Balanced scorecard in the Nordic countries
- public sector experiences
Dr. Nils-Göran Olve www.cepro.se; www.ida.liu.se/labs/eis/people/ngolve.html
”The Nordic
countries”?
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The Concours Group
Concours (kôn’körs’,-körs’) n. the act of moving or
flowing together … from the Middle English and Old
French … to assemble.
Founded in 1997 • Independent • Growing Successfully
Distributed Offices across North America and Europe and in Sydney, Australia
Stockholm office, CEPRO, founded in 1968 as a separate company.
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Offering three integrated services
Research
Education
Consulting
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First
published in
1997, revised
in 1999
(Also in
Finnish 1998)
Wiley 1999;
now translated
also into Spanish,
Japanese, Korean,
Portuguese and
Dutch
Capstone 2002
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Agenda
• Why scorecards became popular in the Nordic countries
• Scorecard use in the public sector
• Some ideas for scorecard implementation and use
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Why scorecards became popular in the Nordic countries
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350
SEK
(bill.)
Assets
250
(=”Intellectual
Capital”?)
”Market Cap”,
shareholder
value
Premium
During the past four years
”Unseen wealth”?- Ericsson’s value
Equity
Liabilities
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The Balanced
Scorecard
Financial
Perspective
Goals
Internal
Process Perspective
Customer
Perspective
Goals
Yesterday
Measures
Measures
Vision
Goals
Measures
Today
Learning and
Growth Perspective
Goals
Measures
Tomorrow
Kaplan & Norton
(1992, 1996, 2000)
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From vision to action -- responsible: __________________
Vision:…...
Critical Success Factors
Metrics and targets
Action plans
Development
& renewal
Processes /
Internal efficiency
Customers
Financial /
Owners /
Management
Strategic aims
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The Balanced Scorecard Strategy Map
(Robert Kaplan, 2000)
Improve Shareholder Value
Financial
Perspective
Shareholder Value
ROCE
Revenue Growth Strategy
Build the Franchise
Increase Customer Value
 New Revenue Services

Improve Cost Structure
 Customer Profitability

Customer Acquisition
Productivity Strategy
 Cost per Unit
Improve Asset
Utilization
 Asset Utilization
Customer Retention
Product Leadership
Customer Intimacy
Customer
Perspective
Customer Value Proposition
Product/Service Attributes
Price
Quality

Time
Learning &
Growth
Perspective
Relationship
Function
Service
Image
Relations
Brand
Customer Satisfaction
“Build the Franchise”
Internal
Perspective
Operational Excellence
“Increase
Customer Value”
“Operational
Excellence”
(Customer
Management
Processes)
(Operations & Logistics
Processes)
(Innovation Processes)
“Good Neighbor”
(Regulatory &
Environmental
Processes)
A Motivated and Prepared Workforce
Strategic
Competencies
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Strategic
Technologies
Climate for
Action
10
Where we are now:
reflections on the current state of BSC projects
• Great interest:
– 27% of BUs in large Nordic firms in 1999, 61% ”within 2 years”
– One Swede in 600 bought the book, plus other books
– ”Gartner estimates that 40% of the Fortune 1000 companies will have
a Balanced Scorecard in place by the end of 2000”
• But: Disappointments not uncommon:
– just an empty shell and CEO rhetoric
– just one more software package
– just additional key ratios
• How it was meant: a communication tool to…
– agree on tasks
– communicate experiences
– celebrate success and learn from it
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Down to individual employees
• A format for discussing expectations and achievements, and creating
trust and motivation
• Empowered employees cannot be programmed. They need to share the
vision
• Companies increasingly ask employees
to share in building future
capabilities ”on speculation”:
– building customer relations
– developing new skills and ways of operating
– documenting for the future
– …...
People need guidance and motivation for this!
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To tell the story of our vision
• …to our employees
• …to customers, partners and others whom we engage in our ”imaginary
organization”
• …to the market for new talents
• …to our owners and banks
• …to society at large
Not a static value, but a convincing and dynamic logical case
why our way of preparing for the future will be rewarded!
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Scorecard use in the public sector
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The public sector in Sweden
• 289 primary local authorities (municipalities; ”communes”)
– roads, schools, welfare…
• 21 counties (”secondary communes”)
– health services, public transit etc
• >300 government authorities, boards, committees etc
– Post, railroad etc are state-owned companies which are
gradually being deregulated and opened to competition
– Tradition of greater independence from government than in
most countries
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Books and booklets have been
produced, and sometimes
distributed free of charge, by
organizations like the
Association of local authorities
and the National Financial
Management Authority
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State level: the Swedish government
• Several attempts, but no major examples
• The ”Legal, Financial and Administrative Services Agency” a pioneer
• Mostly on local level – and some cases where existing metrics have
been restructured according to four (or five) scorecard perspectives
• Encouragement from the Swedish National Financial Management
Authority: book, conferences, community
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The Swedish Police
• National Police Board + 21 county Police authorities
• Scorecard projects in several counties:
– Voluntary; encouraged from the national level
– Participation a central theme
– Often very down-to-earth and concrete, starting on
operative level
– No coherence and still after several years no unifying
project. But local scorecard activities persist
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A Finnish state example
• Third stage of development program for the management of the Road,
railroad and maritime administration
• Proposes BSC-like model
• Indicators: 1) describe current situation, 2) monitor development
• Used in connection with budgetary planning. Measures to be reported in
March and November each year.
• Ministry of communication to develop method for tracking the situation
continuously for all transportation in Finland, beginning in 2001
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Department of Internal Medicine
Hospital of Hoegland
County level: Jönköping one of the leaders
Department of internal medicine, Högland hospital
Further traing staff (5 days/year)
Net budget
100%
Objectives in percent
Personnel costs
Results in percent
80%
Further training doctors (10 days/year)
Medicine costs
60%
40%
Colleague discourse
Laboratory costs (incl X-ray + MRI)
20%
0%
Work satisfaction
Discharge letter (from discharge to sending)
Patient's satisfaction w ith care
Care guarantee 3 months
Care guarantee 1 month
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Medical variables
Hospital stay in percent of beds available
Number of patient occasions
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Hospitals in the Stockholm region
”4 P”:
• Patients
• ”Personal” = employees
• ”Pengar” = money
• Processes
Patients
Employees
Processes
Money
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Aiming for virtuous circles
Patients
Will
attract
competent
staff
Employees
Processes
Will attract
contracts
from
purchasing
authorities
Money
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Finnish public servants to be measured with BSC
• Decision in 2000 to develop a model based on ”useful and valid
multidimensional (BSC) systems for evaluating and informing about the
results of local government activities, to support strategic activities and
personnel leadership”.
Factors to take into account:
– Service effectiveness
(available, adapted to needs)
– Service quality
– Customer satisfaction
– Productivity
– Profitability
– Agility of service processes
– Employee ability
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Local government level: BSC in Swedish local authorities
• At least 30 (of 289) have more extensive projects
• About half of these only for city government use
• Three or four are implementing complete ’balanced steering’
• Schools and welfare are the most popular areas for scorecards
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Helsingborg - 1
• Two years of education and tests
• Project organization with:
– Steering group with political representatives
(members of city government)
– Project team consisting of 14 project leaders. These
answer for their areas, but grouped in new
constellations (eg, environment+construction+
technology)
• Scorecards on (at least) three levels, but only some
metrics are aggregable
• ”Without digitization scorecards will die”
• Participation, dialogues – cf. Helsingør (”DW but no
process), but yet they collaborate…
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Helsingborg - 2
•
”By describing activities from several perspectives knowledge about the
whole increases and deepens. It becomes easier to carry on a dialogue
about activities, to prioritize, follow up and evaluate. Balanced steering
creates a learning process, where the emphasis is on the future and on
development.”
•
”All activity areas shall develop balanced scorecards, the contents of
which shall be of a general nature and form the basis for comparisons
within and between different units and activities over time, where possible.
The scorecards shall be accessible for citizens, employees and other
interested parties within accepted ethical norms.
They shall be easy to understand and clear for different constituencies so
that each and every one without specific pre-knowledge shall understand
their contents. The information in the scorecards shall in a simple
explanatory way be possible to trace to their source, in order to achieve
optimal credibility.”
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Helsingborg - 3
• Began with seminars in the committees for welfare, education etc.
• Don’t go too fast – important to have many involved
• Not much was entirely new. Some were concerned that BSC would
duplicate existing quality management projects
• Important to include contractors who carry out the actual activities
• Balance handbooks: Who measures? How often? How are measures
organized and presented?
• Politicians first informed, than involved
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Balanced Steering
Subgoal 1.
Scorecard proposals - 2002-03-15
Content:
* Vision and activity idea / area of activity.
* Four perspectives: Economy/Customer/Process/Future
* Three indicators per perspective
* Explanation: [ CSF-goal-how-indicator ]
* Balance handbook: [ CSF-Indicators-aim-methodresponsibility-execution-frequency-perspective]
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Ex. Project organization Balanced Steering
SUBPROJECTS
Political steering
group
WELFARE
PROJECT TEAM
•County council
representatives
* Project leadership (empl)
* Project leader
* Subroject leaders
EDUCATION
TECHNOLOGY
RESOURCE GROUP
* Finance.
* Personnel.
* IT
DEVELOPMENT
CULTURE
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Balanserat styrkort - Insatser för äldre
Ekonomi / Finans
Kommuninvånare / Brukare
Framgångsfaktorer:
1. Rättssäkerhet
2. Respektfullt bemötande
3. Delta i den offentliga debatten
Framgångsfaktorer:
Använda ändliga resurser effektivt
Indikatorer:
1. Utfall / budget
1.1 Prisutveckling utöver budget
1.2 Volymutveckling utöver budget
Värde:
102 %
0,0 %
0,6 %
Mål:
100 %
0%
0%
Helsingborg
kännetecknas av hög tillgänglighet.
Bostadsområden, närservice, kollektivtrafik, vägar
och gator är anpassade för att alla enkelt ska kunna
ta sig fram i staden. Även de som har begränsad
rörlighet kan delta i samhällslivet.
Framgångsfaktorer:
1. Uppföljning av att beslut genomförs
2. Rätt kvalitet
3. God tillgänglighet
4. Attitydförändring
Indikatorer:
1. Andel inkomna handlingsplaner
2 Andel inkomna kvalitetsplaner
3. Telefoniuppföljning
Indikatorer:
Värde:
1. Andel nöjda kunder
1.1 Antal inlämnade besvär till Länsrätten
1.2 Antal bifall i Länsrätten
0
2. Antal klagomål avseende bemötande
47
I Helsingborg tar varje invånare ansvar för sig själv. Var och en planerar
för sin egen livssituation - och sin egen ålderdom. Målet är god hälsa och
eget boende på egna villkor, så länge som möjligt.
Vården och omsorgen i Helsingborg kan erbjuda flera
alternativ. Man arbetar inte minst förebyggande, för att
underlätta ett självständigt liv i eget boende. Alla kan
förlita sig på att få omvårdnad när behovet finns och på att
få inflytande över
vårdens
utformning.
Värde:
9,4 %
0%
-
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Process / Arbetssätt
Framgångsfaktorer:
1. Aktiva medborgare
2. Möjliggöra kvarboende i närområdet
Indikatorer:
Värde:
1. Antal medborgarprojekt
2
2. Andel av befolkningen över 65 år i särskilda
boendeformer
5,6 %
2.1 Andel av bef över 65 år med insatser i ord boende 13,9%
2.2 Indikator kopplad till kvarboendeprojektet
31
Framtid / Utveckling
Many Danish local authorities use BSC
• One example: Århus, with 7000 employes (400 managers)
• ”It’s also a matter of image – to show that old-age care
practices modern management.”
• The cornerstone is a set of values like dialogue, responsibility,
trust and commitment.
• Four perspectives: Political, Economic, Environmental, and
Employee
• 2001 goals focus on user satisfaction, complaints, employee
absenteeism and contact time with users. Quarterly measures,
to be publicized and benchmarked against peers and other
towns like Copenhagen, Odense and Ålborg.
• Precise and operational measures are essential, and that they
are presented in a ”manager-friendly” way. All employees need
knowledge about ideological values and targets.
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A Norwegian example: 2001 BSC prize to Stavanger
• Four perspectives: Users, Processes, Employees, Financial
• Surveys of citizens and employees, eg:
– Childcare twice a year
– Old age homes
– Culture surveys among employees
• Budget 2002 and business plan 2002-5 use the same structure. IT
integrated with other systems. Well received
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Summary of experiences - 1
• Everyone stresses dialogues and participation
• Lots of support from the employees – sometimes more difficult to
convince the politicians. (Are clarity and logic antithetic to politics?)
• Many reformulate the four perspectives, but most stick rather close to the
original ones. Some change their order, eg:
Citizens
Processes
Renewal
Finances
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Summary of experiences - 2
• The four perspectives can also be made to parallel those of a normal
business, but adapted to the non-profit character of the public sector:
Owner
Citizens
Process
Renewal
• In this way, the scorecard will help in deciding:
– How extensive and expensive activities are justified
– To prioritize between users
– Boost morale by showing how employees contribute to society.
For all of these, dialogues are essential.
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Current concerns in managing the Swedish public sector
• Those managing activities must be able to describe what they want
• Tasks should be more stable
• Need to find good ways to achieve involvement from employees, which
is necessary
• Responsibility and authority should match
• Although money may be short, that should not lead to short-sightedness
All of these make many believe that BSC is a timely idea!
2002 © ConcoursCepro. All Rights Reserved.
Ideas for scorecard implementation and use
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How it is done
 A format for discussing expectations and
achievements, and creating trust and motivation
• Start with interviews and documents - to know where we are
• Seminar with management team:
– Strategic aims and critical success factors
– The logic, ”the story of our success”
• Breaking down the scorecards to lower levels
• Concurrently, start developing metrics
• Consolidate with business plan
• Gradually: create IT support structure
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A scorecard process as a virtuous circle
Management
Control Systems
Strategy
Development
IT Support and
Procedures
Learning
Organization
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Breaking the circle
Management
Control Systems
Strategy
Development
IT Support and
Procedures
Learning
Organization
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Vision
KappAhl as the industry’s
leading service company
Business idea
Smart-looking and good
value for up-to-date people
Area of
focus
Finance
Strategic
goals
Increased
performance
per square metre
Customer Employees
Loyal and
satisfied
customers
Critical
success
factors
Measures
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Selling and
satisfied
employees
Process
efficiency
Development
Goal-oriented
organization
Growth
Action plan for
one focus area
(excerpts)
Focus area:
Customer
Strategic aim:
More loyal and satisfied customers
Critical Success factors:
1. Expression in shop
2. Active salespeople in every shop
3. Visitors in shop
Measures:
1. Customer per visit
2. Winning the company contest (customer contacts)
3. Number of visitors per year
Action plan:
Action
1. Simulate shopping round by second visit in shop
•
Design checklist together with shop personnel
•
Introduce way of working
•
Use digital camera to convey examples
2. Establish expectations
•
Ring all shop managers
•
Push for the competition in weekly newsletter
3. Joint VIP activity twice a year
•
Perform evaluation
•
Test”campaign z” in 5 shops
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Responsible
Coach
NN
Coach
Deadline
March
March-June
March
Done

April
April
October
42
The logic of a scorecard: a real estate company
Value growth
+
The right
customers
Buy
Merge
Sell
Financial/
Owners
Current profits
Customer
satisfaction
Admin. &
IT support
Property
portfolio
Market
positioning
Perspective
(focus)
Customers
Property
management
Outsourced
day-to-day
operations
Processes
Partner
development
Corporate
image
IT
utilization
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Development
43
Strategy map for a graduate school within a university –
initial draft
University’s
standing in
society
Linking education,
research, and community
Examination
Academic
quality
Satisfied
students
Environment scanning,
positioning, planning…
Attract students
and partners
Create and
maintain content
Competence
and contacts
Identity and
image
Repertoire
and routines
New competence,
new partners
New systems,
new
technology
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Trustees’
focus
Economic
performance
Carrying out
education
New ways of
working
Customer
focus
Assisting
students find
work; alumni
activities
Process
focus
Development
focus
44
The measurement model of EFQM
People Management (9%)
Leadership
(10%)
Policy and
Strategy (8%)
Resources
(9%)
People
Satisfaction (9%)
Processes
(14%)
Customer
Satisfaction (20%)
Business
Results (15%)
Impact on
Society (6%)
Source: Adapted and reprinted with permission from EFQM ”Self-assement Guidelines,” European Foundation
for Quality Management (1998)
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Implementing scorecards
Measures in scorecards need to be…
1
2
3
4
5
relevant, and logically coherent
accepted and practical
available and accessible
perceived as important and actionable
useful for learning
To achieve this, you need:
 to build initial scorecards right
 cost-efficient systems and software for measuring and reporting
 controls and responsibilities that signal that scorecards are important
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“Measures”
• Compact descriptions of observations on something, summarized in
numbers or in words:
– its attributes, or change during some time period
– its performance (potential or actual)
– using general measurement units, or a shared language
– absolute, or relative to standards
– scales may be nominal, ordinal, ratio
– should not be confused with evaluation, although it’s built into some
measures
– often part of a model of causation.
• So: it’s important to consider how measures will be used - who’s telling
whom?
• Aggregation of measurements: not always needed, but it is obviously
useful if we can avoid too many different, and know how they relate!
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Scorecard projects in practice
• Take time and effort, and sometimes stop at management team level.
• Because of this, commitment and perseverance are necessary.
• If done right, create strong commitment among employees – who
understand and get involved with the drivers of long-term performance!
• Start by identifying dialogues where scorecards will be useful
• If there are many users, well-designed IT support will be needed. But it’s
the way scorecards are used that will determine their success.
• Difference between US and (North-)European approach?
– US companies require specific metrics, and stress aggregation
– Swedish companies encourage but do not require specific formats
Econometric models vs. language for strategic conversations?
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Conclusions
• A simple and elegant idea: a format to discuss any human activity?
• Supports most kinds of strategic and operative discussions
• Useful in practice, but success depends on how it is done
• Reflects the growing role of immaterial assets, and the increasing
dependence on employees who share a vision
• Scorecards are essentially communication tools. They can be adapted to
the different dialogues which are needed in modern organizations. This
means that scorecard projects should be carefully tailored to the
perceived needs.
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A more detailed look…
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Financial (Owners’) perspective
• Financial consequences of actions already taken
• (Other “final deliverables” requested by owners)
• Growth (turnover and mix)
• Revenues and return on capital
• Costs and efficiency
• Risk and yield
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Customer perspective
• How do we look to our customers?
• Which customers do we want?
• Market share, awareness, and image
• Customer satisfaction and complaints
• Customer attitudes and retention
• Prospecting
• Customer profitability
• Structure (age, geography, gender, income)
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Internal process perspective
• Value chain
– Primary and secondary processes
- Lead-time, availability, efficiency, quality
- Scope, competencies, skills
• Information processes
– Documentation, data bases, intranet,
e-business systems…
- Utilisation, quality
Separate employee perspective, or not?
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Renewal and development perspective
• Development of:
–
–
–
–
markets, customers, and partner relations
products and new solutions
competencies and processes
technology and infrastructure
• Scanning:
– environment trends and competition, demand and supply markets
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A separate ‘employee’ perspective?
• Not in the original US model
• Many Swedish firms have one
• Fits with Skandia’s intellectual capital model
• Aren’t people a part of all perspectives?
+ HR and scorecards:
 impact on how HR are described in all scorecards?
 a scorecard for the HR ‘dimension’?
 a scorecard for the HR function/department?
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Required for successful implementation:
1. Measures that are relevant and logically coherent
- What that means will differ depending on
how you want to use your scorecards!
Bonus
calculations
Targets
Benchmarking
Reports from
subsidiaries and
business
initiatives
Increasingly
normative
Executive
remuneration
Reports to
boards etc
External reports
Neutral
description
Internal use only
2002 © ConcoursCepro. All Rights Reserved.
Publicized
Increasing
audience
56
Required for successful implementation:
2. Measures that are accepted and practical
• Can existing measures be used?
• Need for new measures:
–
–
–
–
automatic machine collection
record auditing (reusing data)
surveys
(estimates)
• Definitions and measurement procedures - how, when, by whom?
• Comparisons and benchmarking
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Required for successful implementation:
3. Measures that are available and accessible
• How should data be made available
–
–
–
–
Integrated into existing reports and “intranet news”?
Who’s sender and receiver
Authorization and integrity
Reporting cycle and action
• IS support
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Systems and software
• Software for scorecards; measurement practices; presentation
routines; any manual systems used temporarily etc
• Links to existing administrative systems
• Customized systems exist, also linked to ERP systems.
A normal development path is:
1 User interface - presentation system and graphics
2 Integrate with other systems - automatic data collection, data
warehouse
3 Database functionality, simulation capabilities
• Software vendors have different ”roots”:
– ERP; ’Business intelligence’ (DW); ”components”
• Start simple!
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Software used at
Ericsson
(”Cockpit
communicator”)
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Required for successful implementation:
4. Measures that are perceived as important and
actionable
• Measures as goals and commitments
–
–
–
–
link to planning
relation to other reports
possible to influence
relevance for bonuses and other reward systems
 Will the scorecard change behavior?
 Will scorecard control be perceived as fair (matching responsibility to
action, and success to rewards)?
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Linking rewards and incentives to measures
• ”Our description of the important things we do,
to make it possible to discuss further improvements”,
not ”their measures on us”
• Which performance should be rewarded?
– own unit or higher level
– reward current achievements (performance drivers?)
or wait for effects (outcomes?)
 NB: whose is the risk?
• Weighted mix of metrics, or other method of combination?
• Bonuses should be seen as one part of rewards. Success can
be celebrated in many ways...
• Remember: scorecards are tools for learning!
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Required for successful implementation:
5. Measures that are useful for learning
Linking the measures to portray
our business logic
Value of increased
customer base
Attracting new
customers
Existing cust’s
start using
Marketing
of service
+
Perspective
(focus)
Profits from
current eBusiness
Financial/
Owners
Customer
satisfaction
Functioning
of web-site
Customers
Low-cost
operation
Concept and
content
Technology
performance
Performance
of partners
Processes
out as expected?
– Learning opportunity about causation,
time lags… and surprises!
• Modify initiative, increase it,
abandon…?
Development
Competences
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• Learning from experiments - did it work
4
• Revise scorecard and measures
e SC R e .su l ts W ork s h op
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65
Controls and responsibilities
• Scorecard control needs to agree with other controls and rewards
• Control is contingent on strategy
• Responsibilities for scorecards:
–
–
–
–
–
Managing the activities described in a scorecard (unit management)
Designing scorecards and the processes for using them (controllers)
Measuring and making measurements accessible (IS function)
Using scorecards in planning and control (CEO)
Learning through scorecards (all)
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66
Dominant modes of control?
(Nilsson & Olve in European Management Journal, August 2001)
Corporate strategy
Portfolio Management
Organizational level
(Low synergy potential)
Activity Sharing
(High Synergy Potential)
Corporate
BU-level
Operational
level
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67