InetSoft Seminar: Balanced Scorecard Creation

This is the continuation of the transcript of an in-person customer seminar hosted by InetSoft on the topic of "Ingredients for a Performance Management System to Succeed." The speaker is Christopher Wren, Principal Consultant at TFI Consulting.

Continuing our balanced scorecard creation, the roof of our house contains all that strategic stuff. Strategic results is the lintel of the house. The pillars of the house are the strategic themes. The floors of the houses are the perspectives of the performance dimensions. And incidentally the double arrows here are for when you build a private sector scorecard. Financial measures are the top of the food chain, aren’t they?

It's the value of the business to the owners, profitability, revenue cost control and so on. That’s not the case in a public agency or a not for profit. That doesn’t work. The original balanced scorecard model does not work very well for a not for profit or government agency. I mean it doesn’t work for a number of reasons, but the more significant of which is financial is not the top of the food chain. Customer, citizen, war fighter, whatever your stakeholder group here is.

So we always put that at the top or recommend putting that at the top. Be careful. We’ve seen some applications that put financial at the bottom for public agency. That’s a big mistake because what you are essentially doing is arguing that all you need is more money right.

Try going to an OMB budget examiner with financial at the bottom because essentially what you are saying is everything that I need to do create value costs more money. Right? It’s a wrong argument to me. What you want to do is make the argument of cost effectiveness, and all my programs and services are serving citizens or serving the war fighter, whatever the effectiveness calculation yields.

The foundation of the house is engaged leadership, interactive communications, again emphasis on engaged and interactive. Finally, the house you know we’re trying to get to is that high performance organization, a shared vision, and so on, efficient communications processes, and a motivated staff. Now the other way to do this, of course, as shown in this cartoon, the other way to integrate all the stuff is just to add it all up. We don't recommend that but we’ve seen people try to do that.

Is there anything that we have missed? Are there any other ingredients in this process? What else?

After step six, after the strategic initiatives that have been identified, which is usually a short list, when you go through a process like this with workshops, with the different voices in an organization, a lot of new ideas come out. And what happens is on average, we will end up with anywhere from 50 to 150 initiatives that are candidates for the planning and management system.

What we’ll do is put in a prioritization scheme with the workshop to be able to rank these. So you end up with the short list and an A list of maybe a dozen strategic initiatives and a B list and C list. Then the A list goes to funding to budget formulation. Some of those initiatives are things we are already working on but many of them are new ideas that have now risen to the level of strategic.

So that's where we enter the budget formulation stuff. Yeah, we have heard that argument, too. Sometimes there is an argument that financial and customer are really equal. Put them both in the same top position, and use your objectives, your placement of objectives to differentiate between continuous improvement activities for the customer side and for the finance side.

That’s one way of handling it, rather than saying one has to be at the top and the other serving into it. We have done that several times. Anything else, any other ingredients that we are missing to a successful system?

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How frequently should this process start? Usually once a year. The evaluation step, step nine, we will usually do once a year. I mean you are continuously getting performance measurement information, so the evaluation is not, did I get my monthly report. It’s more about the big picture stuff.

It’s funny when we get a call, usually I will go through this kind of pitch to somebody, and they will say, “we really don’t need to do that vision stuff. We have a vision; we have a mission.” When I say, “When was the last time you looked at it, two years, three years, five years?” And I say, “Okay, 20 years even, you hold the record. You just won the record.” And what I will do is I will finesse it by saying, “Well, let me just revalidate it for you.”

And I would say probably 95% of the time we have done this, the vision has changed. When people start trying to connect to strategy through the mission to a vision, they say, “Wait a minute. That really doesn’t sound right now.” I mean what we are trying to do is get people to think. We are not trying to give them a prescriptive way of doing something here.

And once you get people with different voices in the same room thinking and hearing things from different perspectives, there is magic in the room in these workshops, folks. There are ‘aha’ moments where the light bulb goes on for people, many of whom have never seen each other before. So the key to this process working is really good facilitation. You are going to do it this way to make sure you find somebody who knows how to lead because that’s what this is really about.