| The balanced scorecard
is a proven system of tracking and improving organizational
and individual performance. It categorizes ongoing performance
measures into four equally important (balanced) focus
areas chosen by the organization. These usually come
from the following areas: people/talent, process/operations,
productivity, innovation, finance, sales/markets. The
identification and regular review of a vital few 'focused
indicators makes this a useful tool to review the progress
of individuals and organizations." You can't manage
what you can't measure. A few good measures can have
a major impact. The key to success is identifying the
vital few."
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The keys to a successful balanced scorecard implementation
are as follows: Participation by all parties in mutual
construction of measures.
- Having measures that matter concerning core processes
and customer concerns.
- Picking and defining four focus areas essential
to the success of the organization.
- Having more leading/trending indicators than lagging/trailing
indicators.
- Linking success on scorecard indicators to performance
reviews and incentives.
- Acceptance of equal value of four quadrants in achieving
vision and profit goals.
WHY 'BALANCED' SCORECARD?
The balanced scorecard assists us in being the high-performing,
adaptable organization consistent with our values and
vision. The balanced scorecard helps us create this reality
by driving common goals, guiding behavioral changes, and
focusing on measurable results. When people can see the
core values in action, the vision linked to their performance,
and that contributions will be recognized, they become
fully engaged. The 'balance' in balanced scorecard recognizes
success is more than just the measure of financial results.
Instead, success is the culmination of the creativity,
knowledge, and capabilities of each individual in the
organization. It really measures how well we are doing
in serving our employees and customers. When we do this
well, financial success almost always naturally results.
WHY THE EMPHASIS ON LEADING/TRENDING
INDICATORS? The key to an effective balanced scorecard
is to have a good mix of leading as well as lagging performance
indicators. Think of a river. What are the upstream activities
or indicators that result in the final product the customer
sees downstream? What are the trending or predictive indicators
instead of just trailing indicators--such as a bad customer
experience? We want to be able to proactively make performance
corrections early, prevent problems before they occur,
not wait until we have a customer experience a performance
or service failure!
HOW
DO KEY INDICATORS GET SELECTED? Not every activity
we do is of equal value. We want to focus on critical
core processes that impact our customers and our overall
effectiveness. Within these critical core processes there
are activities that have great downstream impact. We want
to have an indicator of how well we are doing on each
critical process. Each indicator should follow the S.M.A.R.T.
rule and be specific, measurable, attainable, relevant,
and timely.
WHAT IS THIS
DASHBOARD YOU KEEP MENTIONING? One way to display
the scorecard is as a series of gauges placed in the four
quadrants. Like a dashboard of a car or plane you want
them all within the proper tolerances. You want to have
gauges that contain vital information influencing your
estimated time of arrival and safety, not just data for
data's sake. It is also better if they be like a thermostat--ones
you can act on to change the environment--than like a
thermometer that just reflects the environment.
HOW DOES THIS IMPACT ME AT THE INDIVIDUAL
LEVEL? Once the total team and various profit centers
have identified their four focus areas, we want the balanced
scorecard to serve as a model for how personal reviews
will be handled throughout the organization. The balanced
scorecard 'dashboard' with key indicators for each critical
process will be reviewed monthly so that we can make timely
course corrections and/or recognize top performance. We
want each individual to have their own personalized scorecard
with four critical main responsibilities you have chosen
to be accountable for on your job that will help the organization
achieve our vision. This is also referred to as a PAR
or performance accountability report. For each of your
four major responsibilities you should have goals meeting
the SMART criteria listed above. These goals are your
KPI's or key performance indicators. These two tools form
the basis for regular monthly or quarterly reviews with
your leader.
WHAT ABOUT
TRADITIONAL PERFORMANCE REVIEWS? The process above
either enhances your traditional performance review or
replaces it. If it replaces it, people often refer to
the annual or six month formal review as the scorecard
impact review (SIR). This would be a review of your progress
against your personal scorecard (PAR) and key performance
indicators (KPI's) to see if your performance has matched
or exceeded your expectations. Regardless, you should
meet regularly (monthly or quarterly) to discuss your
progress so their are no surprises during the formal review--you
will know if you are meeting or beating expectations because
you have been discussing them all along.
WHAT
IS THE TIMELINE FOR THIS? The recommended timeline
is as follows:
- Determine four focus points (quadrants).
- Analyze and identify critical core processes for
each.
- Develop key performance indicators to measure each
critical core process.
- Prepare scorecards (all levels) two months before
next fiscal year begins.
- Individuals develop personal scorecards (PARs) with
key performance indicators.
- Be sure completing accumulated scorecards will accomplish
organizational goals.
- Monitor monthly/quarterly reviews of all scorecards.
- Complete formal performance reviews well before
year ends so corrections can be made.
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