BSC Designer – Balanced Scorecard Software

Strategic planning is vital for any business.  Recent financial crisis has wiped out many companies from the world business map, while hundreds of businesses appeared to be unable to respond to challenges of economic meltdown.  Any company should have comprehensive goals and measures to reach them.  In this sense balanced scorecard system is one of the most popular but at the same time controversial business performance measurement tool created in 1993 and used all over the world ever since.  As any revolutionary invention in the field of business management and strategic planning balanced scorecard system has its supporters and those who doubt efficiency of this tool.  As a result, there appeared numerous myths and misconceptions about Balanced Scorecard System (BSC).

There are several reasons why managers have certain misconceptions about Balanced Scorecard System.  One of the reasons is an aggressive advertising campaign which sometimes presents Balanced Scorecard System as a treatment for all “illnesses” which boosts company performance and immediately increases revenue.  Lots of managers view balanced scorecard system as a robot that runs business.  Who doesn’t want to control company performance and reach strategic goals by monitoring several figures on the dashboard?

Sure, Balanced Scorecard System has received its portion of criticism, and no one claims this is a perfect solution of all business problems.  At the same time, balanced scorecard system proved to be quite effective if applied properly.

So what is the truth about Balanced Scorecard System?  As they say the truth is the golden mean – you don’t have to believe in the extreme criticism, but at the same time it is unwise to view balanced scorecard system as a magic tool.  Inefficient use of balanced scorecard system may cost companies big money.  That’s why it is imperative to dispel myths about this performance evaluation tool.

1. Balanced scorecard system helps create effective corporate strategy.

BSC works from the top

Well, Balanced Scorecard System is the tool which implements goals and links strategic and operational management based on key performance indicators and relations between them.  Balanced scorecard system is built from the top which means that strategic goals are formulated into individual elements that become goals of the linear management.  So, it is easy to guess that if wrong strategic goals are set this will result in mistakes in the work of individual employees and goals/key performance indicators of individual departments.  Eventually the strategy will remain just a theory, no matter what measures of personnel motivation were taken.  This is not something business owners would want to happen to their companies.  It is also important to keep goals realistic.  Imagine that you set a goal of wiping out all competitors in one year, while your current market share equals 2%.  Obviously all measures to reach such goals will fail and balanced scorecard system will turn out to be helpless. We need to take into account human factor.  Goals are formulated by people.  It seems like no software and no IT solution can change such course of things.

2. Balanced scorecard system is effective for all organization and needs no other additional tools of business management

This is the way many managers tend to think – balanced scorecard system is a major tool or a treatment for all “business illnesses” which needs very little time to turn a small company into an international corporation. NBA slogan “Where amazing happens” does not work here.  There is no magic in business.  If a company has a very complex structure in which there is no fruitful cooperation between departments and there is no strategic planning, Balanced Scorecard System will not be helpful and will remain just a pile of useless documents with figures and graphs.  Successful implementation of the Balanced Scorecard System does not force company management to give up traditional planning and budgeting methods, although they undergo certain changes.

One should be very careful when implementing Balanced Scorecard System in the developing markets. As known such market are volatile.  It would be quite problematic to introduce changes in BSC if market conditions drastically change every three months.  Stability is one of the preconditions for successful implementation of Balanced Scorecard System.

3. The more key performance indicators, the better.

Top managers do not need to control a large number of KPI

This misconception is based on a manager’s desire to control operational part of business activity. Such managers mistakenly think that if they control more indicators, employees would work better.  However, the more does not always mean better.  It is very difficult to process such huge amount of information.  Moreover, there is no need to do that.  A top manager would lose much time if he attempts to control such KPI as expendables per employee, or daily reject item rate per employee.  Balanced scorecard system is a tool to reach STRATEGIC goals.

To the contrary, there is a misconception that the less KPIs are measured, the more effectively Balanced Scorecard System works.  A top manager is convinced that he needs one or two KPI that will make it possible to evaluate business performance and control its development.  Well, it is possible theoretically, but in such a case a top manager looks like a business owner who doesn’t take part in strategic planning and operations, pain he’s attention only to net revenue.  Under such circumstances neither Balanced Scorecard System nor other tools will help.

A manager’s dashboard should include only those KPIs which directly influence reaching strategic goals, not more not less.  As a rule a number of KPIs in the traditional set varies from 15 to 25.  Only in such a case Balanced Scorecard System can really work and live up to the expectations of business managers and owners.

4. It is impossible to use balanced scorecard system without ERP solutions.

Many top managers do not want to use complex Corporate Information Systems to work in combination with Balanced Scorecard System. “Well, my employees can make some mistakes, and as a result I will get the wrong data in the form of weird columns full of figures.  It is better to have a look and diagrams with comments and instructions,” many managers would say.

In fact Balanced Scorecard System automation is a must only often it has been successfully implemented and tested.  There is a big risk to distort information.  Employees may not feel confident in operating the program while the software itself is not easy to use.  As a result it produces pressure on management system.  Besides, in 40% of cases Balanced Scorecard System undergoes changes during the first half year of implementation, and changes in software solutions require additional investments.

There are some examples of companies that first used simple ways to implement Balanced Scorecard System.  For instance, MS Excel was first used to automate the process.  This program is known by most office employees, and only sometime later sophisticated automation tools are introduced.  As you can see the company management gives employees opportunity to test the system and see how it works (learn its mechanics) before using ERP systems.

5. It is easy to develop and implement Balanced Scorecard System without professional assistance.

Implementation of BSC System is not as easy as it may seem

This is the most common myth about Balanced Scorecard System.  Such statement is articulated by top managers who start developing the system.  They do not only lack experience in this field, but also have no idea about under water rocks and obstacles in the way of “manual” implementation of Balanced Scorecard System.  There are no qualified employees who are ready to take this serious job, no necessary tools for personnel, and what is more important there is no time to do the job.  As a result chances of successful implementation of Balanced Scorecard System equal to zero.

Norton and Kaplan (creators of BSC) often say that only 27% of top managers are satisfied with independently implemented Balanced Scorecard System, while this figure increases to 93% if Balanced Scorecard System is developed and implemented by qualified specialists. But as they say, a man is the king in his house. It is up to the top manager to make a final decision.

5 most common myths about BSC system

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Intro

The earlier articles described basic the operations aimed to creating and managing categories and indicators. But more features are to be added and now it is time to show data management within time progress. It is certain that business is a constantly developing structure and its indicators’ values are time changed as well. This article will guide you through the time management process in Balanced Scorecard concept and in the particular software product BSC Designer.

The following features and tools related to time points with BSC Designer will be described:

• What the calendar is and where is it placed;
• How to assign values for indicators for different dates;
• What program shows if there was not value assigned for certain item for certain date, but you have selected this date.

Calendar

While working with the program viewing strategy tree tab in top right corner the calendar could be found. BSC Designer fills up its calendar by taking the information directly from the user’s operation system’s date. That is why the current date is always boxed. There is no clock showed in the program but there are dates, months, years. Month and year could be found and changed on top of calendar’s field, the right vertical line shows weeks from the beginning of the year and all the other field’s space presents days of the week and dates.

The calendar field

In order to select the particular date of the calendar just click on it. If some other month is needed use arrows on top of calendar field until the proper month is selected. If some other year is needed click once on sign the current month and year like “November 2009”. Calendar field will be changed into year-and-month mode and clicking on arrows will allow selecting of the year and left click on month will select it as well. After the proper moth and year is selected click on the date to choose it.

Selecting the certain date: November, 3

Selecting the certain month: August

Selecting year and month: February, 2006

How to assign values for indicators for different dates

In the article “How to manage indicators and performance values with BSC Designer” values’ management was described. But referring to time line every indicator’s value might be changed as well. BSC Designer’s calendar function allows user to input values for the certain date. That function makes it possible for managers and specialists to fill up the project with actual information for every indicator. Also a monitoring process could be easily performed by top management with help of the program’s calendar function. Viewing the certain date a manager could see all the values starting with the whole project’s performance value and finishing with the particular indicator’s value.

In order to assign values for indicators for the certain date at first the date needs to be selected. The process of selecting date was described in previous paragraph. As an example select yesterday date. After the date has chosen click on any indicator and change its value. Certainly the performance of updated indicator will be changed as well as category’s and the whole project’s performance. Now return to the current date by clicking on it in calendar and check out the indicator. As you can see some dynamics appeared. It could be viewed on the graph located right under the calendar field. The graphs and diagrams will be fully described in future how-to articles. Using this simple logic of filling up the project with up-to-date information every indicator could be managed. Congratulations! The project now starts living its own life!

Changing yesterday’s value of KPI

Return to the current date – dynamics appeared

Dynamics also appeared for the whole project (“Balanced Scorecard” in our example)

Updated and not updated signs for certain date

At first indicator’s values for few more dates are to be added. Let’s fill up the project with KPI’s values within 3 days including current date.

KPIs have been changing for 3 days

Those three dates are now showed with enhanced font in calendar field. Let’s try to click on the date before any changing been applied. In current project this could be November, 15. As you can see every indicator has Grey color meaning that it was not changed. But if one of those 3 dates is selected a blue color of indicators as well as little “up” and “down” arrows will mean that some dynamics took its place.

Selecting certain date the item was not updated on

Selecting certain date the item was updated on

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This is the second part of the article “How to manage categories and KPIs using BSC Designer’s functions”. The beginning might be found here.
The following part will describe how to:

• Add new measure units into the indicators’ value parameter;
• Fill up the project with additional information about every category and indicator;
• Use file’s attachment function;
• Find elements in the project’s tree.

Adding new measure units

In the article “How to manage indicators and performance values with BSC Designer” KPIs values were mentioned. Also the difference of Score and Percentage value units were described using examples. Default BSC Designer’s settings allow to use only those two values’ measure units but what if the KPI cannot be measured neither by score nor by percents? “Cash flow” KPI in “Financial perspective” category could be a good example. It is much more convenient to use USD as a measure unit for this indicator.

In order to add new measure units open “File” menu on top and select “Properties”. Then choose the tab “Measure Units” and click on “Add” button. A new measure unit called “New” has been created. Erase the text “New” and type “USD” or whatever unit is needed instead. After that click on “Apply” button to save changes and click on “OK” button to close dialog window. Create the new indicator using the way described in this article. Now go to the new indicator’s properties bottom dialog field and change the “Measure” option, selecting “USD” sign instead of “Score”. After that set maximum amount by typing for example “3000” in “Max” field and set “Min” field as “-1000”. Let the “Value” be “1500”. Well done! The new measure unit had been added and is already in use in one of KPIs.

File -> Properties

Adding new measure unit named USD

Selecting “USD” as measure unit for the new KPI

Descriptions

To continue filling up the project indicators’ and categories’ descriptions are to be added. Descriptions’ fields are located in bottom properties fields of each tree element. Describing categories and indicators might help all the managers and specialists understand the purposes of it and find out the most perspective way to execute task. It also plays a role of database in BSC project.

In order to add description select any category or indicator and find the “Description” field and the “Target Description” field (for indicators only). Type the information in the fields and click anywhere on the tree dialog to apply changes.

Adding description

Files’ Attachment

Sometimes it is not enough to write descriptions. More complex data like charts, long text files, multimedia files (images, sounds, videos) could be needed to be linked with any indicator or category. That is why BSC Designer has a files’ attachment function. Using this function any specific documents like orders, multiplex charts and schemes could be added as well as video and audio instructions and descriptions to any category or indicator. Also a great advantage could be gained of multiple-edition web documents usage (for example Google Documents service). The attached file could locate on local hard disc or in the internet.
In order to add attachments select any category or indicator. Then right click on it and select “Edit attachment list” in pop-up menu or click on “Initiatives” button on the bottom dialog field. Now click on “Add File” button to attach a file from the local computer or click on “Add Link” button to attach any file in the Internet. Then double click on the selected file will open it using the software installed on the user’s computer. Pay attention not to delete the files! BSC Designer creates links to the files making it available to open files directly from BSC project but it does not save the files somehow!

“Initiatives” button

“Attachment” field

“Find” function

BSC project might grow up to a huge tree and it could be useful to find whatever indicator or category is needed in a short time. The best way to find the element is to use “Find” function that is realized in BSC Designer. Just few letters of any word used in the name of sought-for element might help to find it.

Let’s use this function to find “Number of products manufactured monthly” KPI. Click on “Edit” button in the top menu and select “Find …” sign. Now enter of the unique words or part of it. Let it be “manu” – the part of “manufactured” word press “OK”. Congratulations! BSC Designer’s just found the needed KPI.

Edit -> Find …

“Find” function dialog field

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Intro

Finishing KPIs management’s description a few more functions are to be noticed. Most of them are used for user’s convenience purpose rather than the program proper work. We understand that company’s management process sometimes is an extremely complex thing to do so BSC Designer aims to be a perfect tool even not only referring to Balanced Scorecard concept but also to linking the database objects among the organization’s strategy tree and to other helpful features.

This part of the article will show how to:

• Move elements up and down;
• Execute undo and redo functions;
• Copy, cut and paste elements.

Up and down movement

Moving categories and indicators could help the program’s user to structure the project’s tree according to any logic direction. One of the reasons to reconstruct the tree could be categories’ weights. Let’s open the project in BSC Designer and reconstruct the tree using the way of moving categories with bigger weight values upper than categories with less weight values. In order to do make movement select particular category or indicator and click on “Move up” or “Move down” buttons with arrows images in the toolbar right above the tree dialog field. After the movement is finished the project’s tree becomes sorted like on the screenshot below.

Movement arrows

Undo and Redo functions

Like many other programs BSC Designer has such very useful functions as Undo and Redo. Specifically Undo is a command to erase the last change done to the project reverting it to an older state. Oppositely Redo is a command reverses the undo or advances the buffer to a more current situation. Referring to the current BSC Designer project let’s pretend the accident deleting of “Internal process perspective” category! In spite of the pop-up dialog window like “Are you sure want to delete category?” such an accident could happen in real as well as some other unexpected action. In order to revert the project’s state click on “Undo” button in the central line on top toolbar. Congratulations! “Internal process perspective” category is back!

Ooops! The category is missing

The category is back thx to Undo function!

Copy, cut and paste functions

Besides a “copy as text” function BSC Designer has a function of copying, cutting and pasting such elements as categories and indicators including all the values, statements and descriptions included. Referring to Balanced Scorecard project copying, cutting and pasting could be used to create new elements with parameters alike. Also cutting an element like category or indicator and then pasting it to the same place might help to analyze its role in the project by viewing the performance’s values while it is absent. It could be some other reasons to use “copy”, “cut” and “paste” functions.

To copy the particular element into buffer select it and then click on “Copy element” button in the central line of top toolbar or push “Ctrl” + “C” buttons on the keyboard. The button for cutting element locates right near the “Copy” one or the hotkey “Ctrl” + “X” could be used to cut the selected category or indicator. In order to paste the copied or cut element from the buffer first some area in the tree needs to be selected. After that click on “Paste element” button in the central line of top toolbar or push “Ctrl” + “V” buttons on the keyboard. As an example of copy-paste functions usage the “Complains number” KPI in the “Customer perspective” category will be multiplied.

Copy, cut and paste functions testing

Click here to read the second part of this article

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Intro

Continuing how-to articles we aim to establish advanced viewing of categories and KPIs management. Last time we created the four categories and few indicators for every perspective. Also basic parameters’ weights were changed. But after that more controlling and management operations need to be done in order to organize the project’s proper work linking to a successful business management as well.

Processing categories and KPIs management special measures need to be set to change the performance value of categories and the whole project. Our task will be to understand how to control such parameters as KPI’s values and analyze its influence on the project’s performance.

KPI’s Values

We have already learned that every indicator and category has its weight but it tells a program the only importance of those parameters. To make any summary of the project itself KPIs Values are have to be added. Those numbers describe what percentage or score does every indicator have at the moment. Let’s look at few examples of value to be set.

Percentage Value

Such indicator as “Return on investment” in financial perspective shows the amount of money gained or lost on an investment relative to the amount of money invested. Using BSC Designer with default settings the value of this indicator might be set as the percentage of money gained. If $1,000 invested and 300 have returned at the moment the value of “Return on investment” KPI will be 30 with “%” selected as measure option meaning that 30% of money invested had returned.

In order to set up this KPI’s value select the indicator and change its name into “Return on investment”. Now in the same indicator’s bottom dialog field find” Value”, “Measure”, “Min” and “Max” fields. Then change the Measure option, selecting “%” sign instead of “Score” and also type “30” number in Value field. Leave “Min” field with “0” and “Max” field with “100” that means you measure the percentage from 0 till 100. After that click on the projects tree dialog for changes to become set. Congratulations! The first KPI now has its value!

Setting up indicator’s percantage value

Score Value

The example for score value could be “Number of products manufactured monthly” in internal process perspective. This KPI’s value should show how many products the organization produces during the calendar month comparing to the manufacture plan. Here the actual number needs to be set without any calculations but the maximum have to be corrected according to organization’s plan. If 200 bikes were planned to be produce but actually just 130 were manufactured this KPI’s value will show 130->200.

Let’s input this information into the BSC Designer’s project. Select a KPI in “Internal process perspective” category and change its name into “Number of products manufactured monthly”. Now look at the bottom dialog field where you have just changed the name and type 130 in Value field. Then choose the measure option, selecting “Score” in “Measure” field. After that set a proper maximum number by typing “200” in “Max” field and leave “Min” field as “0”. That is it.

Setting up indicator’s score value

Optimization direction

Not every indicator needs to grow in case of company’s performance. There are several factors that are needed to be minimized. The option of optimization direction choice in BSC Designer is used for such KPIs. Such indicator as “Complains number” in “Customer perspective” category could be a good example. It is certain that the best number of customers’ complains is 0 what means everybody is satisfied with the product or service. So in case of project’s balanced scorecard optimization this KPI’s value needs to look like X->0 where X Is the number of complains at the moment. If the company has 3 complains about its goods there will be the KPI’s score value of 3 with minimize optimization direction.

To fill up the project with this data select an indicator in “Customer perspective” category. Change this KPI’s name into “Complains number”. Now let’s fill up the fields referring to the KPI’s values. Type the number “3” in “Value” field. Now choose the measure option selecting “Score” in “Measure” field. Leave “Min” as “0” and set “Max” as the number of product the company sells monthly or some average number of complains. Let the “Max” number be “100” in our example. After that change optimization direction selecting “Minimize RP = MP * (Max – Value) / (Max – Min)” in “Optimization” field. Click on the projects tree dialog for changes to become set and that is it.

Setting up indicator’s score value to be minimized

Performance

While the new data was input into the project the value of “Performance” were changing as well. The performance is the most important metric in BSC project and it is not possible to change it directly. The performance of the whole project depends on its categories weight and performance values while the categories’ performance depends on its indicators weights and values.

To fill up the project and make its performance proper count at least one more KPI’s value needs to be set in “Innovation and learning perspective” category. Let it be “Illness rate” indicator meaning calculation by comparing employee illness-related absences against planned working time within a month. It is calculated using the formula of (illness-related absence time, days) / (planned working times, days) and has the measure of percents. As we already know the minimize optimization direction is needed to be used in this case and also “%” measure fits here. Let’s set the value of 13% as example. Now every of the four categories has its performance value and it equals 60.26%

Project’s total performance

Minimal project’s performance

In order to look what might cause a zero percent performance of the whole project let’s change numbers in ”Value” field of every KPI as at worst. KPIs “Return on investment” and “Number of products manufactured monthly” have a maximize optimization direction so its values are needed to be decreased down to “0”. KPIs “Illness rate” and “Complains number” have a minimize optimization direction that is why its values are needed to be increased up to maximum number. When all the parameters are set the whole project’s performance value becomes 0 which means the company is not effective at all.

Minimal project’s performance

Maximal project’s performance

To reach the performance of 100% every indicator’s value needs to be set for the best perspective. KPIs “Return on investment” and “Number of products manufactured monthly” have a maximize optimization direction so its values are needed to be increased up to the maximal nuber (“100″ for “Return on investment” and “200″ for “Number of products manufactured monthly”). But “Illness rate” and “Complains number” indicators have a minimize direction of optimization so its values are needed to be decreased down to zero. After the proper changing the whole project’s performance increases its rate up to 100% which means the business works absolutely perfect.

Maximal project’s performance

Conclusion

In Balanced Scorecard concept KPIs are determined within each company or company’s market niche according to organization’s strategy and plans. That is why this article aims to show the logic of KPI’s management process with BSC Designer software so you could be able to set any special parameter you actually need.

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