Developing a Balanced

Scorecard
CIPD Norfolk Group, 17 October
2006

Richard Barnes
Culturetracker.com
 What is a “Balanced”
Scorecard
 A strategic and operational tool
 Owned by the Executive
 Shared by everyone
 Balances:-
 Long and short term
 Hard and soft measures
 Leading and trailing indicators
 Internal/external perspectives
 Like writing a novel, not writing a list
 Measures support change, not monitoring
 It is NOT
 A new idea
 An end in itself
 A playing field for internal politics
 An “initiative” of Finance, HR,
Marketing etc.
 Boardroom art
 A make-work exercise
 Its origins
 Nolan-Norton Consultants 1990
 12 client “Organisation of the Future” study
group
 Based on premise that financial measures were
insufficient for a modern business
 Principles espoused previously by:-
 Rensis Likert (The Human Organisation, 1960)
 TQM “gurus” (Deming, Crosby, Juran etc.)*
 European Foundation for Quality Management
(1985)
 Maisel and McNair parallel models
* Original K&N source was part of a TQ programme
The EFQM Excellence Model

9%
9%

10% 14%
8% 20%
15%

9% 6%

(percentages show how each elements is scored for importance)

 Kaplan and Norton model
(1996)

Customer

Balanced Business
Financials Scorecard Processes

Learning
& growth
 A question of balance?
Customer perspective
Corrective activity
Developmental activity
Balancing compliance
with added value
Financial Measures Business Processes
Key performance ratios Drumbeat
Balanced
Financial health Time, cost, quality
Balancing leading with Scorecard Balancing inputs
trailing indicators and outputs
Learning and growth
People measures
Knowledge measures
Balancing soft and
hard indicators
Building the Balanced
Scorecard
How do you
create value?

The key
question
A strategic tool
 Starts with strategy
 Continuous process
 Needs to become
culturally
embedded
 The story of a scorecard
To be successful for our shareholders, we must be (position in market),
which means that we must return superior financial results in .......

Our customers are the people who will secure these results for us so we
must offer our customers superior value by .........

To deliver this superior value we must excel in the way we manage the
processes for .......

These processes are operated by our people. We must provide our people
with ....... to achieve excellent performance.
 Cause and effect chain
Strategic Objective
May be What
reversed Financial Measure
How
Customer Value Measure
How
Process Measure
How
Employee Measure
Cause and effect chain
example
Become No 2 player
What
F Market share
How
C Service span offer
How
P Services delivered per customer
How
E Availability of data
The Balanced Scorecard

Where does it
fit?
 Where does it fit? Building
Using
Balanced
Scorecard
Vision
Mission and CSFs
Strategic Objectives
Measures

Alliances

Structure
Rewards

Systems
Projects
Targets

Culture and values (leadership/style/relationships etc.)

 Example Retail Strategic
themes
Themes Projects Measures
 Broadening  Pharmacy store  Pharmacy store

the offer expansion sales growth

 Focus on  New store  Brand

Health and opening Penetration

Beauty process (Market
 Friendly and  Living the Research)
Fun Mission  Mystery Shopper

 Destination of  Category  Footfall and

Choice management basket size

 Sample retail scorecard
Customer perspective
Basket Size
Mystery Shopper index
Footfall
Complaints
Financial Measures Business Processes
Sales Revenue growth Stock Outs
Balanced
Return on Turnover New store plan vs. actual
Cost of sales Scorecard Strategic Projects delivery
Shrinkage Supply chain process time
Learning and growth
Absence level
Stability index
Mission involvement index
Starfish.net ideas
 Joined up thinking?
PEOPLE CUSTOMER
Blue arrows indicate positive correlation. Red arrows negative. Broken line is a weaker connection

Staff Loyalty Complaints*

Development Satisfaction * No data available

for this element
0.16

Morale (absence) Loyalty*

-0.20
only in Metro and -0.28 0.16
Extra Stores

Recruitment 0.27 Market share*

only in smaller store
formats - Metro and
Express
One in Front*
Sales Growth*
0.13
0.1
0.17
0.11
-0.1
Productivity -0.16
0.22 Cost Controls (Sales var)
-0.1
Stock availability
Profitability*
Waste Mgt*
Stock Mgt Driving extra sales to bottom
line*

Number at arrow head indicates size of Pearson co-efficient of correlation.

OPERATIONS Superstores used for consistency of statistic except where indicated. FINANCE
Using the Balanced
Scorecard

Drill-down
into HR
systems
 Performance management
Age What is Key process Key Output Culture
valued?
Pre-industrial Community Belonging Contribution Social
Age Loyalty

Industrial AgeObedience Compliance Output Work-ethic

Output
Information Knowledge Empowermen New value Mobility
Age Innovation t
 Learning and growth
 Employee satisfaction
 Employee capability
 Information availability
 Knowledge growth
 Performance and reward
management systems
 Cultural measures from surveys –
e.g. leadership, communication,
recognition (enablers)
 Success factors
 Drill-down into Systems
 Planning and objective setting
 Operational targets
 Budgeting
 Internal audit
 Continuous improvement
 Project management
 Performance
management/appraisal
 Reporting and meeting regimes
 Reward and recognition.......
“Unfortunately, this year’s
low score on morale in the
employee survey means our
balanced scorecard index is
below the threshold for the
bonus award”

…with grateful
thanks to Catbert
 Customer
•On time delivery
•Customer satisfaction score on
product quality

Financials
•Budget management
•Operating expenses
Business Processes
•Employee satisfaction
Balanced •Capacity utilization
Scorecard at •No. of samples deviating from FCO
Specifications
•Material consumption

Learning & growth

•Implementation of new initiatives
in unit
•R&D Portfolio