ScoreCard 3rd Gen

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Performance Management &the 3rd Generation Balanced ScorecardAn Introduction

- April 2004 Performance Management & 3rd Generation BalancedScorecard

1 2GC Limited, 2009

Performance Management & 3rd Generation Balanced ScorecardPurpose of this slide pack Welcome this 2GC slide pack has been

produced to introduce you to PerformanceManagement and the Balanced Scorecard

This pack should help you to improve yourunderstanding of

What is Performance Management

What is Balanced Scorecard

Why use Balanced Scorecard

How to design a modern Balanced Scorecard

How to implement your Balanced Scorecard

The Balanced Scorecard fills the void that exists in most management systems - thelack of a systematic process to implement and obtain feedback about strategy.

Robert Kaplan & David NortonThe Balanced Scorecard, HBS Press, 1996


2 2GC Limited, 2009

General Management Issues

Section Summary:

In most organisations thecommunication of strategic goals andobjectives is poor so it is hard forpeople in the organisation to know whatto do . . .

. . . and it is therefore hard for seniormanagers to check that the right thingsare being done what are the rightthings?

The result: only one third oforganisations believe they are successfulin implementing their strategic goals

Strategic success therefore requires thatpeople are clear about what needs tohappen, and that managers get usefulinformation about this activity.


Performance Management Key to StrategicSuccess

3rd Generation Balanced Scorecard

Designing and Deploying Balanced Scorecard Best Practice Insights

Next Steps Getting ready to Implement inYour Own Organisation


3 2GC Limited, 2009

General management issuesWhat are the issues?

Dilbert

From: Dilbert - A Treasury Of Sunday Strips: Version 00 by Scott Adams, (Andrews McMeel Publishing 2000)


4 2GC Limited, 2009

General management issuesThe management challenge

How to decide what to do?

How to balance the actionsrequired over time?

How to effectively communicatewhat is needed to the widerorganisation?

How to make these decisionsrelevant to the rest of theorganisation?

How to confirm that the necessaryactions are actually being taken?

Simply measuring anorganisations performance does

not by itself ensure that theorganisation will begin to

perform as either it should do orcould do


5 2GC Limited, 2009

General management issuesImplementing strategic goals is difficult

Vision

97%

Vision

97%97%

Significant strategic success

33%

Significant strategic success

33%33%

Clear strategic

plans

80%

Clear strategic

plans

80%80%

Some strategic success

52%

Some strategic success

52%52%

From: Strategic Performance Measurement & Management

Business Intelligence / Renaissance Worldwide, 1997

Percentage of organisations having . . . .

Almost all organisations have astrategic vision . . .

but few manage to realise it

You have got tosucceed at doing

what is necessary

Sir Winston Churchill

How do successful organisations achieve their strategic goals?


6 2GC Limited, 2009

Performance Management

Section Summary:

To be able to design a performance managementsystem, you must first be clear about what it is youare trying to achieve - i.e. what is good performance

To know if good performance is being achieved youneed a process to supply useful information about

Whether the actions needed to improveperformance are being carried out

Whether the actions being carried out are havingthe desired impact

Carried out poorly, the activity to collect performanceinformation is focused on too many (of the wrong)things, and the organisation then struggles to usefullydefine targets, evaluate performance, or use theavailable information to drive improved behaviours

Some of these issues can be addressed by using astandard framework for the PerformanceManagement system design.

Performance Management systems have evolved tosupport the articulation, communication, monitoringand updating of strategic goals as part of an efficient,proven management process

The most commonly used Performance Managementframework is the Balanced Scorecard


Performance Management Key toStrategic Success





7 2GC Limited, 2009

Performance ManagementHow successful organisations drive strategyimplementation

Traditional Performance Management has focused on the last two steps

Articulate the

Strategy

Communicatethe

Strategy

MonitorActivity

ManageActivity

1 2 3 4StrategicSuccess

Management checksthat actions

are being completedand results arebeing achieved

Managementcommunicates these

decisions to therest of the

organisation

Managementdecides what needsto be achieved, anddocuments these

decisions

Managementtakes action when

results aredifferent from those

expected


8 2GC Limited, 2009

Performance ManagementWhat happens when strategy is unclear?

Frameworks are helpful in deciding what to measure . . .

Articulate the

Strategy

Communicatethe

Strategy

MonitorActivity

ManageActivity

1 2

?

Only 2/3* of seniorexecutives understand

how the strategy relatesto their own job . . .

. . . and only 1/10* ofshop floor staff

understand how thestrategy relates to their

own job

With the strategy unclear, managers: Select unhelpful performance measures Select too many performance measures Attempt to monitor everything Dont really know what is going on across the organisation

When monitoring is done poorly, managers: Cant see the wood for the trees Attempt to manage with inadequate intelligence Struggle to exercise control over organisational activities Fail to realise organisational potential

* Survey, Business Intelligence / Renaissance Worldwide, 1997


9 2GC Limited, 2009


Section Summary:

The original Balanced Scorecard concepts weredeveloped in the late 1980s and werepublicised by Kaplan & Norton in a 1992 HarvardBusiness Review paper

Early Balanced Scorecard focused on strategyand vision, but said little about how to design oruse effectively

Over last decade the understanding of BalancedScorecard has improved Balanced Scorecarddesign and design methods have evolved toaddress the shortfalls inherent in the originalapproach

The latest version of Balanced Scorecard is 3rdGeneration it offers major benefits to usersand developers over prior versions

Quicker to develop, more reliable, easier touse, set targets for, and to cascade withinorganisation







10 2GC Limited, 2009

3rd Generation Balanced ScorecardBalanced Scorecard first appeared in 1992

Kaplan & Nortons1st GenerationBalanced Scorecard

Objectives InitiativesTargetsMeasuresTo achieve our vision, how will we sustain our ability to change and improve?

Learning & Growth

Objectives InitiativesTargetsMeasuresTo satisfy our shareholders & customers, what business processes must we excel at??

Internal Business Processes

Vision & Strategy

Objectives InitiativesTargetsMeasuresTo succeed financially, how should we appear to our shareholders?

FinancialObjectives InitiativesTargetsMeasuresTo succeed

financially, how should we appear to our shareholders?

FinancialObjectives InitiativesTargetsMeasuresObjectives InitiativesTargetsMeasuresTo succeed

financially, how should we appear to our shareholders?

Financial

Objectives InitiativesTargetsMeasuresTo achieve our vision, how should we appear to our customers?

CustomerObjectives InitiativesTargetsMeasuresTo achieve our

vision, how should we appear to our customers?

CustomerObjectives InitiativesTargetsMeasuresObjectives InitiativesTargetsMeasuresTo achieve our

vision, how should we appear to our customers?

Customer


Learning & GrowthObjectives InitiativesTargetsMeasuresObjectives InitiativesTargetsMeasuresTo achieve our

vision, how will we sustain our ability to change and improve?

Learning & Growth


Internal Business ProcessesObjectives InitiativesTargetsMeasuresObjectives InitiativesTargetsMeasures

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


Vision & Strategy

But 10 years have seen some major improvements to this framework



3rd Generation Balanced ScorecardBest practice Balanced Scorecard has evolved

2GC Limited, 2003.

Strategic Linkage Model

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

& G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to my Needs

DBX Products are my First Choice Products

DBX Products are Good Value for Money

DBX Products are Visible and Available

DBX has an Excellent Consumer Franchise

Drive Trade Terms by Channel

Implement Major Account Management

Programme

Effective Control of Business (No Surprises)

Sales Growth (by City by Product)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a % of

NSV

Improved Shareholder Value (ROCE)

I Have a Good Relationship with DBX

Develop Better Work Practices and IS

Develop and Retain Professional Managers

Develop Service Agreements

Effective Management of Company Assets

Deliver Excellent Internal Customer

ServiceDeliver Customer Service Standards

Develop Professional, Customer Oriented, Skilled

Sales Force

Deliver Excellent Consumer

Propositions

Understand Impact Of Various Marketing Levers

2GC Limited, 2003.

1st Generation Balanced Scorecard


Learning & Growth



Vision & Strategy


Financial


Financial

Objectives InitiativesTargetsMeasuresObjectives InitiativesTargetsMeasuresTo succeed financially, how should we appear to our shareholders?

Financial


Customer


Customer

Objectives InitiativesTargetsMeasuresObjectives InitiativesTargetsMeasuresTo achieve our vision, how should we appear to our customers?

Customer


Learning & Growth

Objectives InitiativesTargetsMeasuresObjectives InitiativesTargetsMeasuresTo achieve our vision, how will we sustain our ability to change and improve?

Learning & Growth



Objectives InitiativesTargetsMeasuresObjectives InitiativesTargetsMeasuresTo satisfy our shareholders & customers, what business processes must we excel at??


Vision & Strategy

First Generation Balanced Scorecardsbroke new ground by combining financial andnon-financial performance measures groupedinto four perspectives

Second Generation Balanced Scorecardsdefined strategic objectives, linked togetherusing a causal strategy map to help identify theactivities and results that needed to bemeasured

Third Generation Balanced Scorecardsuse the creation of a Destination Statement asthe starting point for choosing StrategicObjectives, selecting measures and setting targets

Building a modern Balanced Scorecard requires a good design process

2GC Limited, 2003.

Destination Statement

Sales Volume:50,000 MT

Distribution:50 Cities

Sales Revenue : 50 Million

One Manufacturing Site

ROCE: 7%Capital Employed: No more than 45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No more than 6 Core Brand ProductsMinimum sales volumes: 5,000 MT for each core brand 2,000MT for each product

Employer of Choice: (# 1 in industry and ranked in FMCG top 10)

Marketing Sales

Branding: Clear brand propositi / systems established for the six core brands

DBX has two of the top five category product brands Product/house brand awareness targets in DBX city

strategies achieved

Media and promotional strategy: City market share targets achieved within agreed budget

Models and measures of the relative impact of all marketing levers available to assist in the evaluation / targeting of marketing activity

Improved Skills and Processes: Standardised and transparent marketing processes developed and agreed within DBX and with Group

Marketing team skills targets (based on external benchmark comparisons) achieved through training and recruitment (where applicable)

Overall: DBX seen as one of top 10 FMCG Co. s servicing key accounts in the country (and #1 in category)

Customer Market Focus: Sales staff achieving set targets in line with city strategies for focus on customer and market issues

Assess using distribution by channel, visibility and trade promotions

Improved Skills and Processes: Standardised and transparent sales processes developed and agreed within DBX and with Group

Sales team skills targets (based on external benchmark comparisons) achieved through training and recruitment (where applicable)

Organisational Structure Clear scope and role statem ents exist for all functi(including Sales

& Marketing): Supporting functi(including supply chain) will be achieving all

agreed service level targets with sales & m arketing

Supply ChainCost efficient supply chain based on flexible production lines w ill deliver: Increased responsiveness to m arket dem ands Lower cycle tim es Product / channel freshness targets

Information SystemsAppropriate inform ation system s that will m eet DBX s needs All necessary m anagem ent inform ation produced within pre - agreed tim elines and

scales Management Senior m anagem ent will be com m itted to working on strategy and e valuated on

their ability to coach / advise / guide and ensure that tasks ar e delegated effectively.

Professional m iddle m anagem ent will exist that will be able to act m ore independently within defined guidelines, and have the skills req uired for their job / role

Succession plans for key positiwill exist Recruiting and training policies will aim to raise middle manage ment

competence to meet international standards



2GC Limited, 2003.

Balanced Scorecard Measures & Targets

F1.1

F1.2

-30p

8

150p

18Dividend expected kept at 28 p. for whole year, but share price still around 1,000 pence leading to low P/E compared with sector and results from previous years

NG

Measure Value Target Performance comments for objective Objective OwnerObjective Status

Outperform capital markets

F4.1

F4.2

17

257

24

600No major M&A targets in sight yet. Pipeline cover - 50% due to aggressive growth targets combined with severe scarcity of targets. Profit mix and growth market numbers not available yet

NGSuccessful deal doing

F3.1

F3.2

F3.3

1,550

652

93%

1,442

488

90%

Division E still far behind budgets. C positive, but below budget. A on budget (flat budgets). L4L sales positive in D driven by brands. C index 120 on L4L

NGSales & profit growth from

existing businesses

F5.1 7.65% 7.44%Cost on average 10% > Category 1 competitors. On level with category 2 competitors NG

F2.1

F2.2

200

-6

185

4 Increasing cash inflow from divisions A and D but levels of investments in B,C and E makes the group cash negative for at least another 12 months NGCash & asset management

Competitive cost of capital via

capital structure

Rsh1.1

Rsh1.2

65%

8More shareholders vary about our future earnings potential due to drop in TSR and general negative press. All is down to next big announcement indicating new thrust and direction

ESShareholders

support and back strategies

7

74

3rd Generation Balanced ScorecardKey components


To build management consensus

To articulate the intended results of implementingthe chosen strategy


To identify what actions must be taken, and whatinterim outcomes are required, to deliver thestrategy

Measures & Targets

To track whether objectives are being achieved

To drive the right management actions

2GC Limited, 2003.


Out

com

esAc

tiviti

es

A4: Develop our people (ROC3, ROC4)

A2: Maintain Quality (14001 / 9001) (ROC1, AP6)

A1: Deliver Procurement

Improvements (ROC3, RO5)

A6: Improve Health and

Safety (ROC1)

A5: Implement Change

Programmes (ROC1, AP1)

A8: Improve Productivity

(ROC5, AP2, AP7)

A7: Change our Systems (ROC4, ROC5, ROC7, AP7,

AP8)

A3: Better Processes for

Better Services (ROC5, AP7)

A9: Go and meet people

O4: Environmental Footprint (EO2)

O9: Delivery of Programme

(EO6)

O2: Environmental

Impact (EO7)

O8: EA is Trusted Advisor / Partner

(ER2,ER4,ER6)

O3: Agency Estate (EO8)

O1:Partners & Customers use EA

eBusinesssolutions(ER7)

O13: Environmental Incidents (EO4)

O12: Awareness (EO5)

O6: Customers rate EA as Best in

Class (ER3)

O5: Partners & Customers

influenced by EA (ER1)

O10: Informing Government

(EO3)

O11: Advocacy (EO1)

O7: Brand(s) known by

clients (ER5)

2GC Limited, 2003.


Sales Volume:50,000 MT

Distribution:50 Cities

Sales Revenue : 50 Million

One Manufacturing Site

ROCE: 7%Capital Employed: No more than 45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No more than 6 Core Brand ProductsMinimum sales volumes: 5,000 MT for each core brand 2,000MT for each product

Employer of Choice: (# 1 in industry and ranked in FMCG top 10)

Marketing Sales

Branding: Clear brand propositi / systems established for the six core brands

DBX has two of the top five category product brands Product/house brand awareness targets in DBX city

strategies achieved

Media and promotional strategy: City market share targets achieved within agreed budget

Models and measures of the relative impact of all marketing levers available to assist in the evaluation / targeting of marketing activity

Improved Skills and Processes: Standardised and transparent marketing processes developed and agreed within DBX and with Group

Marketing team skills targets (based on external benchmark comparisons) achieved through training and recruitment (where applicable)

Overall: DBX seen as one of top 10 FMCG Co. s servicing key accounts in the country (and #1 in category)

Customer Market Focus: Sales staff achieving set targets in line with city strategies for focus on customer and market issues

Assess using distribution by channel, visibility and trade promotions

Improved Skills and Processes: Standardised and transparent sales processes developed and agreed within DBX and with Group

Sales team skills targets (based on external benchmark comparisons) achieved through training and recruitment (where applicable)

Organisational Structure Clear scope and role statem ents exist for all functi(including Sales

& Marketing): Supporting functi(including supply chain) will be achieving all

agreed service level targets with sales & m arketing

Supply ChainCost efficient supply chain based on flexible production lines w ill deliver: Increased responsiveness to m arket dem ands Lower cycle tim es Product / channel freshness targets

Information SystemsAppropriate inform ation system s that will m eet DBX s needs All necessary m anagem ent inform ation produced within pre - agreed tim elines and

scales Management Senior m anagem ent will be com m itted to working on strategy and e valuated on

their ability to coach / advise / guide and ensure that tasks ar e delegated effectively.

Professional m iddle m anagem ent will exist that will be able to act m ore independently within defined guidelines, and have the skills req uired for their job / role

Succession plans for key positiwill exist Recruiting and training policies will aim to raise middle manage ment

competence to meet international standards

Strategic Objectivesdeveloped directly

from a detailedvision of the

organisation at afuture date called a

DestinationStatement

Causality isshown bylinkages

between theobjectivesselected



3rd Generation Balanced ScorecardBenefits of 3rd Generation design

Efficiently builds management teamconsensus

Faster to develop than earlier designs

Easier to use for target setting

Identifies linkages between the strategicactivities required and the strategicoutcomes desired

Better for communicating strategic prioritieswithin organisation

Drives selection of meaningful performancemeasures

Enables better strategic alignment:Vertically between organisational units - BalancedScorecard cascades are now practicable

Horizontally, between organisational units at samelevel

Between people and their organisational unit

Produces a Balanced Scorecard with greaterlongevity



Best Practice Design & Deployment

Section Summary:Requirements of a best practice design process

Short

Engaging

Efficient use of managers time

Designed by the eventual users of the Balanced Scorecard /Performance Management system

Developed in the round transparent, not magic!

Deployment

Cascade is a powerful mechanism for alignment, even incomplex organisation

Integrate fully with other business processes

Need to build maintenance ability into organisation duringdesign process

Knowledge Transfer Support Tools Automation if required

Using

First six months are critical to establish behaviour patternsthat use Performance Management information effectively

Strong sponsorship is critical

Changes to key processes (e.g. the Board Agenda) help toensure the tool is used

Linking the use of the Balanced Scorecard to budgets is apowerful mechanism for getting organisational units toparticipate

Be wary of using to align personal goals with organisationalobjectives this is too expensive for most purposes, plusincentives undermine the dynamic nature of BalancedScorecard




Designing and Deploying BalancedScorecard Best Practice Insights




Best Practice Design & DeploymentRequirements of an excellent Balanced Scorecard designprocess

Actively involves Balanced Scorecardowners in the design

Makes efficient use of managers time

Understandable and transferable

Easily aligned and cascaded acrossthe organisation

Compatible with existing process

Only the responsible managers knowthe answer

Management time is a scare resource

Must be communicated and drivendownward

To help the entire organisation workto a common purpose

Other management processes andtools must be usefully retained

Characteristics Logic

3rd Generation design processes can deliver these characteristics



Best Practice Design & DeploymentA proven, six-step design process

Document Review & Interviews Meeting 1 Homework 1 Meeting 3Meeting 2 Homework 2

Review of strategicdocumentation toidentify strategicchoices

Structured interviewswith responsiblemanagement team toidentify areas ofagreement anddivergence

What is involved

Facilitated discussionbetween all membersof the managementteam to identify thestrategic choicesfacing the organisationand to select amongthese choicesWorking sessions todescribe theorganisation at somefuture point in time

OutputsProject & WorkshopPlan

Homework to reviewand amend the DraftDestination Statementand to begin proposingrelated StrategicObjectives

One-on-one meetingswith participants toreview Meeting 1 andto support completionof homework

Homework tocomplete StrategicObjectives definitionsand to begin definingpotential Measures foreach Objective

1-on-1 meetings withparticipants to reviewMeeting 2 and tosupport completion ofhomework

Revisit and updatethe Draft DestinationStatement fromMeeting 1,incorporatingHomework outputDebate and developthe medium termStrategic ObjectivesDevelop a DraftStrategic LinkageModel (SLM)

Obtain finalagreement on contentsof DestinationStatement and SLMReview and finaliseStrategic ObjectivesDevelop Measuredefinitions and targets

Draft DestinationStatement

Revised DestinationStatementDraft StrategicObjectives

Updated DestinationStatementDraft StrategicObjectives and SLM

Draft ObjectiveDefinition Forms

Final DestinationStatementFinal SLMCompleted ObjectiveDefinitionsDraft MeasuresDefinitions and Targets

3 monthdesign

Managementengagement

Smallfacilitation

team

Low techprocess

3-5Meetings

1 2 3 4 5 6



Best Practice Design & DeploymentKey learnings

Realisation of organisational strategy requiresthat managers have access to appropriateinformation and to the interventions neededto control organisational activity

3rd Generation Balanced Scorecard givesmanagement this ability

Control is greatly enabled when the followingelements are in place:

Clarity of direction (Destination Statement)

Agreement on how to achieve the strategy(Strategic Objectives)

Understanding of causal relationships betweenObjectives (Strategic Linkage Model)

A well considered set of Performance Measures

An effective design process is a pre-requisiteto building a modern Balanced Scorecard

The design process can be straight-forward,but requires genuine managementinvolvement

Design can be completed in about 3 months;embedding the Balanced Scorecard typicallyrequires another 3 months



Best Practice Design & DeploymentIntegrate Balanced Scorecard with existing frameworks

Balanced Scorecard can be seen as an umbrella concept that linkstogether organisational philosophies and management tools



Best Practice Design & DeploymentBalanced Scorecard complements other management toolsand processes

BalancedScorecard

RiskManagement

Process

StrategicPlanningProcess

EFQMBEM EVA

Balanced Scorecard identifiesthe organisations strategic

objectives. Risk managementprocesses then evaluates

these objectives to identifyrisks to their achievement andmitigation activities required;

these activities are thenmonitored through the

Balanced Scorecard reviewprocess

Balanced Scorecard helpsorganisations to do the rightthings, while BEM helps to

do things right usedtogether they can ensure that

the organisation does theright things right

Economic Value Add (EVA)uses specific financialmeasures to evaluate

organisational unitperformance Balanced

Scorecards financialperspective can accommodate

these particular measures

Balanced Scorecard identifiesthe high level strategicobjectives and actions

required to deliver these thestrategic planning process

translate these objectives andactions into detailed

implementation plans



Best Practice Design & DeploymentUse multiple Scorecards to align the organisation

26 November, 2002 DLO / Balanced Scorecard Project 2002 / Outputs from 2 Day workshop (14 - 15 November 2002)Page 9

2GCActive

Management 2GC Limited, 2000

SatisfyHMG

Out

com

esA

ctiv

ities

Defence Logistics Organisation Balanced ScorecardStrategic Linkage Model (draft)

Do performance management

Improve asset management

Improve planning

Do customer relationships

Improve financial

management

Sort out the organisation

Relationship with suppliers

Communicate with external stakeholders

Do process reviews

Satisfied Front line commands

Improved process doing things

better

In -year financial

management

Support to current ops

Reduce TOCs by 1.225 bn March 2006

DLO has a good reputation

Appropriate org. and skills in

place

Deliver outputs to customers

(CSAs)

Deliver strategic plan

Bought - in goods & services are

good value

Deliver outputs within budget

Training

Set up performance management

system


2GCActive


SatisfyHMG

Out

com

esA

ctiv

ities




Improve planning


Improve financial

management




Do process reviews



better

In -year financial

management





place


(CSAs)



good value


Training


system

Top Level

ExternalStrategicFactors

Second Level

LocalStrategicFactors


2GCActive


SatisfyHMG

Out

com

esA

ctiv

ities




Improve planning


Improve financial

management




Do process reviews



better

In -year financial

management





place


(CSAs)



good value


Training


system


2GCActive


Defence Logistics Organisation Balanced ScorecardDraft Destination Statement Text 2007/08FINANCIAL & RESOURCES (FR)

FR1 [11 votes] DLO have reduced total operating costs by at least 1.225 billion achieving an up to 17% reduction in annual outputcosts from the STP02 baseline (CR to provide figure to update to 2008)

FR2 [14 votes] The value of DLO balance sheet assets is 50% lower than the STP02 baseline

FR3 [14 votes] DLO has 20,000 staff (against STP02 Baseline) with no more than 5% in HQs

FR 4 [19 votes] DLO understands the cost of its outputs and can explain them

FR5 [4 votes] Irreducible spare capacity is 80% utilised by third partiesORGANISATION & CULTURE (OC)

OC1 [27 votes] DLO has reduced layers of management to enable a leaner, flatter less bureaucratic organisation to emerge

OC2 [4 votes] DLO has an effective workforce with high levels of satisfaction and motivation

OC3 [2 votes] DLO has a suitable skill and experience profile to meet current and future business needs

OC4 [15 votes] DLO has defined accountabilities and responsibilities for and between all layers of management (e.g. HQ functions, ServiceProviders, IPTs)

OC5 [] DLO has responded to and exploited new opportunities and threatsEXTERNAL RELATIONSHIPS (ER)

ER1 [8 votes] DLO has achieved its SDA targets (of %) ER1a [8 votes] DLO has achieved its CSA targets (of %) ER2 [6 votes] DLO has delivered the agreed levels of logistic support to

current operations ER3 []DLO has complied with legislation, departmental regulations, and

directives ER4 [8 votes] DLO has demonstrated year on year increases in the

effectiveness and efficiency of its supplier base. ER4a [8 votes] DLO has an effective strategic approach to future

procurement across the business ER5 [12 votes] The DLO provides expert logistic advice and operational

planning to contribute to MOD decision making

ACTIVITIES & PROCESSES AP1 [20 votes] Performance and risk management is, timely, accurate

and objective, and is the basis of decision-making by the DLO Management Board

AP2 [1 vote] DLO has in place capabilities and processes to manage its relationship with key customers, suppliers and other stakeholders

AP3 [14 votes] Coherent end-to-end logistic processes provide the most cost effective support to customers whilst delivering full operational capability

AP4 [9 votes] DLO maintains the optimum decider-provider split to maximise operational capability at minimum cost

AP5 [6 votes] All common DPA-DLO activities have common processes in place

AP6 [8 votes] The DLO has coherent knowledge management and information systems to meet its defined business needs

AP7 [12 votes] DLO has financial systems that allow timely, comprehensive, and accurate financial data including output costing to be widely communicated

AP8 [1 vote] The DLOs STP process properly captures all support costs and we capture STP costs for EP options

AP9 [6 votes] All business change initiatives are presented with full business cases and tracked to ensure benefits are delivered

AP10 [3 votes] All IPTs have costed through life management plans inplace

AP11 [] DLO has effective electronic business processes in place AP12 [] DLO has maximised its opportunities for collaborative support

with its allies AP13 [] The DLO has a business plan that will deliver its strategic plan

and logistic vision

[votes are explained on next page]

Third Level

LocalStrategicFactors


2GCActive
































and logistic vision


Ensuring all BalancedScorecards add up to

deliver higher level needs isa collective responsibility of

the level

Strategic LinkageModels relate todelivery of the



2GCActive
































and logistic vision


Cascading is primarilythrough Destination

Statements



Best Practice Design & DeploymentMaintain your Balanced ScorecardFor a Balanced Scorecard to continue to beuseful over time, several elements must be inplace:

Reporting tools

This needs to be owned, managed andresourced explicitly by the organisation:automation should be a cost-benefit driven

Supporting ongoing use

The organisation needs the ability to respondto problems with the use and management ofBalanced Scorecard (e.g. train new users)

Annual reset capability

The organisation needs to be able to resource,manage and co-ordinate periodic updates /reviews of the Balanced Scorecard

Evolution of use and implementation

The provision for expertise that understandsthe wider picture of Balanced Scorecard andhow it might integrate with future and currentprocesses and how it can be improved

Ongoing Use /Support

Evolutionof Use andImplementation

ResetCapability

BSCSystem

Reporting Tools



Best Practice Design & DeploymentFive actions to realise the benefits

Strategies must be updated as the internal and external environments evolve Strategic Objectives and Measures must evolve to stay relevantMaintain

Balanced Scorecard can be an effective top-down and bottom-up communicationtool:

Use it to communicate: This is what we expect of you

Communicate

Balanced Scorecard is a vehicle to drive behavioural change If the status quo is maintained, the Balanced Scorecard is adding little valueAct on

Only through discussion can the causes and implications of the performanceresults be fully understood

Make it an item on the management agenda!

Discuss

Performance reports must be regularly reviewed by the accountable managementteam

Anything less is pure bureaucracy!

Report

LogicRequirement



Preparing for implementation

Section Summary:

Not a trivial exercise need to get sponsorship andsupport at highest level

Implementation must involve all managers, so needto get consensus about project before you start

Will take at least three months up to 2 years inlarge / complex organisations so make sure youhave time / budget / will power to do this

Project design is critical to success

Only get one shot at this type of project you needto be very sure that youll get it right first time

Clever design of the methods used can lead tosubstantial improvements in ownership of BalancedScorecards, plus save lots of time and money

External Expertise can be very valuable

External consultants will not be able to tell you whatthe right measures are only you know that butthey will be able to share the benefit of theirexperience of carrying out similar projectselsewhere.

Typically projects with external support use lessinternal time / resources, are completed morequickly, and result in higher levels of ownership andsatisfaction than projects done by internal teams

Something else?








Preparing for implementationGet it right first timeBuilding a Balanced Scorecard requiressignificant management time and energy

Failure to get the design right typically resultsin the project failing, or the BalancedScorecard being abandoned over time

You only get one shot at glory you must getthe design right first time!

Management teams will only make thisinvestment once every few years

Dont start too soon plan properly andensure full involvement of all key resources:

Content experts (the management team)

Process experts (internal or external)

A simple checklist helps get you into the rightframe of mind:

Question 1 - What are you managing?

Question 2 - Who is managing (what)?

Question 3 - What do you want performancedata for?

Question 4 Will using a framework help?



Preparing for implementationSponsorship and communicationsEffective communication is not generated bya one-off effort it requires dedication,commitment and patience to ensure it issustained throughout the change

Visible commitment and active communicationfrom key sponsors

Project sponsor: ~50% of project time oncommunications initially

Executive team: ~30% of project time oncommunications initially

Clearly defined communication roles withdedicated time allocated

Clearly outlined areas of communicationresponsibility

Input from all content experts driving thechange

Core team to co-ordination and ensureconsistency

Listen to concerns at all levels in theorganisation and act to rectify them

Prompt responses to feedback

Integrate into Board/Steering CommitteeAgendas



Preparing for implementationFacilitation is always better than consultancyWhy is facilitation better than consultancy?

The management team will always know moreabout what they want to achieve than anexternal (or internal) consultant

The guess comment edit approach leadsto very generic outcomes being adopted asthese are the only ones that can be clearlycommunicated both ways

The same problem applies in reverse when itcomes to signing off the externally driven design

However long you spend trying to work outwhat is in the proposed design

You wont really work it out the way thedesigners did

Your colleagues will work it out differently(or may, but you wont easily find out)

Example: Only one of the pictures on the right isthe right way up

Which one is it?

You cant know for sure only an insider (theartist for example) can tell us

Use consultants to facilitate your project ratherthan do it for you



Preparing for implementationJoint teams bring the necessary mix of skills

Knowledge of companystrategy

Intimacy of the boardPolitical understanding

Access to the managementteam

Credibility with managementteam

Sponsor (senior)

Facilitation skillsProject design skills

Workshop designProcess knowledge

ExperienceExpertise

Time available to do thisOrganisational liaison

+

Management Team(Scorecard Owners)

brings:

Project Team(Internal Team + External Support)

brings:



Preparing for implementationHow 2GC can help

If you are exploring Balanced Scorecard for the 1st time wecan help:

Building a case for change

Giving basic training

Providing board briefings (or simply call for a chat)

If you are starting a Balanced Scorecard project we can help:

Supplying advanced training

Designing the Balanced Scorecard project/programme

Giving presentations and briefings

Providing facilitation / project support

If you already have a Balanced Scorecard we can help:

Briefing the Board on the latest Balanced Scorecarddevelopments

Auditing existing Balanced Scorecards

Redesigning / resetting existing Balanced Scorecards

Providing coaching support

Integrating Balanced Scorecard with existing managementsystems

Supplying independent advice on software selection

2CG Project Locations



3rd Generation Balanced ScorecardTo find out moreVisit 2GCs Web Site

We focus specifically on strategic controland performance measurement issues,and have a wide range of workingpapers, FAQs, and presentations todownload on these topics

The site also has a recommendedreading list that covers relevant topics,and the Weblinks database of relevantInternet sites

Contact 2GC

Let us know if you have a question youcant answer, well do what we can tohelp email to [email protected] orcall on+44 (0) 1628 421 506

ScoreCard 3rd Gen

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