Building & Managing the Balanced Scorecard

eLearning for Building & Managing the
Balanced Scorecard
Course Manual

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01622 – User Manual ©2008 Balanced Scorecard Collaborative, Inc., a Palladium Company • bscol.com
Contents
Introduction
Course 1: Curriculum Introduction
Course 2: Introduction to the Balanced Scorecard
Course 3: Getting Started
Course 4: Conducting Leadership Interviews
Course 5: Mapping the Strategy
Course 6: Workshop I
Course 7: Determining Strategic Measures
Course 8: Identifying Targets
Course 9: Workshop II
Course 10: Aligning Initiatives
Course 11: Workshop III
Course 12: Balanced Scorecard Reporting
Course 13: Curriculum Summary
Course 14: Managing Change with the BSC
Course 15: Building Strategic Analysis
Course 16: Preparing Strategy Analysis
Course 17: Presenting Strategic Analysis
Course 18: Using Measures and Targets
Course 19: Alignment for Teams and Individuals
Course 20: Strategy Refresh

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Introduction
This student handbook is intended for use with the on-line
Balanced Scorecard eLearning courses. It is not intended for
use as standalone training material.
Each chapter contains an overview of the key learning points
from the corresponding on-line course. Users should use this
handbook as a reference guide and for note-taking while taking
the courses.

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The Strategy Focused Organization
Course 1: Curriculum Introduction
TRANSLATE STRATEGY INTO
OPERATIONAL TERMS
ALIGN THE ORGANIZATION TO
THRE STRATEGY
MOTIVATE TO MAKE
STRATEGY EVERYONEÕS JOB
MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
GOVERN TO MAKE STRATEGY
A CONTINUAL PROCESS
• Strategy – Focused Organizations (SFO) address three key
dimensions:
– Strategy – establish strategy as central to an organization's agenda.
– Focused – create focus. Align every resource and activity in an
organization with the organization's strategy.
– Organization – assign all members of an organization independent roles
guided by the organization's strategy. Create linkages across "silo"
business units, services, and individuals.
• Successful SFOs demonstrate a consistent pattern of achieving their
strategic goals. They practice five common principles; they:
– Mobilize change through leadership.
– Translate the strategy into operational terms.
– Align the organization with the strategy.
– Motivate to make strategy everyone's job.
– Govern to make strategy a continual process.

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Course 1 Curriculum Introduction
Successful Strategy – Focused Organizations
• MOBILIZE change through senior leadership. Transforming any organization into
a Strategy-Focused Organization is a large-scale change that requires the active
involvement of a Leadership Team.
– First, the organization's leadership must create the climate for change by demonstrating
the need for change. Sometimes this need is obvious, as when an organization is clearly
failing and must change to survive. In other cases, the reasons are less obvious. Effective
leaders can motivate organizations to change by establishing stretch targets that break
down complacency among organization members and provide inspiration. Throughout the
scorecard development process, leadership must lead and participate in changing the
culture of the organization.
• TRANSLATE the strategy to all members in their organization so that they can all
understand it and implement it efficiently.
– You can't execute something you can't describe. The problem with traditional
management methods is that they generally apply only to financial strategies. The
BSC offers a way to describe an organization's overall strategy with the use of the
Strategy Map. The Strategy Map is a visual representation of an organization's strategy
and the processes and systems necessary to implement that strategy; it shows
employees how their jobs are linked to the organization's overall objectives.
– The Strategy Map leads to a shared vision throughout an organization and creates a
common language for describing an organization's strategy. In this way, the Strategy Map
builds leadership team consensus; developing it is as important as developing the
product.
• ALIGN with their strategy. This creates a line of sight from "flagpole to front line."
– While a Balanced Scorecard provides a framework for organizations to describe and
implement their strategies, an SFO requires more than for each unit of the organization to
use its own scorecard. To be effective, each unit should have its scorecard aligned with its
parent scorecard and linked, where appropriate, with other units' scorecards; this process
is known as "cascading.“
• MOTIVATE to make strategy everyone's job and empowering them with roles
guided by the strategy.
– Ultimately, the people in an organization are responsible for implementing the strategy
once it is defined. For an organization to achieve the objectives of its strategy, all of its
participants must understand their independent roles in the successful implementation of
the strategy and must also recognize how the success of the strategy will reward them.
• GOVERN to make strategy a continuous process through organization-wide
learning and adjusting.
– An SFO must have the information and flexibility to update its strategy as the environment
changes and as the strategy matures. Organizations monitor performance on their BSC
against the data that is gathered and continually interpret performance data. They
formulate new strategic direction, update their BSC as necessary, and reallocate
resources as necessary.

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Course 2: Introduction to the Balanced
Scorecard
• Learning Objectives
– Define what a BSC is and how it fits into an SFO.
– Explain why the BSC approach is effective.
– Identify what differentiates the BSC from other forms of organizational
measurement.
– Identify what creates balance in the scorecard.
– Define each of the components of the BSC.
– Identify the purpose of strategic measures.
– Identify the key benchmark of a good BSC.
– Explain why the Army is implementing the BSC.
– List the five basic BSC process steps.

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The Balanced Scorecard
• The Balanced Scorecard (BSC) is a strategic management system
that helps organizations translate their strategies into objectives that
drive both behavior and performance.
– The scorecard illustrates an organization's strategy in terms that
all members of an organization can understand.
– Objectives drive performance. They are action statements that create
measurable results indicating the success level of executing the strategy.
• The BSC focuses on and aligns an organization to its strategy.
• The BSC works because it maximizes an organization's ability to
execute strategy by clearly defining an organization's goals and
objectives and by involving people, resources, and processes at every
level of the organization.
Course 2 Introduction to the Balanced Scorecard

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Four Barriers to Strategy Implementation
• There are four barriers to strategy implementation:
– Vision
– Resource
– Management
– People
• The BSC addresses all of these barriers through an integrated
approach that accounts for strategy and success across multiple
perspectives, rather than just the traditional "bottom line" perspective.
• The BSC helps an organization define the value of non-tangible
assets, such as internal processes and learning and growth. These
perspectives indicate the areas an organization needs to improve in
order to achieve its goals.

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Characteristics of a Good Balanced Scorecard
• Leadership Involvement
– Strategic decision makers validate and own the strategy and the BSC.
• Cause-and-effect Relationships
– Every assigned objective is a part of a chain of cause-and-effect
relationships that represents the strategy.
• Performance Drivers
– A balance of outcome measures and leading measures facilitates
anticipatory management.
• Linkages to Stakeholder Perspective
– Every objective ultimately relates to a desired outcome from the
stakeholder's perspective.
• Change Initiatives
– Actions align with strategic objectives to achieve the objectives and,
hence, close the performance gap.

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Cause and Effect Relationships
• The BSC process treats strategy as if it is a series of linked
hypotheses that describe cause-and-effect relationships.
– For example, an “employee satisfaction" measurement may indicate
improvement, but if “employee retention and employee productivity"
measurements do not also indicate improvement, a hypothesis that links
the two measures may be invalid.
• This type of linked measurement is what differentiates the BSC from
other forms of organizational measurement. BSC measurements
provide an ongoing account of the validity of projected cause-and
effect relationships across perspectives and, therefore, are essential
to making informed decisions about changing course direction.

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Development Process Steps
• Developing a BSC involves five basic steps:
– Getting Started
– Mapping the Strategy
– Defining Measures and Targets
– Aligning Initiatives
– Reporting
• Although it appears linear, the process is iterative; as you progress
through the steps and learn more about your organization, you are
likely to revisit previous steps and adjust your scorecard.

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Balanced Scorecard Components
• The basic components of the Balanced Scorecard are:
– Perspectives
– Themes
– Objectives
– Measures
– Targets
– Initiatives

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Balanced Scorecard Perspectives
• There is a standard four perspective framework:
– Financial
– Customer
– Internal Business Process
– Learning and Growth
• Perspectives form the basic architecture of the BSC, accounting for
all relevant factors in an organization's execution of strategy and,
thus, creating balance in the scorecard.
• Perspectives allow an organization to:
– Balance long-term and short-term objectives
– Link desired outcomes and the drivers of those outcomes
• Perspectives allow leaders to evaluate outcomes by accounting for
the drivers of those outcomes.

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Themes
• Themes are the major components of an organization's strategy, and
provide an overview of how an organization will carry out its mission.
• An organization's mission will usually be broken down into three or
four basic themes that may cross all perspectives.
• A theme consists of a collection of objectives that enables the
execution of the theme.

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Objectives, Measures, Targets and Initiatives
• Objectives are a statement of what an organization must achieve and
what’s critical to its success.
• Measures allow an organization to determine whether it has been
successful in executing its strategy. There are two fundamental
purposes to strategic measures:
– Organizational motivation
– Evaluation of the strategy and strategic learning
• Targets define the level of performance or rate of improvement
needed
• Initiatives are key action programs required to achieve objectives

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Course 3: Getting Started
– List the major activities that are necessary to launching the BSC project.
– State the role, membership composition, and time commitment for each of
the three types of teams in the BSC.
– Identify the attributes of the Project Manager and Core Team members.
– List the information needed to identify the strategy.
– State the purpose of the kick-off meeting.
– List the critical success factors in launching the BSC process.

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Development Teams
• To successfully launch the BSC process, an organization must
employ the right people, prepare its people, and gather the
resources required for the success of the project.
• Three teams are involved with scorecard development:
– Leadership Team consists of the organization’s leaders and specific
functional leaders as assigned and provide strategic guidance for the
process. Their time commitment includes a 90 minute interview and
follow-up meetings as needed.
– Core Team consists of a project lead and two to five experienced mid-
level staff and represent the organization as a whole. The Core team
guides the development of the BSC, manages the process, scheduling,
and all details of the scorecard components. They typically dedicate
50-100% of their time to scorecard development.
– Sub-Teams are lead by Core team members and typically have four to
five members. Sub-Teams provide the Core Team with detailed input,
especially on measures and targets. They typically spend 20-50% of
their time over a four week period supporting the Core team.
Course 3 Getting Started

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Core Team Members
• An organization's Project Manager and Leadership Team
collaboratively select Core Team members. Core Team members are
selected for their qualifications, rather than for their availability.
• Core Team members should have:
– The ability to represent their organization as a whole.
– A broad base of experience.
– The ability to effectively interact with their organization's leaders.
– Respect among peers.
• The Core Team is responsible for the execution of the entire BSC
design process, specifically:
– Collect and analyze initial data.
– Interview leaders.
– Create a straw model strategy map for leadership approval.
– Guide measurement and initiative gathering.
– Lead Measurement Sub-teams.
– Develop implementation plan.

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Critical Success Factors and Project Kick-off
• The critical success factors are:
– Involve the right people
– Ensure that the leadership team truly understands and endorses the BSC
– High level sponsorship to ensure the BSC project's sponsors are able to
effectively command the attention of everyone in the organization
– Ensure the leadership team's time commitment to the BSC project
demonstrates high level sponsorship
• The development typically starts with a kick-off meeting to clearly
define the projects intent and tasks and to establish organization-wide
commitment to the project. Outcomes of the BSC kick-off meeting
include:
– A better understanding among leaders and Core Team members of the
BSC and its prospective benefits to their organization
– An overall agreement on a project plan
– An assignment of resources to the BSC project
– A BSC development agenda for the Core Team that ensures each Core
Team member understands and knows how to implement

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Developing the Straw Model Strategy Map
• The information required to develop a BSC rarely exists in one
document or source.
• Sources of information include:
– Strategic Plan
– Annual Budget
– Annual Reports
– Operational Plans
• The Core Team uses information in relevant documents to
determine the organization's goals and objectives and to form
hypotheses of the organization's strategy.
• The Core Team then creates a straw model strategy map, which is
the first document developed from the strategic information collected
by the core team.

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Course 4: Conducting Leadership Interviews
– Recognize the purpose and importance of the leadership interview and
identify its chronological place in the BSC process.
– Understand the importance of constructing a straw model strategy map to
use during leadership interviews.
– List the purpose and components of an interview guide and recognize key
questions that should be asked during leadership interviews.
– Identify the components and techniques of an effective interview and know
when to use them.
– Identify how the Core Team synthesizes information from leadership
interviews.

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Leadership Interviews
• Leadership interviews allow you to work one-on-one with key
leaders to determine the strategy for your organization. You
conduct these interviews to understand each leader's concept of
the organization's mission and strategy. Then you use the
information you obtain from the interviews to
confirm your organization's overall strategic destination, refine the
perspectives and themes within your BSC, and confirm potential
objectives in your straw model strategy map.
• Leadership interviews are a part of the second step in
the development of the BSC. These interviews provide the Core
Team with the information it needs to begin mapping the strategy.
Ideally, the Core Team completes leadership interviews within two
weeks of the start of the BSC development process.
Course 4 Conducting Leadership Interviews

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Drafting the Straw Model Strategy Map
• Draft a straw model of your organization's strategy map prior to
conducting your interviews
– Interviews tend to move along and stay more focused with the aid of a
straw model, which elicits discussion and comments from the interviewee.
• Drafting a Straw Model Strategy Map
– Review Collected materials
• Collect and review all materials that describe your organization's vision, mission,
strategies, and internal structure.
– Clarify Strategic Destination
• Document your organization's three-to-five year vision and how your organization
should achieve this vision.
– Develop high-level architecture
• Identify the major strategic themes that drive your organization and place them in
the appropriate perspectives.
– Draft a straw model
• Add strategic objectives to your high-level architecture.

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The Interview Guide
• After drafting the straw model, develop an interview guide that will
help focus and lend consistency to each interview you conduct.
• The interview guide includes:
– A meeting agenda
– A project plan
– A BSC overview
– Interview questions
• Use your straw model to develop your interview questions. Begin with
high level questions that address the strategic initiatives of your
overall organization and then ask about each of the four perspectives
in the BSC.

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Interview Guidelines
• Schedule individual interviews
– Interview only one person at a time. Individual interviews generally result in
more frank and open discussions than group interviews.
• Plan 90-minute interviews.
– If an interviewee cannot commit to that amount of time, accept whatever
amount of time is offered. Often, once you begin the interview, the
interviewee will see its value and extend its time.
• Use the aid of a peer during the interview.
– This person may take notes documenting the interview, thereby enabling
you to focus on the interviewee and ask important follow-up questions to
his or her responses and comments.
• Listen carefully during the interview.
– Ask the leader to repeat or re-explain his or her comments and responses
when you need further clarification.
• Be consistent
– Resist the temptation to revise your interview guide and/or your high-level
architecture between interviews. Your goal is to identify points of
agreement and disagreement, and your consistent use of interview
materials will help you achieve this goal.
• Prioritize questions if your interviews must be less than 90 minutes in
length.
– You may need to adapt your interview to fit a limited time frame by
asking fewer questions.

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Interview Techniques
"In your opinion, which one
of these four objectives is the
top priority?"
When the interviewee's idea
of the strategy isn't clear to
you and you are trying to
narrow down the focus
Options interviewees may
select their response from
Provide Options
After you present the straw
model, you ask: "What do
you think about this
diagram?" Provide Options
When you want to receive
the interviewee's feedback
on something you've already
created
Brief presentations or
illustrations that elicit a
response from the
interviewee
Response Interview
"Do you agree that the main
themes are readiness and
transformation?"
When your time is limited;
when you think you know
what the interviewee's
response to a question will
be; when you need to focus
the discussion
Questions or statements used
to verify an interviewee's
ideas or responses
Confirming questions or
summary statements
"What process will
accomplish that goal?"
When you want to encourage
the interviewee to speak
freely
Questions that require
analysis; usually begin with
words such as "who",
"what," "where," "when,"
or "why"; cannot be
answered by "yes" or "no"
Open-ended questions
ExampleWhen to UseWhat They AreInterview Techniques

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Summarizing the Interview Information
• Collect, review, and synthesize the interview information to confirm
strategic objectives and uncover any issues that need to be resolved
in order for the scorecard process to move forward.
• To facilitate the process, look for information such as:
– The strategic destination
– Points of agreement and disagreement about the strategy
– Where the organization will be in the short and long term
– The organization's stretch goals
– Threats to the organization
– Opportunities for the organization
– Points of general consensus among leaders
• After reviewing the interview information, create a document that
summarizes all of the interview findings.

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Course 5: Mapping the Strategy
– Identify the purpose of the strategy map.
– Identify the components of a strategy map.
– List perspectives on a strategy map.
– Note strategic themes on a strategy map.
– List objectives on a strategy map.
– Identify cause-and-effect relationships on a strategy map.

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The Strategy Map
• A strategy map is a one-page visual representation of an
organization's strategy and the steps that must be taken to implement
that strategy.
• The strategy map is based on the high-level architecture and straw
model developed prior to the leadership interviews.
• A strategy map:
– is an ideal way to communicate an organization's strategy
– provides a framework for testing assumptions about the strategy
Course 5 Mapping the Strategy

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Building the Strategy Map
• The strategy map is based on the high-level architecture and straw
model developed prior to the leadership interviews.
• While there are many ways to build a strategy map, it is best to work
from the high-level architecture and straw model you developed prior
to your leadership interviews.
• First, use the information you collected from your leadership
interviews to modify your perspectives and themes. Then incorporate
objectives and cause-and-effect linkages to create the map.
• The four steps to building a strategy map are:
– List perspectives
– Define themes
– Create objectives
– Build linkages

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Perspectives
• There is a standard four-perspective model:
– Financial
– Customer
– Internal Business Process
– Learning and Growth
• Collaboratively, the perspectives account for the various dimensions
of a strategy and tell the story of a strategy in a concise and balanced
framework.
• Begin building your strategy map with the BSC perspectives.
Perspectives provide the architecture for the BSC; they expand an
organization's strategic vision to account for more than stakeholder
outcomes.
• BSC perspectives are placed on the far left of the strategy map.

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Themes
• Themes provide a concise, big-picture overview of the steps that
need to be taken to implement a strategy. Most strategies can be
represented in three to five themes.
• Themes typically appear in the internal process perspective. In
some instances, however, themes cross two or more perspectives.
• This organization’s theme’s are: Technology Leadership, Strong
Partnerships, and Operational Excellence.
• The theme illustrates how an organization plans to accomplish its
mission. These themes are in the Internal Process perspective
since it represents things that this organization must do to
accomplish the theme.

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Objectives
• After you identify your BSC themes, you incorporate objectives
into your strategy map.
• Objectives are brief action statements that communicate what an
organization must do to achieve its strategic goals. They represent
what must be achieved in order to successfully realize its mission and
reach its strategic destination.
• Objectives are measured; you assign these measures later in the BSC
process.
• Objectives are typically written in a verb-adjective-noun format that
describes an action, description, and result, respectively.

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Linkages
• After adding your objectives to your strategy map, incorporate cause-and-
effect linkages.
• Linkages connect objectives to show the primary cause and effect
relationships between objectives. The cause-and-effect linkages also
illustrate connections between different aspects of the strategy.
• For example, they may show how different perspectives are related to one
another and/or how different objectives are interlinked.

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Course 6: Workshop I
– Recognize the purpose and importance of Workshop I
– Identify where Workshop I falls within the BSC process
– Identify activities and pre-work done in preparation for Workshop I
– List BSC elements reviewed and validated during Workshop I
– List the Workshop I deliverables

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Preparing for Workshop I
• Best Practices: Setting the Ground Rules: Before the meeting, ask
the Leadership Team to agree on the decision-making process they
will use in Workshop I. Attendees should agree to work within the
organizationally accepted process. Here are some questions you can
ask to finalize the decision-making process:
– How will the Leadership Team deal with issues that surface?
Ask the key decision-maker for direction on how to handle controversies
that arise among members of the Leadership Team.
– Who will make the ultimate decision?
Find out who the ultimate decision-maker is on the Leadership Team.
– Will it be a democratic or dictated process?
Find out what the organizationally accepted process is: democratic or
dictated. Use that method when the members of the Leadership Team
cannot reach consensus.
• Finalize Inputs for Workshop I: Before Workshop I occurs, the Core
Team completes several activities. The information gathered and
synthesized during these efforts provides the input for Workshop I.
The pre-workshop activities include:
– Reviewing strategic documents
Collect, analyze, and synthesize all strategic documents in preparation for
the interviews.
– Conducting leadership interviews
After the interviews are done, summarize the results and integrate them
with document review data.
– Drafting the straw model strategy map
Using the data you've accumulated, narrow the strategic objectives down
to the "critical few."
Course 6 Workshop I

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Finalizing Logistics
• Recommended Supplies and Materials for Workshop
– Flip charts/markers
– LCD projector/screen
– Hard copies of the presentation
– Pens and notepads for all attendees
– Tape (make sure it is OK to tape flip chart paper on walls)
– Food/snacks and refreshments
– Optional: some teams bring a placemat-sized, color version of their straw
model strategy map
Course 6 Workshop I

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Conducting Workshop I
• Workshop I Agenda:
– BSC concept review
– BSC project plan
– Mission and destination confirmation
– Straw model review
– Key issues
– Objective statements
– Next steps
• Review BSC Project Progress
– The work that has been completed
– The place where Workshop I fits in the project plan
– The work that lies ahead
Course 6 Workshop I
• Review Mission and Strategic Destination
– You may have to negotiate.
– You may have to facilitate a discussion.
– You may have to take a vote.
– You may have to ask the head of the Leadership Team to make a
command decision.

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Reviewing the Strategy Map
• Review Perspectives
– Walk them through each perspective: financial, customer, internal, and
learning & growth. They will start to see how each perspective represents
a different area of their strategy.
• Reviewing Themes
– After walking through the perspectives, you will next explain the meaning
behind each theme. Emphasize that themes typically will run through the
entire strategy map or just be in the internal perspective. Themes will help
organize the strategy into several strategic thrusts.
• Reviewing Objectives and Cause-and-Effect Linkages
– The first step is to read through each objective and make sure all
participants understand the meaning behind the objective. This is where
the objective statements come in handy. They will provide clarification on
what each objective means.
• Addressing Specific Issues
– As the Leadership Team continues to validate and approve the strategy
map, certain issues will have to be addressed.
Course 6 Workshop I

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Identifying Next Steps
• Assigning Sub-teams
– The sub-teams finalize the objective statements, draft measures, and
suggest targets for their assigned objectives. The work they do forms the
basis for the Workshop II discussion.
• Establish Accountability for Objectives
– An important part of Workshop I is assigning responsibility for the
objectives. All objectives should be "owned" by a member of the
Leadership Team. One way to assign objective owners is by theme. The
owners would then be responsible for all of the objectives contained in
their theme.
Course 6 Workshop I
• Identify Leadership Champions and Core Team Facilitators
– The role of the Leadership Team Champion
Monitors and "owns" the work that is done within his/her theme. Presents
the team's measure recommendations to the Leadership Team in
Workshop II.
– The role of the Core Team Facilitator
Guides and manages the sub-team's deliverable for Workshop II.

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Course 7: Determining Strategic Measures
– Describe what good strategic measures do for a BSC organization.
– Identify good strategic measures.
– Determine good lag measures.
– Develop good lead measures that predict outcomes.
– Identify best practices for measurement in the BSC.

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Strategic Measures
• Measures allow organizations to test how well their BSC
process is achieving their strategic objectives. Measures illustrate the
relationship among strategic objectives and constantly test the validity
of the strategy.
• Good strategic measures make the strategy "real" and impact the
execution of the strategy by providing:
– Organizational motivation.
– A means to evaluate the strategy and strategic learning.
• An organization has selected good strategic measures if they are:
– Useful for strategic communication
– Repeatable and reliable
– Appropriate for update frequency
– Useful for target setting
– Useful for establishing accountability
– Aligned with objectives on the parent organization's scorecard
Course 7 Determining Strategic Measures

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Developing Measures
• Some organizations assemble a sub-team that creates BSC strategic
measures with the materials provided by the Core Team. In some
organizations, a sub-team is not a formal team, but rather a collection
of individuals who help the Core Team determine appropriate
measures, measure formula, and gather information.
• Whatever the makeup of your team, you should roughly follow
the following procedure for developing measures:
– Start by reviewing the strategy map:
• Strategic objectives
• Key linkages between objectives
• Potential measures
– Determine the types of measures that can support the cause-and-effect
linkages and strategic objectives in your strategy map:
• If a core organizational process is not working, the existing measurement may be
inadequate.
• The best measure may be one that the organization does not currently maintain.
– Identify and organize existing measures that are good strategic measures.
– If your parent organization has a BSC, review its measures for ideas.
– Clarify and finalize measures.

44
Measure Traps
• As you begin the process of determining measures, avoid these three
traps:
– Determining a target before determining whether or not its measure is
appropriate
– Limiting measurements to only those that already exist
– Creating new measures for every objective when serviceable measures
are already in use; "better is the enemy of good enough"
• Realize that some existing measures may serve as a structure for the
development of new measures. Also, you may need to revisit your
strategic objectives for clarity and precision.

45
Measure Types
• Measures take on many forms. Each type of measure has its own
advantages and disadvantages. Use the type of measure that
best accommodates what you want to measure. Common types of
measures are:
– Absolute Numbers
– Indices
– Rankings
– Ratings
– Ratios
– Percentages
• One way to offset the various disadvantages is to make
sure you have a mix of different types of measurement forms in your
scorecard so that you get an accurate picture.

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Outcome Measures
• Outcome measures:
– Focus on the performance results at the end of a time period or activity;
examples include:
• Year-end budget expenditures.
• Employee satisfaction.
• Net-Profit margin.
– Describe a success or failure of the past.
– Are usually objective and easily captured; i.e. dollars, numbers, ratios, or
percentages.
• Every strategic objective in the BSC requires at least one outcome
measure. If more than one outcome measure is applicable, use the
one that best tracks and communicates the intent of the strategic
objective.
• If two outcome measures seem absolutely necessary for the
objective, re-evaluate the objective, to determine if it should be
separated into two objectives instead of one.

47
Lead Measures
• Sometimes you need to do more than measure outcomes to focus
on your organization's strategy. You should prescribe behaviors that
support the strategic objectives in order to effectively lead future
performance. This is accomplished with Lead Measures.
• Lead measures are used to predict future performance and have the
following characteristics. They:
– Measure intermediate processes and activities
– Provide insight on the ability to accomplish an objective
– Predict future performance
– Allow organizations to adjust behaviors for performance
• Lead Measures communicate how your unit aims to accomplish its
strategy. Lead measures are powerful because they allow you to look
into the future. They let you see well you are going to perform and can
be used to drive behaviors.

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Measure Best Practices
• To recap, as you determine your scorecard's measures, keep in mind
these best practices:
– Use one outcome measure for every strategic objective (for all 18 to 25
objectives on your scorecard).
– Use lead measures to predict future performance where early intervention
is needed in order to prevent undesirable outcomes. Lead measures are
usually in the internal process and learning and growth perspectives.
– As a rule of thumb, a Balanced Scorecard typically has an average of 1.5
measures per objective. For example, if you have 18 objectives, you would
have approximately 27 measures.
– Remember that these are best practices. Some organizations may need
more lead or outcome measures than other organizations do.

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Course 8: Identifying Targets
– Describe what makes a good target
– List and offer examples of the sources of target levels
– Apply the process of setting appropriate target levels
– Evaluate relationships among targets
– Identify best practices for target setting in the BSC

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Targets
• Targets are crucial because they:
– Set and communicate the expected performance level. Targets serve to
communicate the strategy's tangible goals to an organization's personnel.
– Focus the organization on improvement. Measure allows an organization
to evaluate its performance, but does not indicate the level of
performance that is required to achieve the objective. When you add
targets to measures, you focus on specific improvements you aim to
achieve.
Course 8 Identifying Targets

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Good Targets
• A good target is a quantifiable performance level to be reached within
a specific timeframe.
• Without a performance level, the objective is not very useful. How
much improvement is required?
• Without a timeframe, there is no tangible incentive to begin, keep up
or finish the process. By when? How fast?

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Setting Targets
• Targets setting steps:
– Determine a source for your targets
– Establish stretch targets
– Set intermediate targets
– Ensure that your targets support status indicators for reporting purposes

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Target Sources
• Derived from overall goal
– Whenever the measures on a child scorecard are derived from measures
on their parent scorecard, the child units can derive their targets from the
parent organization's overall target.
• Benchmark leaders
– Benchmarking similar organizations can provide useful target information.
It is often hard to get good benchmark information and benchmarks may
not represent what your organization can or needs to do.
• Incremental improvement based on historical performance
– Targets are incremental improvements based on historical performance.
Most organizations use historical performance as the source of their
targets.
• Establish baseline and define targets over time
– When there is no basis for defining the performance level required, many
organizations monitor performance before identifying desired target levels.
After collecting some data, the organization can begin to plot the required
performance levels.

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Target Sources

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Establish Stretch Targets
• Establish your long-term goal, or "stretch target," for where you want
your organization to be on the long-term planning horizon, usually 3-5
years out.
• The stretch target should be at a level that will ensure achievement of
the strategic objective.
• There are two reasons to establish the stretch target before setting
short-term targets. Doing so:
– Takes the focus off short term
– Forces you to look at the intermediate goals and the stretch target as a
collective set

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Set Intermediate Targets
• Once you have the long-term or stretch target established, you can
work backward to figure out the intermediate targets. These mark the
path to the long-term stretch goal and communicate to individuals in
the organization what they need to do to stay on track.
• For example, a retail bank sets an intermediate target of 2 million
customers converted to online. This translated into intermediate
targets as follows:
– The Year 4 target meets their stretch target goal.
– Years 1 – 3 determine how quickly they will improve performance.

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Support Status Indicators
• For status purposes, you need a quick view of where you are at a
point in time in relationship to where you want to be.
• Organizations often use a color signifiers to denote "on track" and "off
track" performance. The following are typical colors used by
organizations:
– If the status of a measure is green, no time needs to be spent "managing
it." It's where it is supposed to be and progress is "on target."
– If the status of a measure is yellow, it's below target level. It should be
watched.
– If the status of a measure is red, it signals to leadership it needs to be
reviewed and evaluated to determine the causes.

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Status Indicator Traps
• The green, yellow, and red indicators (GAR) are useful to leadership
in managing strategy. But be careful not to let these color signifiers
influence your target setting negatively.
• Avoid setting targets so that the status is always "green." You should
not set targets so that they will always be met. If you set all of the
targets low, everything will always be green, and there will be no
change within the organization.
• Avoid setting targets so that the status is always “yellow" or "red." You
do not want to set targets at a level that causes wasted leadership
and management time investigating a "red" status, merely because
the target levels were set too high or inappropriately.

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Target Relationships
• There are several ways targets relate to one another.
– Child organizations often derive their targets from the targets of the parent
organization.
• In these situations, review your targets to make sure they support the parent
organization's targets.
– Targets must work together.
• Make sure the target's order of magnitude is appropriate to close the gap.
– Targets are a comprehensive set
• Set each target in such a way to optimize overall outcome for the entire strategy.
• Tensions among Targets
– If treated in isolation, instead of as part of a comprehensive set, targets
can send the organization in conflicting directions. So it is important to
view all the targets in a Balanced Scorecard together as a comprehensive
whole to see if any potential conflicts might surface. Keep in mind that
sometimes the tension is "natural" and actually positive for the
organization. It is up to leadership to determine which target should be met
to best achieve the organization’s strategic goals

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Target Best Practices
• Be quantifiable.
– Targets should be a number or an amount--a quantity. Targets that are not
quantifiable can lead to subjective evaluation later on in the BSC process.
It must be clear whether or not the target was met within a specified
timeframe.
• Communicate expected level of performance.
– There must be no doubt in an organization as to what is expected of the
organization.
• Be limited to only one per measure, per reporting period.
– More than one target may cause confusion in an organization and may
communicate an unfocused strategy.
• Set targets so that they relate to the other targets throughout the
scorecard.
• Make sure that the target's order of magnitude is appropriate to close
the performance gap.
• When in doubt, look back to your strategy and performance gap.

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Course 9 Workshop II
– Recognize the purpose and importance of Workshop II
– Identify where Workshop II falls in the BSC process
– Identify activities and documents completed in preparation for Workshop II
– List BSC elements reviewed and validated during Workshop II
– List the Workshop II deliverables

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Preparing for Workshop II
• Finalizing Inputs for Workshop II: In Workshop II the Core Team
presents the Leadership Team with the following inputs:
– Revised strategy map with linked objectives
This strategy map represents the most current version of the map that was
created in Workshop I. The objectives should be connected with cause-
and-effect linkages. The strategy map should be finalized as much as
possible before Workshop II so that the Leadership Team can start
reviewing the measures.
– Refined set of objective statements
These are the statements that further clarify the meaning behind each
objective on the strategy map.
– List of draft measures and targets
This is the list of measures and targets that the Measurement Sub-teams
draft in preparation for this meeting.
• Preparing the Workshop II Document: The Workshop II
presentation document contains the output from Workshop I as well
as the measures and target work that has been completed since that
first workshop.
• Pre-present to Key Leaders
– Before Workshop II, you should again set up time to meet one-on-one with
the key leaders. Use these meetings to review changes to the strategic
objectives, objectives statements, and the measures and targets that the
Measurement Sub-teams recommended. Highlight areas of disagreement
or inconsistency.

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Preparing for Final Logistics
• Recommended Supplies and Materials for Workshop II
– Flip charts/markers
– LCD Projector/screen
– Laptop
– Hard copies of the presentation
– Pens and notepads for all attendees
– Food/snacks and refreshments
– Tape (Make sure it is OK to tape flip chart paper on the walls.)

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Conducting Workshop II
• Conducting Workshop II
– Conducting Workshop II
Once you have taken care of the pre-work for the workshop, it's time to
think about the agenda. One of the most important items is presenting the
BSC project plan to the teams, showing them how far you have come in
the BSC process. By the end of Workshop II you will be more than halfway
through building your scorecard.
• Facilitation Tips
– Review agenda/timing/ground rules
– Engage attendees
– Monitor the mood
– Record comments/suggestions
– Maintain momentum
– Encourage leaders to take ownership of their measures
• Reviewing the Strategy Map
– Go back through the strategy map from Workshop I and make sure the
Leadership Team agrees that the map still accurately represents their
strategy. Validate the themes, strategic objectives, and cause-and-effect
linkages. As you review each objective, read through the corresponding
objective statement, making sure that the wording is accurate and
concise. If necessary, make changes to get the wording right.

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Course 10: Aligning Initiatives
– Distinguish between strategic initiatives and non-strategic projects.
– Identify the purpose of initiatives.
– Identify the steps in the process of collecting, taking an inventory of, and
mapping current initiatives.
– Identify the correct use of the initiative map.

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What Are Strategic Initiatives?
• Strategic initiatives are actions taken to close the gap between
desired and actual levels of performance.
• A strategic initiative may be considered as an "intervention project." A
strategic initiative represents change to an organization's normal
operations. It addresses an organization's performance gap between
one of the strategic objectives in the organization's BSC and the
expected performance as defined in the measurement of that
objective.
• A good strategic initiative should have:
– Accountability at the senior leadership level
– A timeline
– A budget
– Committed resource allocation
– Expected benefits
Course 10 Aligning Initiatives

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What's Not a Strategic Initiative?
• Not all projects or activities in an organization are strategic initiatives.
A strategic initiative is an organization-sponsored project that bridges
a gap between current and expected performance on a strategic
objective. It's not a project that supports the normal, day-to-day
activities of the organization. Examples of non-strategic initiatives
often include:
– Intentions
They are outcomes or operational objectives (not strategic objectives).
Unlike strategic initiatives, intentions do not have scheduled start and stop
dates or budgets.
– Pet Projects
Some activities that are not organization-sponsored are often "pet
projects." A leader may be investing resources in a favorite program that
does not benefit the overall enterprise.
– Required Projects
There are projects that are required to be part of an organization's
operations; these projects include preventive maintenance programs,
safety programs, financial reporting to regulators, and building firewalls for
IT systems. These projects may be necessary, but they are not strategic.
– Lower-level Activity
Another type of project that falls into the "activity" category is a project that
is being done deep within the organization and is not sponsored across the
organization. A strategic initiative is broad-based; a lower- level activity
does not affect more than one command within the organization.

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The Purpose of Initiatives
• Objectives articulate the strategy's components.
• Measures communicate the information used to monitor performance
and drive behaviors.
• Targets set the expected level of performance.
• Initiatives are strategic projects that help close the gap between
desired and actual levels of performance.

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Linking Objectives and Initiatives
• Strategic initiatives link to strategic objectives because initiatives are
intended to close performance gaps between where you are and
where you need to be in achieving your strategic objectives.
• The initiative will close the gap between your target and actual
performance and will thus drive the achievement of your overall
objective.

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Managing Initiatives
• Organizations usually have more initiatives than they have resources
to support, which is why they need a good initiative management
program. They process steps are:
– Collect all initiatives.
– Map initiatives to strategic objectives.
– Prioritize initiatives.
– Rationalize initiatives to meet the resources available.

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Collect Initiatives
• The Core Team drives the process for inventorying and mapping
initiatives.
• First, the Core Team collects the current initiatives within its
organization.
• The Core Team then screens these initiatives for fit with the
organization's strategy.
• The result of this screening is a shorter list of strategically aligned
initiatives.

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Mapping the Initiatives
• The Core Team maps or links initiatives to the objectives that these
initiatives support. While examining initiatives and relating them to
objectives, you may find the following questions helpful: "Will
completing this initiative influence the measure for the objective?" or
"Will this initiative help accomplish the objective?“
• On the Initiative Map, initiatives are listed across the top of the chart
and objectives are listed down the left side. The circles in the chart
represent points at which initiatives support particular objectives.
Reviewing the initiative map to see how initiatives align with strategic
objectives is the best way to determine which strategic objectives are
supported by current initiatives. Aligning initiatives also allows you to
assess how well initiatives fit with the strategy.

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Prioritizing Initiatives
• The next step in managing initiatives is to prioritize them. Your
organization may have more initiatives than resources, even after
you've correctly mapped them to objectives. When this happens, you
must prioritize these initiatives to match the resources available.
• Factors to consider when setting priorities include:
– Completion time
– Interdependencies
– Strategic value
– Overall size in resources and dollars

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Rationalizing Initiatives
• After sifting through all of your organization's initiatives and prioritizing
them according to value in supporting strategic objectives, you are
ready for the final step of rationalizing the initiatives.
• Based on resources available and resources required for each
initiative, you make the difficult decisions on which initiatives to keep.
You should:
– Create the criteria (weighing/scoring) to be used in evaluating strategic
initiatives.
– Create a common format to review the strategic initiatives.
– Evaluate strategic initiatives using your stated criteria.
– With the leadership team, select which initiatives to implement.

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Initiative Management Benefits
• Initiative management helps you identify gaps in your strategy
implementation. It also helps align your scarce resources with the
efforts that are most important in achieving your strategy.
• Initiative management also clarifies accountability; as you proceed
through the initiative management process, you identify a sponsor for
each initiative.
• Finally, this process supports the implementation of the Strategic
Readiness System (SRS). By participating in the initiative
management process, you plan the efforts that directly contribute
to your organization's strategy.

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Course 11 Workshop III
– Recognize the purpose and importance of Workshop III
– Identify where Workshop III falls within the Balanced Scorecard process
– Identify activities and pre-work done in preparation for Workshop III
– List Balanced Scorecard elements reviewed and validated during
Workshop III
– Explain the Core Team and Leadership Team's role in Workshop III
– List the Workshop III deliverables

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Workshop III Preparation
• Examples of inconsistencies that may surface include:
– Lack of agreement about where initiatives map on the Balanced
Scorecard. The influence that initiatives have on objectives will become
clearer once you begin to measure against the objective and make
progress on the initiatives.
– Conflicting opinions about measure calculation methods. There will be
improvements to calculation methods once you begin to gather and report
on data. Make a note about any points of contention and address these in
the workshop. Remember, the measure should drive employees to make
the right decisions that drive the strategy forward.
– Disagreement on targets. If past target data or a benchmark is not
available, it is best to begin gathering data, and then establish a target
based off that trend and overall strategic goal.
• The Presentation Document
– The Workshop III presentation document identifies the initiatives the
organization is going to support to drive the strategic objectives forward
and ultimately, achieve the vision. As part of this process, the document
addresses the topic of how the organization will implement the scorecard.
• Pre-present Workshop III Document to Leaders
– Workshop III may reveal initiatives in which members of the Leadership
Team are deeply vested. Some of these initiatives may not directly support
the strategy. It is helpful to do a thirty to sixty minute pre-brief with each
leader before the workshop. The pre-brief serves as a "test run" for the
upcoming workshop and helps you predict the questions and concerns that
will surface. Address these issues before Workshop III to increase your
chance of reaching consensus during the meeting, and be prepared to
handle the unresolved issues in the workshop. Pre-briefing the leaders will
enable you to go into Workshop III with important allies.
• Pre-Brief Follow Up With Core Team
– Following the pre-briefs you should share the results with the rest of the
Core Team. Based on the leaders' feedback and Core Team response,
make the necessary edits to the Workshop III document. Highlight the
outstanding or contentious issues the Leadership Team members raised in
your sessions. Send revised copies of the Workshop III document to all
Core Team and Leadership Team members before the meeting.

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Workshop III Logistics
• Facilitation Tips
– As in Workshop I and II, a member of the Core Team usually facilitates
Workshop III. This person is usually the Project Manager or someone who
has been actively involved in the Balanced Scorecard process all along the
way.
– Before the workshop the facilitator should become thoroughly familiar with
the meeting agenda, the timing and the ground rules. During the workshop
the facilitator is responsible for adhering to the timetable and the ground
rules. In addition, it's up to the facilitator to ensure that someone records
the proceedings.
– Most important of all, the facilitator must be able to engage attendees and
monitor the mood of the group. There is a lot of information to cover in
Workshop III. The facilitator needs to maintain the momentum to get
through the meeting.
• Pre-Workshop Activities
– A week prior to the workshop, confirm that the facility and materials are in
place. If you are located in a new room, make sure that it is big enough for
the group. Be sure to make arrangements for the equipment you will need,
such as flip charts and markers, an LCD projector and screen.

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Conducting Workshop III
• Conducting Workshop III
– To set expectations, the facilitator should structure the agenda over the
whole six hours. It is easier to finish early than it is to request additional
time.
• Review BSC Concepts
– By this stage in the Balanced Scorecard development process the
Leadership Team has become familiar with scorecard concepts. The
Balanced Scorecard concept review should briefly cover the placement of
objectives, measures, targets, and initiatives on the Balanced Scorecard.
You can include information on the basic components of the Balanced
Scorecard in the workshop document and refer to it if needed.
• Review BSC Project Progress
• Discuss Missing Measure Details and Target Issues
– After you review the Balanced Scorecard concepts and project plan, the
next step is to review the feedback you received in the pre-brief sessions.
Your focus should be on points of contention with regard to measure
definitions, methods of calculation, and targets.
• Review Prioritized Initiatives
• Map Initiatives to Objectives

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Workshop III Deliverables
• Workshop III Deliverables
– Mapped and prioritized initiatives to strategic objectives
– Accountability for initiatives and confirmation of Objective and Measure
Owners
– Established implementation teams and accountability for implementation
planning areas relevant for your organization

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Course 12 Balanced Scorecard Reporting
– Identify the purpose of reporting.
– Identify the roles and responsibilities of team members in preparing a
report.
– Create a report.
– Manage and run reporting as an ongoing process in your organization.

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Balanced Scorecard Report Purpose
• The BSC is your strategic management system. The BSC Report is
the document you create in preparation for your reporting meeting,
which you use to monitor your progress in executing your
strategy. The ultimate goal of the BSC Report is to generate
discussion, make course corrections, and determine the next steps in
the implementation of the strategy.
• The reporting process enables your organization to focus on the key
strategic objectives, measures, and initiatives that will drive strategy
execution and lead to breakthrough results. The use of the BSC
Report in reporting meetings helps team members establish their
organization's strategy as the topic of discussion.

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The Reporting Meeting Purpose
• The main purpose of the BSC reporting meeting is to establish an
ongoing process to discuss the execution of your strategy. The
Organization should experience a cultural change as time spent
discussing past performance becomes a second priority to the time
spent on present and future strategic issues.
• In ongoing reporting meetings you should expect your team to:
– Discuss the strategy map.
– Report on strategic objectives.
Your organization should decide which Review initiatives that support your
strategic objectives.
• The ultimate goal of ongoing reporting meetings is to make strategy
execution the main topic of discussion in management meetings.

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The First Reporting Meeting
• The structure of your first reporting meeting is different from that of
subsequent meetings. Because it can be overwhelming to cover all
aspects of your BSC in the first reporting meeting, a higher-level
process is suggested.
• The goals of the first reporting meeting include:
– Reviewing the strategy map by perspectives or themes.
– Discussing all strategic objectives by perspective and/or theme.
– Reviewing all measures and identifying missing measurement data.
• The first reporting meeting is also used to establish the reporting
meeting format.

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Balanced Scorecard Report
• A BSC Report has several key components, including:
– A visual overview in the form of a strategy map and/or BSC of how their
organization is performing.
– A performance analysis, with a Strategic Objective Owner identified for
each strategic objective.
– Measure details, including Measure Owners, calculation methods, and
actual figures as compared to established targets. Initiative details,
including accountability, milestones, completion status, and progress
comments.

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Reporting Roles and Responsibilities
• Scorecard Owner – is the highest level advocate for the BSC in your
organization
• Strategic Objective Owner – is intimately familiar with the strategy
map and reports on strategic objective performance
• Initiative Owner – is actively involved with initiative management and
documents the initiative status for the Strategic Objective Owner
• Scorecard updater – oversees the data collection process and
communicates the reporting meeting outcomes
• Measure Owner – helps set targets and takes responsibility for
measure performance

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Reporting Goals
• Reporting is a transformation management activity. It provides a
disciplined approach to managing and executing your organization's
strategy by maintaining commitment and support for your
organization's BSC process. Over time, you should expect to achieve
the following goals in reporting:
– Consensus around the strategy map and its relationship to other cascaded
scorecards
– Movement towards collecting the right data to support your organization's
BSC measures
– Continued dialogue and agreement on how initiatives are mapped to
strategic objectives
– Reassessed strategic objectives, measures, targets, and initiatives--with
proposals for edits or additions
• "Don't shoot the messenger." When an objective is off target, it is the
entire team's responsibility to discuss how to get it back on track.

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Example Report Preparation Steps
• Prior to the reporting meeting, Measure Owners must update their
measures with data and comments and submit these updates to the
appropriate Strategic Objective Owners. Initiative Owners must also
perform their status evaluations and provide comments on their
supporting initiatives to the appropriate Strategic Objective Owners.
• The Strategic Objective Owners must establish a green, yellow, or red
status for each of their strategic objectives and must incorporate
supporting detail on the progress of the supporting initiatives for these
objectives.
• The Scorecard Updater compiles information into a report and
disseminates the report to the Scorecard Owner and the Strategic
Objective Owners.

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Reporting by Theme
• Reporting by Balanced Scorecard by theme is reviewing a select set
of objectives, their measures, and supporting initiatives for a theme.
• Reviewing strategic objectives by theme, rather than by perspective,
highlights cause-and-effect relationships between various strategic
objectives.
• You should experiment to customize the review process so that it best
fits your organization's culture.

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Ongoing Reporting
• A reporting meeting should be regarded as a strategy problem-solving
meeting among an organization's leaders. The ultimate goal of
ongoing reporting meetings is to make strategy execution the main
topic of discussion in management meetings. In ongoing reporting
meetings, you should review a subset of your strategic objectives.
• The following guidelines will ensure that your ongoing meetings are
productive:
– Report on BSC objectives on either an exception basis or on a rotating
basis.
• Exception reporting involves working through off-target strategic objectives and
reviewing their measures and supporting initiatives.
• Rotating reporting reviews a selected set of objectives on a periodic basis. Discuss
those objectives in detail and review their measures and comments.
– Discuss the status of supporting initiatives and milestones. Establish new
initiative milestones, as appropriate.
– Review cascaded strategic objectives and measures, as well as initiatives
shared between units or departments.
– Allow time to review and define your next steps and assign accountability
for follow-up work between meetings.

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Course 13 Curriculum Summary
• The overall goal of the BSC process is to make strategy execution a
core competency in your organization.
• Using this training, along with expert facilitation, you should be able to
build a scorecard for your organization.
TRANSLATE STRATEGY INTO
OPERATIONAL TERMS
ALIGN THE ORGANIZATION TO
THRE STRATEGY
MOTIVATE TO MAKE
STRATEGY EVERYONEÕS JOB
MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
GOVERN TO MAKE STRATEGY
A CONTINUAL PROCESS
The Strategy Focused Organization

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Balanced Scorecard Process
• Step 1: Getting Started
– Getting Started introduced the SFO, the BSC, and the importance of
strategy in the BSC process.
• Step 2: Mapping the Strategy
– Mapping the Strategy begins with leadership interviews. You use the
information from these leadership interviews to build your
organization's strategy map.
• Step 3: Defining Measures and Targets
– Defining Measures and Targets revealed that every strategic objective on
the scorecard should have at least one measure assigned to it. Measures
communicate the information used to monitor performance on an
objective. Targets are levels of expected performance; every measure has
a target. Targets help individuals focus on their performance levels and
help an entire organization focus on improvement.
• Step 4: Aligning Initiatives
– Aligning Initiatives showed that a strategic initiative addresses the gap
between an organization's actual performance and expected performance
on a strategic objective, as defined in the measurement of that objective.
• Step 5: Reporting
– Reporting discussed the purpose and importance of reporting. BSC
reporting is part of a transformation management process that establishes
strategy execution as the agenda of leadership meetings.

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Additional Resources
• You will find a wealth of information about the BSC and the SFO on
the Balanced Scorecard Collaborative's website, which you may
access at www.bscol.com.
• Sign in and view multimedia presentations that explain the principles
of the SFO in detail.
• These resources are free of charge.

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Course 14 Managing Change with BSC
– Establish the Balanced Scorecard as a tool for strategic change.
– Align your leadership team.
– Define and communicate a compelling strategy for your organization.
– Build your organization's consensus on the strategy and commitment to
the BSC process.
– Generate short-term wins using the BSC.
– Establish the BSC process as a standard part of your organization's
operations.

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What is strategy?
• What is a sound Strategic Plan?
– Objectives
– Infrastructure
– Tools
• A Sound Strategic Plan has the following Characteristics:
– Competitive Position
• In the private sector, a unique competitive position is marked by the
performance of activities that differ from those of competitors or are
similar to those of competitors in unique ways. Jiffy Lube has
established a unique competitive position by providing only auto
lubricants and serving customers through “drive-thru” oil-change
bays.
– Trade-off’s
• In the private sector, making trade-offs means choosing the activities
you will and will not do. Neutrogena has strategically positioned its
soap as a medicinal product. The organization chooses not to
emphasize the product's cleansing qualities. It sacrifices some sales
in order to maintain the product's unique, profitable position in the
market of medical products.

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BSC: A tool for Strategic Change
• We organize the eight change-leadership steps into three phases:
Unfreeze, Effect Change, and Breakthrough & Sustain; as shown in
the diagram.

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Unfreezing the Organization
• To unfreeze your organization, follow the first three steps in the Kotter
change-leadership model:
– Create a case for change.
• Assess where you’ve been
• Assess where you are now
– Use the SWOT Analysis and compare to BSC
– Align your leadership team.
• Building Consensus
• Securing Commitment
– Develop your vision and strategy.
• Express your vision in clear, compelling, and specific terms. The
best vision statements follow what are called the "AIM AT" criteria:
They describe a vision that's Aspirational, Inspirational, Measurable,
Attainable, and Time-based.

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Effecting Change
• Communicate your strategy: To effectively communicate your
organization’s strategy to everyone in your organization, follow these four
success factors:
– Prepare a communication plan. Indicate how and when you’ll target
specific personnel with messages about the BSC and your strategy.
– Make your organization’s strategy visible. Keep the strategy in the
forefront of everyone’s mind through memorable visual displays.
– Convey a consistent message. Ensure that all of your communications
about your strategy state the same overall message.
– Use the “ripple effect.” Enlist people to communicate the strategy down
to all levels of the organization.
• Identifying Change Agents: To continue building momentum for
change in your organization, you need to identify and enlist change
agents. These individuals fill four key roles, serving as:
– Advocates: They “sell” change initiatives—such as the use of the BSC to
drive strategic change—to everyone in their organization.
– Subject-matter experts: They educate and guide their organization
members through implementing initiatives, and they lead BSC design
efforts.
– Point persons: They serve as points of contact for questions and
concerns, working to diffuse resistance.
– Coordinators: They orchestrate key strategic meetings and events,
setting the leadership agenda and shaping key issues.

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Breaking Through and Sustaining Change
• Generate Short Term Wins: Short-term wins are essential to any change
effort. Why? Change is difficult, and early successes keep people motivated and
on- board. Short-term wins demonstrate that:
– Change is possible.
– The organization is capable of navigating even difficult change.
– Minor successes, once they accumulate, can have major payoffs.
• View the BSC as an Ongoing Journey: Change takes time.
Organizations that have achieved results using the Balanced Scorecard process
may begin reaping the biggest benefits in as long as three-to-five years down the
road.
• Integrate the BSC into the Management Process: To make strategic
change “stick,” you need to institutionalize it, or embed it into your organization’s
DNA. In other words, you must integrate the BSC into your management process.
• The BSC Journey: Two Directions: The BSC journey doesn’t
consist of only a single path that you tread in a linear fashion. Rather,
it’s a journey that unfolds in two dimensions/directions:
– Depth (vertical). You drive the BSC farther into the organization by
cascading scorecards from major commands to increasingly lower-level
commands.
– Breadth (horizontal). You broaden the BSC’s reach by integrating the
Scorecard process into your organization’s key management processes.

100
Course 15 Building Strategic Alignment
– The definition of alignment.
– How alignment benefits your organization.
– How to design, implement, and sustain vertical and horizontal alignment in
your business unit.
– How varied organizations have addressed the challenges of alignment.

101
What is Alignment?
• Alignment: In an aligned organization, each business unit supports the
strategy of the unit above it, as well as the strategy of its peer units. For that
reason, alignment is an activity that unfolds (often simultaneously) in two
directions:
– You achieve vertical alignment by ensuring that your unit's scorecard
supports the strategy of the unit above you, and that lower units'
scorecards support your unit's strategy. This is also known as cascading.
– You achieve horizontal alignment by linking your unit's scorecard
objectives with those of peer units. This is also known as integrating.
• Four Steps to Achieving Alignment
– Define your organizational position: Clarify where your business unit fits
vertically and horizontally in your organization; what is your unit's
relationship to the units that are above and below it? Which peer units do
you need to collaborate with to create synergies and to fulfill your overall
organization's vision?
– Create an alignment action plan: Decide how you'll carry out the actions
necessary for cascading and/or integrating.
– Apply tools and techniques: Use appropriate tools and techniques to carry
out your alignment action plan.
– Sustain and communicate: Take steps to communicate and sustain your
alignment efforts.

102
Case Study: MarineCo
• Challenges: To understand the benefits of alignment, consider the story of
MarineCo, an offshore engineering company that designs, builds, manages, and
maintains oil-drilling rigs. Before creating a strategy map, MarineCo faced
numerous management challenges:
– It consisted of six independent companies, each of which supplied a
unique service for marine oil-rig construction.
– It operated in a "siloed" fashion, with each of its business units servicing
customers independently.
– Often, several MarineCo companies didn't know that they shared
customers.
• Cascading: To achieve vertical alignment, MarineCo leaders cascaded the
corporate-level strategy map down to the six operating sub-companies.
• Integration Process

103
Case Study: MarineCo
• MarineCo: Alignment's Benefits
– Through cascading and integrating, MarineCo scored some major
successes:
– Profitable product: The sub-companies collaboratively developed a
profitable new product offering--Integrated Development Solutions--that
began generating 30% of all of MarineCo's revenue.
– Cost and time savings: MarineCo completed one oil-field development
project six months ahead of schedule and $150 million under budget; it
also launched offshore drilling projects faster than its competitors did.
– New customers: MarineCo's rate of contract awards rose by 50%.

104
Cascading
• Step 1: Define Your Organizational Position
– Organization Type
– Higher Units
– Lower Units
– Similarity among units
• Step 2: Develop an Action plan for Cascading

105
Cascading
• Step 3: Apply Techniques and Tools to Cascading
– Shared
– Contributory
– Hybrid
• Step 4: Communicate and Sustain Cascading
– Common Objectives
– Smoother Hand off’s
– Periodic Approval Meetings

106
Integrating
• Step 1: Define Your Organizational Position: Below are the three types
of relationships between peer units.
– Customer Supplier
– Joint Process Owner
– Similar Function
• Step 2: Develop an Action Plan for Integrating
– Accountability
– Sequence
– Scope
• Step 3: Apply Techniques and Tools to Integrating
• Step 4: Communicate and Sustain Integrating

107
Course 16 Preparing Strategic Analysis
– Why effective strategic performance analysis is powerful.
– Who does what during the performance analysis process.
– How to collect and analyze performance data.
– What steps are necessary to take in order to collect data for a strategic
performance analysis.
– What the three types of analysis are and when to use them.
– How to assess whether the cause-and-effect relationships in your
organization's strategy are working.
– How to determine why a measure is not performing to target.
– How to write an effective quantitative and qualitative performance analysis.

108
What is Performance Analysis
• Why is Performance Analysis Important?
– Continually assess the progress and success of their organization’s
strategy.
– Identify weak areas.
– Spot opportunities to make improvements.
• Double-Loop Learning
• The bottom loop represents operational learning. Based on the
organization's strategic direction (Balanced Scorecard), leadership applies
resources to areas requiring improved performance. Results are reported
back to the leaders, who take corrective action if necessary.
• The top loop represents strategic learning. Assessing operational results,
leaders decide whether the implemented strategy is working as planned
and whether recent developments (new technologies, competitive shifts,
new regulations) warrant modifications to the strategy.
• Who Manages Performance Analysis?
– Objective Owner
– Measures Updater
– Strategic Review Coordinator

109
Performance Analysis Steps
1. Clarifying scorecard elements: checking the validity and logic of
themes/perspectives, objectives, measures, and initiatives
2. Gathering internal data: collecting current and historical
information on measures and initiatives, and ensuring that the
most recent information is in place
3. Gathering external data: collecting information from regulatory,
industry, and other outside sources
4. Updating objectives, measures, and initiatives
5. Analyzing trends and cause-and-effect relationships in the data
6. Summarizing your findings in qualitative and quantitative terms

110
Course 17 Presenting Strategic Analysis
– Why presenting strategic-performance analysis is important.
– How to develop recommendations and action plans for improving strategic
performance.
– How to develop the right reporting formats for presenting your findings.
– How to populate your reports with meaningful data.
– How to conduct a strategy review meeting.
– How to communicate performance to the field.

111
• Step 1: Develop Recommendations and Action Items: the best
recommendations and action items are clear and action-oriented.
They also provide the following information:
– Reasons behind recommendations
– Expected outcomes
– Specific steps required to carry out the action plan
– Persons/teams responsible for executing recommended changes
– Specific dates for completion of execution

112
• Step 2: Identify Requirements and Develop Formats
Effective briefs encourage:
– Clear, focused analysis.
– Ownership of the data by those viewing it.
– Readability of the information.
– Useful, strategic discussion and decision-making.
– Your briefs should follow a consistent format. This consistency
• Step 3: Hold the Strategy Review Meeting
To ensure active participation and a productive discussion during a strategy
review meeting, the meeting leader must manage the following logistical matters:
– Attendees: The meeting leader must ensure that all members of the unit’s
leadership team know about and attend the strategy review meeting.
Optional attendees may include additional individuals who have analyzed
the unit’s scorecard data, as well as people who have valuable insights
into a particular initiative.
– Frequency: The meeting leader must schedule strategy review meetings
regularly—once every month or quarter.
– Meeting run time: The meeting leader must ensure that the meeting is
scheduled for the proper run time to allow significant discussion of the
strategy. Strategy review meetings can range from two to eight hours.
Shorter meetings generally correspond to situations in which leadership
meets monthly to discuss the scorecard. If leadership is only available
quarterly, longer meetings are necessary.

113
• Step 4: Communicate Performance to the Field
Who is your audience when you’re communicating performance? Actually, you’ve
got more than one audience – you’ve got internal and external audiences. The
following are examples of each type of audience:
– Internal audiences: support staff, teams, individuals, managers and
supervisors (of units, functions, and remote sites)
– External audiences: corporate headquarters, oversight boards, analysts,
partners and vendors, customers, industry associations

114
Course 18 Using Measures and Targets to Drive Strategy
– Explain why well-developed measures and targets are important for
managing strategic performance
– Identify measure development techniques
– Develop measures for the strategic objectives on your organization’s
scorecard
– Identify target development techniques
– Craft targets for the measures you’ve developed

115
Testing Your Cause-and-Effect Assumptions
• During this process, you ask two key questions:
– Are the drivers we’re measuring and setting targets for really generating
the outcomes we’re seeing?
– Do the targets we’ve set for drivers and outcomes accurately represent the
performance we need to carry out our strategy?

116
Using Measures to Manage Strategic Performance
• The Dual Purpose of Measures: You select measures to evaluate
your organization’s performance on strategic objectives. These
measures serve two key purposes:
– Organizational motivation
– Strategy evaluation and strategic learning
• The Importance of Cascading Measures
– In most organizations, subordinate business units’ scorecards contain
many of the same measures that have been defined for strategic
objectives in the higher-level scorecard. We call these cascading
measures.
– Cascading measures create a measures hierarchy. They measure similar
things—but at different levels of the organization.

117
Developing Measures
• Lead and Lag Measures: A Quick Review: In selecting measures
for your scorecard, consider expected outcomes (lag) measures as
well as outcome drivers (lead) measures. Remember:
– Lag measures focus on the performance results at the end of a time period
or activity.
– Lead measures focus on intermediate processes, activities, or behaviors
that drive those results.

118
Developing Measures
• Measures and Scorecard Perspectives
• Evolving from Process-Control Measures

119
Reviewing Targets
• How Targets Drive Resource Allocation
• Leadership establishes targets to determine the level of resources
required to achieve them. Targets should reflect the actual performance
required to successfully carry out the associated objective. If targets are
set too high, leaders might devote resources to them that could have been
better allocated to other objectives. And if huge amounts of resources are
dedicated to small performance improvements, inefficiencies result.
• Targets focus leadership's attention on performance shortfalls. By
highlighting performance shortfalls, targets help leaders decide whether to
provide additional resources or accept the risks associated with the
performance. In either case, leaders must still identify the causes behind
performance shortfalls and consider corrective actions. Often, leaders use
initiatives,specific projects or programs, to improve performance.

Building & Managing the Balanced Scorecard

Building & Managing the Balanced Scorecard

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