As is fairly common it was simply an excel spreadsheet showing a collection of measures, without any actions, projects, objectives or ownership. They had or course categorised them into perspectives, but in true “not invented here” fashion they had [...]]]> Working with a management team the other day, they showed me their recently created “Balanced Scorecard”.

As is fairly common it was simply an excel spreadsheet showing a collection of measures, without any actions, projects, objectives or ownership. They had or course categorised them into perspectives, but in true “not invented here” fashion they had decided to call them “domains”. Most were activity or process measures, a few were customer, and a few financial.  Fairly typical thinking for a first generation balanced scorecard consisting simply of a set of measures, in this case around 50-60 with various colours showing trends and targets.

There were no objectives, no drivers of performance and no relationship to projects, or organisational change.  Typical first generation balanced scorecard thinking.

You will know that first generation balanced scorecard thinking is very much of the mindset “How do we get a wider perspective of the measures in the organisation?” This was a classic of that thinking and mind set.

Digging a little deeper we got to an interesting truth. This was the scorecard presented to the executive team and board. When i asked, who produced it, the response came back was that it was “produced by middle managers and represented what they though the executive and board needed to know”.

I think this is quite a revealing comment. Using the principle, “A strategy map and balanced scorecard for a management team: a set of balanced scorecards for an organisation” this was clearly a middle management scorecard presented to the executive. It also explains why the board were complaining that they felt they had few levers of control that were working. The control of these levers was the domain of the middle managers: they were the ones who primarily gathered, managed and influenced these measures.

Again this breaks the principle, “Create a scorecard for a team to influence their decision making.”

I invite you to have a look at the balanced scorecards in your organisation. Who designed them, for whom to managed? It creates some revealing answers…

1) What categories of measures are you using on your scorecard?  Do they describe how change will occur?

2) Do you represent the multiple strategies that you are implementing, for instance cost reduction through policy decisions, simplifying operations and also perhaps preventative measures?

3) [...]]]> Let me ask you three questions about your Public Sector scorecard:

1) What categories of measures are you using on your scorecard?  Do they describe how change will occur?

2) Do you represent the multiple strategies that you are implementing, for instance cost reduction through policy decisions, simplifying operations and also perhaps preventative measures?

3) Do you accurately represent measure how your various service delivery models are working?  Through partnerships, through collaboration, through, joined up working or even through Big society thinking?

You see I came across a model of the Public Sector balanced scorecard put out by Max Moulin of the Sheffield Hallam University.  In it he suggests a collection of perspectives that include, for instance, operational excellence.   Unlike Max, working with my clients I have not found that mixing a strategy such as “operational excellence” with a perspective is helpful.  In Norton and Kaplan’s balanced scorecard thinking, the perspectives are independent of the strategy.  How you serve customers’ needs and the population (customer perspective), whilst delivering within budget (financial perspective) , and satisfying the political demands (regulatory perspective) relies on what you choose to do(process perspective)  and is underpinned by your organisational capability and capacity (in balanced scorecard perspective terms this is Learning and growth).

In the model we use strategies such as “operational improvement” should work across these perspectives.  So increasing your ability to implement lean processes, should improve your processes efficiency and lower costs, whilst creating better outcomes for the community (and keeping the politicians happy).  So, there is as aspect of operational excellence in each perspective.   The same is true to any other strategy such as policy change, preventative activities or outsourcing your services to a third party to deliver, or what ever strategy is chosen.

We believe strategies should not be confused with perspectives.  Strategies work independently across the balanced scorecard perspectives informing a strategy.

This is the main reason I wrote a paper on”The public sector strategy map” for the PMA (Performance Management Association)  Newsletter.

Over the past 10 years we have developed balanced scorecards working with all sorts of public sector organisations ranging from central government and the MOD, through to many parts of the NHS, Fire Service and City Councils. In developing a scorecard (balanced scorecard) you first have to ensure you capture their business or service delivery model and also identify their strategy for change.

If you fail to identify their strategies for change, and simply collect measures in perspectives that look like sensible categories (such as “operational effectiveness”) the effect will be you will see what has gone on, but not what is driving your strategy and change.

Using a public sector strategy map, with the generic public sector strategy map structure and then imposing the service delivery model and strategies over the top, will ensure that the set of measures you eventually create on your scorecard will be ones that inform and drive your strategy.

The paper is to be published in the Performance Management Association’s newsletter for September.  If you want to learn how to make better Public sector balanced scorecards drop me an email and I’ll send it to you.

Here are ten Underlying principles for Effective Strategic Management and Performance Management using a Balanced Scorecard based management approach

1. If you don’t know where you want to go, you are unlikely to get there.

2. Be absolutely clear what you are using your scorecard for.

3. It is about cause and [...]]]> Balanced Scorecard Principles: Keys to success

Here are ten Underlying principles for Effective Strategic Management and Performance Management using a Balanced Scorecard based management approach

1. If you don’t know where you want to go, you are unlikely to get there.

2. Be absolutely clear what you are using your scorecard for.

3. It is about cause and effect.

4. It is about balance.

5. Measure what you want to manage, (not manage what you can measure).

6. Never, never, never, ever start a scorecard project with measures.

7. Make sure you are explaining and communicating the strategy.

8. Be clear about the themes of your strategy and how they relate to Balanced Scorecard perspectives.

9. It’s a collective endeavour – it’s about collective understanding.

10. Strategy evolves, you learn from its execution: Management is about testing and learning from its execution. Performance management needs to reflect this.

11. Making it strategic relies on top level sponsorship: get it, or be operational.

OK, there are 11. But, we couldn’t miss the last one out, could we?

The Balanced Scorecard approach is an effective, systematic approach to capturing strategy  (Strategy maps), Planning (the alignment between strategy maps and scorecards) [...]]]> You might be wondering whether you should use a Balanced Scorecard for strategic planning process.  Here is my response to that very question.  Don’t use “a balanced scorecard”: use “The Balanced Scorecard Approach”.

The Balanced Scorecard approach is an effective, systematic approach to capturing strategy  (Strategy maps), Planning (the alignment between strategy maps and scorecards) and for communicating and managing strategy.  I used to work for Norton and Kaplan and have used the Balanced Scorecard approach as a tool of strategy,and implementation, FOLLOWING THEIR PRINCIPLES, for around 15 years.

The Fourth generation balanced scorecard approach is also effeective at creating agile, responsive learning organisations.

Three warnings:

1) Be aware that as you try to capture the strategy you will find pieces that are incomplete or where manager disagree (or don’t have complete agreement).  Part of your role as a facilitator is to manage that.

2) IT IS NOT ABOUT MEASURES.  It is about BEHAVIOURS.  The measures that you use as a minor part or the approach are there to provide evidence and tell a part of the story, but it is much more about communication, encouraging the right behaviours and changing the way people work and act.

3) Focus on how people meet, the conversations they have and the actions they take.  IT IS ABOUT LEARNING.  How do we implement this, execute it and learn from what we have done to do it better.

Ignore all the people who tell you the approach does not work.  In my time working with many organisations, there is not one organisation that I have failed to map a strategy, or where the executive team have not said, “Yes that represents out strategy”.  But do concentrate on the principles like the cause and effect relationship, what drives strategy and change and the way people meet and manage (rather than using measures and targets as a crude mechanism of change).

You still have to do detailed planning and budgeting with it as you cascade the approach, but using the approach properly you can create a much simpler and more flexible plan that allows for a much more agile and responsive organisation (and much less paperwork).

You can read more at my site http://www.excitant.co.uk/index.php particularly the Balanced scorecard and sesame street video and the strategic learning model.  I am now using fourth generation balanced scorecard which builds upon the Norton & Kaplan approach.  My book, “Strategy Mapping for Learning Organisations”, is to be published by Gower later this year.

Please feel free to ask any further questions, as I have second guessed your question to some extent.

Phil

When every performance measurement approach is a “Balanced Scorecard” and every collection of measures is a “scorecard”, it creates a real problem with the language of performance.  The phrase has acquired such a broad meaning that distinctions in the quality of different [...]]]>

The problem when Everything gets called a balanced scorecard

Mistakes to avoid:

When every performance measurement approach is a “Balanced Scorecard” and every collection of measures is a “scorecard”, it creates a real problem with the language of performance.  The phrase has acquired such a broad meaning that distinctions in the quality of different approaches have been lost.  It clouds what is meant by a balanced scorecard and hides the originators intent and subsequent developments.

What causes this?

The first problem is that every single collection of measures is called a scorecard.  It is worse than that.  The balanced scorecard has become ubiquitous as a phase to describe almost any measurement approach.  The specific brand has become the generic term, the same way that the brand name Biro refers to all ball point pens, iPod means any MP3 player and “to Google” refers to using any internet search.

This is a marketing success, but creates problems with understanding. As a result, in many peoples’ minds, there are no distinctions between a “scorecard”, a “balanced scorecard” and what Norton & Kaplan describe as the “Balanced Scorecard approach”.  Kaplan dismisses many of these scorecards and balanced scorecards as “mere operational scorecards”.

Mistakes to avoid:

Failing to recognise when you will get smeared with the effects of past changes.

Calling every approach a “balanced scorecard” has meant that the approach has been smeared with the reputation created by poor operational measurement systems.  In many communities, performance management has been beset with poor measure design, simplistic implementation, poor target setting and a lack of attention to management and decision making, let alone strategy execution.  In the Public Sector derogatory phrases such as “The tyranny of targets”, measure mania” and “feeding the beast” are frequently used when measurement is discussed.

As a result much performance measurement and management has acquired a bad reputation. When any measurement system is called a scorecard, all balanced scorecards are tarred with the same brush.  This is a problem when you come to implement a Balanced Scorecard based upon the principles of Norton & Kaplan that is richer than this simplistic approach and labelling.

What this means for our clients

There are two solutions to this.  1) Change the name of the approach.  2) Change the perception of the approach.

We don’t change the name of the approach.  We explain the principles that others have missed and emphasise how it has improved.  That is why we refer to fourth generation balanced scorecards, emphasising how the approach has moved on, particularly with our innovations.

I suggest you, like us,  employ many of the techniques we learnt working with Kaplan and Norton, because they work, so we don’t like to suggest that what we do is not a proper balanced scorecard.   For instance we never do a balanced scorecard without first doing a Strategy Map.  We have enhanced and developed the thinking but still rely on much of the original principles, because they work.

We believe changing the perception and re-education is the best approach.   I recommend you do too.  The best way to do that is to give people a different experience that over-writes what they experienced last time, and changes their perceptions.  The approach includes, amongst many other techniques, deeply involving people in the design, making sure measures are useful at the point they are produced and improving the quality of conversation between teams and between layers of management.  We find this works and our clients tell us it works.

We also recognise that, quite often an organisation will have an existing “balanced scorecard” that needs updating and building on.  It is wrong to throw this away as often much time and energy went into its design.  Often it is being used and is useful.  So in the next section we look at some of the types of (so-called) balanced scorecard that are out there, they problems they have and the mistakes they have made, because understanding where they are today, and how they got there, enables you to move forward.

Phil Jones

Of course this is reassuring because both approaches are based on a degree of common sense.   It is also true of six sigma thinking.

One particular area where they overlap is their view [...]]]> Both lean thinking and the balanced scorecard are very popular techniques, which on closer inspection overlap in their thinking and approach.

Of course this is reassuring because both approaches are based on a degree of common sense.   It is also true of six sigma thinking.

One particular area where they overlap is their view of the customers.  An important part of the lean thinking is to understand the customer and the customer’s perspective, to map their processes and to align the organisation’s processes to what the  customer wants rather than, as many organisation do, forcing the customer to comply with the organisation’s processes.

It turns out that exactly the same thinking is applied when the objectives in the  customer perspective of the strategy  map are developed during balanced scorecard design.  It is important to realise that we are not simply looking for measures of the customer in a modern balanced scorecard.  Rather we are looking for their objectives which we later work out the best way to measure.  This approach is fundamental to good balanced scorecard design: Never start with measures.

The question that a good designer of  a strategy map asks when dealing with the customer perspective  is “What are the few things that make the biggest difference, from the  customer’s perspective“.  That is why, in a balanced scorecard the perspectives are called perspectives.  Things are looked at from that perspective.

This question is exactly the same in lean thinking and practice.

The next stage is to align the  processes of the organisation with the customers processes and objectives.  This is true in both approaches.  So what we have here is a common approach where the experiences of practitioners from both approaches can inform the thinking and approach of the  others.  More importantly, from the perspective of an organisation implementing lean thinking and practices, it should be a relatively small step to also implement a modern balanced scorecard using strategy maps to describe how the strategy will drive improvement and also ripple through to the customers and the ultimate financial results.

If you run a meals on wheels service [...]]]> If you manage an airline, you will know that your aircraft have to leave and arrive on time, you need efficient check-ins, you want to ensure your planes are full and you want to optimise the income (yield) from each flight.  These are each “points of performance”.

If you run a meals on wheels service you want to know that the meals are arriving on time, in good condition, that your customers are safe and well and that they are eating the food, getting the nutrition they need.

If you are a retailer, you want to know your takings at the point of sale, you want to know footfall and conversion in your outlets, you want to ensure your supply chain works so your is in the right place, you want to be buying at the right price so you can make a margin.  These are each “points of Performance”.

Points of performance are where the activity of your business reaches a critical touch point with either your customers or finances.  Monitor these are you have a very good idea of the health of your business.  Ignore them and your business will run away with you.

Points of performance are ideal locations for a KPI (Key Performance Indicator).  That is a key, critical or informative  indicator of performance (How you are doing) and result indicators (how it affects your customers and finances).   Indicators that tell your staff how they are doing and tell management how the business is doing as a whole.

They are also useful rallying points for improvements.  20 years ago, British Airways focused on their point of performance with a Key Performance Indicator (KPI) that measured whether their planes were leaving on time.  If they were more that two hours late the Chief Executive rang for an explanation.  Today their KPI is to have the plane ready to leave two minutes before the plans has its take-off slot.  Their level of performance for this important, industry wide measure, has improved dramatically.

These points of performance are really useful in balanced scorecard design.  They usually sit in the process perspective.  They provide points where operationally imperative data should be reported and monitored.  The information passes that important test of being useful to the people who are on the ground producing it.  It is also extremely helpful to their managers.

Operationally it is keeping on top of the day to day performance of the business.  Strategically you can ask, how could we improve this to get ahead of our competition?

So where are the “Points of Performance” in your business?  Work out where these are and you can determine where your KPIs should be and where key performance targets should be.

Of course choosing the right Key Performance Indicator to use at that point of performance is another technique, because choosing the wrong one can still lead to dysfunctional behaviour and gaming the system to achieve the targets.   A topic of another post.