Chapter 2: Scorecards and Measurable Objectives

CHAPTER 2: SCORECARDS AND MEASURABLE OBJECTIVES

Objectives
The objectives are: Set up a scorecard framework. Set up strategic perspectives. Define posting periods. Set up objectives for a scorecard. Set targets for objectives.

Introduction
In Microsoft Dynamics AX Balanced Scorecard, the scorecard framework is a hierarchy of interconnected components used to: Communicate the high-level strategy, and the level in the organization at which the strategy is implemented (scorecard). Outline measurable operational achievements (objectives). Identify strategic areas in which to measure performance (measurements).

A business aligns the efforts of its workforce with its strategy by clearly communicating what to achieve, and the individual steps to achieve it. This section examines how to create a scorecard at the corporate, department, and employee levels, and then how to set up strategic, operational level objectives that include target results.

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Microsoft Dynamics AX Balanced Scorecard

Scenario
The company wants to diversify its service offering portfolio and plans to launch a new service. During the start up phase, the company communicates the highlevel strategy and the operational level objectives it wants to achieve as a business. The company then identifies the measurements that it will use to track progress toward the objectives. After determining the strategy, objectives, and performance measurements, the company then creates a scorecard that contains the objectives and measurements in the system. The company relies on its managers to update the performance values by using measurement journals, so it does not create measurement elements for the measurements in the scorecard.

Setting Up a Scorecard
Assemble the four primary components of a scorecard in the following order:
Note: The four steps below assume that perspectives are already created.

1. Create the scorecard The scorecard provides the framework in which to assemble the components used to implement a strategy and measure progress. The scorecard itself defines whether performance is being measured at the corporate, organization unit, or employee levels. 2. Create objectives Define key tasks, goals, or achievements required in order to realize the strategy outlined in a scorecard. 3. Define measurements for each objective Specify how to measure progress toward objectives by selecting and monitoring important strategic contributors. Measurements are described in the section titled Quantifiable Performance Measurements. 4. Measurement journals or elements Define how and how often to update performance values in a measurement. Use measurement journals to manually update values, or use elements to do so automatically. Measurement journals and elements are discussed further in the section titled Updating Performance Values. In short, these four steps define the following: What to achieve (scorecard) How to achieve it (objectives) How to measure progress (measurements, measurement journals, and elements)

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Chapter 2: Scorecards and Measurable Objectives

Procedure: Set Up a Scorecard
To create a scorecard, start by typing a name to indicate the strategy it implements and then specify whether to measure performance at the organization unit, employee, or corporate level: To measure performance at the employee or organizational unit level, select the person or unit. For corporate level scorecards, leave the Organization unit and Employee fields blank.

The following are steps to create a scorecard.

BALANCED SCORECARDSCORECARD

FIGURE 2.1 SCORECARD FORM OVERVIEW TAB

1. In the Scorecard field, enter a unique ID for the scorecard. 2. In the Name field, enter a name for the scorecard. This indicates the strategy represented in the scorecard. 3. To define the level at which to implement the scorecard, do one of the following: To create a corporate scorecard, leave the Organization unit and Employee fields blank. To create a organization unit scorecard, select the unit in the Organization unit field. To create an employee scorecard, select the employee in the Employee field.

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Microsoft Dynamics AX Balanced Scorecard

Defining Strategic Objectives for a Scorecard

Objectives represent the operational level achievements necessary to realize a scorecards overall strategy, and cannot exist independent of a scorecard. It is important that all objectives focus on the outcomes necessary to achieve the organizations vision for the future. Some basic guidelines to consider when creating objectives are that objectives must: Communicate strategically important achievements. Be maintained over periods of time to allow comparisons, and thereby indicate progress. Contain target values that indicate what is being worked toward. Contain reliable, verifiable, and accurate measurements.

The following settings are available for each objective: Field Target Description Represent the preferred value of the objective, that is, the value that indicates that the objective is achieved. Use targets to quickly measure progress by comparing the current value of an objective with its target. Because some objectives may contribute more heavily than others, when several objectives are assigned to a single perspective use weighting to rank objectives according to importance.The total weighting defined for all objectives assigned to the same perspective must equal one hundred. Indicate the strategic viewpoint to which the objective contributes. Assign as many objectives to a perspective as needed. Define how often values in an objective are updated. Measurements are used to calculate and post performance values to the objective. Measurements are discussed in the section titled Quantifiable Performance Measurements..

Weighting

Perspective

Period Measurements

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Chapter 2: Scorecards and Measurable Objectives

Setting Up Perspectives
Before you can begin to create objectives, one or more perspectives must be created because all objectives in a scorecard must be related to a perspective. In Microsoft Dynamics AX Balanced Scorecard, perspectives provide balance to a scorecard by: Representing multi-dimensional strategic viewpoints from which to target strategic results. Providing a way to group strategic objectives according to the perspective to which they contribute.

Remember, perspectives represent general strategic areas, such as finance. This means that a perspective can contain objectives whose values are not comparable as long as they contribute to the same general strategic area.
HINT: Perspectives can be compared with account types in the ledger chart of accounts, which divide ledger accounts into operating and balance accounts. In much the same way, perspectives divide objectives into disparate but connected general strategic areas.

A perspective to which objectives are assigned cannot be deleted.

FIGURE 2.2 DEFINE PERSPECTIVES

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Microsoft Dynamics AX Balanced Scorecard

Procedure: Set Up a Perspective
The following steps demonstrate how to create a perspective.
BALANCED SCORECARDSETUPPERSPECTIVES

FIGURE 2.3 PERSPECTIVES FORM OVERVIEW TAB

1. In the Perspective field, enter an ID for the perspective. This typically indicates the perspectives strategic focus. 2. In the Description field, enter a brief description of the perspective. This is often the same as, or a simple description of, the perspectives ID.

Setting Up Posting Periods

Posting periods define how often to update the performance values in objectives and measurements. Periodically updating performance values enables a business to make comparisons among periods. Periods are also used when generating statistics as a way to indicate the time period for which to view results. A period that is being used by an objective or measurement cannot be deleted.

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Chapter 2: Scorecards and Measurable Objectives

Procedure: Set Up a Posting Period
The following steps demonstrate how to create a posting period.
BALANCED SCORECARDSETUPPERIODS

FIGURE 2.4 PERIODS FORM GENERAL TAB

1. In the Period field, enter an ID for the period. This typically indicates the length or duration of the period. 2. In the Description field, enter a brief description of the period. This is often the same as, or a simple description of, the periods ID. 3. In the Start date field, select a date to define when the period will start. After a period is used the first time, all periods are consecutive based on the information in the Unit and Per fields. 4. In the Unit field, select the basic unit for the period in terms of days, months, or years. The unit number in the Per field defines how many days, months, or years comprise the period.
NOTE: The Last period field group is useful after one or more periods have past. The dates in this group indicate the next period in which a performance value can be posted.

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Microsoft Dynamics AX Balanced Scorecard

Procedure: Set Up an Objective
The following are steps to create an objective.
BALANCED SCORECARDSCORECARDOBJECTIVES

FIGURE 2.5 OBJECTIVES FORM OVERVIEW TAB

1. In the Objectives field, enter a unique ID for the objective. 2. In the Name field, enter a name for the objective. This usually indicates the goal represented by the objective. 3. In the Weight field, indicate the importance of the objective relative to other objectives assigned to the same perspective.
NOTE: The total weighting of all objectives assigned to the same perspective must equal 100.

4. In the Perspective field, select the perspective to which the objective contributes
NOTE: The copy feature can also be used to create a new objective based on the settings of one that already exists. Copying an objective reduces time spent on creating new objectives. When this is done, specify whether to also copy its measures and elements. Afterward, modify settings for each component if required.

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Chapter 2: Scorecards and Measurable Objectives

Setting a Target Value for an Objective
Users must set a target value for each objective to represent the preferred result, that is, the values that indicate that objective are achieved. Users can then measure progress toward targets by comparing the target value with the measurements actual (current) value. Set one target value per objective per posting period. The targets period is defined either automatically based on the objectives period or on the period defined for the previous target.

Procedure: Set a Target for an Objective

The following steps demonstrate how to set a target for an objective.
BALANCED SCORECARDOBJECTIVESTARGET

FIGURE 2.6 TARGETS FORM NOTE: The Targets form is used to set targets for both objectives and measurements. Use the upper part of the form to set a target for an objective.

1. If a period is defined on the objective, the Start date and End date fields contain those dates that must be used. If no period is defined on the objective, select dates to define a period. 2. In the Comment field, enter a brief description of the target. 3. In the Value field, enter a number to define the target value.
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Microsoft Dynamics AX Balanced Scorecard

Conclusion
When implementing a scorecard in Microsoft Dynamics AX Balanced Scorecard, a company must define: What to achieve, and at what level to achieve it (scorecard). How to achieve it (objectives). What you expect to achieve (Targets)

Although it is easy to set up a scorecard framework in Microsoft Dynamics AX Balanced Scorecard, it is important not to underestimate its value. The scorecard is the first window into a strategy, and therefore must clearly and concisely state strategic intent. From the scorecard, a business must identify targeted strategic objectives balanced among several perspectives. By assembling components at the scorecard level, a business ensures that all components are directly connected to the strategy represented in the scorecard.

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Chapter 2: Scorecards and Measurable Objectives

Lab 2.1 Set Up Perspectives

Scenario: Although the company plans to implement a variety of perspectives in addition to the four traditional perspectives, it considers the four traditional perspectives as a good starting point, and therefore creates each one so that they are available for use when the scorecard is implemented.

Need a little help?

The four traditional perspectives are Financial, Internal Business Processes, Learning and Growth, and Customer.

Lab 2.2 Set Up Posting Periods

Scenario: The company plans to create several scorecards that measure different performance areas at different levels in the organization. To allow for variations in the posting needs of each scorecard, the company defines a progression of three period lengths. The shortest period is one week, and the longest is one year.

Need a little help?

Start by defining the shortest period, and then proceed to the next longest.

Lab 2.3 Set Up a Scorecard and Objectives

Scenario: The company wants to improve and diversify the service portfolio offered by its service department and plans to launch a new service. As part of the start up phase, the company establishes the high-level strategy in its corporate level scorecard and the operational level objectives it wants to achieve as a business. The company then identifies the measurements that it will use to track progress toward the objectives. After determining the strategy, objectives, and performance measurements, the company then creates a scorecard that contains two objectives in each of the four traditional perspectives.

Need a little help?

Remember the component hierarchy, and start by creating the scorecard and then its objectives. Consider what high level objectives might be relevant and to what perspectives they contribute. Also, think about the importance of each objective in relation to the others assigned to the same perspective.

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Microsoft Dynamics AX Balanced Scorecard

Test Your Knowledge Build a Scorecard

1. List the four primary components of a scorecard, and describe the order in which to assemble them.

2. What must you remember when defining the importance of the objectives assigned to a particular perspective?

3. List the three levels at which to create a scorecard.

4. List some of the guidelines to consider before creating objectives.

5. What value can be assigned to an objective or measurement in order to measure progress toward its achievement?

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Chapter 2: Scorecards and Measurable Objectives

Quick Interaction: Lessons Learned

Take a moment and write down three Key Points you have learned from this chapter: 1.

2.

3.

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Microsoft Dynamics AX Balanced Scorecard

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