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The Ten Essentials of Developing a Successful Balanced Scorecard

The Ten Essentials of Developing a Successful Balanced Scorecard. Agenda – Ten BSC Essentials. Two Fundamental Issues Leading to the Balanced Scorecard (BSC) BSC fundamentals Essential 1 – Objectives for the BSC Essential 2 – Executive Sponsorship

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The Ten Essentials of Developing a Successful Balanced Scorecard

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  1. The Ten Essentials of Developing a Successful Balanced Scorecard

  2. Agenda – Ten BSC Essentials • Two Fundamental Issues Leading to the Balanced Scorecard (BSC) • BSC fundamentals • Essential 1 – Objectives for the BSC • Essential 2 – Executive Sponsorship • Essential 3 – A Solid Implementation Team • Essential 4 – A Strong BSC Champion • Essential 5 – Training and Education • Essential 6 – Cause and Effect; “Strategy Maps” • Essential 7 – Reporting Results (and soon!) • Essential 8 – Cascading the BSC • Essential 9 – Linking the BSC to Key Management Processes • Essential 10 – Making the BSC Part of the Organization

  3. Only 10% of organizations execute their strategy • Not consistent with today’s business realities • Driving by rearview mirror • Tend to reinforce functional silos • May sacrifice long-term thinking • Not relevant to many levels of the organization Barriers to Strategy Execution Vision Barrier People Barrier Management Barrier Resource Barrier Only 5% of the workforce understands the strategy Only 25% of managers have incentives linked to strategy 85% of executive teams spend less than one hour per month discussing strategy 60% of organizations don’t link budgets to strategy Two Fundamental Issues Facing Organizations 90% of organizations don’t implement their strategy Financial measures don’t tell the whole story

  4. Balanced Scorecard Fundamentals

  5. Essential 1 - Objectives for the Scorecard • Why are you developing a Balanced Scorecard? • BSC alone will not transform the organization • Clear objectives are critical for communication, education, and guiding BSC evolution Put the big rocks in first! The beginning is the most important part of the work -Plato, The Republic

  6. FINANCIAL CUSTOMER INTERNAL PROCESSES EMPLOYEE LEARNING AND GROWTH Objectives for the Balanced Scorecard Aligning improvement initiatives New leadership Clarifying current strategy New organizational strategy Setting new targets Aligning employee goals Business crisis Communication and education

  7. Essential 2 – Executive Sponsorship “To make initiatives work it took passionate, all-consuming commitment from the top…Every leadership action must demonstrate total commitment to the initiative.” -Jack Welch, Jack: Straight From the Gut • No BSC initiative will survive without active executive sponsorship • Executives hold key knowledge for BSC success • Everyone watches what the boss watches • You can influence executive sponsorship

  8. Essential 3 – A Solid Implementation Team “A team is a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable.” -Katzenbach & Smith, The Wisdom of Teams • No single person or group holds all the information necessary to build the BSC • Team members are crucial BSC ambassadors • Team members influence their own executives • Team participation is a wonderful learning opportunity

  9. Balanced Scorecard Essential 4 – A Strong BSC Champion “A recent review of our Balanced Scorecard Hall of Fame organizations demonstrates that virtually every successful CEO had a partner – a change agent who played the lead role in introducing the Balanced Scorecard program.” - David P. Norton, The Balanced Scorecard Report (May-June, 2002) • Guides the BSC process • Provides thought leadership on the BSC • Must be a skilled communicator • Should be full-time role in the organization

  10. Essential 5 – Training and Education Companies that don’t encourage employee education of all kinds are dumb! • The perceived simplicity of the BSC means training is often overlooked – that is a mistake! • BSC is simple, but not simplistic • Training “levels the playing field” and encourages involvement • Training leads to important questions • Provide background information, your objectives, success stories, your plan, etc.

  11. Essential 6 – Cause & Effect; “Strategy Maps” Increase Profitability Financial • A good Balanced Scorecard should “tell the story of your strategy” • Strategy Map specifies relationships and makes them testable • Also acts as a powerful diagnostic tool for your BSC • Great way to communicate your Scorecard Serve customers on their terms Deliver Customer Value Through Integrated Offerings Customer Continuously Improve Customer Experiences Allocate Capital Resources Effectively Develop New Products Internal Processes E.L. & G Build an Environment where people maximize their personal potential Improve Communications Through Technology Create a Safe & Healthy workplace

  12. Essential 7 – Reporting Results (and soon!) • Don’t wait until you have 100% data to start reporting • It’s o.k. to start with simple reporting tools • Structure your Management review meetings around BSC results • Track action items and review progress • Use the BSC as a tool for “real-time strategic learning” Is this what your Management Reporting feels like? If so, you need a Balanced Scorecard!

  13. Essential 8 – Cascading the Balanced Scorecard • Allow everyone to demonstrate how they contribute to overall goals • Create a consistent language through measurement • Achieve a laser- like focus on strategy

  14. Essential 9 – Link the BSC to Mgt. Processes Budgets Compensation • BSC has evolved from a measurement to a “strategic management” system • Initiatives on the BSC provide a natural link to the budgeting process • Using the BSC, budgets are based on strategy (less than 40% of organizations currently make this link) • Linking the BSC to compensation makes it “real” for many employees • Remember that you get what you measure

  15. Essential 10 – Making the BSC Part of the Organization • Don’t think of the Balanced Scorecard as a project to be “checked off” • Give the BSC a home in the organization • Assign accountability for the BSC (the BSC Champion??) • Develop BSC policies and procedures – but keep them simple! • Update the Scorecard’s core elements regularly Will your Balanced Scorecard stand the test of time?

  16. Questions? Thank you for your time. If you have any other questions, please feel free to contact me through my website at: www.primerusconsulting.com

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