4 | Info Mgmt
How to Develop a Balanced Scorecard
Organizations that want to get a better handle on how they are doing in the areas most important to their success often decide to develop a Balanced Scorecard. Here are four typical stages of development.
Stage 1: Enlightenment. Senior executives need to believe that the path to solid, long-term success requires knowledge of: (a) customer requirements and how to meet them; (b) employee requirements in order to reduce turnover, improve processes, and provide better service; and (c) operational processes and costs to discover how to become faster and more flexible. With this realization, leaders seek measurements that will tell them how the company is doing in each of these areas. Better yet, they want a measurement system that shows the connection between these vital areas. They are enlightened. The need for a Balanced Scorecard grows.
Stage 2: Identification. The organization initiates a system-wide effort to identify existing measures and to create needed measures where none exist. It begins to track performance on these measures, to report progress to employees, and to reward them for meeting performance goals.
Stage 3: Refinement. The reaction to the measurements, progress, reports, and rewards suggests that people respond to what is measured. This leads to greater refinement of…
11May2010 | Steve George | 0 comments | ContinuedCommunicating Performance on Key Measures
Wainwright Industries manages by fact. One visit to Mission Control and you believe it.
Wainwright dedicates one conference room at its headquarters in St. Peters, Missouri, to displaying the information and analysis that drives its award-winning continuous improvement efforts. It calls the room Mission Control.
The walls display a plethora of charts and graphs, including trends for quality and performance indicators and, for each customer, monthly satisfaction index scores, trends for quality measures, stretch targets for exceeding customer expectations, and weekly customer feedback reports.
Wainwright developed five key strategic indicator categories from its strategic business planning process: safety, internal and external customer satisfaction, Six Sigma quality, and business performance. “We focus on safety first and making money last,” says plant manager Mike Simms. And the focus has paid off. “We went from $100,000 in Workers Compensation claims in 1991 to zero in 1994,” Simms said, “and our number of recordable accidents dropped from 66 to 12.” At the same time, putting business performance last did not mean it suffered. Over the same time period, Wainwright’s gross profit as a percent of sales jumped from 8.7% to 14.2%.
Mission Control displays key quality indicators for each of the five categories, all of which link to…
23Mar2010 | Steve George | 0 comments | ContinuedThe Financial Impact of Integrating Baldrige
Business leaders have long sought proof that embracing the Baldrige model, implementing Total Quality Management, or applying for Baldrige Award or state quality awards pays. Does it make our company more profitable? Does it return value to our shareholders? Is it worth the effort and changes involved?
The answer to all three questions is, “Yes.”
Dr. Vinod Singhal of the Georgia Institute of Technology and Dr. Kevin Hendricks of the College of William and Mary did a five-year study of more than 600 quality award winners. They compared the financial performance of these winners with a control sample of companies similar in size and operating in the same industries. Singhal and Hendricks tracked both groups for ten years: six years before the award winners won their award and four years after.
Their study revealed that, over a five-year period starting one year before the winners won their first award, the award winners averaged significantly larger increases in several key measures of financial performance:
- 44% higher stock price return
- 48% higher growth in operating income
- 37% higher growth in sales
When Singhal and Hendricks separated the independent award winners (Baldrige and state quality award winners) from those companies winning supplier awards, the results were even more dramatic:
- 61% increase…
Which Side of the Digital Divide Is Your Organization On?
The Baldrige Criteria ask how you communicate within and outside your organization and how you collect and transfer knowledge. The best answers to those questions are moving in a digital direction.
Here’s a quick quiz to determine if your organization is “switched off” for digital or “switched on,” courtesy of Jeffrey F. Rayport (“Does Your Company Need a Digital Readiness Checklist?” Harvard Business Review, February 9, 2010).
- We use a “walled garden” client like Lotus Notes for email, calendar, and contacts vs. we use an “open platform” like Outlook that facilitates easy connectivity.
- Our technology staff behaves as if we work for IT vs. our technology staff knows it works for us by enabling our productivity and output.
- Our organization’s policies block external streaming media, social networking, and some commercial sites to PCs and apps downloads to mobile devices vs. our policies embrace external media streams in all formats and from all sources.
- Our day-to-day communications rely on extended voicemail and lengthy face-to-face meetings vs. our daily communications rely on email, IM, phone, and concise face-to-face meetings.
- Internal communications are infrequent and randomly issued and take the form of “official” memos vs. frequent and regularly issued internal communications in the form of email employing rich media.
- Our intranet lacks or has limited…
My Personal Baldrige: Measurement
Management by fact is a Baldrige core value. Organizations struggle with this to the point that the average scores for Category 4 in Baldrige applications—Measurement, Analysis, and Knowledge Management—have traditionally been lower than any other Category.
Performance measurement has improved over the last decade with the proliferation of balanced scorecards, but individuals continue to struggle with measuring performance. Part of it is a natural resistance to measurement, the fear that, if I measure my performance, somebody is going to use the results of those measures against me. That’s a justifiable concern, but it ignores the opportunity to use the results of those measures to demonstrate your value to the organization. If you are lucky enough to have a boss who understands performance measures and how the results of those measures can be used to improve and not to punish, then identifying personal performance measures can help you do your job better. If you have a boss who will beat you over the head with them, save yourself the aggravation unless you can keep your personal measures private.
Remember that it’s hard to personalize Baldrige without a little learning and effort, and the Baldrige model is not designed to prescribe an individual’s role,…
29Jan2010 | Steve George | 0 comments | ContinuedGet the Information You Need
Do you have the information you need to do your job? Do you have what you need to make critical decisions?
IBM asked these questions of business leaders in a business analytics and optimization study published in April 2009. One-half said they didn’t have the information required to do their jobs. One-third reported that they frequently lacked the information needed to make critical decisions.
IBM defines analytics as “the use of information to find patterns, identify new possibilities, create scenarios, make predictions, and prescribe actions.” Optimization is “a process that entails analyzing opportunities and constraints and then driving decisions about them deep into the organization.”
In August, IBM surveyed nearly 400 business leaders worldwide about how they use information and apply business intelligence. It compared top performers—top quintile based on self-reported performance relative to their peers—and lower performers in the bottom two quintiles. Twice as many top performers as lower performers had mastered three basic characteristics of information management:
- Aware. They were able to gather and use information from inside and outside the enterprise.
- Precise. They could sort through and extract the most relevant aspects of information.
- Linked. They were able to align information with business objectives and across functions.
Organizations that integrate the Baldrige model also…
28Dec2009 | Steve George | 0 comments | ContinuedCreating a Balanced Scorecard
Performance measurement improved significantly with the advent of the balanced scorecard. Before that, no matter what an organization did, it tended to emphasize one set of measures at the expense of all others. Businesses focused on financial performance. Schools targeted test scores. Government concentrated on…I have no idea.
Each set of measures was important but just part of a bigger picture, and each a lagging indicator of performance on all of the processes that produced these results.
The balanced scorecard directs leaders’ attention to how their organization operates, and how it operates determines how it will perform. A scorecard is also a powerful tool for aligning the activities of an organization with its vision, mission, goals, and objectives. Most Baldrige Award winners rely on balanced scorecards, along with their strategic plans, to focus everyone on what the organization must do to succeed.
I recently sat in on a Webinar by Stacey Barr, a performance measurement expert, in which someone asked a basic question about how you figure out what to measure. The Baldrige Criteria put it this way: How do you select data and information for tracking daily operations and overall organizational performance?
Barr suggested asking a different question. Rather than thinking about how…
14Dec2009 | Steve George | 0 comments | Continued
