WORKGROUP-LEVEL OVERVIEW. What You Will Learn. What You Will Apply To Your Workgroup

Transcription

1 INTRODUCTION TO PERFORMANCE SCORECARDS WORKGROUP-LEVEL OVERVIEW What You Will Learn 1. By implementing Performance Scorecards, you are adopting an organized, proven method of defining key business outcomes and data as part of your planning process. 2. A Performance Scorecard is comprised of three basic components: Scorecard Summary, Scorecard Glossary, and Scorecard Report. 3. Your organization will benefit in numerous ways when using scorecards to measure and manage performance. 4. Understanding the Performance Scorecard deployment process, associated timeline, and primary roles and responsibilities is necessary to successful integration of measures, performance objectives, and improvement plans into your current system. 5. There are six phases of scorecard development that can be applied to your workgroup. What You Will Apply To Your Workgroup 1. Discuss the need to collect strategic inputs to guide your workgroup in developing your Performance Scorecard. 2. Begin to identify core processes related to key business outcomes within your workgroup, your workgroup s customer segments, and those customers key requirements. 3. Create your plan to collect the inputs needed for your scorecard development process. NOTE: Some of the terms used in this program may differ from organization to organization, so for ease of reading, Richard Chang Associates, Inc. has chosen to use the following terms throughout these materials. Next to each term are some common alternatives. Organization (Company, Corporation) Employee (Associate) Workgroup (Business Unit, Department, Team) Strategic Goals (Strategic Priorities, Strategic Imperatives, Overarching Goals) Key Results Areas (Critical Success Areas, Workgroup Outcomes) Key Indicators (Measures) RICHARD CHANG ASSOCIATES, INC. 1 INTRODUCTION INTRODUCTION TO PERFORMANCE SCORECARDS

2 Introduction To Performance Scorecards (cont.) Agenda Scorecards: The Foundation Of Your Business Performance Management System Measuring Organizational Performance What Is A Performance Scorecard? Scorecard Linkage The Performance Scorecard Management Cycle Performance Scorecard Deployment Process Introduction To SolvNET (Case Study) Performance Scorecard Tiers Phase 1: Collect Scorecard Inputs Creating Vertical Alignment Creating Horizontal Alignment Defining Core Process Chains Identifying Customers Key Requirements Wrap-Up RICHARD CHANG ASSOCIATES, INC. 2 INTRODUCTION INTRODUCTION TO PERFORMANCE SCORECARDS

3 MEASURING ORGANIZATIONAL PERFORMANCE Organizations that effectively manage performance through an integrated and aligned Business Performance Management System achieve superior business results. A Business Performance Management System uses scorecards and good measures as a foundation for effective deployment and alignment of plans. The system begins with the organization s strategic vision, mission, core values, and core passions that in turn feed the Strategic Planning Process. These strategic plans measured by a Performance Scorecard then become the foundation to manage the organization s overall performance. By effectively applying the concepts and methods in the Line Of Sight With Performance Scorecards training and application process, you will contribute to the achievement of the right business results. Business Performance Management System Refinements Review, Evaluate, And Improve Business Performance Management System Rewards And Recognition Vision, Mission, Core Values, And Core Passions Organization-Wide Strategic Planning Process Annual Deployment Cycle Workgroup And Individual Performance Management Process Develop Organization-Wide Performance Scorecard Management Cascade Operating Plans, Budget, And Scorecard Cascading Process Foundations For Achieving Business Performance Results Teaming Process Improvement Project Management System And Skills System And Skills System And Skills Leadership Development System And Skills NOTE: Developed by Richard Chang Associates, Inc., the Business Performance Management System helps organizations achieve superior business results. RICHARD CHANG ASSOCIATES, INC. 5 INTRODUCTION INTRODUCTION TO PERFORMANCE SCORECARDS

4 WHAT IS A PERFORMANCE SCORECARD? A scorecard is a comprehensive set of balanced business measures linked to business strategies and goals. A single scorecard is used at a specific level of an organization an executive team, a vice president, a manager, or a department to monitor, manage, and improve a specific area of the business. In general, a Performance Scorecard consists of three components: Scorecard Summary lists the measures on a Performance Scorecard for the specific performance category measured. Scorecard Glossary defines the measures listed on the Scorecard Summary. Scorecard Report provides the charts and graphs that reveal historical, projected, and comparative information about the scorecard measures. The three components of scorecards provide consistent information throughout an organization to review, evaluate, and compare performance to targets, competitor s performance levels, and world-class levels. Key Result Areas (KRAs) are critical, must achieve, make-orbreak performance categories for an organization or workgroup. Key Indicators (KIs) are specific measures that help determine how well you are performing in a given KRA. Scorecards are used to monitor trends, predict future business results, identify strengths and weaknesses, and provide feedback on management actions. Scorecard measures, called Key Indicators (KIs), are grouped into categories called Key Result Areas (KRAs). The KRAs define high-level make or break business outcomes that are critical to the stakeholders of the organization. KRAs are based on business objectives, strategies, desired outcomes, and business direction. (KRAs are also known as Critical Success Areas.) KIs provide feedback on collective progress toward the KRAs. (KIs are also known as measures.) RICHARD CHANG ASSOCIATES, INC. 9 INTRODUCTION INTRODUCTION TO PERFORMANCE SCORECARDS

5 THE PERFORMANCE SCORECARD MANAGEMENT CYCLE At this point, you have probably begun to understand that scorecards can help you address your measurement concerns and provide you with the line of sight you need. The Performance Scorecard Management Cycle, illustrated in the figure below, defines a simple six-phase approach to guide you through steps for building, linking, and refining scorecards.! Collect Scorecard Inputs " Create Your Scorecard # Cultivate Your Scorecard $ Cascade Your Scorecard % Connect Your Scorecard & Confirm Your Scorecard From these phases, you can produce and deploy linked scorecards. Such scorecards will provide results-oriented feedback that enables your managers and workgroups to focus time, attention, and resources toward improved results. Performance Scorecards Pages xxi xxviii RICHARD CHANG ASSOCIATES, INC. 16 INTRODUCTION INTRODUCTION TO PERFORMANCE SCORECARDS

6 PHASE 1: COLLECT SCORECARD INPUTS In the first phase of the Performance Scorecard Management Cycle, you gather inputs for your scorecard from your organization s strategic goals and senior-level measures/business objectives. Also, you identify your workgroup s outcomes, core work processes, and customers key requirements. As you move through the scorecard development process, this information will become the framework for your scorecard development. This ensures that your scorecard measures will match your organization s strategic aims, your customers requirements, and your workgroup s business objectives. Line Of Sight Road Map Phase 6: Confirm 1. Assessment (for validation) 2. Scorecard improvement process (for relevance) Phase 1: Collect 1. Top-level vision, mission, goals (for alignment) 2. Core processes (for linkage) 3. Customers requirements (for targets) Phase 2: Create 1. Scorecard Summary (for improved line of sight) 2. Action items (for start-up) Phase 5: Connect 1. Individual Performance Plans (for focus) 2. Individual Scorecards (for feedback and continuous improvement) Phase 3: Cultivate 1. Scorecard Glossary (for clarification) 2. Scorecard Reports (for understanding and action) Performance Scorecards Page 33 Phase 4: Cascade 1. Cascade plan (for deployment) 2. Cascaded scorecards (for drill-down) RICHARD CHANG ASSOCIATES, INC. 25 INTRODUCTION INTRODUCTION TO PERFORMANCE SCORECARDS

7 DEFINING CORE PROCESS CHAINS 2. Core processes By charting your core processes, you will identify your core customers, suppliers, inputs, and outputs. You can chart the customer-supplier chain from external suppliers through internal suppliers, value-added processes, and internal customers to the ultimate external customers. Within your workgroup, there are likely to be many chains that contribute to the outputs you deliver to your customers. A simple illustration of the overall relationship looks like this. Customer-Supplier Chain (Value-Added Process) Requirements Requirements Supplier Inputs Producer Outputs Customer Requirements Feedback Feedback Core process chains convert supplier inputs to useful outputs for customers. Measuring Organizational Improvement Impact Pages Performance Scorecards Page Your scorecard must provide you with indications of how well your core process chains are performing. Identify your four to eight core process chains by answering the following four questions. 1. What are the major outputs (products and/or services) your workgroup produces? 2. What are the major activities of your workgroup? 3. How would you describe your workgroup s primary purpose in three or four words? 4. Who are your key customers? Examples of core process chains at various organizational levels include: Installing new office equipment Designing a new product Managing customers complaints and feedback Processing a customer order Producing a monthly report RICHARD CHANG ASSOCIATES, INC. 28 INTRODUCTION INTRODUCTION TO PERFORMANCE SCORECARDS

8 IDENTIFYING CUSTOMERS KEY REQUIREMENTS A key requirement is a characteristic of your delivered output that is most important to your customer. 3. Customers requirements Generally, customer requirements fall into some of these key areas: SAMPLE KEY REQUIREMENTS Timeliness Cost Accuracy Functionality Responsiveness Follow-through Quantity Thoroughness Dimension Yield Price Availability This sample list of key requirements is useful for brainstorming and defining key customer requirements. Use these sample key requirement areas to help jump start your discussions to define specific customer requirements for your workgroup. Over time, as you get more specific requirements based on customer feedback your measures, targets, and ability to manage with your scorecard will improve. Defining Key Requirements First, determine each of the key requirements for your workgroup s core customers. Consider whether your workgroup has received customer feedback recently to answer three key questions. 1. What does your customer need and expect from you? 2. What does your customer do with your work outputs? 3. Do gaps exist between what you provide and what your customer needs and expects? RICHARD CHANG ASSOCIATES, INC. 30 INTRODUCTION INTRODUCTION TO PERFORMANCE SCORECARDS

9 PHASE 1: COLLECT SCORECARD INPUTS YOUR TOP-LEVEL SCORECARD, CORE BUSINESS PROCESSES, AND CUSTOMERS KEY REQUIREMENTS How To Use This Section This section contains assessments and worksheets for you to complete on your own (or with your workgroup) before the next session. Use them to guide you through Phase 1: Collect Scorecard Inputs. Also, there are placeholders for you to insert your organization s specific strategic information that currently exists. Remember, the purpose of this phase is to collect the inputs that you will need to draft your workgroup scorecard in the upcoming sessions. What You Will Apply To Your Workgroup 1. Complete an assessment of your current Performance Measurement System and develop an improvement plan. 2. Identify organizational and business unit strategies that are critical inputs for your scorecard. 3. Identify core processes related to key business outcomes within your workgroup, primary customer segments, and those customers key requirements. Use the assessment and worksheets in this section to aid you as you collect the inputs you will use in the next session. RICHARD CHANG ASSOCIATES, INC. R1 PHASE 1 COLLECT SCORECARD INPUTS

10 Worksheet ASSESSING YOUR PERFORMANCE MEASUREMENT SYSTEM To improve your measures, start with this self-assessment. This self-assessment provides feedback and a better understanding of the elements that contribute to successful measurement systems. Please complete this assessment and bring it with you to the next session. Rating Scale Read each of the following statements. For each statement, rate your workgroup based on the following response scale. Your workgroup is defined as the area that you work in and have influence STRONGLY DISAGREE DISAGREE NEITHER AGREE OR DISAGREE AGREE STRONGLY AGREE STATEMENT RATING 1. Our current measurement system measures all the right things. 2. We collect measures linked to organizational improvement goals. 3. We define our measures from the customer s point of view. 4. Our measurement system does not focus solely on bottom-line financial results. 5. This organization uses measurement data to promote continuous improvement and learning. 6. Our measurement system does not generate more paperwork than necessary. 7. Our measurement system always gives us the information we need when we need it. 8. Our measurement system focuses on continuous improvement rather than compliance and control. 9. We are only accountable for measures for which we have control. Subtotal 1 RICHARD CHANG ASSOCIATES, INC. R3 Reproducible Worksheet PHASE 1 COLLECT SCORECARD INPUTS

11 Worksheet IDENTIFYING PERFORMANCE MEASUREMENT SYSTEM IMPROVEMENT OPPORTUNITIES Based on your overall score for your assessment of your measurement system, please discuss the items below. Column 1 Review your responses on the assessment. Select those items you feel you could most improve (i.e., the lowest ratings). In each box in Column 1, summarize the statement. Column 2 List the key reasons why you believe your scores are low. For example, if your score for Item 16, We always share measurement results with the appropriate managers and employees was a 1, one reason may be that workgroup members may be careless about record keeping, etc. Column 3 In this column, list ways you can improve your performance measurement system for each of the items listed in Column 1. COLUMN 1 STATEMENT COLUMN 2 REASONS FOR SCORES COLUMN 3 WAYS TO IMPROVE RICHARD CHANG ASSOCIATES, INC. R9 Reproducible Worksheet PHASE 1 COLLECT SCORECARD INPUTS

12 Worksheet IDENTIFYING YOUR WORKGROUP S CORE BUSINESS PROCESSES, CUSTOMERS, AND THEIR KEY REQUIREMENTS You may have had the opportunity to begin defining the information below during the Introduction Session. If so, you may want to use that work as a starting point for completing the cells below. PRIMARY SUPPLIERS (From Whom) INPUTS (What) YOU (Value-Added Process) OUTPUTS (What) PRIMARY CUSTOMER(S) (To Whom) CUSTOMER REQUIREMENTS (Needs And Expectations) RICHARD CHANG ASSOCIATES, INC. R19 Reproducible Worksheet PHASE 1 COLLECT SCORECARD INPUTS

13 PHASE 2: CREATE YOUR SCORECARD YOUR WORKGROUP-LEVEL SCORECARD SUMMARY What You Will Learn 1. Key Result Areas (KRAs) define the outcomes that are critical to your success, and must be aligned and linked throughout the organization. 2. As a workgroup, you will adopt the KRAs above you when appropriate, and, at times, you will define a flat-top KRA specific to your workgroup. 3. Key Indicators (KIs) are the measures that determine your success within each KRA. 4. KIs that are fundamentally controllable by a workgroup can be difficult to define. 5. KIs at the top-level are complex measures, typically a rolled-up set of data from many measures in workgroups around the organization. What You Will Apply To Your Workgroup 1. Determine your workgroup s critical performance outcome categories Key Result Areas (KRAs). 2. Compare current business objectives to the KRAs and define new objectives where needed. 3. Determine your workgroup s vital few Key Indicators/measures that align with your KRAs. Agenda Phase 2: Primary Output Your Scorecard Summary Select Workgroup Key Result Areas Aligning Your KRAs Vertically Brainstorm Potential Key Indicators For Your Workgroup KRAs Select The Vital Few Key Indicators For Your Performance Scorecard Defining Business Objectives And Targets To Drive Success Phase 2 Wrap-Up RICHARD CHANG ASSOCIATES, INC. 1 PHASE 2 CREATE YOUR SCORECARD

14 PHASE 2: PRIMARY OUTPUT YOUR SCORECARD SUMMARY Upon completion of this phase, you will have the first draft of your workgroup s Scorecard Summary. 1. Scorecard Summary The format of your Scorecard Summary will reflect the outline below. KEY RESULT AREA 1 KEY RESULT AREA 2 Key Indicator 1 Key Indicator 2 Key Indicator 3 Key Indicator 1 Key Indicator 2 Key Indicator 3 Key Result Areas (KRAs) are critical, must achieve, make-orbreak performance categories for an organization or workgroup. Key Indicators (KIs) are specific measures, which help determine how well you are performing in a given KRA. KEY RESULT AREA 3 KEY RESULT AREA 4 Key Indicator 1 Key Indicator 2 Key Indicator 3 Key Indicator 1 Key Indicator 2 Key Indicator 3 KEY RESULT AREA 5 KEY RESULT AREA 6 Key Indicator 1 Key Indicator 2 Key Indicator 3 Key Indicator 1 Key Indicator 2 Key Indicator 3 The first step in drafting your Scorecard Summary is to determine your workgroup-level KRAs. Secondly, you determine the KIs within each area. RICHARD CHANG ASSOCIATES, INC. 3 PHASE 2 CREATE YOUR SCORECARD

15 SELECT WORKGROUP KEY RESULT AREAS Your workgroup Key Result Areas are adopted from the Top-Level Scorecard. They typically include areas similar to the following. Example definitions for each KRA are included. Usually, you will only need to define those KRAs that are unique to your workgroup FINANCIAL SUCCESS Typical considerations: Financial performance of the organization Example: Top- and bottom-line financial stability that ensures the organization s longevity OPERATIONAL EFFECTIVENESS Typical considerations: Performance of internal processes that deliver products and/or services to customers, stakeholders, etc. Example: Productive, efficient, and effective processes that fully satisfy customer and stakeholder requirements CUSTOMER LOYALTY Typical considerations: Performance in the internal/external customer segments that the organization impacts Example: Satisfied and loyal customers that advocate on our behalf EMPLOYEE DEVELOPMENT Typical considerations: Growth and improvement of organizational resources used to close the gap between current capabilities and superior performance Example: Highly-skilled, competent, and highperforming workforce Identify KRAs that fit your workgroup, but limit the number to no more than eight categories. MARKET LEADERSHIP Typical considerations: Performance in specific market segments Example: Industry-recognized product and service leadership in the specific market segments we serve COMMUNITY IMPACT Typical considerations: Impact the organization has on the external community Example: Viewed as an indispensable, highlyrespected corporate citizen in the communities where we operate Measuring Organizational Improvement Impact Pages RICHARD CHANG ASSOCIATES, INC. 5 PHASE 2 CREATE YOUR SCORECARD

16 BRAINSTORM POTENTIAL KEY INDICATORS FOR YOUR WORKGROUP KRAS You should now have a list of workgroup KRAs that: Align with the strategic goals of the organization (vertically) Align with your customers key requirements (horizontally) The next question is: What are the Key Indicators (or measures) that would demonstrate success within these areas? Essentially, you are creating an ideal set of success areas and measures. Key Indicators can take many shapes and forms. Following are some common KI terms you will want to become familiar with. COMMON MEASUREMENT TERMS Ratio Index Level/Rating Percentage Variance DEFINITIONS Relation in degree or number between two similar things. A number derived from a formula, used to characterize a set of data (usually used as a way to standardize or normalize varying types of data). A position assigned on a scale; a standing. A proportion or share in relation to a whole an amount that varies in proportion to a larger sum. The difference between what is expected and what actually occurs. Measuring Organizational Improvement Impact Pages Performance Scorecards Pages RICHARD CHANG ASSOCIATES, INC. 15 PHASE 2 CREATE YOUR SCORECARD

17 PHASE 3: CULTIVATE YOUR SCORECARD YOUR WORKGROUP-LEVEL SCORECARD GLOSSARY AND REPORT What You Will Learn 1. The Scorecard Glossary is where you record information that defines your KIs. 2. The glossary describes the definition of each KI, the calculation method, and the source of the data. 3. You must define your data sets so everyone understands them in the same way. 4. Collecting and displaying the data will help you to understand your business performance. 5. There are various display tools that are more appropriate for certain sets of data than others. What You Will Apply To Your Workgroup 1. Develop the first draft of your workgroup s Scorecard Glossary. 2. Determine the appropriate data display and interpretation tools for your data and your Scorecard Report. 3. Plan the development schedule for your Scorecard Report. Agenda Developing A Scorecard Glossary Your Scorecard Report Creating Scorecard Reports To Analyze And Interpret Data Using Control Charts Phase 3 Wrap-Up RICHARD CHANG ASSOCIATES, INC. 1 PHASE 3 CULTIVATE YOUR SCORECARD

18 DEVELOPING A SCORECARD GLOSSARY 1. Scorecard Glossary As you identify your vital few Key Indicators (KIs), it will become apparent that clear definitions are important. That is the purpose of a Scorecard Glossary. People can interpret things in different ways, which can result in fuzzy KIs. A Scorecard Glossary eliminates that pitfall by bringing clarity to the: Definition of your KIs Calculation method Source of the KIs VITAL FEW DEFINITION CALCULATION SOURCE KEY INDICATORS METHOD Defined on your Scorecard Summary during Phase 2: Create Your Scorecard. The precise meaning of each KI (includes type of KI, units of measure, where the KI is derived from, and any exceptions). The actual number/set of information that will appear on your data display tools. Where the KIs come from and who will be responsible to collect them. As you learn more information and new concepts throughout Phases 3 and 4, you will be returning to your Scorecard Glossary to update and refine it. The Scorecard Glossary is the place to capture the necessary information on definitions, methods, and responsibilities for future reference. But the importance of this component cannot be overstated. It is a critical management tool for scorecards. RICHARD CHANG ASSOCIATES, INC. 3 PHASE 3 CULTIVATE YOUR SCORECARD

19 CREATING SCORECARD REPORTS TO ANALYZE AND INTERPRET DATA 2. Scorecard Report In Phase 2: Create Your Scorecard, you identified the desired vital few KIs on your Scorecard Summary. On your Scorecard Glossary you defined the KIs more completely. Now you will need to collect current and historical data on you KIs and display the data appropriately. The data charts will form your Scorecard Report. It will help you to: See a snapshot of historical performance Analyze current performance trends Set appropriate and meaningful targets for each of your vital few KIs Provide a baseline from which to manage over time Monitoring Performance Changes Results can be displayed in Scorecard Reports using graphs for run charts, control charts, or other appropriate tools. These are easily developed using standard software packages such as Microsoft Excel. An example of a Run Chart from Vince s review is shown below. Percent Rework 20% 18% 16% Percent Rework 14% 12% 10% 8% 6% 4% 2% 0% Weeks Average Target Best Competitor RICHARD CHANG ASSOCIATES, INC. 15 PHASE 3 CULTIVATE YOUR SCORECARD

20 Exercise # 3 DEFINING YOUR ACTIONS Data may (or may not) exist for your KIs as you have defined your measures on your Scorecard Glossary in Exercise #1. Use the space below to develop your action plan to collect information for your Scorecard Report in two categories: Historical data Current performance data VITAL FEW EXISTING EXISTING WHAT MUST WHO IS WHEN WILL IT KEY HISTORICAL CURRENT OCCUR INVOLVED BE DONE INDICATORS DATA DATA RICHARD CHANG ASSOCIATES, INC. 30 PHASE 3 CULTIVATE YOUR SCORECARD

21 SUMMARY OF REMAINING SCORECARD PHASES 4 CASCADE 5 CONNECT 6 CONFIRM What You Will Learn 1. The data on Performance Scorecards point to the processes that need improvement when the process measures are aligned and linked. 2. The right measures must be defined at the right levels to create the management line of sight. 3. Index (summary) measures are an excellent way to aggregate different data sets into one performance indicator. 4. Ultimately, the scorecard measures are connected directly to individual scorecards and performance evaluations. 5. Evaluating your scorecard and development process will help to confirm that you are measuring the right things in the right way driving toward organization performance improvement. What You Will Apply To Your Workgroup 1. Create a plan to cascade your scorecard to the next level in your organization (if appropriate). 2. Understand the linkage of scorecards to Individual Performance Plans, and the need to coach and evaluate employees to ensure successful performance. 3. Establish a process to continually evaluate and refine your scorecard and the process to create it. RICHARD CHANG ASSOCIATES, INC. 1 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

22 Summary Of Remaining Scorecard Phases (cont.) Agenda Phase 4: Cascade Your Scorecard Determine Scorecard Key Indicators For Next-Level Workgroups Verify Cascaded Key Indicators Are At The Appropriate Levels Affecting Scorecard Results Applying A Systematic Continuous Process Improvement Model SAMIE Establish Process Measures That Align To Scorecards Phase 5: Connect Your Scorecard Review Your Performance Management Process Individual Performance Plans Planning, Coaching, And Evaluating Individual Performance Phase 6: Confirm Your Scorecard Evaluate Your Scorecard Prioritize Improvements Refine Your Scorecard Summary Of Remaining Scorecard Phases Wrap-Up RICHARD CHANG ASSOCIATES, INC. 2 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

23 PHASE 4: CASCADE YOUR SCORECARD To implement the Cascade Phase, you determine if there is a workgroup at the next level of the organization. If there is, you begin to work with them to cascade your scorecard to this next level. You ensure that all the measures you affect are defined at the appropriate organizational level. Throughout this phase, you refine the components of your scorecard, and you identify the connections between your measures and specific processes. You create plans to improve the processes to reach your overall targets. Line Of Sight Road Map Phase 1: Collect 1. Top-level vision, mission, goals (for alignment) 2. Core processes (for linkage) 3. Customers requirements (for targets) Phase 6: Confirm 1. Assessment (for validation) 2. Scorecard improvement process (for relevance) Phase 2: Create 1. Scorecard Summary (for improved line of sight) 2. Action items (for start-up) Phase 5: Connect 1. Individual Performance Plans (for focus) 2. Individual Scorecards (for feedback and continuous improvement) Phase 3: Cultivate 1. Scorecard Glossary (for clarification) 2. Scorecard Reports (for understanding and action) Phase 4: Cascade 1. Cascade plan (for deployment) 2. Cascaded scorecards (for drill-down) Performance Scorecards Page 102 RICHARD CHANG ASSOCIATES, INC. 3 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

24 VERIFY CASCADED KEY INDICATORS ARE AT THE APPROPRIATE LEVELS Most managers and workgroups tend to measure too many items, obscuring the line of sight toward the vital few KIs. This can be avoided by evaluating whether the level of scorecard measures (in order of increasing detail) is appropriate for the organizational level. Levels of measures are referenced by M1, M2, M3, or M4 (or even M5 or M6!). Measures can be categorized by the organizational level to which they relate and the point in the process they are taken. The figure below illustrates the relationship between process measures at different levels of the organization. Similarly, measures at each level can be classified as external or internal, depending on the source. External measures are based from sources outside the organizations, usually customers or competitors. A customer satisfaction rating based on customer focus group inputs is a perfect example of an external measure. Performance Scorecards Pages Internal measures are based on organizational practices and process. Unit cost to produce a product or similar service is an internal measure. The distinction is important because you are always managing toward matching the internal to the external. Measures Vary By The Line Of Sight They Provide In A Work Process LEGEND M1 - Executive Scorecard Measures M2 - Vice Pres./Director Measures M3 - Manager Scorecard Measures M4 - Work Group Measures M1 External M3 M3 M3 M1 Internal M4 M4 M4 M4 M4 Work Process Task 1 Task 2 Task 3 Task 4 Task 5 M2 Process Outcomes Customer Sub-Process 1 Sub-Process 2 Team And Individual Performance Commitments RICHARD CHANG ASSOCIATES, INC. 9 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

25 APPLYING A SYSTEMATIC CONTINUOUS PROCESS IMPROVEMENT MODEL SAMIE The SAMIE Model The following SAMIE (Select, Analyze, Measure, Improve, Evaluate) Model, developed by Richard Chang Associates, Inc., is provided as one way to implement Continuous Process Improvement (CPI). It provides a basic, systematic approach, which incorporates the core characteristics fundamental to CPI success. Although each of the steps within the major phases is presented in a linear fashion, please bear in mind that while cycling through the model, many of the steps may actually overlap and/or be carried out in parallel (depending on actual progress being made). EVALUATE 9. Assess impact of process improvement 10. Standardize process and monitor ongoing improvement SELECT 1. Define key requirements for core customers 2. Determine process to improve Continuous Process Improvement ANALYZE 3. Document as is process 4. Establish process measures IMPROVE 7. Set process improvement goal(s) 8. Develop and implement improvements on trial run basis MEASURE 5. Gather baseline process performance data 6. Identify process performance gaps Measuring Organizational Improvement Impact Pages NOTE: For more information on the SAMIE Model, refer to the Continuous Process Improvement (CPI) packaged training program by Richard Chang Associates, Inc. RICHARD CHANG ASSOCIATES, INC. 15 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

26 PHASE 5: CONNECT YOUR SCORECARD In the Connect phase, you continue the cascade process to individual employees, connecting scorecard measures with individual performance scorecards and results. You then provide on-going coaching support, and eventually, hold employees accountable through their performance evaluations. You help each employee understand how he or she contributes to the overall success of the workgroup and the organization. Line Of Sight Road Map Phase 1: Collect 1. Top-level vision, mission, goals (for alignment) 2. Core processes (for linkage) 3. Customers requirements (for targets) Phase 6: Confirm 1. Assessment (for validation) 2. Scorecard improvement process (for relevance) Phase 2: Create 1. Scorecard Summary (for improved line of sight) 2. Action items (for start-up) Phase 5: Connect 1. Individual Performance Plans (for focus) 2. Individual Scorecards (for feedback and continuous improvement) Phase 3: Cultivate 1. Scorecard Glossary (for clarification) 2. Scorecard Reports (for understanding and action) Phase 4: Cascade 1. Cascade plan (for deployment) 2. Cascaded scorecards (for drill-down) Performance Scorecards Page 124 RICHARD CHANG ASSOCIATES, INC. 20 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

27 REVIEW YOUR PERFORMANCE MANAGEMENT PROCESS Workgroup performance is linked to individual performance. To achieve business targets, it is essential that individual efforts tie to workgroup objectives and scorecards. However, this does not mean that you need to break down every one of the workgroup-level scorecard KIs into individual measures. Actually, you want to leave most KIs at the workgroup level, and help each individual employee understand how his or her efforts contribute to workgroup results. Deploying workgroup-level objectives and KIs to individuals is commonly done through a performance management process. During performance management, you and each employee participate in a planning session, at least one interim review, and a year-end review. The three primary steps for performance management are: Planning Coaching Evaluating Total Rewards And Recognition Workgroup Work Group Performance Performance Scorecard Scorecard Annual Annual Performance Performance Review Review Development Plans And Actions RICHARD CHANG ASSOCIATES, INC. 21 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

28 Review Your Performance Management Process (cont.) SOLVNET EXAMPLE SOLVNET S VISION To be the customer s first choice for information services throughout all of our service territories. CUSTOMER SERVICE BUSINESS UNIT (WORKGROUP) SCORECARD (EXCERPT) KRA: Workplace Excellence WORKGROUP OBJECTIVES MEASURES TARGETS 1. Improve service quality to customers 10% by the end of year Service Center Expenses Reduce to $4.0 M SUPPLIERS PERFORMANCE Internal/External Suppliers Performance KRA: Workplace Excellence HELP DESK DEPARTMENT (WORKGROUP) SCORECARD (EXCERPT) WORKGROUP OBJECTIVES MEASURES TARGETS 1. Improve service quality to customers 10% by the end of year % Help Desk Calls Needing Rework % Help Desk Calls Abandoned % Help Desk Calls Closed First Call Average length Of Help Desk Call Reduce by 20% Reduce to 1% Increase by 25% Reduce by 20% CUSTOMERS REQUIREMENTS Limited network and/or work station down time Immediate responses to Help Desk calls Knowledgeable, courteous, and efficient Help Desk Specialists Competitive costs and service value KRA: Workplace Excellence INDIVIDUAL SCORECARD (EXCERPT) INDIVIDUAL PERFORMANCE OBJECTIVES 1. Reduce rework calls associated with software trouble calls by 25% by year end MEASURES % Software calls needing rework TARGETS Reduce by 25% RICHARD CHANG ASSOCIATES, INC. 23 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

29 Exercise # 3 DRAFTING INDIVIDUAL SCORECARDS Part 1 2. Individual Scorecards Line Of Sight With Performance Scorecards On-The-Job Reproducible Worksheets Part 1: Review the workgroup scorecard. Develop at least one Individual Performance Objective for each workgroup Key Result Area. Part 2: Draft Action Steps for achieving the target of each listed objective. Part 3: Assess the scorecard. Are the Individual Performance Objectives and action steps appropriate? How will you know objectives are achieved? Is the employee s performance linked to the workgroup target? Share your findings in a small group. Afterwards, debrief the larger group concerning your findings. INDIVIDUAL SCORECARD EMPLOYEE POSITION DEPARTMENT SUPERVISOR DATE WORKGROUP KEY RESULT AREA WORKGROUP OBJECTIVE MEASURES TARGETS INDIVIDUAL PERFORMANCE OBJECTIVE ACTION STEPS RESULTS ' Exceeds ' Fully Meets ' Meets Most ' Does Not Meet Comments: RICHARD CHANG ASSOCIATES, INC. 28 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

30 PHASE 6: CONFIRM YOUR SCORECARD In the Confirm phase, you check the effectiveness of your measures. In addition to assessing whether you have the right measures, you determine if you have the right number of measures. You begin to understand how certain measures on your scorecard are related and how to pull the levers to achieve desired outcomes. You revise as needed and the process repeats. Line Of Sight Road Map Phase 1: Collect 1. Top-level vision, mission, goals (for alignment) 2. Core processes (for linkage) 3. Customers requirements (for targets) Phase 6: Confirm 1. Assessment (for validation) 2. Scorecard improvement process (for relevance) Phase 2: Create 1. Scorecard Summary (for improved line of sight) 2. Action items (for start-up) Phase 5: Connect 1. Individual Performance Plans (for focus) 2. Individual Scorecards (for feedback and continuous improvement) Phase 3: Cultivate 1. Scorecard Glossary (for clarification) 2. Scorecard Reports (for understanding and action) Phase 4: Cascade 1. Cascade plan (for deployment) 2. Cascaded scorecards (for drill-down) Performance Scorecards Page 149 RICHARD CHANG ASSOCIATES, INC. 32 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

31 PRIORITIZE IMPROVEMENTS You probably still have a lot of work ahead for improving your scorecards and associated measurement processes. Instead of trying to accomplish all of the improvements at once, determine your priorities before you act. Consider the following as you determine your improvement priorities. Resources available for improvement actions Urgencies related to some KIs (i.e., customer satisfaction, financial results) Reporting cycles for KIs (daily versus weekly versus monthly versus quarterly) Areas requiring immediate improvement attention Investments and returns associated with improvement actions The number of people impacted and/or the visibility of the improvement In the On-The-Job Reproducible Worksheets unit you will find an assessment to Evaluate Your Scorecard. This will become an invaluable tool to help you identify your improvement priorities once you have completed your scorecard development. Line Of Sight With Performance Scorecards On-The-Job Reproducible Worksheets Performance Scorecards Pages RICHARD CHANG ASSOCIATES, INC. 34 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

32 REFINE YOUR SCORECARD 2. Scorecard improvement process As you address measurement issues, new issues will continue to arise. This is normal. As changes occur to your organization, your products, your customers, and your processes, measures will need to change. The key is to establish an ongoing process for handling the issues that continually surface. A process to manage scorecard changes involves four primary stakeholder groups. 1. Measurement Leads serve as a focal point for measurement issues, questions, and proposed changes 2. Measurement Steering Teams address cross-functional measurement changes and issues 3. Senior Managers provide management involvement and oversight 4. Workgroups use the scorecard, surface measurement issues, and continually refine measures Measurement Leads The Measurement Lead resolves issues through management action or hands them off to the Measurement Steering Team. The Measurement Lead requires decision-making authority for issues that do not require involvement by the Measurement Steering Team. This position is typically filled by a manager or staff specialist. Measurement Steering Teams A Measurement Steering Team convenes when needed. It approves the system for gathering and reporting measures and reviews proposed changes to measures that affect the entire workgroup. The Measurement Steering Team is composed of managers or representatives from the functions within your workgroup. Senior Managers The workgroup s Senior Manager charters the Measurement Steering Team and oversees the correct use of measures and integration with normal business processes. Recommendations or issues that cannot be handled by the Measurement Steering Team are given to the Senior Manager for resolution. Performance Scorecards Pages RICHARD CHANG ASSOCIATES, INC. 37 PHASES 4, 5, AND 6 SUMMARY OF REMAINING SCORECARD PHASES

33 RICHARD CHANG ASSOCIATES, INC. R11 Reproducible Worksheet WORKSHEETS PHASE 2: CREATE YOUR SCORECARD

34 Worksheet SELECT YOUR WORKGROUP VITAL FEW KIS Use the selection matrix below to help select your vital few KIs for your workgroups KRAs. Rate the relationship using a scale of 1 (low) to 10 (high) for each KI and total the scores. Using the same criteria, repeat this process for each of the remaining KRA-KI sets on the following pages. KRA: KEY INDICATORS SELECTION CRITERIA KI 1 KI 2 KI 3 KI 4 KI 5 KI 6 1. Will the measure result in a number that you can quantify and graph? 2. Will stakeholders and customers care about the measure? 3. Will the measure give useful feedback? 4. Can you assess performance against competitors or industry standards? 5. Can your workgroup influence the outcome of the measure? TOTAL POINTS RICHARD CHANG ASSOCIATES, INC. R11 Reproducible Worksheet WORKSHEETS PHASE 2: CREATE YOUR SCORECARD

35 Worksheet REVISING AND DEFINING BUSINESS OBJECTIVES Do you need to draft or rework your objectives to align to your KRAs to make them SMART? Use the spaces below to help you. To: + (action word) What: + (end result) By: + (target) When: (projected completion date) To: + (action word) What: + (end result) By: + (target) When: (projected completion date) To: + (action word) What: + (end result) By: + (target) When: (projected completion date) RICHARD CHANG ASSOCIATES, INC. R15 Reproducible Worksheet WORKSHEETS PHASE 2: CREATE YOUR SCORECARD

36 Worksheet RELATE YOUR CURRENT BUSINESS OBJECTIVES TO KEY RESULT AREAS = Strong Relationship = Moderate Relationship = Little/No Relationship Use the table below to indicate the relationship of your current business objectives with your KRAs by inserting the type of circle on the left that represents the appropriate relationship. If you have a business objective that has little or no relationship, you will need to determine: 1. If it is truly important to your business success or not 2. If it is not then you may want to defer it to another time KRA BUSINESS OBJECTIVES RICHARD CHANG ASSOCIATES, INC. R17 Reproducible Worksheet WORKSHEETS PHASE 2: CREATE YOUR SCORECARD

37 Worksheet DEFINING YOUR ACTIONS Data may (or may not) exist for your KIs as you have defined your measures on your Scorecard Glossary. Use the space below to develop your action plan to collect information for your Scorecard Report in two categories: Historical data Current performance data VITAL FEW KEY INDICATORS EXISTING HISTORICAL DATA EXISTING CURRENT DATA WHAT MUST OCCUR WHO IS INVOLVED WHEN WILL IT BE DONE RICHARD CHANG ASSOCIATES, INC. R3 Reproducible Worksheet WORKSHEETS PHASE 3: CULTIVATE YOUR SCORECARD

38 Worksheet DEVELOPING A CASCADE PROJECT PLAN Construct a project plan to address cascading and deployment of scorecards to the next level in your organization. Consider the questions in the checklist below to help you plan. If necessary, construct a timeline to show how and when various workgroups will be involved in the development and use of scorecards. Use a timeline, Gantt chart, or action summary to help you organize your thoughts and activities. Using your own level of involvement in developing the top-level scorecard as a gauge, consider the resources that you will need to support the cascade and ongoing development. Checklist DEFINE DESIRED WORKGROUP OUTCOMES IN TANGIBLE TERMS QUESTION ANSWERED WHEN 1. When will workgroups actually begin developing and using scorecards? ' 2. Which workgroups will be affected? ' 3. Are all workgroups expected to develop scorecards at the same time? 4. Who will be involved in helping the workgroups develop scorecards? 5. Are objectives defined for the workgroups affected in the cascade? ' ' ' 6. Are targets defined for these workgroups? ' RICHARD CHANG ASSOCIATES, INC. R1 Reproducible Worksheet WORKSHEETS SUMMARY OF REMAINING SCORECARD PHASE

39 Worksheet EVALUATING YOUR SCORECARD Part 1 Assessing Scorecard Alignment The assessment sections below are grouped into three sections. 1. Scorecard Alignment 2. Scorecard Processes 3. Scorecard Content Complete each section and rate each statement using the five-point scale provided. At the end, tally and interpret your results STRONGLY DISAGREE DISAGREE NEITHER AGREE OR DISAGREE AGREE STRONGLY AGREE STATEMENT RATING 1. Our scorecard helps us focus on our workgroup s business objectives. 2. Our workgroup s objectives and measures are linked to our corporate goals and strategic priorities. 3. Our workgroup s objectives, measures, and targets are linked to our customers key requirements. 4. Our scorecard measures promote understanding of overall organization strategies within our team. 5. Customers key requirements are used for determining workgroup objectives and measures. 6. Objectives and measures that link to our suppliers are identified and tracked. 7. We set clear and appropriate performance targets for our workgroup s scorecard measures. 8. Our workgroup s scorecard measures allow us to identify clear improvement objectives. 9. The right people from our work group are informed and involved throughout scorecard and measurement development. 10. The right people from our suppliers, customers, and associated processes are involved with our scorecard development process. Subtotal 1 RICHARD CHANG ASSOCIATES, INC. R5 Reproducible Worksheet WORKSHEETS SUMMARY OF REMAINING SCORECARD PHASE