Balanced Scorecard Designer

Over the last few weeks I have been running an interesting experiment in one of my classes. I gave each student $5 and told them to go turn it in to more. The project is evaluated on these variables:

Each variable is given a range of 1-5 with the extremes being defined

1) Internal team dynamics;
1. Don’t want to do business with this team ever again
5. Will name my kids after my business partners

2) Engage others in helping out with execution;
1. Did it all ourselves
5. An international movement came together to make it happen

3) Utilization of public and community resources (space/tools/software);
1. Just used what we had
5. Multiple community resource holders begged us to come again

4) Effectiveness of execution and repeatability;
1. We have no idea by what miracle it happened
5. We can do it consistently and have trained others to do it

5) Were the customers open to doing more business?
1. Everyone told their friends to run the other way
5. Lots of referrals and invitations to do more business

6) Was it profitable enough for the team to want to keep doing it?
1. Not even if this was the only way I could make money
5. Michael Dell, Bill Gates and the rest of college dropouts got nothing on me

7) Was everything done to minimize risks?
1. I am just glad we are not dead or in jail right now
5. Stakeholders, community and environment could possibly be harmed by this project

Does any of this matter in a really long run?

1. In the long run, we are all dead. – John M. Keynes
5. The impact of this project will matter even after this Universe is no more.

This has been a great success with students quickly exploring many real business ideas and one of them managing to get $80 return on the money, while most made between $7 and $30.  More importantly, they learned a lot about starting a business, mainly that it’s not a pretty theory, but rather a matter of doing something others will pay for. For the next round I have tightened up the requirements and suspect they will do even better.

These eight basic metrics could just as easily be applied to any team, working on any business. These metrics may be hard to ascertain for some businesses, and are way to subjective in other situations, yet these metrics may well be a much better guide to starting a business than many of the more highly specialized metrics that seem to abound.

—

Oleg Tumarkin, JD, MBA, CSSBB is an Adjunct Professor of Business at Lakeland College and Concordia University of Wisconsin. His firm, FutureWorks, in partnership with Bucket Brigade and AKS-Labs provides business coaching and Balanced Scorecard implementations.  His life’s passion is the development of a universal business measurement and management system that would cause management in to the realm of a repeatable, replicable, yet humane and flexible science.

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In any organization, the training element plays an important role in aligning the workforce and the business processes with the business objectives of the organization, which is inclusive of both the existing and new hires. While the training process involves numerous categories spanning across specific processes, skill sets or BPR initiatives, all of which require the ROI (Return on Investment).

A Training Scorecard essentially looks at measuring the efficacy and efficiency of a training program and must ideally focus on finding measurable parameters which are easily quantifiable. Honing the employee skills in sync with the organization objectives and enhancing business performance correspondingly. Focusing on the various dimensions of the training process and linking them with the Balanced Scorecard provides assessable results that can be effectually utilized to measure productivity and quality parameters.

Using the Microsoft Excel Spreadsheet Application, an effective Training Scorecard can be developed which covers various quantifiable parameters that consists of certain metrics and training specific perspectives that derive the net performance of the training program keeping in close check the viability and cost effectiveness.

These programs are designed to benefit the organization and the employees simultaneously by enhancing the competence levels and facilitate contribution the business goals. Now we shall look at the steps involved in creation of a Trainer Balanced Scorecard on the Excel Spreadsheet application that involves the below mentioned process:

1. In order to start creating a Trainer Scorecard one needs to plot the basic objectives of a specific training program as per the requirement in case of New Hire training or Existing training. In case of as new hire training program it is important to comprehensively put together the organization dynamics with all intricacies and corporate details coherently to the new joiner to facilitate effective understanding of the organization and its long term objectives and goals and its views regarding the current market share and its future plans as well. The use of various technical and non-technical aids becomes important in developing the employee performance and form a driving force to induce better productivity and quality. .

1. Once the goals and objectives are at hand, the next step is to allot various perspective groups on the Balanced Scorecard needs to be plotted that form the four major perspectives of training which includes the Assessment Perspective, Training Delivery perspective, Financial Perspective and Learning and Feedback Perspective.

1. Post the determination of the perspectives, the next step is to assign the indicators underneath each perspective. For example, under the Assessment Perspective the four indicators can be put in as follows:

-       Product Knowledge Assessment

-       Functional Skills Assessment

-       Team Work and Goal Assessment

-       Post Training Performance Assessment

The Assessment needs to be derived and measured as pr the type of training imparted, whether to a new hire or an existing employee.

1. Thereafter, finally the task at hand is to put in the values corresponding to the indicators like Weighted Values, Max, Relative Performance and Absolute Performance.

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The Balanced Scorecard approach was strategically developed by Dr. Robert Kaplan and Dr. David Norton in the 90s to devise fresh plans for business success and long term growth and excellence. The Balanced Scorecard is a performance management system that integrates use of metrics to measure the different aspects of an organization’s performance categorized under financial, customer, internal and learning and growth perspectives.

The Human Resource Department is one of the most critical departments of any organization that is responsible for hiring and performance of the workforce that contribute to business success. The HR process in itself contains the scope of developing an individual scorecard that encompasses a host of verticals describing and providing a valuable insight into the HR performance and the people involved in it. The HR metrics involves a wide ranging aspects that facilitates improvising the Human Resource functioning and measure its productivity; besides calculating the efficiency of the key performance indicators with regard to the different HR aspects like leadership, motivation and training that assists in understanding of the HR management corresponding to the Business goals.

The Hiring process entails the most important element of hiring the right employees for the right job that includes the selection indicators and metrics that indicate the desired traits required to develop a capable and competent workforce.

The Training metrics pertains to value addition and development provided to the hired employees in accordance with the strategic goals of the organization and determines the performance indicators to check the training viability and precise requirement, besides the resultant performance.

The Leadership metrics describes the aspects under which the process managers strive to enhance the employee management like improvised security for the employees, reduction in turnover percentage, along with succession planning and employee effectiveness.

Encouraging employees to perform better and give in best always and guiding them to overachieve benchmarks is the key to boosting the performance levels. Further, monetary and non-monetary tools can also be used effectively to perk up performances and motivation metrics soundly describe the indicators inducing enhanced performance.

Another important part of the HR process is the retirement factor and succession planning that requires preparing for filling up critical job requirements and providing adequate training for same to ensure smooth working of the current employees and guide them to sail towards new professional heights.

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Futura, a custom aluminum extrusion company, realized that their employees were their greatest asset in a competitive marketplace, and the foundation of their success in customer service, operations and profitability.  They used the Balanced Scorecard approach to make employee retention and support a priority, implementing a suite of human resource tools and effecting a significant and measurable increase in employee loyalty and satisfaction rates.

Introduction

An international company based in Clearfield, Utah, Futuraspecializes in customized, start-to-finish aluminum extrusion services, including finishing, fabrication, machining and design.  With nearly 60 years in business, the company has built up a niche clientele in a wide range of industries, including home construction, electronics, transportation, retail and more.

The Challenge

Futura was a conscientious company that had already developed a set of financial and customer relationship metrics, and they had also achieved ISO accreditation (an internationally recognized quality designation offered by the International Organization for Standardization).  However, they knew that their most valuable assets were their employees, and that they needed to focus on their human resources infrastructure.  A competent, stable, committed workforce was the key to improved operations, better customer relationships and larger profits.

In fact, in 1995 Futura hired a new CEO, Susan. D. Johnson, because of her “employees first” philosophy. The company wanted to find a way to improve retention, satisfaction and advancement rates among workers, and ensure the loyalty and performance excellence of their workforce.

They needed to build a corporate culture that put employees first and ensured that the benefits of a supported, loyal workforce were measurable in all areas: as measurable improvements in employee retention and job satisfaction, financial growth, organizational efficiency and customer relationships.

The Solution

Starting in 1996, Futura used the Balanced Scorecard approach to create four aligned perspectives: the financial perspective, the customer perspective, the internal operations perspective and the learning, innovation and growth perspective. Goals were developed for each perspective, along with a series of measurements to help them determine how close they were to achieving each goal.

Because employee engagement was considered to be the basis upon which excellence in each perspective was built, the learning innovation and growth perspective was prioritized, with a host of new tools created to engage employees and measure improvements in the workforce.  These new measurement and engagement tools included:

• “Employee Friendly Initiatives at Futura” survey, a survey that listed more than 60 employee benefits and encouraged staff to identify benefits that were a priority.  Prioritized benefits, such as dependent and spouse scholarships, flex-time options and short-term loans, were then added to employees’ benefits packages.
• “Birthday Review,” an interview conducted with each staff member on their birthday to determine their employment satisfaction levels and identify gaps in their on-the-job support.
• “Leadership Survey,” an opportunity for employees to provide feedback on the levels of courtesy and support their superiors show them.
• “Certification and Training Matrix,” a certification program that encourages employees to improve their skills and cross-train, resulting in a more upwardly mobile and flexible workforce.  The matrix also helps clearly define the pathway to advancement for employees at all levels.
• “Annual Performance and Personal Development Review,” a thorough and holistic performance review process that evaluates past performance, sets future goals, explores how employees can enrich their personal and professional lives and allows them to provide input on how their superiors can better support them.

The Balanced Scorecard helped Futura to identify the right tools and determine meaningful ways of measuring their effectiveness.

The Result

Within three years of implementing a Balanced Scorecard approach,Futura has met—and in many cases exceeded—their human resource goals.

The Balanced Scorecard helped the company to put the focus on nurturing their human resources by implementing an engagement and retention strategy with a set of holistic tools, including surveys, performance reviews,attractive benefits that reflect the specific needs and priorities of Futura’s workforce, clear certification pathways and opportunities for employees to “manage up,” providing valuable feedback to their superiors and leaders.

This allowed the company to exceed their employee satisfaction goal of 3.2 out of a four on their annual Gallop employee survey.  Within three years, employees were returning average scores of 3.26.

Most importantly, Futura was able to increase staff retention significantly as a result of these efforts, resulting in a 33% reduction in turnover.  The company now boasts a retention rate that is far above the industry average.  Industry-wide, the turnover rate is approximately 50%; Futura’s is a fraction of that at 10.7%.

Trademarks mentioned in this article belongs to the respective owners.

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Balanced Scorecard in the traditional execution allows us to measure the most crucial but also the most painful variable. This variable is management team’s development:  learning and growth. After all, given enough time, the right management with the right skill sets can fix anything, or even build the whole organizations from scratch. They would find a way to locate and meaningfully organize the resources necessary to produce the desired outcomes. No organization can go above and beyond their management talent and in most organizations, the entire business is nothing more than magnified picture of the eccentricities of the executive team.

However, the Balanced Scorecard does not hold the spotlight to the management’s learning and growth too tightly, allowing the leeway to pick the the Key Performance Indicators that either don’t really monitor their performance in a meaningful ways, or worse yet, apply to only lower echelon of workers in the organization.

Two thousand years ago,  James, brother of Jesus, made a statement that I think is highly applicable to managers today. Just substitute the word teacher for the word manager and you will get the point:

“Not many of you should presume to be teachers, because you know that we who teach will be judged more strictly. We all stumble in many ways. If anyone is never at fault in what he says, he is a perfect man, able to keep his whole body in check.

When we put bits into the mouths of horses to make them obey us, we can turn the whole animal. Or take ships as an example. Although they are so large and are driven by strong winds, they are steered by a very small rudder wherever the pilot wants to go. Likewise the tongue is a small part of the body, but it makes great boasts. Consider what a great forest is set on fire by a small spark. The tongue also is a fire, a world of evil among the parts of the body. It corrupts the whole person, sets the whole course of his life on fire, and is itself set on fire by hell.

All kinds of animals, birds, reptiles and creatures of the sea are being tamed and have been tamed by man, but no man can tame the tongue. It is a restless evil, full of deadly poison.

With the tongue we praise our Lord and Father, and with it we curse men, who have been made in God’s likeness. Out of the same mouth come praise and cursing. My brothers, this should not be. Can both fresh water and salt water flow from the same spring? My brothers, can a fig tree bear olives, or a grapevine bear figs? Neither can a salt spring produce fresh water.”

I believe that the description he has for the tongue and for teaching readily applies to the management of the organizations, as well. It is a lot easier to manage millions of dollars than it is to manage oneself and our own tongue.  One management decision can influence the fate of many resources, entire organizations. A failure by the manager is by far more devastating than that of an entry level employee. So, managerial development is essential for the organizational growth and development. It is crucial for organization’s health and survival that there is a significant emphasis on the development of the organization’s management team, or the organization is gambling with that which is the foundation of all else.

In most organizations you see precisely the opposite:  a lot more effort is spent on measuring and managing the performance of lower level employees than on those of the executive team. Nobody wants the spotlight pointing toward them. Yet, who has the most impact on the organizational performance? Is it the person who is capable of sending a shipment to the wrong location, or is it a person who can hire and fire that person, or a person who can institute policies and processes that eliminate the opportunities for these kinds of mistakes?

With that said, what are some good Key Performance Indicators that would help an organization insure that there is a culture of learning and growth that permeates its executive ranks? Well, the output variables are pretty easy to track: Engagement of the workforce, a clear result of great management can most easily be tracked by the number of improvements that are recommended by the workers and are implemented per employee.  Unlike good attendance or other such measures that can be forced by just paying or punishing for them, it cannot be achieved without a good working relationship between the managers and the workers. But while this is a valuable Key Performance Indicator, it looks at the output not the input.

Another variable that might serve as KPI for good managers, is dollars or Return on Investment generated by the new initiatives of the management team, but this variable takes years to materialize and can be affected by a bunch of factors that have nothing to do with the talents of the management team.

In all reality every KPI on the scorecard is a reflection on the management, but they are mostly all outputs.  In the next article I will discuss some inputs of good management.

—

Oleg Tumarkin is an Adjunct Professor of Business at Lakeland College and Concordia University of Wisconsin. His firm, FutureWorks, in partnership with AKS-Labs provides business coaching and Balanced Scorecard implementations.  His life’s passion is the development of a universal business measurement and management system that would cause management in to the realm of a repeatable, replicable, yet humane and flexible science.

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Event: Kaplan & Norton Balanced Scorecard Certification Boot Camp March
Date: March 22-25
Where: London

Price: from €3,995

Who should attend:Balanced Scorecard Directors, Managers and Co-ordinators, Executive Directors, Managing Directors, Vice Presidents, Chief Executive Officers, General Managers, Quality Managers, Financial Directors and Managers, HR Directors and Managers, Operations Managers, Corporate Planners, Marketing Managers, Strategic Managers, Strategic Planners, Performance Analysts

Topics:

• Developing Strategy with the Balanced Scorecard
• Mapping Strategy with the Balanced Scorecard
• Cascading Strategy with the Balanced Scorecard
• Executing Strategy with the Balanced Scorecard

More information: Palladium Website

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Event: Kaplan & Norton Balanced Scorecard Certification Boot Camp March
Date: March 15-19
Where: Ottawa, ON Canada

Price: $5995

Who should attend:Balanced Scorecard Directors, Managers and Co-ordinators, Executive Directors, Managing Directors, Vice Presidents, Chief Executive Officers, General Managers, Quality Managers, Financial Directors and Managers, HR Directors and Managers, Operations Managers, Corporate Planners, Marketing Managers, Strategic Managers, Strategic Planners, Performance Analysts

Topics:

• The Kaplan and Norton Strategy System
• Balanced Scorecards and Dashboards
• Strategy Development
• Recap of Stages
• Test & Adapt
• Executive Leadership
• Strategy Translation
• Organizational Alignment
• Human Capital Alignment
• Linking Strategy & Operations

More information: Palladium Website

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We have released a BSC Designer Light – a freeware version of Balanced Scorecard Designer software.

Who will find this tool useful?

• Home users who need powerful of balanced scorecard, but don’t want to buy expensive professional version;
• People who want to start learning Balanced Scorecard concept with free tool;

No more cracks and stolen serials for BSC Designer:

• If you don’t have budget to buy BSC Designer you can now use BSC Designer Light for free.

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BSC Designer online is web-service that provides KPI management functionality.

BSC Designer online is a web-based KPI service, which brings the power of desktop versions of BSC Designer online.

Benefits of online Balanced Scorecard Software

• With BSC Online the information from KPI is represented in a form of diagrams, charts and online dashboards;
• It is possible to integrate this SaaS with other business systems in your company;
• Balanced Scorecard metrics from our commercial library of KPI metrics can be imported into web-based balanced scorecard software.

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