Balanced Scorecard Design Toolkit

Balanced Scorecard concept is about measure and control. The first step is to determine the goal of Balanced Scorecard: it should help to measure and control the performance of business unit. The next step is to assign a target performance values and develop a plan to archive the target results. The final step is controlling the performance, re-thinking business and separate business processes. Balanced Scorecard must be a document packed with performance information. That’s why it is the best way to share management and business goal ideas with colleagues.

Robert Kaplan and David Norton in early 1990’s suggested performance measurement perspectives: Financial Perspective, Customer Perspective, Internal Processes Perspective, Employee Learning and Growth Perspective. These perspectives are must-use basic groups. Even if it’s necessary to describe the business unit that is not involved in sales, financial perspective must be taken in account. Using these four perspectives is a guaranty that all aspects of business will be considered carefully.

For instance, if your goal is to describe the call center performance, then it's a good idea to focus of financial perspectives of call-center, not the whole company. Try to focus on such metrics as revenue per successful call or cost per call.

Any scorecard support system should represent perspectives and metrics, providing them with adequate importance estimations and scores. How to calculate the performance value using a given values of metrics’ importance and user assigned scores. The total performance value will be calculated in three steps: Normalization of the score to absolute score values; Normalization of the weight to absolute weight values; Calculation the total performance values;

Normalization is necessary for further calculations. Assume, the initial weight and score values were given on scale [0..10], where 0 is for the “minimal importance” and 10 is for the “maximum importance”. The same scale is used for score values – 0 might be for 0% progress and 1 might be for 100% progress. In this case the value W-value might be normalized to [0..1] scale by dividing W by 10:

The total performance value for the certain perspective will be calculated as multiplication of perspective weight at the sum of multiplication of normalized score value and score weight. The total performance value for all perspectives can be calculated as a sum of each perspective performance value.

Building a Scorecard that works involve two main processes: Suggesting a proper metrics; Calculating the total performance. Metrics should be designed by key managers; suggested metrics should be carefully evaluated in action. As for calculating performance, start with some simpler tools, such as spreadsheet processor to describe the Balanced Scorecard of the business unit and calculate the performance.

Article Source: http://www.rightbiz.com

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