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  1. 1. Proof CONTENTSAbout the Authors viiiAbout the API xList of Figures and Tables xiAcknowledgements xiiiForeword xiv 1 Both Efficient and Effective: The New Public Sector 1 Performance Agenda 2 Balanced Scorecards: The Journey from Measurement to 14 Strategic Performance Management 3 Using Lean Thinking to Improve Strategic Performance 42 4 Designing Strategy Maps to Agree Strategic Priorities 63 5 Agreeing High Level Strategic Outcome Targets and 90 Key Performance Indicators 6 Selecting Strategic Initiatives 112 7 Aligning Financial Management with Strategic Goals 134 8 Keeping Your Eyes on the Ball: Reporting and Reviewing 157 Performance 9 Building a Culture Focused on Strategic Performance 182 Management10 Conclusion and Key Strategic Performance Questions 212Notes 230Index 240 vii
  2. 2. Proof 1 BOTH EFFICIENT AND EFFECTIVE: THE NEW PUBLIC SECTOR PERFORMANCE AGENDA We can no longer afford to sustain the old ways when we know there are new and more efficient ways of getting the job done. Barack ObamaINTRODUCTIONIt is fair to say that the collapse of the financial markets in 2007/2008was an epoch making event. As well as popularizing the then obscureterm “credit crunch,” commentators watched in disbelief as long-established and venerable companies such as Lehman Brothers wentout of business and other household names such as Citibank in theUS and the Royal Bank of Scotland in the UK were saved from extinc-tion only through massive financial interventions from their nationalGovernments. Few industries and sectors were unscathed by the global economicrecession that was triggered by the collapse of the financial markets.From construction to publishing, from property to computing, organ-izations were forced to hurriedly batten down the hatches and waitwhile the recessionary hurricane passed by. Although we haveavoided the deep “depression” that was widely predicted at the turnof 2009, the recession can still be seen as a massive economic cata-strophe and it is safe to claim that the road to full recovery will belong and treacherous and many more well known organizations maywell die en route. 1
  3. 3. Proof MORE WITH LESSTHE AMERICAN RECOVERY AND REINVESTMENT ACTFinancing the recovery will place enormous demands on public pursesthat, due to demographic and other influences, have already been stretchedin recent years. Perhaps the most powerful measure of the cost of recoverycan be gleaned by considering the price tag on The American Recovery andReinvestment Act (ARRA) of 2009. Largely based on proposals made byPresident Barack Obama, the Act introduced measures intended to stim-ulate the US economy that together will cost about US$787 billion. Therange of measures include federal tax cuts, expansion of unemploymentbenefits and other social welfare provisions as well as domestic spending oneducation, healthcare and infrastructure projects. And bear in mind thatARRA spending is on top of significant amounts of money that have alreadybeen pumped into the US economy by the Government (and that wasreplicated in other nations such as the UK) to shore up the banking sectoras well as the cost of other recession-busting and depression-avoidinginterventions.TRANSPARENCY AND ACCOUNTABILITYWhen looked at strictly from a performance management perspectiveARRA is nothing short of groundbreaking. For many years, those of usworking to improve performance management within the Governmentand public sectors (which, for ease of reading, together we will refer toas the public sector) have been actively promoting the establishment ofmechanisms that substantially improve performance accountabilityand transparency, which we have long argued must be at least on parwith that expected in the commercial sector. Therefore it is heartwarming to note that an ARRA provision calledfor “a website on the internet to be named, to foster greateraccountability and transparency (authors’ italics) in the use of funds madeavailable in this Act.”1 is operated by the Recovery Trans-parency and Accountability Board, which was also created by the Act. Unprecedented in the levels of performance transparency andaccountability (indeed the words “Track the Money” are emblazonedacross every webpage) the website tracks areas such as:– Are the public benefits from the use of the Recovery funds being reported clearly, accurately and in a timely manner?– Are Recovery projects avoiding unnecessary delays and cost overruns?– Do Recovery programs meet specified goals and targets? 2
  4. 4. Proof BOTH EFFICIENT AND EFFECTIVEFEDERAL DIRECTOR OF PERFORMANCEAlthough the ACCA can be viewed as a short-term response to a des-perate situation (even though some of the funding is earmarked forlonger-term economic developments) the Act should be understoodwithin a broader performance improving agenda that beats at the heartof the Obama administration. For example, in June 2009 the Presidentappointed Jeffrey D. Zients (an American CEO, management consultantand entrepreneur) as the United States Chief Performance Officer. Zientsis also Deputy Director for Management of the Office of Managementand Budget in the federal government of the United States. According toPresident Obama, Zients’ assignment is to help “streamline processes, cutcosts, and find best practices throughout the US government.”2 Zients replaced Nancy Killefer who withdrew from her nominationto this position in February 2009 to avoid controversy about herpersonal income taxes. On announcing the new position of Chief Performance Officer,Obama made a statement that accurately describes the need for reformin public sector performance management across the globe, “We canno longer afford to sustain the old ways when we know there arenew and more efficient ways of getting the job done,” he said, add-ing that, “Even in good times, Washington can’t afford to continuethese bad practices. In bad times, it’s absolutely imperative thatWashington stop them and restores confidence that our Governmentis on the side of taxpayers and everyday Americans.” Although the two just-cited examples relate to the USA, throughoutthe world we are witnessing a radical refocusing of how the publicsector is spending its money, with words such as transparency, account-ability, efficiency and effectiveness peppering the uncountable perfor-mance dialogs that are taking place from the UK to New Zealand, fromCanada to Singapore.A PUBLIC SECTOR HISTORY OF PERFORMANCEIMPROVEMENTAlthough the discussions have become heightened, the quest to radi-cally improve performance is hardly a new concept in the public sector.Over the preceding two decades there have been repeated attempts toremove waste, bureaucracies and the inward foci from public sectoragencies. For instance in 1993 the then US President Bill Clinton intro-duced the Government Performance Results Act (GPRA), which set out 3
  5. 5. Proof MORE WITH LESSto improve agency program performance and accountability, thusimproving the public’s confidence in Federal Agencies. Key programgoals included:– Initiate program performance reforms with a series of pilot projects in setting program goals, measuring program performance against those goals, and reporting publicly on their progress.– Improve Federal program effectiveness and public accountability by promoting a new focus on results, service quality and customer satisfaction.As the result of this Act, the head of each Government agency has tosubmit to the US congress a strategic plan detailing the strategic aimsand performance indicators. The key performance results are thenaggregated into an executive branch management scorecard, whichis published for everybody to see. Note the use of terms such as measurement, goals, reporting andaccountability, which all feature strongly in the words that have beencoming out of ARRA and the importance of transparency. Switching our attention to the UK, a catalog of programs and init-iatives has been launched in recent years with the clear goal of improv-ing public sector performance. For example the “best value” schemethat requires local authorities to deliver service to clear standards bythe most economic, efficient and effective means available was firstlaunched in 1999 and has evolved since. Other UK-based Governmentinitiatives that have been in place for some time include the use ofnational league tables for National Health Services trust and primaryand secondary schools. Although controversial (critics claim that localfactors are not taken into account and that the emphasis should be oncelebrating and sharing best practice rather than naming and shamingpoor performers) league tables have delivered some benefits in thatthey have catapulted performance issues onto the agendas of healthtrusts and school managers as well as raising public awareness of thedistance that separates the best from the worst performers.THE EFFICIENCY PRIORITYBut although we have witnessed concerted attempts to improve publicsector performance through the last decade of the last century and thefirst of this, as we enter the second decade of the 21st century there isno doubt that there is a new performance imperative to contend with. 4
  6. 6. Proof BOTH EFFICIENT AND EFFECTIVEThe fact is, as a result of the recession that followed the credit crunchpublic sector leaders have to do a lot more than ever before but withmuch smaller public purses. In essence, public sector bodies have littleoption but to focus squarely onto cost savings and efficiency gains.Scottish exampleAs just one indication of the scale of the challenge that is facingpublic sectors leaders throughout the world, Audit Scotland (which isa case study in this book) released a report in November 2009 thatpainted a worrying picture of Scotland’s future public sector finances.The report noted that although it was commendable that ScottishMinisters had committed to a 2% annual efficiency saving to 2011(Audit Scotland itself has internally embraced this target) that thiswould be insufficient to fill the shortfall that will see the Scottishbudget fall between 7% and 13% in real terms by 2013–2024. Thisshortcoming, it commented, was caused primarily by falling govern-ment revenues, rising unemployment, ever-increasing demands forimproved public services and an aging population. To contend with this shortfall, the Scottish Auditor General RobertBlack noted that difficult decisions would be needed to find otherways to reduce public spending. Black highlighted an “urgent need”to improve the efficiency and productivity of public services in Scot-land, alongside better information linking spending with actual servicedelivery, costs and performance. Put in stark terms, the Audit Scotlandreport warned that “severe spending constraint is on the way.”3 Of course Scotland is not the only nation facing spending con-straints, the same holds true for public sector funding in just aboutevery other developed nation. Without significant efficiency gains,public sector bodies will simply not be able to properly deliver theirservices in the next decade.A DELAY IN IMPACTAs a result, the need to become efficient has become perhaps the keyperformance imperative for public sector bodies. What’s more as thereis a delay from the time commercial organizations emerge from reces-sion and public funds recovering, the aftermath of the current recessionwill continue to hurt the public sector long after the present downturnends. 5
  7. 7. Proof MORE WITH LESS Basically, while most private businesses can just get on with the jobafter money starts flowing more freely, governments have to deal withthe huge debt burdens, they still own major stakes in banks that needto be restructured and they have to cope with the reduced tax income.While budgets are often set for three or five years, the next budgetround will mean reduced budgets for most government organizations– be it central government departments, agencies, education insti-tutions, schools, NHS organizations, police forces, fire and emergencyservices, justice organizations, local authorities, etc. All of those will beforced to cut costs and become leaner and more efficient, which is atrend that is likely to continue for many years until the massive debtsare repaid and public purses look more healthy again. The fact is overthe coming years public sector bodies are facing harsh economic real-ities, the likes of which has not been seen since the end of World War 2.IMPROVING EFFECTIVENESSBut note. Although there will be massive pressure on public sector bodiesto deliver quantifiable and significant cost savings in the coming yearsthere is a wider and more complex performance challenge facing publicsector leaders. They will have to achieve the potentially large-scale costreductions without negatively impacting citizen-facing performance.Indeed as the public gets more demanding of performance, public sectorbodies might be expected to improve service outputs with the sameor fewer resources. While this might be achievable in some large andinefficient departments, it’s a lot harder for some organizations that arealready lean. Basically efficiency savings are on a logarithmus scale andwill become exponentially more difficult. So here’s the rub. Public sector bodies are being asked to becomeboth more effective as well as more efficient (not therefore becomingefficient at the expense of being more effective). Often seen as inter-changeable words, we can define efficiency as “doing things right,”and effectiveness as “doing the right things.” In essence, from an effectiveness perspective the general public ofdeveloped nations are demanding that their public sector agencies per-form to the same level of customer-centricity that they now expect fromtheir commercial sector suppliers. Indeed over the last 20 years or so(perhaps measurable from the early 1980s when total quality manage-ment principles were first introduced into Western organizations withtheir focus on increased efficiencies through tight process managementas well as the inculcation of greater customer focus – see Chapter 3) as 6
  8. 8. Proof BOTH EFFICIENT AND EFFECTIVEthe performance of private sector companies improved, consumersbegan to use the standards of the best companies as the benchmarkfor all of their service providers – commercial or public. The perfor-mance of the public sector was generally found wanting which ledto an interesting cycle: private citizens vented their frustrations regard-ing public sector performance on elected officials. These officialsthen passed this anger straight back to public sector managers, withthe non-negotiable order to demonstrate substantial service perfor-mance improvement. Fast forward to today, this means that as publicsector bodies look to (and are forced to) cut costs they will not beallowed to trade this with any measurable and sustained degradationof service. However unfair it might seem to beleaguered public sectorleaders, the general public will not stand for poorer performancefrom public sector bodies and therefore neither will their electedofficials.EFFICIENCY AND EFFECTIVENESS: AUDIT SCOTLANDCASE EXAMPLEIn short, the expectation of public sector leaders is that they deliver“more value for less money.” As a best practice example of this pro-mise consider our case organization: Audit Scotland. Its vision is that:“On behalf of the Auditor General and the Accounts Commission,we will provide assurance to the people of Scotland that their moneyis spent appropriately and we will help public sector organizationsin Scotland to improve and perform better.” This vision speaksdirectly to the efficiency (value for money) and effectiveness (perfor-mance improvement) strands of Audit Scotland’s responsibilities. DianeMcGiffen, Audit Scotland’s Director of Corporate Services notes that,“The vision we have now captures the essence of the priorities thatour stakeholders and clients have identified for the next five years,”therefore stressing the fact that their customers anticipate improve-ments to both efficiency and effectiveness performance strands – notone or the other. As well as an external performance improvement focus, AuditScotland pays equal attention to improving the efficiency andeffectiveness of its own performance. To help achieve both itsexternal and internal goals and bring these together in one docu-ment, Audit Scotland, as with all of the other case organizationsin this book, uses a Balanced Scorecard as it core managementframework. 7
  9. 9. Proof MORE WITH LESSA BALANCED SCORECARDDescribed in detail in Chapter 2, a Balanced Scorecard is essentially astrategic management framework that comprises both financial andnon-financial performance perspectives. First popularized in the early1990s by Harvard Business Professor Dr Robert Kaplan and manage-ment consultant Dr David Norton, a “classic” Balanced Scorecard (thatis as defined by Kaplan and Norton) comprises learning and growth,internal process and customer perspectives in addition to the financialperspective. These perspectives are collocated within a Strategy Mapand an accompanying scorecard of indicators, targets and initiatives. A number of variations to the Balanced Scorecard have evolved sincethe Kaplan/Norton framework was first introduced. Indeed the termBalanced Scorecard today most accurately relates to a broad range ofperformance management systems or frameworks that comprise finan-cial and non-financial performance dimensions.VALUE CREATION MAPAlongside the “classic” Balanced Scorecard, this book also outlines howorganizations have amended and changed the Balanced Scorecardconcept to make it work for their organization. Bob Kaplan and DaveNorton make it very clear that organizations shouldn’t see the “classic”scorecard template as a straight jacket and encourage organizations tochange the standard templates to better reflect their unique strategies.One such evolution is the Value Creation Map that is used by AuditScotland and many of the other case studies that we profile. The ValueCreation Map is also described in detail within the next chapter. But as aquick description, a Value Creation Map describes the strategic objectives,initiatives and supporting key performance questions and key perfor-mance indicators that an organization must master in order to deliver toits vision or mission. Figure 1.1 provides a diagrammatic overview of aStrategy Map of a “classic” Balanced Scorecard and a Value Creation Map(which throughout this book we will also refer to as a Strategy Map). Theprocess of strategy mapping (the most important phase in any BalancedScorecard creation) is described fully in Chapter 4.PERFORMANCE PRIORITIZATION IN THE PUBLIC SECTORAlthough the original Kaplan/Norton Balanced Scorecard was designedfor deployment within commercial organizations (and indeed emerged 8
  10. 10. Proof BOTH EFFICIENT AND EFFECTIVE Strategy Map Value Creation Map Financial Perspective Outcomes/Stakeholder Value Proposition/Output Deliverables Customer Perspective Internal Processes Perspective Core Activity Core Activity Information Capital Human Relational Structural Resources Resources Resources Human Capital Organizational Capital Financial Physical Resources Resources Figure 1.1 Balanced Scorecard Strategy Map and a Value Creation Mapfrom a 1990 study involving 12 large listed organizations that werelooking at better ways to measure performance than could then beachieved through reliance on financial metrics alone4) Balanced Score-cards have perhaps become even more popular and enduring in publicsector organizations. A key reason for this popularity is that a BalancedScorecard enables public sector leaders to successfully contend with achallenge that is normally far tougher for them than their private sectorcounterparts – prioritizing where to spend money (which of coursehas today taken on a significantly more important focus than haspreviously been the case). Simply put, whereas commercial organizations can boil every-thing down to some form of shareholder value focus (be that as apublicly traded or family owned enterprise) for public sector bodiesthere’s a requirement to deliver equal value to a range of stakeholders:funders, consumers and partners, as examples. This can confuse thepublic sector leaders as to where they should prioritize attentionand resources. Peter Ryan, Manager, Planning and Performance atour case study organization Christchurch City Council puts it well:“The leaders of public sector bodies have a great deal of difficultyin knowing what they’re there to produce in terms of outcomes and 9
  11. 11. Proof MORE WITH LESSwhat they need to support that,” he says. “So their greatest short-coming is that they lack a real sense of what their business is.” Ryan continues that, “It’s not like a private company where you’re justpitching it at a profit measure which is a nice, simple thing to have as aprime directive. Public sector organizations have so many things thatthey’re seeking to deliver that they end up not knowing what they’resupposed to do.” He asks: “How can they set realistic and useful performance objec-tives and targets and prioritize performance when they’re not surewhat they’re supposed to do in the first place?” Ryan, along with other practitioners and thought leaders that weinterviewed for this book states that a Balanced Scorecard is an idealtool for those public sector leaders that want to properly understandwhat they should be doing and where to prioritize their spending. Andusefully, given that public sector organizations are not subjected to thecommercial sensitivities that exist in the private sector, they have beenmuch more willing over the years to share the content of their BalancedScorecards with other organizations. As a consequence, a substantialbody of best practices and learning has emerged and been made freelyavailable, which has been much less evident in the commercial sector.The best of these practices and learnings are reported in this book.LEAN METHODOLOGIESThroughout this book we also provide best practices in learnings as tohow public sector organizations have used “Lean” methodologies to drivesignificant efficiency gains. Essentially Lean is a collection of methodo-logies and approaches (of which Six Sigma is perhaps the most popular)that are used to systematically identify and drive waste out of organ-izational activities and processes. Long-established and proven within thecommercial sector, leaders within the public sector are waking up to thecost-saving potential of Lean within their own setting. As we explainthroughout this book, Lean methodologies work extremely well whendeployed as part of a Balanced Scorecard implementation. When Lean isused as part of a scorecard effort, organizations can ensure that they iden-tify the most impactful organization-wide efficiency opportunities whilemaking sure that the effectiveness performance dimension is not com-promised. It also ensures that efficiency programs are tied to the organ-ization’s longer-term strategic agenda. Although the role of Lean within ascorecard implementation is described in many parts of the book, wedescribe Lean in detail within Chapter 3 and explain its key role in theidentification of strategic initiatives in Chapter 6. 10
  12. 12. Proof BOTH EFFICIENT AND EFFECTIVECONCLUSIONThis chapter has explained that as a result of the economic downturnpublic sector organizations are under intense pressure to become muchmore efficient in their usage of scarce financial and other resources.But we also explained that they will be under huge pressure to remaineffective; that is continuing to deliver (and improve upon) the requiredstandards of service to an ever-demanding and increasingly unforgivingcitizen-base: that is delivering “more value for less money.” The remainder of this book explains how public sector leaders canproperly deliver these efficiency/effectiveness requirements. This beginswith building a Balanced Scorecard, which as we describe in the nextchapter is much more than simply choosing a bunch of financial andnon-financial performance metrics (as we also explain, too many publicsector bodies have become “obsessed” with measurement in recent times,largely as a consequence of externally mandated target-setting). Rather itis about public sector bodies using Balanced Scorecard principles andmethodologies to place a robust strategic performance managementframework, which includes a measurement component. In essence, thisis about identifying what matters, measuring this and then managing it soto improve the effectiveness, efficiency and overall performance of anorganization. Such an approach beats at the heart of the new publicsector performance agenda. SIDEBAR Global study of performance management in the public sector Recently the Advanced Performance Institute (API) conducted the research project, Strategic Performance Management in Government and Public Sector Organizations – a Global Survey, which, with more than 1100 responses is the largest and most comprehensive global study of Government and public sector Performance Management to date.5 These findings, alongside an extensive review of academic and practitioner literature on performance measurement and perfor- mance management, and from a consultation with a panel of leading academics and practitioners in this field – enabled the identified best practices and from this tested ten principles of good performance management for government and public sector organizations. 11
  13. 13. Proof MORE WITH LESS We questioned public sector respondents about their Perfor-mance Management practices in this light, tested the impactof these principles on organizational success using the lateststatistical tools, determined how widespread these approachesare, and how effective they are when used. We found that organ-izations which have these principles in place are able to: 1. Create clarity and agreement about the strategic aims. 2. Collect meaningful and relevant performance indicators. 3. Use these indicators to extract relevant insights. 4. Create a positive culture of learning from performance information. 5. Gain cross-organizational buy-in. 6. Align other organizational activities with the strategic aims outlined in the Performance Management system. 7. Keep the strategic objectives and performance indicators fresh and up-to-date. 8. Report and communicate performance information well. 9. Use the appropriate IT infrastructure to support their Perfor- mance Management activities.10. Give people enough time and resources to manage performance strategically. (1) Achieve Strategic Clarity (2) Collect Meaningful Performance Indicators Learning (3) Apply Performance Management Analytics (4) Create a Positive Learning Culture Strength of impact (5) Gain Cross-Organizational Buy-in Better Decision (6) Ensure Organizational Alignment Making (7) Keep the System Fresh (8) Report and Communicate Performance Well Improved Organizational (9) Implement Appropriate Software Performance (10) Dedicate Resources and Time Figure 1.2 10 Principles of Good Performance Management 12
  14. 14. Proof BOTH EFFICIENT AND EFFECTIVE The principles with the strongest individual impact on perfor-mance improvement were confirmed to be: (1) creating clarityabout the strategy with agreement on intended outcomes, out-puts and necessary enablers, and (4) creating a positive culture oflearning and improvement (see Figure 1.2). Both (1) and (4) are prerequisites for succeeding with a BalancedScorecard. That said, where all ten principles were found to be inplace, the improvement was particularly substantial, confirming thatthe combined effect is far greater than the sum of the parts. It isnotable that most of the case studies within this book would scorehighly for the deployment of all ten principles. Throughout thisbook we report the key findings from this study. 13
  15. 15. Proof INDEXNote: Page numbers followed by “f” and “t” denote figures and tables,respectively.accountability, 2 Alignment: Using the Balanced of initiative selection, 119, 121–6 Scorecard to Create CorporateAdvanced Performance Institute (API) Synergies, 31 Audit Scotland and, 37–8 American Recovery and Reinvestment Creating and Implementing a Act of 2009 (ARRA), 2 Balanced Scorecard: The Case of Apple Computer, 23 the Ministry of Works, Bahrain, Armstrong, Charles, 185–6 75 Audit Scotland four performance meetings, 177 Advanced Performance Institute New Directions for Government: and, 37–8 Five Principles for sustainable cascading the strategy map, 81 Recovery, 80 effectiveness, 7 Reporting and Communicating efficiency, 7 Performance Information efficiency priority, 5 Appropriately, 161, 168 financial management with Strategic Performance Management strategic goals, 135–6 in Government and Public Sector key performance questions, 94–5 Organizations – a Global lower level map circulation, 74 Survey, 11–13, 12f, 15, 18, 64, metrics for learning and 92, 103–4, 112, 152, 161, improvement, 195 191, 213 performance report, 172 “Use the appropriate IT senior management interviews, 70, infrastructure to support 71 performance management stakeholder-facing improvement, activities,” 161 39 Using Performance Management to strategy map of, 36–9, 37f, 66–7 Transform a Failing Australian Business Excellence Organization, 134 Model, 24alignment, 31–2 automation, benefits of, 160–7 checkpoints, 32 API findings, 161–2, 162f with performance management, packaged versus custom built 113f solutions, 162–6 240
  16. 16. Proof INDEX Christchurch City Council case metrics for learning and example, 163–6, 164f, 165f improvement, 194–5 Ministry of Works, Bahrain case overcoming challenges of example, 163 scorecard implementation, purchase of a packaged solution, 190 advising, 166 resource allocation for initiative scorecard solution, guidelines for, selection, 118–19, 120f 166–7 scoping, 73 strategic objectives/enablers,Baillie, John, 70 number of, 78Balanced Scorecard, 8, 14, 22–31 Strategic Performance aligning Lean to strategic goals Improvement Meetings, 176 through, 46–8 value creation map of, 39–41, 40f, classic, 22, 23 72–3, 72f financial perspective, 135–7 VCM creation, 73 4 box model, 25f Bell, Sheldon, 139 implementation best practice report, creating, 168–72 failure in, 188–9 show the key performance overcoming challenges of, question, 170 189–90 show the strategy map, 170 is not software conversation, 158–9 use headlines, 171 performance enabler, 160 use meaningful graphs and software conversation, 158 charts, 170–1 solution integrating with software, use performance narratives, 172 159–60 see also best practice report strategy-focused organization, Beyond Budgeting Roundtable principles of, 29–31, 30f (BBRT), 138, 140 strategy maps, 25–9, 26f, 29f Big Dig project, 119 translating strategy into action, Black, Robert, 5 23–5 Black Belts, 57–8 vendor failings, 159 break down barriers, 46, 61Balanced Scorecard: Translating Brisbane City Council, 26, 28 Strategy into Action, The, 23 strategic and operationalBalanced Six Sigma, 55–6, 58 measures, 103 see also Six Sigma strategy map of, 103Barberg, Bill, 76, 87, 108–9, 127, Brown & Root, 25 159, 166, 167 budget, 137–48Belfast City Council, 145, 172 abandoning, 138 cascading the strategy map, 81–3, Belfast City Council case 82f example, 145 data collection, 73 budget-free, 139–40 element definitions and narrative Christchurch City Council creation, 73 case example, 143 finance perspective, relegating, 78 cost of, 140–1 241
  17. 17. Proof INDEXbudget – continued strategy map of Ministry of Works, Bahrain case “Balanced Scorecard,” the term, example, 142 avoiding, 70 public sector finance professionals, cascading the strategy map, upskilling, 143–5 83–5, 84f, 85f Purolator case example, 138–9, Cigna Property & Casualty, 23, 141–2 25 Scottish Enterprise case example, Citibank, 1 145–8 City of Brisbane strategy map, 26–7, with strategy, aligning, 137–8 26f transformation advice, 141–3 see also strategy mapbudget-free approach, 139–40 City of Charlotte strategy map, 27–9,budget transformation advice, 141–3 29fBudiarso, Adi, 210 see also strategy mapBush, Patricia, 79, 209 Civil Service College, Singaporebusiness intelligence, 215 incentive compensation, 201 Clinton, BillCAPEX (capital expenditure), 151 Government Performance Results see also Strategic Expenditure Act and, 3–4cascading the strategy map, 80–7 color coding reporting, 108–10cause-and-effect maps, 64–5 communicating performancecease dependence on mass information, 168 inspection, 60 community outcomes, 19–22, 20f,Champions, 56–7 21f, 143charts, 170–1 constancy of purpose, 45, 60Chief Strategy Officer, 204 consumption, targets forChristchurch City Council, New internal/external, 107–8 Zealand, 9, 24, 140 cost cutting, by doing nothing, “better financial reporting” 116–17 program, 143 Creelman, James, 139, 142, 159 custom built solutions of, 163–6, Driving Corporate Culture for 164f, 165f Business Success, 184 Finance Function: Achieving Superior cultural challenge, 183 Performance in a Global culture, 182–211 Economy, 144 API research findings, 191–4 financial management with defined, 184 strategic goals, 135, 143, employees implement strategy, 144f 186 incentive compensation, 199 incentives and rewards, 198 Lean methodologies, use of, 48 incentive compensation, 198–203 Long-term Council Community influence of, 184 Plan, 143 metrics for learning and outputs-focused perspective, improvement, 194–5 19–22, 20f, 21f objective on strategy map, 186–9 242
  18. 18. Proof INDEX scorecard failure in plan operations, 34–5 implementation, 188–9 test and adapt, 35 survey results, 187–8, 188t translate the strategy, 33–4 as organization, 185–6, 185f executive leadership, 45, 56 overcoming challenges of scorecard see also leadership implementation, 189–90 Executive Strategy Management performance-driven, 185, 202 (ESM) Balanced Scorecard values and, 196–8 software solution, 163 winning, 184–5customer and stakeholder, Federal Bureau of Investigation (FBI), distinction between, 79–80 United States, 79 Office of Strategy Management,data manipulation, 191–2 209delay in impact, 5 Federal Director, of performance, 3delivery of strategy map, 80 finance perspective, relegating, 78–80Deming, W. Edwards, 44, 45 financial management with strategic principles of good management, goals, aligning, 134–56 60–2 Audit Scotland, 135–6diagnostic control, 193 budget, 137–48drive out fear, 45, 61 aligning management withDrucker, Peter F., 112 leadership actions, 156 Belfast City Council caseEdwards, Charles, 134 example, 145effectiveness, 144 Christchurch City Council case communication, 169f example, 143, 144f improving, 6–7 cost of, 140–1efficiency, 6, 7, 144 leadership actions, 155 cause and effect, 136–7 Ministry of Works, Bahrain case priority, 4–5 example, 142EFQM Business Excellence model, public sector finance professionals, 24, 24f upskilling, 143–5eliminate arbitrary numerical Scottish Enterprise case targets, 61 example, 145–8, 149feliminate exhortations, 61 transformation advice, 141–3employees Christchurch City Council case behavior, guiding, 193–4 example, 135 implement strategy, 186 efficiency cause and effect, 136–7encourage education, 62 performance managementend lowest tender contracts, 60 systems, aligning, 152–4execution premium management failure to integrate risk system, 32–5, 33f management with align the organization, 34 performance, 153–4, 154f develop the strategy, 33 rolling forecast, 148, 150–1 monitor and learn, 35 Friedman, Mark, 103 243
  19. 19. Proof INDEXGibbon, Edward, 157 target-settinggood management, principles of, color coding reporting, 60–2 108–10Google for external and internal Key Performance Questions, 93–4 consumption, 107–8government guidance, 110–11 outputs-focused perspective, 18 HMRC IMS (HM Revenues andGovernment Performance Results Customs Information Services Act (GPRA), 3–4 Management)graphs, 170–1 Lean methodologies, use of, 48Green Belts, 58 Office of Strategy Management, 210–11Hackett Group overcoming challenges of budget-free approach, 139–40 scorecard implementation, “Linked, Light and Late,” 141–2 189–90 Performance Metrics and Practices performance management of World-Class Finance systems, aligning, 153 Organizations, 142 performance meetings, 176–7 Planning for Economic Sustainability: Horizon, 164–6, 164f, 165f Linking Strategy to Action, 141 human energy waste, 50headlines, 171 see also wasteheat maps, 87–9, 88f, 129Hereford Hospitals NHS Trust, 131–3, improve every process, 45, 60 133t incentive compensation, 198–203Hertfordshire Fire and Rescue incentives, 198 Service UK information waste, 49 initiative selection process, 124–5 see also wasteHewlett Packard, 23 initiative selection, 112–33high level strategic outcome targets, accountability of, 119, 121–6 agreeing, 90–111 cross-cutting, 126–7 focus on increased measurement, importance of, 114 91 International Baccalaureate case meaningful and relevant indicators, example, 115 collecting, 92 Lean thinking and, 127–33 Key Performance Questions, 93–9 Ministry of Works, Bahrain case Audit Scotland, 94–5 example, 115–16 defined, 93 prioritization of, 117–18 Google, 93–4 resource allocation for, 118–19, International Baccalaureate, 98–9 120f Scottish Intellectual Assets role of, 113–14 Centre, 95–8, 96f, 97t templates, 116–17 strategy map, creating, 91–2 institute leadership, 45, 61 10–step guide to creating KPQs, see also leadership 99–102 institute training on the job, 61 244
  20. 20. Proof INDEXinteresting times, curse of living in, key performance questions (KPQs), 212–13 36, 38, 64, 93–9, 135–6, 170,International Baccalaureate (IB), 217–28 strategy map of, 65–6, 66f, Audit Scotland, 94–5 68–9, 98–9 defined, 93 “balanced scorecard,” the term, Google, 93–4 avoiding, 70 International Baccalaureate, 98–9 finance perspective, relegating, 78 Scottish Intellectual Assets initiative selection, 115 Centre, 95–8, 96f, 97t key performance indicators, 98–9 10–step guide to creating, 99–102 key performance questions, 98–9 Killefer, Nancy, 3 senior management interviews, 71 Kmiecic, Eva, 72 strategic objectives/enablers, number of, 78 leadership actions, 155Al-Jowder, Fahmi Bin Ali, 77, 115, aligning management with, 156 174, 210 executive, 45, 56Juran, Josef, 44 institute, 45, 61 Lean Enterprise Institute, 43kaizen, 44 initiative selection process,Kaplan, Robert, 8, 22, 45, 64, 75, 90, 127–33 138, 163, 183, 204 Lean thinking and initiative selection, performance meetings and, 127–33 172–81 Lean thinking and strategic StartEx and, 151–2 performance, 42–62key performance indicators (KPIs), defined, 43 36, 38, 136, 91, 94–5 kaizen, 44 actionable, 107 poke-yoke, 44 collecting, 92 Six Sigma common definitions, 106 capability of, 53 danger of repackaging, 106 challenges of, 58–9 design template, 102–3, 102f DMAIC principles of, 54–5 externally imposed, 92 in-house competencies, extracting insights from metrics, building, 56–8 103–4 levels of performance, 54, International Baccalaureate, 98–9 54f ownership, 106–7 popularity, 55–6 qualitative, 105–6 to strategic goals through quantitative, 105–6 balanced scorecard, reviewing metrics, 104–5, 105f aligning, 46–8 Scottish Intellectual Assets Toyota Production System, 44 Centre, 97t, 98 break down barriers, 46 strategic and operational constancy of purpose, 45 measures, 103 drive out fear, 45 245
  21. 21. Proof INDEXLean thinking and strategic color coding reporting, 109–10 performance – continued cultural objectives on strategy improve every process, 45 map, 187 institute leadership, 45 ESM Balanced Scorecard software Total Quality Management, 44–6 solution and, 163 usage in public sector, 42–3, financial management with 48–59 strategic goals, 142 value stream mapping, 43–4 initiative selection process, 115–16,Lehman Brothers, 1 121–4Linkage Models, 26 Lean methodologies, use of, 48Long-Term Council Community Plan lower level map circulation, 74–5 (LTCCP), 21–2, 143 objectives and initiatives, differencelower level map circulation, 74–8 between, 122–4 Office of Strategy Management,Malcolm Baldrige Framework and 210 Award, 24, 48 ownership of metrics, 107managing poor performance, 203 StartEx, 152 see also performance strategy map of, 67, 68f, 107,Marr, Bernard, 35, 91, 158 109–10 Selecting Balanced Scorecard strategy review meeting, 174–5 Software Solutions, 166 Mobil Oil, 25Massachusetts Institute of Technology, 36 National Health Services, 4Master Black Belts, 57 New Directions for Government:McCusker, Michelle, 74, 204 Five Principles for sustainableMcGiffen, Diane, 7, 37, 66–7, 74, Recovery, 80 81, 94 new philosophy, the, 60McNeil, Kay, 190, 204, 210–11 non-incentive rewards, 201–3meetings, 172–81 see also rewards four performance, 177 Nordea Bank, 139 operational review, 173t North East Lincolnshire Council review, the term, avoiding, 177 financial crisis of, 134–5 strategy review, 173t, 194 Northumbria Healthcare heat map, strategy testing and adapting, 87–9, 88f 173t see also heat mapsmetrics see key performance North West Collaborative indicators Commercial Agency (NWCCA)Michelangelo, 90 “balanced scorecard,” the term,Ministry of Finance, Indonesia avoiding, 70 Office of Strategy Management, heat maps, 89 209–10 lower level map circulation, 74–5Ministry of Works, Bahrain (MoW) strategic objectives/enablers, cascading the strategy map, 85–6, number of, 78 86f, 87f strategy map of, 69, 69f 246
  22. 22. Proof INDEX values charter, 196–8, 197t information requirements, 173t vision/mission statement, and strategy review meeting, distilling, 69–70 advising against combining,Norton, David, 8, 22, 31, 32, 45, 64, 175 65, 90, 138, 183, 204 see also meetings Palladium and, 79, 91, 163 OPEX (opening expenditure), 151 performance meetings and, see also Strategic Expenditure 172–81 organization, culture as, 185–6, 185f StartEx and, 151–2 outcome-based perspective, 15–17, 16f, 17fObama, Barack, 1, 216 outputs-focused perspective, 15–22, American Recovery and 16f, 17f Reinvestment Act of 2009 reasons for, 17 and, 2 ownership, 106–7 Jeffrey D. Zients and, 3Office of Government Commerce packaged solutions (United Kingdom), 49 advising the purchase of, 166Office of Strategy Management packaged versus custom built (OSM), 30, 203–11 solutions, 162–6 role and responsibilities Christchurch City Council case architect, 205 example, 163–6, 164f, 165f integrator, 207–9 Ministry of Works, Bahrain case process owner, 205–7 example, 163 team, 209 Palladium Group, 79, 91operational dashboards and Balanced Scorecard Hall of Fame, strategic scorecards, distinction 91, 109, 163 between, 167 ESM Balanced Scorecard softwareoperational measures of solution, 163 performance, 103 pay-for-performance, 198 see also key performance indicators see also performanceoperational performance Payne, Ed, 150 improvement meetings, 180 performance attendees, 178t enabler, 160 frequency, 178t improvement, public sector history information requirements, 178t of, 3–4 purpose, 178t indicators see key performance time horizon, 178t indicators see also meetings informationoperational review meetings communicating, 168 attendees, 173t reporting, 168 caution against aligning, 175–6 league, 18 focus, 173t managing poor, 203 frequency, 173t meetings see meetings goal, 173t narratives, 172 247
  23. 23. Proof INDEXperformance – continued public sector performance agenda, pay-for-performance, 198 1–13 prioritization, in public sector, accountability, 2 8–10 American Recovery and reporting and reviewing, 157–81 Reinvestment Act of 2009, 2performance-driven culture, 185, balanced scorecard, 8 202 delay in impact, 5 see also culture effectiveness, improving, 6–7Performance Excellence Study efficiency priority, 4–5 Award (PESA), 24 Federal Director of performance, 3performance management, performance prioritization, in defined, xiv public sector, 8–10performance management systems, public sector history, of aligning, 152–4 performance improvement, HMRC IMS case example, 153 3–4 failure to integrate risk transparency, 2 management with value creation map, 8 performance, 153–4, 154f public-private partnership (PPP), 75,permit pride of workmanship, 62 77personal performance improvement Purolator, 141–2 meetings, 180–1 The Finance Function: Achieving attendees, 178t Superior Performance in a frequency, 178t Global Economy, 138–9 information requirements, 178t purpose, 178t qualitative indicators of time horizon, 178t performance, 105–6 see also meetings see also key performancepoke-yoke, 44 indicatorsprioritization, of initiative selection, quantitative indicators of 117–18 performance, 105–6process waste, 49 see also key performance human energy waste, 50 indicators information waste, 49 tangible outcomes, 51–3, 52f recovery, 213–16 work waste, 50 more integration and alignment, see also waste 215–16public sector more intelligent indictors, 215 history, of performance more partnership and synergies, improvement, 3–4 214–15 Lean usage in, 42–3, 48–59 more serious appointments, 216 performance prioritization in, more strategic clarity, 214 8–10, 2public sector finance professionals, Recovery Transparency and upskilling, 143–5 Accountability Board, 2 248
  24. 24. Proof INDEXrepackaging of measures, 106 strategy map ofreporting and reviewing key performance indicators, 97t, performance, 157–81 98 see also best practice report, key performance questions, creating 95–8, 96f, 97tresource allocation, for initiative Scottish public sector selection, 118–19 Lean usage in, 50–1review, the term, avoiding, 177 see also public sector, Lean usage inReview of Public Administration senior management interviews, 70–1 (RPA), 40 senior management workshops, 71–3rewards, 198 senior management involvement, non-incentive, 201–3 Importance of, 71–2Risher, Howard, 182, 185 strategic assumptions,rolling forecast, 148, 150–1 challenging, 72Royal Bank of Scotland, 1 Shingo, Shigeo, 42Royal Canadian Mounted Police Singapore Business Excellence (RCMP), 72 Model, 24rule of thumb, 151 Six Sigma, 50–9Ryan, Peter, 9–10, 26, 90, 91, 103, aligning Balanced Scorecard 136–7, 143, 144–5, 160, 163–5, with, 130f 188, 199, 304 Balanced, 55–6, 58Ryder, Richard, 153, 177, 189, 204 capability of, 53 challenges of, 58–9Saint-Onge, Hubert, 185 DMAIC principles of, 54–5Schein, Edgar in-house competencies, building culture, definition of, 184 Black Belts, 57–8Schmidt, Eric, 93–4 Champions, 56–7Schumacher, Lisa, 28, 29 executive leadership, 56scorecard solution, guidelines for, Green Belts, 58 166–7 Master Black Belts, 57Scottish Enterprise levels of performance, 54, 54f “a framework for managing the popularity, 55–6 business,” 147 voice of employees/associates/ corporate management team stakeholders, 129 strategy map, 148, 149f voice of the business, 129 financial management with voice of the customer, 129–30 strategic goals, 145–8 voice of the process, 129, 130 initiative selection process, 125–6 Smith, Andrea, 65, 66, 69–72, 115 Reinventing Planning and Budgeting Smith, Kent, 200 for the Adaptive Enterprise, 146 soccer goalkeeper analogy, 53 rolling forecast, 148, 150 software, solution integrating with,Scottish Intellectual Assets Centre 159–60 cultural objectives on strategy software conversation, 158 map, 187 balanced scorecard and, 158–9 249
  25. 25. Proof INDEXSreedharan, Elattuvalapil, 119 creating, 67–8, 91–2stakeholder cultural objectives on, 186–9 defining, 79–80 scorecard failure in distinguished from customer, implementation, 188–9 79–80 survey results, 187–8, 188tstakeholder-facing improvement, 39 delivery of, 80State of Washington, USA, finance perspective, relegating, Department of Revenue 78–80 initiative selection process, 124 heat maps, 87–9, 88fStatoilHydro, 139 importance of, 64–5Stein, Ben, 63 lower level map circulation,strategic aims, clarity of, 15 74–8strategic communication, 65–7 senior management interviews,Strategic Expenditure (StratEx), 126, 70–1 138, 151–2 senior management workshops, capital (CAPEX), 152 71–3 opening (OPEX), 151 strategic objectives/enablers,Strategic measures of performance, number of, 78 103 3–D, 87 see also key performance vision/mission statement, indicators distilling, 69–70strategic performance improvement see also individual entries meetings (SPIMS), 176, 179–80, strategy review meetings, 174–5, 194 177–9 attendees, 178t attendees, 173t, 178t frequency, 178t caution against aligning, 175–6 information requirements, 178t focus, 173t purpose, 178t frequency, 173t, 178t time horizon, 178t goal, 173t see also meetings information requirements, 173tstrategic scorecards and operational and operational review meeting, dashboards, distinction advising against combining, between, 167 175Strategy Aligned Management purpose, 178t (SAM), 76 time horizon, 178tstrategy-focused organization, 138 see also meetings principles of, 29–31, 30f strategy testing and adaptingstrategy maps, 8, 9f, 25–9, 63–90 meetings “balanced scorecard,” the term, attendees, 173t avoiding, 70 focus, 173t benefits of, 63–4 frequency, 173t cascading, 80–7 goal, 173t cause-and-effect maps, use information requirements, 173t of, 65 see also meetings 250
  26. 26. Proof INDEXtarget-setting value creation map, 8, 9f, 22, 35–41 color coding reporting, 108–10 Belfast City Council, 72–3, 72f for external and internal North West Collaborative consumption, 107–8 Commercial Agency, 69, 69f guidance, 110–11 value narrative, 39–41Taylor, Julian, 125, 146, 148 value stream mapping, 43–4Theme Teams, 127 vendor failings, 1593–D strategy maps, 87 see also strategy maps Warwick Business School, UKTomkins, 139 Evaluation of the Lean Approach totop management commitment and Business Management and its action, 62 use in the Public Sector, 50Total Quality Management (TQM), waste, 48–50 24, 44–6 human energy, 50 break down barriers, 46 information, 49 constancy of purpose, 45 process, 49 drive out fear, 45 work, 50 improve every process, 45 Wells Fargo Online Banking, 116 institute leadership, 45 Wileman, Andrew, 203Toyota Production System, 44, 48 winning culture, 184–5transparency, 2 see also culture work waste, 50US Postal Service see also waste incentive compensation, 199–200, 200f Al Zayani, Raja, 76–8, 109–10, 123, National Performance Assessment 142, 160, 163, 174, 175 Program, 200 Zients, Jeffrey D., 3 251