The Balanced Scorecard For Port Authorities
The Balanced Scorecard for Port AuthoritiesPresentation forPaul ArvesonBalanced Scorecard Institutewww.balancedscorecard.org 2007 BalancedScorecard Institute - Do not copy without permission.1
Some BSCI Clients & PartnersFinancial InstitutionsAssociationsIndustrialHealthcareGolden Sunlight MineCopper DevelopmentAssociationFirst Bank of NigeriaInternational BankOf MoscowWorkers Compensation Insurance Rating BureauConsultingBearingPointDeloitte ConsultingCitizens NationalBankMortgage ServicesNot-for-ProfitNational NavalMedical CenterSecurity and IntelligenceGovernmentDefense DepartmentDefenseAirArmament US Army CIOG-6 InformationCommand - (Chief Information Systems Defense EnergyOfficer)Agency Support CenterUS Air ForceU.S. House ofRepresentativesChief Admin. OfficeCustoms BureauU.S. Department ofHomeland SecurityFederal Bureauof InvestigationU.S. Dept. of DefenseJoint InteragencyTask ForceSOUTHCOMEducationNational RenewableEnergy LaboratoryMemphis CitySchoolsU.S. Marine CorpsSystems CommandSoftwareNew YorkOffice of GeneralServicesInstituteUniversity ofWest IndiesMecklenburgCounty NCFollett CorporationSpectrumPartnersLLCRoyal CanadianMounted PoliceAtlanta PublicSchoolsState and LocalMuscogee CountySchool DistrictPearson EducationalTelecommunicationsPinellas CountySheriff's OfficeFloridaGreenville UtilitiesCommissionFranklin County, OHTransportationEnergyLukOilU.S.Departmentof EnergyOneida Tribeof WisconsinGovernmentof MalaysiaCroatian Telecom 2007 Balanced Scorecard Institute - Do not copy without permission.AMIRI Flight AbuDhabi, UAE2
The Key Strategic Issue“People and their managers are working so hard tobe sure things are done right, that they hardly havetime to decide if they are doing the right things.”Stephen R. Covey 2007 Balanced Scorecard Institute - Do not copy without permission.3
What Is the Balanced Scorecard (BSC)? The balanced scorecard is a strategic management systemfor establishing and communicating an organization’svision, mission, and strategy to stakeholders andemployees, and for aligning day-to-day work to the strategy The balanced scorecard provides a framework for planningand measuring strategy as viewed from differentdimensions, or perspectives, of organizational performance The balanced scorecard uses performance measures tomonitor strategic success and guide the selection ofstrategic initiatives. The measurements also provideguidance in budgeting and allow the organization to learnwhat works. 2007 Balanced Scorecard Institute - Do not copy without permission.4
Balanced Scorecard History 1990 - Nolan Norton Institute study on balanced measures offinancial and non-financial performance in several organizations David Norton, study leader Robert Kaplan, academic consultant from Harvard 1996 - “The Balanced Scorecard” book published Introduced the BSC concept and rationale for balanced measures 1997 - Foundation for Performance Measurement founded1998 - Balanced Scorecard Institute founded Merged 2003, now incorporated as Strategy Management Group, Inc. 2001 - “The Strategy-Focused Organization” book published Introduced the strategy map 2004 - “Strategy Maps” book published 450 pages of strategy map examples and case studies The BSC is now used by over 65% of Fortune 1000 companies;increasingly being adopted by Federal agencies, by state andlocal organizations, and internationally. 2007 Balanced Scorecard Institute - Do not copy without permission.5
How theBSC Can HelpPort Authorities Simplifies management by focusing attention on a few high-impactStrategic Themes Communicates vision and strategy effectively by using StrategicObjectives and Strategy Maps Uses performance measures to maintain alignment to strategies andreward the right behaviors Provides agility and flexibility in the midst of rapid and continuouschange Helps everyone to maintain focus on the most important things 2007 Balanced Scorecard Institute - Do not copy without permission.6
Why Strategic Management And TheBalanced Scorecard?Where We Are:Where We Want To Be: Alignment of the organization leads to: Identifying Strategic Performance MeasuresCustomer focusImproved CommunicationResults-based justification for fundingMission effectiveness 2007 Balanced Scorecard Institute - Do not copy without permission.7
Make Strategy Everyone’s Job 2007 Balanced Scorecard Institute - Do not copy without permission.8
The Balanced Scorecard IS:IS NOT:A strategic managementsystemOnly a performancemeasurement systemA tool for evaluatingorganizational performanceA report card on my individualperformanceA system for providingfeedback where it is neededAn executive informationsystem for top leaders onlySupported by software aftermetrics are definedA piece of software you canjust buy and plug inA long-term journeyA short-term project 2007 Balanced Scorecard Institute - Do not copy without permission.9
Balanced Scorecard alStewardshipInternalProcessesCapacityBuildingKey ResultSatisfactionIncreased revenues,Reduced costsOperationalEfficiencyKnowledge,Tools & InnovationKey QuestionsThrough the eyes of ourcustomers and stakeholders:how well do our products andservices meet their needs?For businesses: how do wecreate value for our owners?For government and not-forprofits: how do we maximizevalue and effectiveness of ourmission?How can our employees improveinternal processes to deliverour products and servicesbetter, faster, and cheaper?How can we support the internalprocesses through improvedskills, technology, & leadership? 2007 Balanced Scorecard Institute - Do not copy without permission.10
The Balanced Scorecard TranslatesStrategy Into Operational Terms(Public Sector)MissionVisionCustomer/Stakeholder Perspective“To achieve ourmission, whatcustomer needsmust we serve?” Price Speed QualityFinancial Perspective“How can wemaximize thevalue of ourmission? Productivity Effectiveness GrowthInternal Process Perspective“To satisfy ourcustomers, at which Costbusiness processes Cycle Time Efficiencymust we excel?”Capacity Building Perspective Skills & Knowledge“To excel in our Technologyprocesses, whatcapacities must our Culture Leadershiporganizationhave?” 2007 Balanced Scorecard Institute - Do not copy without permission.11
Strategic Planning Framework: The “BSC House”ValuesMissionVisionEnablers Challenges/PainsCustomer Value PropositionStrategic ResultsEngaged ipsCustomer /End icThemesInteractive Communications 2007 Balanced Scorecard Institute - Do not copy without permission.12
Each Strategic Theme SupportsA Strategic ResultStrategic Resultor trategic ThemePERSPECTIVESCustomer 2007 Balanced Scorecard Institute - Do not copy without permission.13
A Strategic Theme ContainsStrategic ObjectivesStrategic Resultor sesCapacityBuildingStrategicObjectives 2007 Balanced Scorecard Institute - Do not copy without permission.14
EXAMPLECustomerKey To A Successful Scorecard:a Strategy MapIncreaseSatisfactionLowerWait TimeFinancial eCostsLowerCycle TimeImproveStrategic SkillsReduceProcurementStepsUpgradeEquipment 2007 Balanced Scorecard Institute - Do not copy without permission.15
BSC for a Regional AirlineEXAMPLEMission: Dedication to the highest quality of Customer Service delivered with a sense of warmth,friendliness, individual pride, and Company Spirit.Vision: Continue building on our unique position -- the only short haul, low-fare, high-frequency,point-to-point carrier in America.Strategic Theme:Operating lProcessCapacityBuilding ProfitabilityLower costs InitiativesProfitabilityLower costsIncreasedrevenueOn-time flightsLowest pricesMore Customers Market Value 25% per year Seat Revenue 20% per year Plane LeaseCost 5% per year First inindustry98%Satisfaction% change 25 Minutes93% ves Measures ReduceturnaroundtimeAlignground crews FAA On TimeArrival RatingCustomerRankingNo. CustomersOn GroundTimeOn-TimeDeparture % Ground crewstockholders % Ground crewtrained 2007 Balanced Scorecard Institute - Do not copy without permission. yr. 1 70%yr. 4 90%yr. 6 100% stomerloyaltyprogram Cycle timeoptimizationprogram Stockownership plan Ground crewtraining16
Building & Implementing A Balanced Scorecard:Nine Steps To Success OrganizationOrganization PainPain OrganizationOrganization EnablersEnablers VisionVision && MissionMission ChangeManagementChange Management BSCBSC DevelopmentDevelopment PlanPlan Performance Results Revised Strategies Alignment Dept. &Support UnitScorecards Value Proposition Strategic Themes Strategic Results Software PerformanceReporting KnowledgeSharing Strategy ActionComponents Cause-Effect Links Strategic Projects Performance Measures Targets Baselines 2007 Balanced Scorecard Institute - Do not copy without permission.17
Balanced Scorecard Development:a Strategic Thinking ProcessMissionVisionValuesStepChallenges, EnablersCustomer ValueCustomer/StakeholderNeedsSTRATEGIC ALTITUDE30,000 ft.D15,000 ft.etainoStep pPerspectivesStepStrategic Themes & ResultslincreStrategicObjectivesases5,000 ft.asStrategy MapwegetlStepqrStep sActivitiesPerformance MeasuresStep& sGround 2007 Balanced Scorecard Institute - Do not copy without permission.Roll outProjectsTasks18
Step nSecure a mandate from senior leadershipTeam must have representation across the organization Step 1: Deploy the BSC TeamCross-functionalMany ranks and rolesStakeholders or their representativesDesired attributes of team members: Analytical thinker, visionary, change agent, internal processexperts, proactive (“outside the box”) thinkers 2007 Balanced Scorecard Institute - Do not copy without permission.19
StepnOrganizational Assessmentz What are the facts? Current levels of performanceChallenges, Enablers, PainsInternal Strengths, WeaknessesExternal Opportunities, Threatsz Who are the customers?Cross-functional teamConducting an OrganizationalAssessment Primary customers Secondary customers Stakeholdersz What do customers need? Functions, servicesTimelinessQuality, reliabilityRelationship, communicationImage, reputation 2007 Balanced Scorecard Institute - Do not copy without permission.20
StepnWhat are Your Port Challenges? 2007 Balanced Scorecard Institute - Do not copy without permission.21
StepoStep 2: Identify Strategic Themesz Strategic Themes: Brief titles that indicate the “pillars of excellence” where theorganization must excel to increase value for its customers Represent the main areas on which the organization mustfocus its efforts to achieve success Encompass all the major functional and support units of theorganization Typically, three to five in numberz Each Strategic Theme has one Strategic Result 2007 Balanced Scorecard Institute - Do not copy without permission.22
StepoCommon Strategic Themes And Results Theme: Build the Business Result: Increased number of customers and sales per customer Theme: Operational Excellence Result: Improved efficiency in delivery of customer-facing services Theme: Strategic Partnering Result: Increased number of partners and quality of partnerships Theme: Delight the Customer Result: Increased customer satisfaction and retention Theme: Life Cycle Management Result: Reduced cost of ownership and improved reliability Theme: Flatten the Organization Result: Improved coordination; more efficient services Theme: Good Governance Result: Clean audits and increased accountability Theme: Community Involvement Result: Increased community involvement and satisfaction 2007 Balanced Scorecard Institute - Do not copy without permission.23
Stepp Step 3: Develop Strategic ObjectivesDesired ResultWhat Are We TryingTo Accomplish?Performance MeasureObjective OwnerWho Is Responsible& Accountable?StrategicObjectiveWhat Strategic ProjectsMust We Implement?Strategic InitiativeHow Are WePerforming?What Specific StepsMust We Take?Action Steps 2007 Balanced Scorecard Institute - Do not copy without permission.24
Stepp How To Write Strategic Objectivesz 1. Start from the Strategic Results at the top of the Strategy Map.z 2. Work downward from the top asking the question “How can weachieve this objective?”z 3. Check by reading upward from the bottom asking the “Why?”questionGood Objectives: Brief; start with imperative quantitative verbs (e.g.,“Improve, Increase, Reduce”); continuous improvement potential (noprojects, or on/off activities; show innovation & creativity; linked to desiredstrategic results.) 2007 Balanced Scorecard Institute - Do not copy without permission.25
SteppCalibrate Your “Strategic Altitude”STRATEGIC ALTITUDEToo high,Too vague“World – class“Provider of choice”“High-performanceorganization”Risk: too vague to provide focus and directionStrategicObjectiveToo low,Too specific“Train employees”“Build a new system”“Upgrade a program”Risk: may miss better options 2007 Balanced Scorecard Institute - Do not copy without permission.26
SteppSample Strategic ObjectivesGood Objectives:z Improve knowledge of customerrequirementsz Reduce workplace accident ratez Improve ability to estimateresource needsz Lower cost per unitz Improve employee moralez Reduce process cycle timez Improve reliability of networkz Increase critical employee skillsz Increase “smarter/faster”headcountNot-So-Good Objectives:z Write a strategic plan (Better:Improve employeeunderstanding of ourstrategic direction)z Complete the IT upgradeproject (Better: Increasenetwork reliability)z Train all employees (Better:Improve employee knowledgeand skills)z Secure more funding for XYZprogram (Better: Improveprogram cost-effectiveness)z Increase workforce diversity 2007 Balanced Scorecard Institute - Do not copy without permission.27
StepqStep 4: The Strategy MapA Strategy Map:z Defines the relationships among objectives that arecauses (performance drivers) and objectives that areeffectsz Helps create a balance among objectives, performancemeasures, and initiativesz Helps define the logical consistency of the scorecard 2007 Balanced Scorecard Institute - Do not copy without permission.28
EXAMPLEA Shipping Company Strategy MapIncreased profitsLower costsIncreased merInternalProcessesLearningand growthFewer overoute planning 2007 Balanced Scorecard Institute - Do not copy without permission.29
A County Department Strategy MapEXAMPLELeading the Way for a Safer CountyPARTNERSHIPS& QUALITY OFSERVICESFISCAL Y &PRODUCTIVITYINTEGRATETECHNOLOGICAL PROGRAMS& EFFECTIVERESOURCE REACCOUNTABILITYAT ALL LEVELSDETER CRIMEEMPLOYEES &INNOVATIONENSURECOMPETITIVEPAY & BENEFITSPROPOGATECULTURALLY DIVERSEWORKFORCE OFEXCELLENCEFOSTER POSITIVEWORK/TEAMENVIRONMENTENHANCE EFFECTIVECAREER DEVELOPMENTPROGRAMSPROMOTE CLEAR& EFFECTIVECOMMUNICATIONASSESS COMMUNITYPARTNERSHIPS,PROGRAMS &RESOURCESPROMOTEEFFECTIVELEADERSHIP 2007 Balanced Scorecard Institute - Do not copy without permission.30
StepzzzzrStep 5: Performance Measures(Metrics)Provide a tangible way to see if our strategy is workingFocus employees’ attention on what matters most to successAllow measurement of accomplishments, not just of the workthat is performedProvide a common language for communication“What gets measured gets done.”“If you don’t measure results, you can’t tell success fromfailure, you can’t claim success or reward it, and you maybe rewarding failure.”“If you can’t recognize success, you can’t learn from it; if youcan’t recognize failure, you can’t correct it.”“If you can’t measure it, you can’t manage it and improve it!” 2007 Balanced Scorecard Institute - Do not copy without permission.31
SteprExercise: Evaluate Your MetricsPointsLevel1Not very well2Somewhat3Quite a bit4Very well; outstandingHow well do your performance metrics:ScoreHelp translate your business strategy into operational terms?Align all business units toward common strategic goals?Fully reflect what your customers and stakeholders care about?Provide the leverage to create change?Account for intangible value?Manage end-to-end results across departments and business units?Enhance your ability to compete in the future?Drive improvements in how work is performed?Include proper benchmarks to judge performance?Total ScoreAdapted from: Measuring Performance, Dr Bob Frost, Fairway Press, 1998 2007 Balanced Scorecard Institute - Do not copy without permission.32
Stepr Performance Measures Are Derived fromStrategic ObjectivesEXAMPLEStrategic Theme:SamplePerformance MeasuresBuild The BusinessResultsRevenue Growth %ExpandmarketsFinancialCash FlowReduceCostsCustomer eIncreaseCustomerRetentionRepeat customersService error rateInternalProcessesImproveServiceQualityDelivery timeReduceCycle TimeNo. trained & tionTechnologyAverage system agePerformanceDrivers 2007 Balanced Scorecard Institute - Do not copy without permission.33
StepsStep 6: Select Strategic Initiativesz New strategic projects identified during thescorecard development processz Widely recognized as solving significantorganization problemsz Prioritized and ranked by: potential alleviation oforganization pain, cost and time to implement,benefits and time to realize the benefitsz Schedule, deliverables, resource commitments andownership definedz Dependencies and sequencing considered 2007 Balanced Scorecard Institute - Do not copy without permission.34
Steps 1-6 Summary:EXAMPLEA Government Task Force BSCMission: Conduct counter-illicit trafficking activities to achieve an effectiveinternational effort.Vision: Leverage assets to cause major reductions in illicit trafficking.Strategy MapStrategy: Improved Operating EfficiencyCustomer/StakeholderIncrease PartnerNationeffectivenessInternalProcessesBest AssetsOn-target, On-TimeImproved Partner NationAnd InteragencyCoordinationObjectives Best assets Increasefield assetavailabilityImproved assetcapability& availability ionCapacityBetter toolsand trainingIntegratedAssessment of needs/better information Agreement onsharedMission & ves 15% inone year Coordination Index 20% inone year CapabilityAvailability 10 newtypes bynext FY Reducedelays 10%per year 95% by nextFY 20M bynext FY 90% Asset Index Internal & external Percentageresource allocation priorities covered Resources receivedsystemImprove training &development Develop crossfunctional teamsIncrease leadershipaccessibilityTargets Employeesatisfaction score Percent signatoriesTeam buildingindex 2007 Balanced Scorecard Institute - Do not copy without permission.95%85% bynext year Develop newcoordinationinitiativesDevelop aCommandCapabilitiesBriefInteragencyroles andresponsibilitiesstudyQuarterlytacticalmeetings Commandresourceinformationsystem aining 35
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The balanced scorecard is a strategic management system for establishing and communicating an organization’s vision, mission, and strategy to stakeholders and employees, and for aligning day-to-day work to the strategy The balanced scorecard provides a framework for planning and measuring strategy as viewed from different
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How to Create a Successful Balanced Scorecard What is a Balanced Scorecard The balanced scorecard is a concept and tool first conceived by by Robert Kaplan and David Norton. The balanced scorecard idea debuted in the Harvard Business Review in 1992. "The balanced scorecard retains traditional financial measures. But financial measures tell the .
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Balanced Scorecard Step By Step guides readers through the processes required for a successful Balanced Scorecard project. In addition, he shows how to become a strategy-focused organiza-tion by imbedding the Balanced Scorecard into critical organizational pro-cesses. The book provides an
