Strategy and the Balanced Scorecard

Strategy City of West Des Moines Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com

Balanced Scorecard (BSC) City of West Des Moines Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com

Thoughts on Strategy

Fewer than 10% of effectively formulated strategies are successfully implemented (Early 1980’s survey)

“ In the majority of cases – we estimate 70% - the real problem isn’t bad strategy but bad execution.” (1999 Forbes Cover Story)

Strategies (the unique and sustainable ways by which organizations create value) are changing but the tools for measuring strategies are not keeping pace

It is estimated that managers & leaders spend less than 1 hour a month on strategy!

Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com

The Barriers to Implementing Strategy Only 10% of organizations execute their strategy 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 Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com

Origins of the Balanced Scorecard

1990 research study by Kaplan & Norton (growing belief that financial measures of performance were ineffective

HBR series of 3 articles on the “Balanced Scorecard”

1996 book The Balanced Scorecard

2001 book The Strategy-Focused Organization

2002: Nearly half of the Fortune 1000 organizations have adopted the Balanced Scorecard

Rationale for the Balanced Scorecard Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com Financial Customer Internal Learning & Processes Growth New leadership Setting new targets Organization crisis Communication and education Aligning employee goals New organizational strategy Clarifying current strategy Aligning improvement initiatives

What Is The Balanced Scorecard? Measurement System? Strategic Management System? Communication Tool?

Plan your work

Work your plan

Your plan will work

What Is A Balanced Scorecard The Balanced Scorecard is an integrated system of managing strategies that links long term objectives with short-term actions, senior management with front-line employees, and organizational vision with organizational activities. Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com

The Balanced Scorecard Customer Learning & Growth Internal Business Process Balanced Scorecard Kaplan & Norton Financial

Starting From A New Perspective From This To This Budget Personal Incentives Review And Reorient Planning And Capital Allocation Strategy And Vision Balanced Scorecard Communicating And Linking Feedback And Learning Organization Planning Translating The Vision Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com

Translating A Mission Into Desired Outcomes Mission Why we exist Strategy Our game plan Balanced Scorecard Implementation and focus Strategic Initiatives What we need to do Personal Objectives What I need to do Core Values What We believe in Vision What we want to be Strategic Outcomes Satisfied Citizens Delighted Customers Effective Processes Motivated & Prepared Workforce Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com

Defining the Cause-and-Effect Relationships of the Strategy Vision and Strategy Internal Perspective “ To satisfy our customers, at which processes must we excel?” Learning & Growth Perspective “ To achieve our vision, how must our organization learn and improve?” Customer Perspective “ To achieve our vision, how must we look to our customers?” Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com Financial Perspective “ If we succeed, how will we look to our taxpayers?”

Perspectives (Customer, Financial, Internal, Learning and Growth

Objectives

Measures

Targets

Initiatives

The Mechanics of Building a Balanced Scorecard Strategy Map Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com

Translating with the Balanced Scorecard Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com Vision Strategy Objectives Measures Customer Financial Internal Learning Processes & Growth Customer Financial Internal Learning Processes & Growth

Developing Objectives

Customer perspective : Who are our targeted customers, and what is our value proposition in serving them?

Financial perspective : What financial steps are necessary to ensure the execution of our strategy?

Internal Process perspective : To satisfy our customers, at what processes must we succeed?

Employee Learning & Growth : What capabilities and tools do our employees require to help them execute our strategy?

BSC Measures “ From our own experience, we expect strategy scorecards To have twenty to twenty-five measures. Here is a typical Allocation across the four perspectives: Financial Five measures (22 percent) Customer Five measures (22 percent) Internal Eight to ten measures (34 percent) Learning and growth Five measures (22 percent)” Kaplan and Norton Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com

Performance Measures – The Heart of the Balanced Scorecard

Quantifiable standards used to evaluate and communicate performance against expected results

Tools to drive desired action

Provide all employees with direction in how they can help contribute to the organization’s overall goals

Supply management with a tool in determining overall progress toward strategic goals

Thinking Strategically The challenge is to think strategically NOT tactically How do you do that? Strategic Measures are those that measure the Strategy! Partners for Performance, Rangeley, ME 04970-0563; 207.864.0914; [email_address] ; www.partnersforperformance.com

Perspectives (Customer, Financial, Internal, Learning and Growth

Objectives

Measures

Targets

Initiatives

The Road Map

Education

Strategy Map

Balanced Scorecard (BSC) 20-25 measures (Customer, Financial, Internal, Learning and Growth)

Implementation Plan

Execution

Feedback and Learning

Public Sector Example City of West Des Moines’ Strategy Map Strategic Themes Customer Perspective Financial Perspective Internal Process Perspective Learning and Growth Perspective Scorecard “ Customer Focused” Analyze & Enhance the Management of Information, Technology, & Processes Foster Employee Skills & Development Promote a Positive & Motivated Work Environment Provide a Safe Community Pursue Beneficial Alliances Provide Sufficient Infrastructure Provide a Well Maintained Community Enhance Service & Program Delivery Strengthen Sense of Community Facilitate Economic Opportunity Community Safety Collaboration Sustainability Resource Management Community Enrichment Planning & Community Development Balanced Development Yields Positive Net Tax Growth Maintain/ Improve Bond Rating Diversification Of Revenue Sources Maximize External Funding Sources Administer Fiscal Plan Maximize Benefit/Cost Optimize Resources Simplify Customer Processes Facilitate Community-Based Problem-solving/ Involvement Promote Positive Customer Relationships Community Safety Collaboration Sustainability Resource Management Community Enrichment Planning & Community Development

Questions & Comments