Measuring Performance: Linking Money To Mission

Measuring Performance: Linking Money to Mission Rebeka Mazzone, CPA Accounting Management Solutions, Inc. www.amsolutions.net June 23, 2010 Use Twitter Hashtag #npweb Special Thanks To Our Sponsors

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Measuring Performance: Linking Money to Mission Rebeka Mazzone Accounting Management Solutions, Inc. June 30, 2010

About Us •  For more than a decade, Accounting Management Solutions, (AMS) has provided accounting support and financial management leadership at the consulting CFO, controller and accounting manager level to dynamic companies throughout the Northeast.

Objectives •  Discuss why scorecards are important •  Learn how scorecards are used as a form of measure •  Understand the differences between scorecards, KPIs, dashboards, benchmarks •  Getting started

Characteristics of Effective Financial Reporting •  No surprises for management – paralyzed by indecision •  Link to strategic plan •  Plan linked to budget •  Measures: Key Performance Indicators (KPI) based on strategy •  Easy to understand •  Meaningful information

What do reports tell us? •  Strategic plan – Where do we want to go? •  Budget – How do we plan to get there? •  Statement of Activity – How did we do? •  Statement of Position – Where are we now? •  Statement of Cash Flow – How did we use our money? •  Cash Flow Projection – Do we have enough to get us there?

Understanding the Financial Condition •  Reports should be designed for the audience. •  There are 4 levels of reporting: 1.  Transaction Detail – Finance Department/Department Managers 2.  Detailed Financial – Finance Department/Department Managers 3.  Management Financial Summary – Exec. Director/Finance Committee 4.  Board Financial Summary – Full Board Too much detail prevents users from focusing on the risks and opportunities.

Benefits of Scorecards •  Power to capture relationship between financial and non-financial data •  Ability to predict and manage future outcomes •  Effectively present financial data to non-financial people •  Drive strategic objectives throughout organization down to individuals •  Align business activities

Example: Revenue and Expense

Example: Revenue and Expense Per Student

EXAMPLE: Organizational Scorecard Key Performance Measures: Non Programs

Going to School on Performance •  Balanced Scorecards = Grade Point Average •  Dashboards = Report card •  KPIs = Class grade •  Benchmarks = Class rank

Inputs & Outcomes

Getting Started GETTING STARTED

Create a Cross-functional Team •  Project Champion •  Clear leadership to drive vision •  Core Leadership Group •  Assess core processes and programs •  Limit team size •  Team orientation •  Requires long term commitment

Understand Your Audience •  Who will be using the scorecards? •  What impact do scorecards have on resource allocation and program decisions? •  What is the key information they need to understand to make strategic decisions? Achieving strategic goals is the priority

Create Buy-in and Ownership •  Top leadership support •  Cross functional / representative teams •  Keep an open dialogue during planning stage •  Keep the process transparent

Enterprise Performance Management System (EPMS) VISION / Board & Executive MISSION Director Organizational Scorecard Executive Director & Departments Departmental Scorecards Departments & Individuals 360 Review

Starting Point 1.  Examine mission and strategic plan 2.  Set goals tied to your mission •  Short-term •  Long-term 3.  Remember: Change takes time

What is the Goal? •  Organization-wide scorecard •  Used to drive strategic plan objectives •  Departmental scorecards •  Informed by Organization-wide scorecard •  Is generally division-specific (e.g. responsibilities and measures are unique to each department) •  Individual Performance Reviews •  Align individual performance to organizational goals “Measures start with a top down approach, but ultimately some will rise up from individual plans”

Strategic Goals & Objectives

Deciding What to Measure •  Mission and program effectiveness •  Anticipated growth •  Benchmarking / peer comparison •  Major financial statement line items and ratios •  Consider the relationship between money and people

Deciding What to Measure: External Drivers •  Legal & compliance •  Facilities •  Public perception •  Remaining life •  Going green/sustainability •  Capacity •  Safety •  Square foot per student •  IT •  Consumer satisfaction •  Competition •  Cost per square foot (maintenance, utilities)

Deciding What to Measure: Four Pillars •  Financial measures – create •  Operational Capacity value •  % time building / •  Profitability by program classrooms occupied •  Ability to meet obligations •  Consumer satisfaction •  Budget success (Individuals/donors/ •  Human Capital grantors) •  Staff/Consumer Ratio •  Retention •  Staff cost per individual •  Completion Rates served •  Cost of success rates (link •  Quality of programs/ $ to outcomes) education •  Diversity ratios

List and Prioritize – Critical HIGH Value to Institution & Mission No Value to Mission or Customers LOW Value to HIGH Customers

Strategic Objectives: Example Mission: To assist low-income adults in realizing their full potential through literacy, employment, advocacy and community involvement. Strategic Objectives: •  Enhance the delivery of services by building on the diversity of student strengths. •  Expand the scope and array of our educational services. •  Expand the base of our advocacy in the state and community for adult basic education.

Strategic Drivers: Example •  Increase service area by 10% over the next 3 years •  Enhance the Organization's admissions and marketing efforts •  Expand the “family service” continuum to better support parents. •  Establish operating reserves •  Determine the effectiveness of our programs and services through evaluations and outcomes studies.

Organizational Scorecard Key Performance Measures: Programs Individual Programs Quantity Quality

Organizational Scorecard Goals: linked to Four budget Pillars Key Performance Measures: Non Programs Change in Revenue per Student Change in Expense per Student Operating Income (loss) by department Avg. # Students per FTE

360 Performance Review 360 Leadership Assessment

What should measures look like?

Key Performance Indicators (KPIs)

Scorecard Example Exceed Goal Moderate Goal Risk

Key Performance Indicators •  KPIs can be both quantitative and qualitative •  Cannot simply be the money •  Programmatic outcomes are the mission •  Finance is the backbone •  Need to trend over time

Key Performance Indicators (cont’d) •  KPI Review Cycle •  Annual scorecard •  Quarterly scorecard •  K.I.S.S. •  Simple to operate •  Simple to understand •  Simple call to action

Review Data For… •  Reliability •  Accessibility / availability •  Accuracy •  Timeliness – past is used to set future goals •  Communicability – Does your audience understand it?

Challenges •  Year One: •  Benchmark year •  Lots of information not available •  Goal – prioritize and focus •  Year Two: •  Measurement tools in place •  Review measures •  Ongoing: Reassessment Some measures might not be available each year

Keys to Success •  A strategic plan and leadership support •  Clearly defined goals & organizational priorities •  Transparency across the organization

Benefits Do You See Any Benefits? •  Easier to understand – 1 hour Board meeting •  People outside of finance can now understand •  Ties money to outcomes to measure effectiveness •  Ability to monitor outcomes over time •  Monitor opportunities for improvement •  Better ability to communicate value

Cautions! •  Visions must be aligned •  Independent of any one department •  Sustained effort •  Start small •  Project manager vs. project champion •  Consistent measures/valid data

Next Steps •  Measure key executive performance •  Each department/division to implement •  Share this with staff; help drive goals and measures •  Data warehouse – move from Excel to database

For More Information •  Rebeka J. Mazzone CPA, Director Rhode Island Region Accounting Management Solutions, Inc. rmazzone@amsolutions.net To keep current on this and other topics, register for our free newsletter at:

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Measuring Performance: Linking Money To Mission

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