I am a huge proponent of the Balanced Scorecard (BSC) just as I am of Lean Six Sigma. Before I discuss how to use the two in a broader framework I think it is important to understand how to develop a BSC. This blog discusses three of the required steps in developing a Balanced Scorecard.
Step 1-Determine the Organization’s Strategies
The first step in developing your BSC will be to determine what the organizational strategies are. This can be achieved by reviewing the strategic objectives presented in the organization’s business and strategic plans and speaking with key executives who can articulate and describe the organization’s strategies.
Step 2-Develop the Executive Scorecard
Once the review is complete, I would recommend that you use the information you gathered from the executive interviews and the organization’s business and strategic plans to develop a high-level strategy map. The strategy map should prioritize the needs for the organizational objectives to be achieved in order for the organization to implement its strategies and the “cause and effect” relationship between each of these objectives.
In this context, cause and effect relationship implies that the contribution to achieving each of the objectives is intertwined. A statement such as “decreased processing times will lead to higher productivity and quicker delivery time, which will result in higher client satisfaction” is an example that illustrates a series of cause and effect relationships.
Step 3-Develop Business Line Scorecard
After the high-level strategy map is in place, I would present and validate this strategy map with the executive team in a workshop setting. During the workshop, I would ask the executives to articulate what success will look like once these objectives are met.
After determining what success will look like once the organization’s strategic objectives are met, you will have a good sense of what the executive performance measures are. The strategy map along with the executive performance measures together form part of the executive level scorecard.
Now that you have the objectives mapped out for the highest level of the organization, you will want to hold another series of workshops with key managers across the organization to review the executive strategy map and measures. During these workshops, ask managers to describe the objectives their business lines would need to achieve in order for it to contribute to the executive strategic objectives.
During the workshops, you will also want to ask managers to provide an example of how their business line might look if it met its objectives and how meeting these business line objectives would contribute to the executive level objectives. Once you have completed these workshops, you will have a good idea of the performance measures to be used by the business lines.
After these workshops are conducted, you will have the formation of an executive level scorecard along with the formation of branch level scorecards that are linked to each of the executive objectives.
The secret in using this technique is to ensure you ask managers and executives what success will look like once you achieved a particular objective and ask for an example. This is a quick and effective way to develop key performance indicators and, in one workshop, you can map out the respective strategies and develop key performance indicators. Most initiatives take much longer to complete both tasks.
Download our free scorecarding article
Links to Valuable Resources
The following sites provide great discussions and insight into the Balanced Scorecard:
Process Excellence Network http://www.processexcellencenetwork.com/
Linkedin Lean Six Sima Group http://www.linkedin.com/groups/Lean-Six-Sigma-37987?gid=37987&mostPopular=&trk=tyah
Linkedin Harvard Business Review http://www.linkedin.com/groups?viewMemberFeed=&gid=3044917&memberID=19127063&goback=.gmr_3044917
Harvard Business Review http://hbr.org/
Palladium Executing Strategy http://www.thepalladiumgroup.com