, and focused
attention can lead to long-
lasting personal evolution
35
In many studies of patients who have undergone coronary bypass
surgery, only one in nine people, on average, adopts healthier day-to-day
habits […] [even if] they clearly see the value of changing their behavior.
Instituting change is at the heart of a successful Scorecard
“The Neuroscience of Leadership,” David Rock and Jeffery
Schwartz, strategy+business, Summer 2006
Introduction

36. Five Components of BSC
Success36
Success
Confusion
Anxiety
Gradual
Change
Frustration
False Starts
Vision Action PlanResourcesSkills Incentives
Action PlanResourcesSkills Incentives
Vision Action PlanResourcesIncentives
Vision Action PlanResourcesSkills
Vision Action PlanSkills Incentives
Vision ResourcesSkills Incentives
Vision
Skills
Incentives
Resources
Action Plan
Introduction

37. Positioning the Balanced
Scorecard37
 Mission Statements describe an
organization’s purpose.
 Vision Statement describes the
aspirations of the organization.
 Strategic Goals are derived in the form of
questions about each perspective.
Introduction

38. A Simple CIO Scorecard
38
Strategies Key Performance Indicators
User
Orientation
Be the supplier of
choice for services
 Customer satisfaction
 User survey score
 Percentage of projects delivered on time
Business
Value
Focus resources on
attaining business
strategies through
effective delivery
 Total business impact
 Service budget as a percentage of revenue
 Cost impact for each release
 Percentage of budget allocated to new
development
Operational
Excellence
Deliver timely and
effective services at
or under budget
 Budget versus actual
 Staff utilization
 Staff turnover
 Historical availability
Future
Orientation
Develop internal
capabilities to learn
and innovate to
exploit future
opportunities
 Number of documented best practices
 Existence of Process Architecture
A simple set of goals provides a good staring point for a BSC
Introduction

39. Strategy Map Connects
Initiatives39
 The strategy map is a
visible indicator of the
connection between
strategic goals and
execution
 The Critical Success
Factors are the
measures of
performance for these
goals
 The process of
strategic thinking starts
with this cause and
effect map of
strategies
Budget Perspective
Budget
Management
Resource
Management
Internal Processes Perspective
Stakeholder Perspective
Application Quality Time to Delivery System Capabilities
Stakeholder
Relations
Recognition
of Value
Service Attributes Relationships
Operations
Management
Stakeholder
Management
Innovation
Processes
Regulatory
Processes
Human Capital
Information Capital
Organizational Capital
Learnings & Growth Perspective
Image
Project
Performance
Culture Leadership Alignment Teamwork
Introduction

40. Strategy
 Strategy is creating fit between a firms
business elements that allow trade–offs to be
made for the benefit of its customers.
 If no trade–offs are made, the resulting
decisions support operational effectiveness but
not strategy

41. What is Strategy?
41
 Strategy is the creation of a unique and valuable
position, involving a different set of activities.
 Strategic position emerges from three distinct sources,
by answering how do we …
 Serve a few needs for many
 Serve the broad needs for a few
 Serve the broad needs for the many
 Strategy requires that trade–offs be made in competing
choices to provide the solutions (services and
products)—to choose what not to do
 Strategy involves creating “fit” among a organizations
activities while providing these solutions
Strategy is not the same as operational excellence …
Introduction

42. Mission and Vision Focus
Strategy
Mission  Action
 What is the
organization about?
‒ What do we do?
‒ Who do we do it for?
‒ What is the benefit?
Vision  Results of
Action
 What does the
organization want to
become?
‒ What are the results of
our actions?
‒ If we achieve our
mission what will the
future look like?
42
Mission and Vision provide the anchors for developing strategy. Without
a mission and vision the underlying performance metrics don’t have a
foundation on which to stand. “Why are we measuring this activity?” Ask
the Mission and Vision for the answer
Introduction

43. Attributes of a Good BSC
43
 Simplicity of presentation
 Explicit links between department and
corporate strategy
 Broad executive commitment
 Drill–down capability and available context
 Individual manager compensation †
† The connection between scorecard performance and compensation is important, but it is also important to
understand that this connection comes ONLY in a mature organization where the scorecard and the resulting
performance has been operational for some time. Without this maturity the expected benefits will not appear
Introduction

44. 7 Deadly Sins of an IT
Scorecard44
Common Pit Falls Impact on the Performance Initiative
An IT centric view of IT
performance
Lack of senior management involvement in metrics
selection and refinement
Measures that don’t
matter to the business
No explicit link between metrics and IT strategy
Lack of common ground Lack of common metrics definitions complicates
aggregation
An over reliance on tools Lack of focus on data collection processes leads to
inaccurate and outdated data
No drill–down capability Unavailable context for scorecard–level metrics
hinders interpretation
Too many metrics Lack of aggregation and screening of low–level
metrics results in cumbersome reports
No individual impact Individual lack incentives to impact scorecard
performance
CollectionSelectionReportingUse
It is easy to fall into the trap of being metrics focused rather than strategy
focused. Make sure these “sins” are not present in the BSC. If they are,
take explicit actions to remove them
Introduction

45. Creating Value Through
Strategy
 An unambiguous sense of
direction permeates the
organization.
 Strategic and operational
plans reinforce each other.
 Decision–makers understand
how their roles contribute to
the total enterprise and their
accountability is clear.
 There are no simplistic ideas
about how customers and
competitors will respond to
actions of the enterprise.
 Empowerment of throughout
the enterprise.
 Conflict and differences of
opinion are not suppressed.
 Interaction of market
knowledge with creative
product ideas produces a
steady stream of innovation.
 Existing and retired
employees are the most
effective source of new
employees.
 Other companies want to do
business with us.
 When asked “if the enterprise
was a school, would you pay
tuition for your children to
attend?” The answer would
be “yes”
45
It is VALUE we’re after with the IT Balanced Scorecard
“The Market–Based Adaptive Enterprise: Listening, Learning and Leading Through Systems Thinking, Vincent
P. Barabba, in Proceedings Russell L. Ackoff and The Advent of Systems Thinking, March 1999
Introduction

46. BSC Strategy for Intangible
Assets46
 The knowledge-based Intellectual assets are
distinctly different from the physical assets of
the firm.
 The strategy of deploying the capital
associated with intellectual assets needs
careful thought,
 Informational
 Organizational
 Human resource skills and capabilities
¾’s of the BSC value comes from intangible assets.
Only the budget quadrant can be traced to tangible assets
Introduction

47. An Intangible Asset Strategy
Example47
Walt Disney World has entirely aligned and integrated their
organizational capital and culture with their strategic goals of
delivering superior customer service to secure customer
loyalty, promote repeat purchase, and fulfill their corporate
mission. Few who have visited Walt Disney World would
dispute the fact that the “cast” (the Disney name for
employees who are “on stage” doing their work) is entirely
infused with serving their customers. This is a prime example
of organizational capital alignment with corporate goals.
Strategy converts intangible assets into tangible outcomes
An example of intangible asset manage built around a scorecard
Introduction

48. Planning
Planning is the ongoing dynamic
activity of peering into the future for
indications of where a solution may
emerge and treats the plan as a
complex situation, adapting to an
emerging solution.
‒ Mike Dwyer, Big Visible Solutions

49. Criteria for a Good Strategic
Plan49
 It must be flexible, not written in stone, since
environments change, the plan must change
with it
 Everyone is involved in its creation
 It's not just a once–a–year exercise, or a piece
of paper that's created and never looked at
again
 It's actionable and relevant to the company's
vision / mission
Planning is a continuous improvement process
Introduction

50. Balanced Scorecard Team
Roles50
Role Responsibilities
Executive
Sponsor
 Assumes ownership for the Balanced Scorecard project
 Provides background information to the team on the strategy and methodology
 Maintain communication with senior management
 Commit resources to the team
 Provide support and enthusiasm for the Balanced Scorecard throughout the
organization
Balanced
Scorecard
Champion
 Coordinates meetings; plans, tracks and reports team results to all audiences
 Provides thought leadership on the Balanced Scorecard methodology
 Ensures that all relevant background material is available to the team
 Provides feedback to the executive sponsor and senior management
 Facilitates the development of an effective team through coaching and support
Team
Members
 Provide expert knowledge of business unit or functional operations
 Inform and influence their respective senior executives
 Act as Balanced Scorecard ambassadors within their business units
 Act in the best interest
Organizational
Change Expert
 Increase awareness of organizational change issues
 Investigates change-related issues affecting the Balanced Scorecard project
 Works with the team to produce solutions mitigating change-related risks
Introduction

51. Beneficial
Outcomes
Identifying the connections
between measurable benefits
to intentional actions is the
core outcome of a Balanced
Scorecard

52. Balanced Scorecard Benefits
 Promote the active
formulation and
implementation of
organizational
strategies
 Make organizational
strategies updated
and highly visible
 Improve
communication within
the organization
 Improve alignment
among divisional or
individual goals and
the organization's
goals and strategies
 Align annual or short-
term operating plans
with long-term
strategies
 Align performance
evaluation
measurement and
long-term strategies
52
Introduction

53. Value of the Balanced
Scorecard53
 An efficient mechanism for managers to both
articulate and communicate their strategic goals
and implementation plans.
 Find out how effectively these plans are being
implemented.
 In larger firms BSV provides a two-way provision
of concise and relevant information about “what’s
going on” in the organization.
 In smaller firms BSC describes the strategic vision
and associated strategic objectives and priorities
in a way that builds consensus and give impetus
to the development and application of more
effective strategic management processes.
Introduction

54. Iron Law of Human Nature and
Economics
54
 Want to know the secret to successful
implementations?
 Define what a "successful implementation" is
and have the courage to ask:
 Is this a definition that creates perverse
incentives?
 Or is this a definition that leads to metrics we can
meaningfully recognize and reward?
Introduction

55. Let’s skip to the end
and look at an actual outcome
from our efforts

56. A Real Example of an IT
Department56

57. Where are going tomorrow?

58. Tomorrows Activities
58
 Using our principle from today, let’s put them
into practice.
 Decompose the IT Plan and Bridge to
Excellence into candidate initiatives.
 Start placing those initiatives in a candidate
Strategy Map.

59. 59
For Today (Tuesday)