Developing Performance Measures and Balanced Scorecards
There is the traditional scorecard, then there is the truly balanced scorecard with C3 inside. The promise of a strategic management system that balances operational and financial measures of success has only been partly realized by standard approaches. Such scorecards generally do a good job of balancing dimensions 5 thru 8 of the 8 Dimensions of Excellence. These four areas are of high priority to the producer-centered culture.
Our observation is that the balanced scorecard concept, both as initially conceived and as most often practiced, fails to balance customer interests (the Voice of the Customer) with internal producer concerns.
A balanced scorecard with C3 inside fully integrates all 8 Dimensions of performance. For example, Dimensions #1 and 2 address customer desired and undesired outcomes, respectively. Every strategic plan and balanced scorecard created for our clients includes:
- Customer-articulated priorities regarding outcomes, key products/services and process (the Voice of the Customer)
- Easy-to-understand measures of success for each outcome
- Aggressive goals that promote innovation, integration and teamwork
- Accountability assigned to specific individuals for outcome success
- A deployment “roll-down” (vs. report roll up) of these outcomes to the department, function or even individual level.
In contrast, the traditional balanced scorecard used by enterprise leadership today is largely silent on customer desired outcomes. How important is this omission? Consider just a couple examples:
- In a healthcare enterprise, the customer-desired outcome of “good health” is not well-defined or measured. On the other hand, the worst-case undesired outcome of death is much better defined and measured. But the absence of death is not good health. Measures that are good for showing improvement in reducing the occurrence of death and morbidity (undesired outcomes) can easily be mistaken as measures of good health. Just because the customer doesn’t die is no cause to celebrate their good health.
- In a financial services enterprise, the customer-desired outcomes of “wealth” or “financial security” are not well-defined or measured. Having money in an account is not equivalent to wealth.
In a business-to-business relationship, your customers’ desired outcomes may include increased profitability, growth in market share, improved customer satisfaction and other results. Their success in any of these areas that can be attributed to your contributions makes you a valuable strategic partner.
In a business-to-consumer relationship, your customers’ desired outcomes may include increased personal time, enjoyment, safety, security, good health, more discretionary funds or improved quality of life. Customer loyalty, sustainable enterprise success and other benefits flow to the customer-centered enterprise that addresses customer outcomes in its balanced scorecard.
There are many other virtues of the customer-centered balanced scorecard. The 8 Dimensions of Excellence framework is used to create strategic direction linked to daily work. This is accomplished through facilitated planning sessions and/or in-house workshops, customized for your unique situation. The article of the same name, Article #3, “Balance Your Balanced Scorecard”, outlines some of the key 8 Dimensions concepts.
Deliverables Can Include
- Definition, measures and numerical improvement objectives covering all 8 of the 8 Dimensions of Excellence.
- Integration of the balanced scorecard at the enterprise level with the Strategy Map. The Strategy Map is a concise document with outlines enterprise strategic outcomes, core values, measures of success, target product products most likely to constrain or enable outcome success and accountability for improvement.
- Clear linkage between enterprise level measures and those relevant at the individual business unit function or department level within the enterprise.
- Ability of individual contributors to see the relationships between their work and the strategic work of the enterprise. Simplicity of structure and language, enabling every employee to understand how strategic direction is connected to daily work and measures of success.
Description of Approach
Available through dialog with Rob.