Lean Champion BB 5 - Develop a Balanced Scorecard

Your Gateway to Operational Excellence
© PSL 2009 All Rights Reserved
Lean Champion Training Package
Module 5 - Develop a Balanced Scorecard

The Increasing Sophistication of Corporate
Performance Measurement
Time
Sophistication
of
Measurement
Systems
Operating measures
Traditional accounting measures
Quality-related operating measures
Activity-based costing
Balanced scorecard
Economic value added
Value-linked measurements for
business strategy, stakeholder
needs, process attributes and the
business environment
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Balanced Scorecard

Balanced Scorecard
Requires a significant culture change

Activity - How do you rate yourselves?
• According to Baldrige Award Criteria, a balanced set of
metrics for any organisation should include roughly the
same amount of data in each of the following areas:
– Circle one that applies to each one
Customer Satisfaction 1 2 3 4 5
Employee Satisfaction 1 2 3 4 5
Financial Performance 1 2 3 4 5
Operational Performance 1 2 3 4 5
Product/Service Quality 1 2 3 4 5
Supplier Performance 1 2 3 4 5
Safety 1 2 3 4 5
Environmental / Public Responsibility 1 2 3 4 5

The Balanced Scorecard and The Big Picture
•Activity Based Costing
•Economic Value Added
•Forecasting
•Benchmarking
•Market Research
•Best Practices
•Six Sigma
•Statistical Process Control
•Reengineering
•ISO 9000
•Total Quality Management
•Empowerment
•Learning Organization
•Self-Directed Work Teams
•Change Management
Mission
and
Vision
Balanced
Scorecard
Strategic
Planning

Activity: Start with Strategy
• Begin with your strategic plan – what things are
critical to future success?
A.
• Focus on customers – what values will we add to
our customers?
A.
• Define the processes – how will we deliver these
services to our customers?
A.
• Build the organization – what capabilities must we
put in place?
A.

Strategic Objectives
• Once we establish our first anchor (goals), we can
develop a set of strategic objectives.
• Strategic objectives define what actions must be
taken to reach the strategic goals.
• Objectives are critical to future success. For
example, in order to grow revenues, we must
introduce new products and expand our market
share.This document is a partial preview. Full document download can be found on Flevy:

Strategic Model
• Strategic Models can emerge from four
principles:
1. Translate strategies into operating terms.
2. Link strategies throughout the entire
organization.
3. Commit everyone to implementing strategy.
4. Make strategizing a continuous process of
learning and adjusting to change.This document is a partial preview. Full document download can be found on Flevy:

Strategic Mapping
• Strategic Maps are the foundation of the Balanced
Scorecard.
• You will need one strategic map for each strategic
theme.
• Maps are constructed over four perspectives.
• Strategic objectives are mapped over the four
perspectives, linked together.
What is a Strategy Map ?
A visual representation of an organization's strategy and the
processes and systems necessary to implement that strategy. A
strategy map will show employees how their jobs are linked to the
organization's overall objectives.

Step Five –
Performance Measures

Measurement Criteria
• Measurements should drive change, providing
teeth to our strategy.
• Measurements define objectives in specific terms.
A good measurement should tell you what your
objective is – this is an indicator of good linkage.
• Measurements should be repeatable, quantifiable,
and verifiable.

KPI Development - What; Who; When; What x2
• SMART
– Specific
– Measurable
– Achievable
– Realistic
– Time Bound

Financial Performance
• A few key financial statistics are used to measure overall
organisational performance;
• Financial metrics cover the past, present and the future
performance;
• Financial statistics are tightly linked to key success factors;
• Overall financial measures like EVA, MVA or ROI are used to push
profitable growth;
• The organisation knows the true cost of its processes and
products/services;
• The organisation continually evaluates and improves its financial
metrics to search for just the right measures that will predict long
and short term success.

Product / Service Quality
• Quality measurement dimensions are defined based on factors that
will delight customers;
• Collect data on sufficiently large samples of products/services;
• Assign an importance weight to each quality dimension, based
upon the relative importance of each to customers;
• Summarise product/service quality data into aggregate indices
such as an overall quality index;
• Set standards for product/service quality levels based on customer
requirements and quality levels of world-class organisations’
product/services;
• Use objective third-party product/service quality data to
supplement internal data.

Employee Satisfaction
• Employees are segmented according to common needs; systemic
research is done at least once a year to determine employee needs
and priorities;
• Formal morale surveys are conducted;
• Focus groups are used to gather qualitative data;
• Absenteeism and turnover are collected & reported;
• Measures relating to employee morale focus on delighting
employees rather than just satisfying them;
• Individual measures relating to employee satisfaction are
summarised into an Employee Satisfaction Index;
• Data are collected on employee satisfaction levels of other similar
organisations for comparison and goal setting;
• Methods used to measure employee satisfaction are continually
evaluated and improved.

Targets
• Once you establish measurements, you need to set a target
for each measurement.
• Targets push the organization to a required level of
performance.
• Targets put focus on the strategy, expressing the specifics
of the strategy.
• When an organization hits its targets, then it has
successfully implemented its strategy.This document is a partial preview. Full document download can be found on Flevy:

Step Six – Initiatives

Example from logistics centre

Communicate to teams

BSC Manages for Results

BSC Challenges

Balanced Score Card Success
Success Equals
Effective well
executed strategy
+
Efficient operations
+
Meaningful change

Piecing it all together
Company Action Plan
Keep New Zealand Clean, Green and Lean

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Lean Champion BB 5 - Develop a Balanced Scorecard