Business Scorecard: Strategy Mapping
Business Scorecard: Strategy Mapping
Strategy maps are communication tools used to tell a story of how value is created for the organization. They show a logical, step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a cause-and-effect chain. Generally speaking, improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up), which in turn enables the organization to create desirable results.
1. Key areas in the Scorecards and Dashboards BI Style
|Dashboards provide an illustrative representation of business performance across the entire organization.
Dashboards are designed to deliver maximum visual impact in a format optimized for quick absorption, using a combination of tables, graphics, gauges, dials and other graphical indicators, as well as conditional formatting, free-form labels, borders and background colors.
Scorecards provide a visual representation of standard key performance indicators (KPIs) – carefully selected metrics that help enterprises measure and manage performance.
Enterprises can choose from the hundreds of pre-defined KPIs included in the pre-built analytic modules of the MicroStrategy BI Developer Kit or build an unlimited number of KPIs based on a specific methodology, such as the Balanced Scorecard Six Sigma, Activity Based Management or individual enterprise design using the MicroStrategy platform.
Managed Metrics Reports are the cornerstone of Corporate Performance Management (CPM), allowing managers to continually track business performance status.
MicroStrategy successfully achieves these kinds of reports using thresholds and indicator graphics to quickly show attainment of performance goals, trends over time and status checks. By incorporating predictive analysis native to the MicroStrategy platform, our managed metrics reports can also show correlations and projections to help anticipate future business performance.
|Automatic personalization of Scorecard and Dashboard content is a significant feature that requires a robust, secure platform architecture that guarantees data access to only authorized users.
Architecture is secure enough to support any level of user access throughout the enterprise. Scorecards and dashboards designed once and the content can be automatically tailored to each person’s role-based profile, privacy restrictions, security policies or subject-area interests.
2. Building a Balanced Scorecard
The process of building a Balanced Scorecard can be divided into seven steps that can be categorized into three phases:
Phase 1: The Strategic Foundation
Step 1: The organization must be aligned around a clear and concise strategy. The strategy is what feeds the Balanced Scorecard. Therefore a strategic plan needs to be constructed at this stage. This includes the identification of the specific objectives that tell people what to do and a set of targets to convey what is expected. For example, a strategic objective may be to decrease the delivery times by 15% over the next six months through more localized distribution centers. This step is at the heart of Balanced Scorecards as the whole organization needs to be aligned and rallied around strategic objectives and targets set at this stage. A communication plan is also outlined to convey these to stakeholders. This may include the communication of the plan to shareholders through a press conference, administrative staff through meetings and distributors through personal contact etc.
Step 2: The major strategic areas on which the organization must focus are then determined. It is important to restrict the organization to select areas of key importance for strategic success otherwise it can find itself doing too many things. Most organization’s strategic focus is on the stakeholder groups such as customers, shareholders, and employees. Most public limited companies, for example will have “shareholder value” as a major strategic area. The strategic areas should be linked to the strategic goals defined in step 1. For example the strategic goal of having the most innovative product line of hand-held computers by the year 2008 means that the strategic area for the organization to focus upon is product innovation.
Step 3: A strategic grid is built for each major strategic area of the business. Having devised the strategy in step 1 and identified the strategic areas in step 2, these are now translated into a set of grids. As described earlier, Balanced Scorecards are structured over four perspectives: Financial, Customer, Internal Processes, and Learning and Growth. Strategic grids include these four layers. Within each layer, the strategic objectives are placed, making sure everything links back. Trying to develop strategic objectives and placing them into the correct layers for all strategic grids is probably the most difficult step in building the Balanced Scorecard (Kaplan and Norton, 1996).
Phase 2: Three Critical Components
Step 4: Measurements are established for each strategic objective in the areas identified. The measurement criteria provide the targets which can then be used to measure the level of success in achieving them. For each strategic objective on the strategic grid, at least one measurement is required. If there are several measurements for a strategic objective, then chances are that there is more than one strategic objective. Is it possible to have an objective without a measurement? Yes, it is possible, but not having a measurement makes it difficult to manage the objective. It’s best to revisit this objective and ask the question: Why is this objective? Measurement makes it easy to quantify the strategic objectives, asking the question: How well are we doing?
Step 5: Targets are set for each measurement. Measurement alone is not good enough. We must drive behavioral changes within the organization if we expect to execute strategy. This requires establishing a target for each measurement within the Balanced Scorecard. Targets are designed to stretch and push the organization in meeting its strategic objectives. For example, suppose the strategic objective is to improve customer satisfaction and the measurement is based on the number of customer complaints. The average number of monthly complaints is 45 for the last 12 months. A target of no more than 40 complaints could be established. Targets need to be realistic so that people feel comfortable about trying to execute on the target. Therefore, targets should be mutually agreed upon between management and the person held responsible for hitting the target. One good place to start in setting a target is to look at past performance. Past trends can be extended for modest improvement. The strategic goals can also provide clues as to what the targets should be.
Step 6: At this step, formal programs, activities, initiatives or projects are designed and launched to achieve the targets set for each area. The final design step is to close the loop and put specific programs in place to make everything happen. This is perhaps the trickiest part in the entire process. How does the organization actually hit these targets and meet its strategic objectives? What major initiatives must the organization undertake to make all of this happen? Programs are the major projects that facilitate execution of everything downstream within the Scorecard. Some typical examples of programs include quality improvement programs, marketing initiatives, enterprise resource planning, customer relations management and supply chain management. These programs usually have certain characteristics such as:
· Sponsorship by upper level management.
· Utilization of designated leaders and cross-functional teams
· Presence of deliverables, milestones and a timeline
· Requiring resources (people, facilities, allocated budget, etc.)
Phase 3: Development
Step 7: The entire process of building a Balanced Scorecard is repeated in other parts of the organization to construct a single coherent management system. This integrates all parts of the organization and allows successful execution of the strategy.