Performance Management & Strategy Execution Blog: The Glue

"On the Road" with the Balanced Scorecard: Is the Framework Strategic or Tactical?

In my first "on the road" post, I talked about how critical it is for a new Balanced Scorecard to demonstrate early results that the executive team cares about (and I provided some steps to help you do so).

Now continuing with my theme of key insights I've learned while implementing the Balanced Scorecard framework across the country, this time I'd like to tackle a question that I hear all the time. I think this is probably the #1 most confusing aspect about Scorecards for people I work with: "Is the Balanced Scorecard strategic or tactical?"

The answer is that yes, the Balanced Scorecard is BOTH STRATEGIC and TACTICAL.

As I answer, I'm reminded of a comment I made in my first "on the road" post -- the very fact that the Scorecard has so many benefits is also its biggest downfall (it can be so many things that sometimes it fails to be good at any of them). There is a similar paradox here. The fact that it's both strategic and tactical is both good and bad.

This can be a good thing because while tactics are critical for keeping your doors open this year, strategy will ensure that your doors stay open in 3 years.

This can be a bad thing because it's a cause for cultural resistance. Most folks already have tactical systems in place, so saying that a new Scorecard framework has a tactical aspect may mean that it threatens to replace what people already have, what they are used to, and what they might really like.

I'll go one step further. If people in the midst of a scorecard business review are given the choice between talking about strategic or tactical issues, they will almost always choose the tactical issues (and likely get bogged down in details). Why? These things tend to be in their comfort zone. Strategy by definition is something bigger. Something that can be uncomfortable. It often requires change.

So how do you overcome this resistance when developing and implementing your Balanced Scorecard? Leave room for the strategy. If you don't set aside "space" on your scorecard for strategic issues before you start, inertia will take over...tactics (the things that are familiar) will take over.

Establish rules for what % percentage of the objectives/measures will be strategic vs. tactical at each level of the organization.

Then, once you've built the strategic issues onto your scorecards, you still have to have the discipline in place to review those strategic issues to maintain focus on those issues. So when you start conducting business review discussions, you should also develop a structured playbook or standard operating procedures that these reviews follow. It should include:

• A protocol for setting the agenda (who sets it, who approves it)
• A protocol for sequencing the discussion (strategy first, fighting fires perhaps second, tactics third)
• A protocol for asking questions about measures (including a checklist to make sure the hard questions are asked)

I'd love to hear your thoughts on this issue! First of all, has it been an issue? Did you make any rules about how "strategic" your scorecards should be?

Did You Miss the "Admin Track" at the ActiveStrategy Client Conference?

Our Client Conferences typically feature a range of case studies delivered by the executives, business leaders, and scorecard owners from our clients. This year for the first time, we added a new option, splitting ActiveStrategy Enterprise software administrators into their own dedicated track. It was so popular that we could barely fit in our breakout room, but that didn't stop us from having some great idea sharing and cooperative thinking.

We invited the client scorecard administrators in attendance to present mini case studies. What a great line-up. Here were some of the highlights:

Miami-Dade County shared how their Office of Strategic Business Management guides the agenda, tone, and logistics for hundreds of monthly department and cross-functional scorecard business reviews.  Also exciting was their ability to re-sequence the cascading of strategic objectives ahead of department budget allocation.

Thomas Jefferson University Hospitals demonstrated how they load large amounts of data (everything from finance to satisfaction) within minutes into ActiveStrategy from both structured and extremely unstructured data sources. Also highlighted was how they use project portfolio functionality to implement and sustain Six Sigma efforts at the health system.

Westinghouse Nuclear Services showcased a creative solution for a visually attractive navigation system, allowing executive users to easily find their scorecards, dashboards, and project portfolios using Visual Map functionality.

NATO recapped how they tackled business reviews of the command's very large program of work (POW) using Program Group Portfolio Reports.  Participants then brainstormed NATO-like job titles for themselves (the "Supreme Director of Strategy Management" was a popular pick).

U.S. Department of Veterans Affairs highlighted their approach for cascading strategic objectives throughout the Chief Business Office through the creative use of cascading matrix tools and naming conventions.

If you'd like to learn more about these topics and the presentations, please post a comment below and I'd be happy to get you more details. If you'd like to read an overview of the Executive Track, see this post.

 

5 Helpful Responses to “But that’s not measurable!”

"But that's not measurable!"...it's almost inevitable that this phrase will come up at some point when we're helping one of our clients build scorecards and cascade performance measures.

It happens while we're discussing how a particular area supports an organizational goal. Typically, everyone involved will decide that a new objective should be on that area's scorecard. But when it comes to selecting the best way to measure progress toward said goal, the "not measurable" objection comes out.

If you're involved in building scorecards or helping your organization select performance metrics or KPIs, you've probably run into this issue as well.

Of course the objection tends to arise when something new is being brought to the scorecard. If it's never been measured before, it might be because it seems too "big" or a little too "fluffy" to measure.

So how do you get past this objection and come up with a measure that will make sense to all involved (and will help you track progress toward achieving your strategic goal)?

Ask yourself and/or your team these questions:

   1. What are you specifically trying to impact or change?
   2. Let’s pretend you’ve already reached that goal -- what would be different?
   3. How will not reaching this goal impact other departments?
   4. How will you know when you you’ve reached this goal?
   5. How would you convince your boss that you’ve reached this goal?

By talking through these questions, we almost always come up with a measure and/or improvement initiative that makes sense, drives the right behavior, and can be effectively tracked on the scorecard.

So the next time you’re working hard with your team, and someone says, “we have to do this initiative, but there’s no good way to measure it,” try using these five questions. It should help your team be more specific in their word choices and help identify good measures for some of those more challenging objectives or projects.

And don't just put these away once your scorecards and metrics are cascaded. These same questions can be used effectively during scorecard-based Business Review sessions as well, as teams are formulating initiatives for under-performing measures. 

The Dark Side of Metrics?

There was an interesting article in the New York Times a few weeks ago called "Are Metrics Blinding Our Perceptions?" In it, author Anand Giridharadas questions whether the prevalence of computers and dashboards have resulted in too many metrics. He wonders if ours is simply a world with too much data -- where metrics are distorting policy, altering the flow of charitable donations, and even driving how parents take care of babies.

It’s a good read, and raises some interesting questions. I think the issue boils down to this: yes, computers and the internet have made it easy for anyone to create dashboards and share metrics, which is why it's more critical than ever that metrics are presented with their correct context and that they are thoughtfully reviewed before using them to make decisions.

In years past, a business dashboard could have taken many "man-months" to create. It would have involved coming up with a well-thought out strategy with strategic metrics (be it for a government, company, or whatever), developing attractive reports with help from graphic designers, professionally printing and hand assembling the reports at great cost on a monthly or quarterly basis.

Today, you can take any old collection of metrics and make them look pretty good with a fraction of the effort. In short: any idiot can create a decent-looking dashboard these days.

But of course more measures, more dashboards, and more reports aren’t going to make the world any better on their own. Garbage in, garbage out holds true for metrics, dashboards, and any process in the world. There are lots of software tools that make it easier to make the garbage coming out look nicer, but from a business perspective, it remains essential to ensure that the strategy, objectives, measures, and initiatives that end up on a scorecard or dashboard are the right ones. And that there aren’t too many. And that they have owners responsible for their performance. And that appropriate goals have been set. All of the things that this blog is about.

So, yes, it's true that metrics can be taken out of context or relied upon too heavily without applying common sense. But what's also true is that when the right metrics are on a functional -- and, yes, ideally attractive -- dashboard, they can mean the difference between excellence and failure.

Just take a look at Datron World Communications. This fast growing, high performing organization has focused on reviewing and managing the right measures systematically on dashboards. Using this approach, they were able to drive incredible tangible business results. In fact, they just won the Overall Business Performance Leadership Award from Ventana Research.

Art Barter, Datron's CEO, confirms that this focus on a dashboard with the right metrics works: "Let’s be good at these three or four things. Let’s understand what impacts results in measurable ways, and let’s stay focused on those things, instead of trying to do 10, 15, or 20 things that we think might impact the results." He credits this approach with $40 million of new business, as well as higher levels of trust in the organization, and improved customer satisfaction levels. You can read the full story in an interview that BPM Magazine conducted with Mr. Barter.

What do you think about the pervasiveness of measurement in your organization? Has it gone too far? Or gone off-track?

What Football Can Teach You About Performance Metrics

I have often made the point that if you want to understand how to use performance metrics to drive results in business, take a look at professional sports. I make this observation without an impressive understanding of any pro game, but simply by listening to the nature of the commentary, particularly during football games.The statistics just keep on coming.

This year I am hearing more about “red zone efficiency.” As I heard in Sunday’s game, in which my beloved Dolphins fell to New Orleans’ Saints (on All Saints Day, might I add), "the Saints scored in four out of their five trips to the red zone, while the Dolphins converted on only three of six.” I bet the Dolphins are running a lot of red zone plays in practice this week. Here at ActiveStrategy, we would call that implementing an action plan to close a performance gap.

The next set of statistics I have in the article in front of me could be loaded in the PGM or “Personal Goal Management” scorecards in ActiveStrategy Enterprise software.  Apparently, our infamous Ricky Williams tied his career high with three touchdowns and the dancing Jason Williams had two sacks and two forced fumbles. If that’s all you knew, you would have thought they won.

Let’s venture into the “leading” measures (the numbers that tell the story for the different units) to see if they give us any insight into the ultimate lagging measure -- the final score. Remember, I could use the help of a fantasy footballer, but by my analysis, only two numbers pop when you compare the statistics of the two teams (besides “red zone efficiency”). Those two are passing, where the Saints tallied 276 yards vs. the Dolphins' 197 yards; and penalties, where the Saints gave up only 25 yards vs. 55 yards lost for the Dolphins.

When you read the expert commentary, in fact, these numbers do tell a critical part of the story. In spite of first half interceptions, the Saints' QB was a second half wonder and the Dolphin penalties came at critical points in the second half. Bottom line, all the fantasy football addicts in your organization should be able to lead the discussion on the relationship between process measures and outcome measures. Are the number of penalties a measure of errors or rework or both?

Either way, leading measures are more important in business than in sports, because in sports your “line of sight” between the lagging measure (the score) and the leading metrics is literally and figuratively far better. Even without the commentators spewing out statistics, the most casual observer can tell if turnovers are killing a team or if the QB is getting less protection than the Prime Minister of Sweden. Just watch the game. 

In business you need to make more of an effort to define and manage that "line of sight" between the lagging measures that are essential to survival (total sales, customer satisfaction, profitability) and the leading measures that impact those lagging measures.

For example, if cycle time suddenly spikes in your organization (because you're having to do rework in one part of a process, perhaps) and you don't have good visibility into your leading performance measures, business leaders might not see the problem until it's far too late. You could be bankrupt before you know what hits you. The bottom line is that if you don't have good visibility into the leading measures in your business (and their relationship to your critical lagging measures), it's like trying to coach a team on the field without knowing anything but the score.

On very rare occasions in business, you can see that the ball is being fumbled and the solution is obvious (like Starbucks offering a cheaper latte). But most of the time to get back on track you need good data on how you're doing in the red zone plus a good team executing a solid game plan, all of which can be enabled with software. If you're curious about that, I invite you to read more about ActiveStrategy Enterprise software.

“Navigating the Fiscal Crisis” - ICMA’s Definitive Paper

O.K. so I am human; I love when hard research supports my predispositions and life experience. The ICMA Alliance for Innovation, led by a team from Arizona State University, has published the seminal white paper on “Navigating the Fiscal Crisis: Tested Strategies for Local Leaders.” The authors report that qualities of well-run organizations that help them manage in good times “are important factors in why some organizations succeed and others decline” when cutbacks occur. Among the qualities listed: an early-warning system to discern which trends and factors will affect strategy and timing; and defined service delivery areas with performance indicators to measure results. “Rigorous analyses determine whether programs are working. If cuts are needed, the government can identify relative program and service effectiveness.”

With 35 years of government service, I have seen the good, the bad and the ugly and even a bit of excellent. ICMA got it right. Excellent is using data on community needs and priorities and program effectiveness to make difficult decisions on budget cuts. One excellent city thought a unit completely dedicated to answering residents’ complaints and inquiries was important to customer service. That was until three years into the program when, under fiscal pressure, they looked at the utilization data. Folks still preferred dealing directly with their contacts in the operating departments and the numbers just weren’t there to justify the unit. It was cut. Another “Center of Excellence” ran the numbers on a “records unit” that was part of sacrosanct Public Safety. With police reports being done by the officers on laptop computers, it was possible to cut this unit from the Police Department budget. Vacancies were not filed and the incumbent employees were reassigned to a Code Enforcement which was struggling to keep up with the Foreclosure epidemic.

So much for the good and the excellent; there was clear evidence in a county I worked with that departments “horded” budget authority to deal with inevitable January across-the-board cuts. Fiscal crises were pretty much an annual event based on inflated revenue projections that tamed the summer budget hearings. Victory went to the crafty and powerful; the impact on the public was known only to the elderly who lost home health services during cut backs. Lack of impact data meant lack of scrutiny, lack of visibility, and accountability only to organized interests.

However, in the ugliest of times I have seen some of the cleverest of savings come from organizations at all levels of “maturity.” As the ICMA paper points out, austerity can push creativity and efficiencies that are politically unacceptable in good time. However, the well-run outfit knows where those opportunities are and is ready with well-documented proposals when the climate is hospitable to cost savings.

Back to the ICMA opus. Figure 4 in the paper -- “Actions to Promote Constructive Change” -- provides the following checklist of best practices during hard times:

• Cut quickly, avoid delay
• Take a long-term view
• Focus on core mission, purpose, and highest priorities
• Invest in innovation and continuous improvement
• Manage revenues as carefully as expenditures
• Examine and improve organizational design and process
• Foster stewardship and cost containment
• Create a sense of inevitability, devise a workable schedule, and stick with it
• Commit to communicating with all stakeholders

Of these nine best practices, two cannot be done at all without performance measurement; and five cannot be done well without it. All, and I mean all, methodologies for continuous improvement and process management begin with knowing what measurable outputs and outcomes you are getting from the status quo. If you don’t know that, you can’t tell if you have improved.

Now imagine quick budget cuts, long range planning, establishing priorities, fostering cost containment and communication with stakeholders without measurement. What you get are arbitrary reductions with no knowledge of the impact -- what I call "government by war lords” -- the strongest get more money.

Enough of my rants and back to our academic advisors. The ICMA white paper concludes, “in economic downturn, lessons from past downturns, research, and practice show that we know what works and what does not to cope with crisis and position local government organizations for strong, long-term development and change. Local government should make cuts in strategic, programmed ways and look for ways to improve the organization while making changes forced by reduced resources.” “Right-on” to our academic brethren.

Governments Endorse Performance Measurement to Manage Hard Times

A recent article on Governing Magazine's website makes the point that government municipalities seem to be relying more heavily on good performance measurement now during the tough economic times. In previous downturns this was not observed, but "this economic malaise is so profound that a growing number of states, cities and counties are newly appreciative of the value results-based performance measures can offer," say authors Katherine Barrett & Richard Greene.

Could this be a bright spot in otherwise gloomy times?

If these (and indeed all) organizations truly change by building performance measurement into their daily practices, we will surely get out of this current mess much faster -- and be better for it in the long run.

Four Things You Should Know About Your Scorecard Measures

Measures trigger work. You're either creating measures, gathering data for them, reviewing them, or trying to improve them. That work will often be resisted due to confusion and credibility concerns. I coach my clients to know 4 things about every measure they have:

1. Where does the data come from? This is the most common challenge leaders throw at measures. "I don't trust the source, so I don't need to act." You need to know what department pulls the data, if they transform it in some way, who quality checks the data, and who loads it into your scorecard. 

2. What is excluded from the data? Too often, leaders look at measures for months without really understanding what the numbers mean. Specifically, they don't really know what's included and excluded from the numbers. It's important to know those nuances before you spend time and money on improving the numbers.

3. Why did we set the target? Typically, those who are responsible for acting on measures weren't in the meeting when the target was set. Many times, there's even confusion within the team that set the target. I ask my clients to find out who set the target and what the rationale was for setting it.

4. What accumulation do we care about? Knowing the answer to this subtle question will help you clear up a lot of confusion. Each time the scorecard team meets to discuss the measure, is it more important to talk about performance YTD, performance just this period, or the performance as a snapshot in time?

Let me know if you consider other questions that I didn't mention.

Don't Get Killed by an Anecdote

I was working with a client today whose Strategy Execution framework I'm helping to build and automate. When we were talking about setting good targets for some key performance measures, I was reminded of an important lesson I had learned years ago about effectively measuring service levels: hitting average service level targets is not enough.

Several years ago, I worked for a CRM company that managed the laptops of very large companies' sales forces. If a sales rep had a problem, he or she simply overnighted the laptop to our company, we fixed it, and overnighted it back. We targeted a 4-day turnaround. In reality, we almost always turned around repairs and shipped the unit back in one -- or at most two -- days. Great, right?

Well, sometimes there were problems. Sometimes an incoming unit was put in the wrong pile. Or the rep didn't put the right RMA number on it. Or it was shipped out without a label. Not to worry, though. These kinds of thing were REALLY rare and we were always within our targeted 4-day average.

The Engine That Powers Balanced Scorecards

Ever wonder why some organizations are so excited about the results of their Balanced Scorecards and others decry the tool as ineffective?

Clearly, there are a number of reasons why scorecards fail, such as not having senior management buy-in, not having the top-level scorecard aligned to the strategic plan, not deploying the scorecards to all key departments, and not performing scorecard reviews on a monthly basis to drive accountability for the proper actions.

However, even when an organization avoids all of the above pitfalls,they must have the right "engine" in place, or Balanced Scorecards still won't work.

The engine behind the scorecard framework is a well-designed system of correlated, cascaded measures. These begin with top-level lagging (or outcome) measures that track performance of the strategic plan. They cascade through to mid-level measures, on to lower-level measures, and even all the way to identified root causes of under-performing measures.