Scorcard- Tracking The Right Things
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The document discusses how to identify the right performance measures to track. It describes how performance measures originated with Sloan in the 1940s and the balanced scorecard approach developed by Kaplan and Norton in the 1990s. This approach measures performance across financial, customer, business process, and learning/growth areas. However, common issues are that measures often lag performance and can encourage focusing on the wrong activities. The document recommends identifying current measures, aligning them with organizational vision/strategy, and focusing on leading indicators to drive future performance.
Scorcard- Tracking The Right Things
- 1. Grand Rapids Section 1001 Scorecards- How do we know we are tracking The right things?
- 2. How did it start Performance Measures Sloan in the 1940s Balanced Scorecards Developed in the early 1990s by Robert Kaplan and David Norton By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 3. Balanced Scorecards Financial Customer Business Process Learning and Growth By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 4. Balanced Scorecards Dash Boards or scorecards Stop light indicators on the health Tracking Frequencies Reporting Frequencies Seminars Workshops Consultants By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 5. Is it the real world? By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 6. How did were get here? Who makes the decision on what to measure? How are the measures decided? Are they telling us what we want to know? By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 7. Who makes the decision? Executive Direction Upper Management Middle Management Culture- How is the company Driven? By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 8. Decision? Technology Driven New products R&D Market Driven Retain Customers New Customers Efficiency Driven Reduce cost or Complexity By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 9. Culture Lets call it the personality of the Company In the family called the company, who gets their way? Engineering Sales Manufacturing By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 10. The Start What we are familiar with What is easy to measure What is going to make us look good Although these are not the right reasons, it is where most get their start. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 11. The issue No modes for improvement Employees that affect performance, may not see the correlation to the measure. What we have as measures do not relate to how the company performs. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 12. The issue thats the issue, the measures are all green, but we are loosing money. Profits are down for three months in a row We do not believe any of our measures, the numbers are not right By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 13. How does that Happen? Two major reasons: Lagging Indicators The measures encourage the wrong activities By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 14. Lagging Indicators Lagging indicators measure output of past activities. Most financial indicators are lagging indicators. Its like horse out of the barn, it already happened. We need to react and the results of our actions may not be seen for two or three reporting periods. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 15. Wrong Activities Purchased Price Variance Negotiate based on price and quantity breaks Excess inventory and carrying costs. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 16. Wrong Activities Machine Utilization Run in excess of current requirements to maximize the measure. Excess inventory, Wrong inventory. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 17. Wrong Activities Direct/Indirect labor ratio Encourages inaccurate labor reporting to maintain acceptable ratio Total costs not in control. Lack of integrity By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 18. Ultimate Lagging Indicator Profit By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 19. Profit Byproduct of actions taken in the past, sometimes the distant past. Profit is the result of many actions. It does not indicate which activities are positive and which are draining the money. Disconnected from non financial factors. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 20. Dont get me wrong Most enterprises are in the business to make money. Provide a return to shareholders. If we use profits as our indicator, its like using the speedometer to tell us if we are driving in the right direction. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 21. Where do we go? These are trying times Companies are in the survival plan We need to watch the pennies? We dont know about whats the day after tomorrow! By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 22. Leading Indicators Leading indicators either measure activity in its current state on in the future state. Forecasting out what the future would look like. Powerful measures, sometimes are difficult to define. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 23. How do we identify Three Different ways to approach 1. Identify all of your current measures 2. Focus on your Vision 3. Look forward strategically By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 24. Identify your current Measures Go through are the areas of the organization and document what is being measured. Not just what is on the scorecard. What gets measured gets done. Organize by business process. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 25. Identify your current Measures I have used cross functional surveys in the past to identify how well a company measures themselves. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 26. Identify your current Measures Summarize the information and use a cross functional team to identify: Leading or Lagging indicator Association with other measures By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 27. Identify your current Measures The association link can be an important one. Lagging indicators may have more than one leading indicators associated with it. Us an affinity diagram or a Fish Bone Diagram to graphically show the association. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 28. Identify your current Measures Through these activities You identify all the measures that are current. Which ones may be more important than your current indicators Focus on the leading indicators for the improvements By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 29. Identify your current Measures Potential Leading Indicators Inventory Turns Although a financial calculation, keeps the company focused on material flow. The impact is on Cash Flow By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 30. Identify your current Measures Potential Leading Indicators On time delivery Both to internal and external customers. Company will focus and work for ways to eliminate waste, not needed activities. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 31. Identify your current Measures Potential Leading Indicators Product Margins Sales minus cost. Understand that variation is waste. Work to reduce that variation. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 32. Focus on your Vision What is the mission of the company Who are we? What are our core values? What are our principles? By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 33. Focus on your Vision If we use these ideals as our guide to running the company We can identify what they look like How they are measured What is acceptable By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 34. Focus on your Vision Manufaturing Facility Reporting Month People Work related Training Hours injuries Tunover Absenteeism Profits Product Scrap $ Perfomance Cost PPM-Internal Productivity Pull Ticket % Improvement $ Technology Customers Program Status Systems-Internal PPM-External CCN Systems- Delivery External By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 35. Focus on your Vision Communicate to all the employees these measures. Show that the company believes in what it says. They can see how they effect the results. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 36. Look forward strategically Where does the company want to be? Executives need to be looking 3-5 years out What will the company look like at that time? Use Indicators as the road map to get us there. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 37. Look forward strategically Using the SWOT Analysis: Strengths, Weaknesses, Opportunities, Threats Identify what the key areas of each section would look like and how would we know if was happening. What would be the measure, acceptable range? By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 38. Look forward strategically These can be the leading indicators of the future. The actions taken can effect the future and can be adjusted with minimal impact to the daily operations. Forecasting By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 39. Look forward strategically We want to be a supplier to Toyota What does a supplier look like How are they different to us What do we need to change What is our plan By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 40. Culture- The drivers from earlier Technology Driven New products R&D Market Driven Retain Customers New Customers Efficiency Driven Reduce cost or Complexity By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 41. Culture- Technology New products R&D How about tracking number of Patents applied for? Tracking number of new products brought to market. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 42. Culture- Market Driven Retain Customers New Customers Scheduled future appointments Ask How is the Customer measuring us? Align with major customer goals Understand their metrics By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 43. Culture- Efficiency Driven Reduce cost or Complexity Ratio of jobs with 2 or less operations Ratio of BOMs used in more that one product. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 44. Wrap UP What three things? Use the note sheet on the table Use it as a tickler for tomorrow By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 45. Three Things May be the difference between a leading and lagging indicator The idea that Lagging indicators have leading indicators associated with them Using Quality tools in different ways to get results. By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08
- 46. Thank you What questions can I answer ??? By helping others succeed, we Michael Hirt bring out the best in ourselves. 13-Mar-08