iSixSigma

Scorecard: Linking Strategy to Performance Objectives

A successful company and its leadership must have the ability to meet financial and customer expectations in a changing global economy. To win customer confidence and meet business plan objectives, the leadership team must not only develop a winning strategy, but drive results by turning the strategy into a reality through communication and a fact-based performance measurement system. Easily said, but turning the business strategy is into actionable items is a difficult undertaking.

Business leaders should be able with confidence to answer the question:

Does every employee in the organization understand the business strategy and how he/she can contribute to the success of the strategy?

By utilizing a performance measurement system, such as a balanced scorecard, an organization commits to assessing performance, monitoring performance, course-correcting performance and aligning all employees with key objectives. Therefore, whether an accountable leader or a staff member who performs the work, employees all have a method to assess progress, ascertain the improvement and make changes if required.

In addition, leaders and staff can be assured of being headed in the same direction when the organization’s strategy is aligned with:

  1. Key projects or program areas that link to personal and team accountability.
  2. Business process with key program areas that link to personal and team accountability.
  3. Business plan objectives with key indicators that link to personal and team accountability.

Key Components of a Balanced Scorecard Approach

An operations plan design should outline the key strategy, priorities, areas of responsibility and critical performance measurements through responsible leadership and team performance toward measurable areas. Critical plan components include strategy, deliverables, performance indicators and organization. Key plan components include:

  • Operating plan strategy: Understand why the targets will be met.
  • Deliverables: Know the performance measurement targets.
  • Performance indicators/measurements: Show how to meet targets.
  • Organization: Understand who is accountable for targets.
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Here is a look at the balanced scorecard approach from an integrated view:

 Strategy
Defines the mission, the customer segment and purpose
 
Organization Alignment
Defines accountability and key focus areas to achieve company’s business plan
Business Objectives
States goals, commitment to stakeholders
Communications
States out loud the mission and how employees can contribute to company success
Performance Metrics
Tools to measure performance against objectives
 

Key operating scorecard dashboard measurements as a minimum should include:

  • Customer satisfaction: Measure customer retention and customer attrition by product and region. (Customer satisfaction survey may be a good tool.)
  • Cost of access: Measure network optimization targets.
  • Network reliability: Measure trouble tickets.
  • Revenue plan execution: Measure sales order backlog, customer churn, install revenue.
  • Internal systems/information management: Measure system availability and system implementation or system consolidation if applicable.
  • Customer delivery process: Measure provisioning times.

Performance metrics may vary by company. However, critical focus on key concentration areas and requirements for success will enable achievement of business objectives. Competitive edge initiatives to be included in implementing a balanced scorecard approach are:

  • Standard product set with clear definition by product and a standard product set that can be sold, implemented for customers and billed effectively.
  • Service delivery process that gives attention to automate key activities and efficiency to reduce manual handoffs.
  • Information management and systems that are aligned with business process and drive system automation. Dependent on company, convergence into common platforms may be required to achieve system automation.
  • Billing processes should guarantee accuracy to minimize customer disputes and ensure cash collections.

Implementing a balanced scorecard requires obtaining consensus on deliverables, strategy, performance indicators and organization design that aligns with business process. The output of a balanced scorecard approach will yield an operating plan that will enable leaders to have clear levels of responsibility for delivering products and services. Performance metrics should ensure alignment with corporate financial performance targets and link to employee performance.

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Metrics should be impartial, ensure trustworthiness of quantifiable results and match concentration areas of the business. As the business grows, integrates, changes in strategic direction, the balanced scorecard metrics should course-correct to align with the changes. Metrics have to be viewed as reliable sources of data.

Balanced Scorecard Checklist for Leaders

Business leaders should develop performance measures using this checklist.

  • Line up the strategy with critical projects or program areas.
  • Line up the business process with strategies and business plan objectives.
  • Line up mission and department objectives with individual and team accountability.
  • Reduce the number of key metrics to ensure that the corresponding reliable pieces of data are greater than multiple metrics that are unreliable pieces of data.
  • Involve group members with responsibility in the deployment of scorecard metrics.
  • Make sure team metrics cut across organizations to ensure cross-functional goals.

Balanced Scorecard Dashboard as a Management Tool

Team leaders can appreciate the benefits of implementing a balanced scorecard when the scorecard becomes a management tool. The team leader can review progress against key target areas on a weekly, monthly and quarterly basis. Reporting of metrics should follow with a schedule of when the data will be available for viewing. For example, a consolidated list of outstanding accounts payable may only be available monthly and, therefore, the scorecard metric should report monthly given data availability.

The balanced scorecard measurement system can show progress month over month and display areas that need improvement, as well as, become a tool to indicate progress over time. Typically, color coding is use on the scorecard. For example, red can indicate that a key metric or program area of focus is underperforming and not meeting expectations. Green could indicate meets or exceeds expectations for the reporting metric. Yellow could be used to indicate near to meeting expectations but requires attention.

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During an operations review or staff meeting, the business leader can review each critical area on the dashboard and use the management tool as a discussion point for progress and performance. In addition, the focus of the operational review leans toward underperforming areas and plans to correct the area with clear accountability. Then progress can be tracked for improvement. The scorecard becomes the communication vehicle to discuss performance.

Conclusion: Road to Predictable Success

Leadership demands action – given that a leader is in charge of meeting deliverables and a leader’s performance is based on his or her ability to execute. Performance management tools, such as the balanced scorecard, provide information vehicles for performance, and sanction employee behavior to focus in areas of improvement and goal achievement. When a leader understands the strategy and turns the strategy into a reality through linking mission to business plan objectives via communication, performance metrics and organizational alignment, then he or she is on the road to achieve predictable success.

Most importantly, a leader can mobilize or motivate team behavior toward achieve goals through using a balanced scorecard measurement system. Action is driven through a balanced scorecard approach using fact-based performance management tools.

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Comments 3

  1. Dpowell

    I accidentally rated this article low (clicked in the wrong spot). This article provided just the information I needed to incorporate performance management into our overall Deployment Plan.

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  2. Khaled

    very useful information on balanced scorecards.

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  3. Joseph Chepsoi

    An excellent article that has deep insides into corporate strategic planning and execution. Bravo to the author!

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