Balanced Score Card & Giving Feedback

Balanced Score Card & Giving Feedback

Jayati Singh

Today’s Agenda Origin  Defining BSC  4 perspectives in detail  Cascading BSC  Example of BSC  BSC Automation  Giving Feedback 

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Imagine entering the cockpit of a Jet Plane and observing that there is only a single instrument. How would you feel about flying on that plane after the following discussion with the pilot: Q: I am surprised to see you operating the plane with a single instrument. What does it measure? A: Airspeed, I am really working on airspeed this flight. Q: That's good. Airspeed certainly seems important but what about altitude. Wouldn't an altimeter be helpful? A: I have worked on altitude for the last few flights and I've got pretty good on altitude .Now I have to concentrate on air speed.

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Q: But I notice that you don't even have a fuel gauge. Wouldn't that be useful? A: Fuel is important, but I can't concentrate on doing too many things well at the same time. So this flight I want all my attention focused on air speed. Once I get to be excellent at airspeed, as well as altitude, I intend to concentrate on fuel consumption on the next set of flights. Probably no one would choose to be a passenger on this plane after such a conversation. Managers are like pilots. Navigating today's enterprises through complex competitive environments is at least as complicated as flying an airplane. The executives thus need a full battery of instrumentation to guide their journey.

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The Balanced Score Card provides an Enterprise view of an organizations overall performance by integrating Financial measures with other key performance indicators around Customer satisfaction, Internal business processes and Organizational growth, learning and innovation.

Need for BSC 

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In the Industrial Age (1850-about 1975) co.s succeeded by how well they could capture the economies of scale & scope Technology mattered but not as much With the increasing pressure to achieve performance improvement, the need to implement highly effective efficient and integrated management systems is continuously increasing. There has been an emphasis on understanding how performance is created within the firm. To understand what drives performance, managers must have in place performance measurement systems designed to capture information on all aspects of the business.

Origin 

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It was originated by Dr. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance. While the phrase balanced scorecard was coined in the early 1990s, the roots of the this type of approach are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950’s and the work of French process engineers (who created the Tableau de Bord – literally, a "dashboard" of performance measures) in the early part of the 20th century.

Measurement Matters “ If you can’t measure it, you can’t manage it”. 

If companies are to survive/prosper in the information age they must use measurements and management systems derived from their strategies and capabilities. Unfortunately many organizations espouse strategies about customer relationships, core competencies, and organizational capabilities while motivating and measuring performance only with financial measures.

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Financial measures are lagging indicators: they report on the outcomes of past actions. Exclusive reliance on financial indicators promoted short-term behavior that sacrificed long-term value creation. Recently, Kaplan and Norton (2001, a) have transformed the BSC from a performance measurement system to a strategic management control system (strategic performance measurement system).

Usage 

Approximately 50% of Fortune 1,000 companies in North American use a version of the BSC, according to a recent survey by Bain & Co. The BSC model support non-financial information which can enhance the organizational future performance (Missroon, 1999).

Major Elements of an Effective Performance Management System

Strategy Maps 

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A strategy map is a visual representation of the strategy of an organization. It illustrates how the organization plans to achieve its mission and vision by means of a linked chain of continuous improvements. For a commercial business, the strategy map illustrates the longterm game plan or competitive strategy to achieve increased profitability. For a nonprofit or governmental organization, it illustrates the plan by which the organization intends to improve performance of its mission. In either case it illustrates the cause-and-effect relationships between different strategic objectives and their measures, or key performance indicators (KPIs) that are included in a balanced scorecard.

Example of a Strategy Map

Balanced Score Card (BSC) 

The Balanced Scorecard is a performance management approach that focuses on various overall performance indicators, including customer perspective, internalbusiness processes, learning and growth and financials, to monitor progress toward organization's strategic goals.

The Balanced Scorecard & Strategy

To achieve our vision, how should we appear to Customers? Customer perspective

Financial perspective To succeed financially, how should we appear to our shareholders? Vision & Strategy To achieve our vision, how will we sustain our ability to change and improve?

Objectives Measures Targets Initiatives

To satisfy our shareholders & customers, what business processes must we excel at? Internal business perspective

Learning & Growth perspective

Financial Perspective 

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The BSC retains the financial perspective since financial measures are valuable in summarizing the readily measurable economic consequences of actions already taken. They indicate whether a company's strategy, implementation and execution are contributing to the bottom line. The financial measures tend to be profit related (by operating income), return on capital employed (ROCE or EVA) and Sales growth or generation of cash flow.

Customer Perspective 

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Identifies the customer and market segment in which the business will compete and measures performance in these targeted segments. The perspective typically includes several core/generic measures like customer satisfaction, customer retention & acquisition and market share. Drivers that represent those factors critical for customers to switch to or remain loyal to their suppliers should also be included.

The perspective should also include specific measures of value proposition in the specific market/customer i.e. lead-time, on time delivery if applicable.

The Internal perspective 

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The Internal perspective identifies the critical internal processes in which the organization must excel. These processes enable the business to: Deliver the value propositions that attract and retain customers Satisfy shareholder expectations on financial returns The internal measures focus on the processes that have the greatest impact on customer satisfaction and financial objectives. The inclusion of innovation measures in this perspective also gives the organization drivers of long-term financial success as well as short-term operational measures.

Learning and Growth perspective 

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Learning and Growth perspective identifies the infrastructure that the organization must build to create long-term growth and improvement. Businesses are unlikely to be able to meet their long-term targets for customers and internal processes using today's technologies and capabilities. Also intense global competition requires companies continually to deliver value to customers and shareholders. Learning and Growth comes from people, systems and organizational procedures. The financial, customer, and internal perspectives will reveal gaps in the capabilities of people, systems and procedures. To close these gaps businesses will have to invest in reskilling employees, enhancing IT systems and aligning organizational procedures. Measures include: Employee satisfaction, employee retention, system availability & "front line" customer information, Alignment of employee incentives with overall organization success factors etc.

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The “balance” of the scorecard is reflected in it mix of lagging (outcome measure) and leading (performance drivers) indicators, and of financial and non-financial measures.

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In turn, each perspective of the BSC involves four elements which are: objectives, measures, targets, initiatives

Balanced Score Card (BSC) 

Each major unit throughout the organization often establishes its own scorecard which, in turn, is integrated with the scorecards of other units to achieve the scorecard of the overall organization.

Cascading BSC 

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With the cascade BSC, the corporate-wide scorecard is actually broken down into several units. The corporate-wide level or the topmost level would be referred to as Tier 1. From Tier 1, the BSC would then be translated right down to the next level of business units, departments, or support units. This next level would then be known as Tier 2. Once this is achieved, the BSC is then translated down to individuals or teams. This next level is then referred to as Tier 3. The end result of this endeavor would then be made the focus across all organizational levels.

Line Managers 

it is most usually carried out by line managers rather than HR professionals, it is important that they understand their role in performance management and how performance appraisal contributes to the overall aims of performance management

Fundamental Differences between Traditional and the BSC 1.

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Traditional approaches attempt to monitor and improve existing business processes. The BSC approach, however, will usually identify entirely new processes at which an organization must excel to meet customer and financial objectives. To incorporate innovation processes. Often these may result in the development of new products or services.

Also, it provides a strategic management system to accomplish critical management processes: 

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Clarify and gain consensus about vision and strategy Communicate strategic objectives, performance measures and drivers at all levels Link strategic objectives to targets and annual budgets Identify and launch strategic initiatives

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Enhance periodic systematic strategic reviews

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Obtain feedback to learn about and improve strategy

BSC Automation 

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There are over a hundred Balanced Scorecard and/or performance management automation development companies. Some of the options are specifically dedicated to Performance Management and/or the Balanced Scorecard. Others include tools which are primarily designed for Business Intelligence, Analytics or Data Warehousing, but have modules dedicated to Performance Management.

Giving Feedback 

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Feedback should be based on facts not subjective opinion and should always be backed up with evidence and examples. The aim of feedback should be to promote the understanding of the individual so that they are aware of the impact of their actions and behavior. It may require corrective action where the feedback indicates that something has gone wrong. However, wherever possible feedback should be used positively to reinforce the good and identify opportunities for further positive action. Giving feedback is a skill and those with no training should be discouraged from giving feedback.

Feedback for effective & ineffective Interpersonal Communication EFFECTIVE FEEDBACK

INEFFECTIVE FEEDBACK

Intended to help employee Specific

Intended to belittle employee General

Descriptive

Evaluative

Useful

Inappropriate

Timely

Untimely

Considers employee readiness for feedback Clear

Makes the employee defensive Not understandable

Valid

Inaccurate

• Difficult feedback is avoided, postponed, sugar-coated or lied about during the appraisal

Why is dealing with things in the moment so difficult? So difficult in fact, that it's routinely avoided rather than dealt with?  Because:  The other person might cry The other person might get angry The other person might get defensive The other person might accuse me of not being fair or not understanding their job I don't like giving bad news I don't want people to think badly of me They must know there's a problem, they're just being difficult What if I know they're lying? It's really uncomfortable Another collection of poor, but understandable, excuses. 

A Couple of Tips 

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Take a good look at what your own fears and concerns are. There is no reason why you shouldn't mention them when you speak to someone who you notice has gone off track: "Elaine, I'm concerned you might get angry with what I'm going to say, yet I'm aware that you're making too many personal calls during working hours and you need to stop." Or "Elaine, this is really uncomfortable for me to say, but you are making far too many personal calls and you need to stop." We also have a very simple model that takes the sting out of giving difficult messages: I noticed that you've not met your deadlines the past few weeks. Would it be a good idea if we reviewed your work schedule on a weekly basis, So that we can identify any additional support you might need. Tell the truth whenever possible. If you treat people like children by withholding information that affects them or their job, then chances are they will react like children. If people are going to get upset with the truth, better they hear it earlier rather than later.

Thank You