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Chapter 2: Scorecards and Measurable Objectives
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CHAPTER 2: SCORECARDS AND MEASURABLEOBJECTIVES
ObjectivesThe objectives are:
Set up a scorecard framework.
Set up strategic perspectives.
Define posting periods.
Set up objectives for a scorecard.
Set targets for objectives.
Introduction
In Microsoft Dynamics AX Balanced Scorecard, the scorecard framework is a
hierarchy of interconnected components used to:
Communicate the high-level strategy, and the level in theorganization at which the strategy is implemented (scorecard).
Outline measurable operational achievements (objectives).
Identify strategic areas in which to measure performance(measurements).
A business aligns the efforts of its workforce with its strategy by clearly
communicating what to achieve, and the individual steps to achieve it.
This section examines how to create a scorecard at the corporate, department, and
employee levels, and then how to set up strategic, operational level objectives
that include target results.
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Scenario
The company wants to diversify its service offering portfolio and plans to launch
a new service. During the start up phase, the company communicates the high-
level strategy and the operational level objectives it wants to achieve as a
business. The company then identifies the measurements that it will use to track
progress toward the objectives.
After determining the strategy, objectives, and performance measurements, thecompany then creates a scorecard that contains the objectives and measurements
in the system. The company relies on its managers to update the performance
values by using measurement journals, so it does not create measurement
elements for the measurements in the scorecard.
Setting Up a Scorecard
Assemble the four primary components of a scorecard in the following order:
Note: The four steps below assume that perspectives are already created.
1. Create the scorecard The scorecard provides the framework in
which to assemble the components used to implement a strategy and
measure progress. The scorecard itself defines whether performance
is being measured at the corporate, organization unit, or employee
levels.
2. Create objectives Define key tasks, goals, or achievements required
in order to realize the strategy outlined in a scorecard.
3. Define measurements for each objective Specify how to measure
progress toward objectives by selecting and monitoring important
strategic contributors. Measurements are described in the section
titled Quantifiable Performance Measurements.
4. Measurement journals or elements Define how and how often to
update performance values in a measurement. Use measurement
journals to manually update values, or use elements to do soautomatically. Measurement journals and elements are discussed
further in the section titled Updating Performance Values.
In short, these four steps define the following:
What to achieve (scorecard)
How to achieve it (objectives)
How to measure progress (measurements, measurement journals, andelements)
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Chapter 2: Scorecards and Measurable Objectives
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Procedure: Set Up a Scorecard
To create a scorecard, start by typing a name to indicate the strategy it
implements and then specify whether to measure performance at the organization
unit, employee, or corporate level:
To measure performance at the employee or organizational unitlevel, select the person or unit.
For corporate level scorecards, leave the Organization unit andEmployee fields blank.
The following are steps to create a scorecard.
BALANCED SCORECARDSCORECARD
FIGURE 2.1SCORECARD FORM OVERVIEW TAB
1. In the Scorecard field, enter a unique ID for the scorecard.
2. In the Name field, enter a name for the scorecard. This indicates the
strategy represented in the scorecard.
3. To define the level at which to implement the scorecard, do one of
the following:
To create a corporate scorecard, leave the Organization unitand Employee fields blank.
To create a organization unit scorecard, select the unit in the
Organization unit field.
To create an employee scorecard, select the employee in theEmployee field.
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Defining Strategic Objectives for a Scorecard
Objectives represent the operational level achievements necessary to realize a
scorecards overall strategy, and cannot exist independent of a scorecard. It is
important that all objectives focus on the outcomes necessary to achieve the
organizations vision for the future.
Some basic guidelines to consider when creating objectives are that objectives
must:
Communicate strategically important achievements.
Be maintained over periods of time to allow comparisons, andthereby indicate progress.
Contain target values that indicate what is being worked toward.
Contain reliable, verifiable, and accurate measurements.
The following settings are available for each objective:
Field Description
Target Represent the preferred value of the
objective, that is, the value that indicates
that the objective is achieved. Use targets
to quickly measure progress by comparing
the current value of an objective with its
target.
Weighting Because some objectives may contribute
more heavily than others, when severalobjectives are assigned to a single
perspective use weighting to rank
objectives according to importance.The
total weighting defined for all objectives
assigned to the same perspective must
equal one hundred.
Perspective Indicate the strategic viewpoint to which
the objective contributes. Assign as many
objectives to a perspective as needed.
Period Define how often values in an objective
are updated.
Measurements Measurements are used to calculate and
post performance values to the objective.
Measurements are discussed in the section
titled Quantifiable Performance
Measurements..
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Setting Up Perspectives
Before you can begin to create objectives, one or more perspectives must be
created because all objectives in a scorecard must be related to a perspective.
In Microsoft Dynamics AX Balanced Scorecard, perspectives provide balance to
a scorecard by:
Representing multi-dimensional strategic viewpoints from which totarget strategic results.
Providing a way to group strategic objectives according to theperspective to which they contribute.
Remember, perspectives represent general strategic areas, such as finance. This
means that a perspective can contain objectives whose values are not comparableas long as they contribute to the same general strategic area.
HINT: Perspectives can be compared with account types in the ledger chart ofaccounts, which divide ledger accounts into operating and balance accounts. In much
the same way, perspectives divide objectives into disparate but connected general
strategic areas.
A perspective to which objectives are assigned cannot be deleted.
FIGURE 2.2DEFINE PERSPECTIVES
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Procedure: Set Up a Perspective
The following steps demonstrate how to create a perspective.
BALANCED SCORECARDSETUPPERSPECTIVES
FIGURE 2.3PERSPECTIVES FORM OVERVIEW TAB
1. In the Perspective field, enter an ID for the perspective. Thistypically indicates the perspectives strategic focus.
2. In the Description field, enter a brief description of the perspective.This is often the same as, or a simple description of, the
perspectives ID.
Setting Up Posting Periods
Posting periods define how often to update the performance values in objectivesand measurements. Periodically updating performance values enables a business
to make comparisons among periods. Periods are also used when generating
statistics as a way to indicate the time period for which to view results.
A period that is being used by an objective or measurement cannot be deleted.
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Chapter 2: Scorecards and Measurable Objectives
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Procedure: Set Up a Posting Period
The following steps demonstrate how to create a posting period.
BALANCED SCORECARDSETUPPERIODS
FIGURE 2.4PERIODS FORM GENERAL TAB
1. In the Period field, enter an ID for the period. This typically
indicates the length or duration of the period.
2. In the Description field, enter a brief description of the period. This
is often the same as, or a simple description of, the periods ID.
3. In the Start date field, select a date to define when the period will
start. After a period is used the first time, all periods are consecutive
based on the information in the Unit and Per fields.
4. In the Unit field, select the basic unit for the period in terms of days,months, or years. The unit number in the Per field defines how many
days, months, or years comprise the period.
NOTE: The Last period field group is useful after one or more periods have past. The
dates in this group indicate the next period in which a performance value can be posted.
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Procedure: Set Up an Objective
The following are steps to create an objective.
BALANCED SCORECARDSCORECARDOBJECTIVES
FIGURE 2.5OBJECTIVES FORM OVERVIEW TAB
1. In the Objectives field, enter a unique ID for the objective.
2. In the Name field, enter a name for the objective. This usually
indicates the goal represented by the objective.
3. In the Weight field, indicate the importance of the objective relative
to other objectives assigned to the same perspective.
NOTE: The total weighting of all objectives assigned to the same perspective must
equal 100.
4. In the Perspective field, select the perspective to which the objective
contributes
NOTE: The copy feature can also be used to create a new objective based on thesettings of one that already exists. Copying an objective reduces time spent on creating
new objectives. When this is done, specify whether to also copy its measures and
elements. Afterward, modify settings for each component if required.
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Chapter 2: Scorecards and Measurable Objectives
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Setting a Target Value for an Objective
Users must set a target value for each objective to represent the preferred result,
that is, the values that indicate that objective are achieved. Users can then
measure progress toward targets by comparing the target value with the
measurements actual (current) value.
Set one target value per objective per posting period. The targets period is
defined either automatically based on the objectives period or on the period
defined for the previous target.
Procedure: Set a Target for an Objective
The following steps demonstrate how to set a target for an objective.
BALANCED SCORECARDOBJECTIVESTARGET
FIGURE 2.6TARGETS FORM
NOTE: The Targets form is used to set targets for both objectives and measurements.
Use the upper part of the form to set a target for an objective.
1. If a period is defined on the objective, the Start date and End date
fields contain those dates that must be used. If no period is defined
on the objective, select dates to define a period.
2. In the Comment field, enter a brief description of the target.
3. In the Value field, enter a number to define the target value.
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Conclusion
When implementing a scorecard in Microsoft Dynamics AX Balanced Scorecard,
a company must define:
What to achieve, and at what level to achieve it (scorecard). How to achieve it (objectives).
What you expect to achieve (Targets)
Although it is easy to set up a scorecard framework in Microsoft Dynamics AX
Balanced Scorecard, it is important not to underestimate its value. The scorecard
is the first window into a strategy, and therefore must clearly and concisely state
strategic intent. From the scorecard, a business must identify targeted strategic
objectives balanced among several perspectives. By assembling components at
the scorecard level, a business ensures that all components are directly connected
to the strategy represented in the scorecard.
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Chapter 2: Scorecards and Measurable Objectives
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Lab 2.1 Set Up PerspectivesScenario: Although the company plans to implement a variety of perspectives in
addition to the four traditional perspectives, it considers the four traditional
perspectives as a good starting point, and therefore creates each one so that theyare available for use when the scorecard is implemented.
Need a little help?
The four traditional perspectives are Financial, Internal Business Processes,
Learning and Growth, and Customer.
Lab 2.2 Set Up Posting PeriodsScenario: The company plans to create several scorecards that measure different
performance areas at different levels in the organization. To allow for variations
in the posting needs of each scorecard, the company defines a progression of
three period lengths. The shortest period is one week, and the longest is one year.
Need a little help?
Start by defining the shortest period, and then proceed to the next longest.
Lab 2.3 Set Up a Scorecard and ObjectivesScenario: The company wants to improve and diversify the service portfolio
offered by its service department and plans to launch a new service. As part of
the start up phase, the company establishes the high-level strategy in its corporate
level scorecard and the operational level objectives it wants to achieve as a
business. The company then identifies the measurements that it will use to trackprogress toward the objectives. After determining the strategy, objectives, and
performance measurements, the company then creates a scorecard that contains
two objectives in each of the four traditional perspectives.
Need a little help?
Remember the component hierarchy, and start by creating thescorecard and then its objectives.
Consider what high level objectives might be relevant and to whatperspectives they contribute. Also, think about the importance of
each objective in relation to the others assigned to the sameperspective.
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Test Your Knowledge Build a Scorecard1. List the four primary components of a scorecard, and describe the
order in which to assemble them.
2. What must you remember when defining the importance of the
objectives assigned to a particular perspective?
3. List the three levels at which to create a scorecard.
4. List some of the guidelines to consider before creating objectives.
5. What value can be assigned to an objective or measurement in order
to measure progress toward its achievement?
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Quick Interaction: Lessons Learned
Take a moment and write down three Key Points you have learned from this
chapter:
1.
2.
3.
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