BSC Alignment & Cascading KPI
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Transcript of BSC Alignment & Cascading KPI
HR Divisional Business Drivers and KPI Development Workshop
HR Divisional Business Drivers & KPI Development Workshop
Program AgendaDay One
• Introduction of Balanced Scorecard• Cascading of HR Performance Scorecard• Strategy Map Human Resources• Identifying Department Key Performance Indicators
Day Two
• Writing SMART Key Performance Indicators• HR Performance Appraisal Form• Performance Appraisal Process (September till December
2009)
HR Divisional Business Drivers & KPI Development Workshop
HR Divisional Business Drivers & KPI Development Workshop
At the highest conceptual level, the Balanced Scorecard is a framework that helps organizations translate strategy into
operational objectives that drive both behavior and performance.
What is a Balanced Scorecard?
HR Divisional Business Drivers & KPI Development Workshop
…a management and measurement system whose purpose is to…
• “translate strategy into• a limited set of measures that• uniquely communicate• your vision to the organization”
– Kaplan and Norton
...its key management perspectives are ...
A Balanced Scorecard is
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What is the Balanced Scorecard?
• It addresses four basic questions:
• Financial Perspective: How are we faring with shareholder returns?
• Customers Perspective: How do customers see us and value our services?
• Internal Process Perspective: What must we excel at to meet customer needs?
• Learning & Growth Perspective: How can we develop our people and their capabilities?
HR Divisional Business Drivers & KPI Development Workshop
Alignment & Cascading Business Agenda
HR Divisional Business Drivers & KPI Development Workshop
The “Balanced Scorecard’ concept…..Finance
Objectives Measures Targets Initiatives
Learning and Growth
Objectives Measures Targets Initiatives
Customer
Objectives Measures Targets Initiatives
Internal Business Process
Objectives Measures Targets Initiatives
VISION AND STRATEGY
HR
Objectives Measures Targets Initiatives
HR Divisional Business Drivers & KPI Development Workshop
• Profitability• Growth • Shareholder Value
The Strategy
• Price• Service• Quality
• Capability enhancement
• Continuous Improvement
• Employee Engagement
“If we succeed, how will we look to our shareholders?”
“To achieve our vision, how must we look to our customers?”
“To satisfy our customers, what management processes must we excel at?”
“To achieve our vision, how must our organization learn and improve?”
• Infrastructure
• Productivity• Cost• Technology
Financial Perspective
Customer Perspective
Internal Perspective
Learning & Growth PerspectiveThe BSC is comprised of themes, objectives, measures, targets, and initiatives.
The BSC represents the cause and effect relationships in your strategy.
Translate Strategy: The BSC Translates Strategy into the Four Perspective Framework
Outcomes
Drivers
Financial PerspectiveFinancial Perspective
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KRAs
STARSTAR
HRA Division HRA Division
IndividualIndividual
Measures KPIs
Complete Framework for YOUR COMPANY
The Importance of Alignment
Financial Perspective
Sustained Shareholder Value
Increase Asset Utilization
Improve Cost Structure
Enhance Customer Value
Expand Revenue Opportunities
Productivity Strategy Revenue Growth Strategy
Customer Perspective
Internal Perspective
Price Quality Availability Selection Functionality Service Partnership
Customer Value Proposition
Brand
Product/Service Attributes Relationship Image
Processes that produce and deliver products and services
Operations ManagementProcesses
Processes that enhance customer value
Customer Management Processes
Processes that create new products and services
InnovationProcesses
Processes that improve communities and the environment
Regulatory & Social Processes
CREATING ALIGNMENT
Learning & Growth
Human Capital Information Capital Organization Capital+ +• Skills• Training• Knowledge
• Systems• Databases• Networks
• Culture• Leadership
• Alignment• Teamwork
CREATING READINESS
Strategic Job Families
Organization Change Agenda
Strategic IT portfolio
The Strategy Map Aligns Processes and Intangible Assets to Customer and Financial Outcomes
HR Divisional Business Drivers & KPI Development Workshop
The Conclusion
Measurement Must Be Linked To Strategy
StrategyBalancedScorecard
Measurement To Communicate, Not To Control
Measurement Communicates Values, Priorities And Direction
The Premise
The Premise Behind the Balanced Scorecard Is that Measurement Motivates Behavior
HR Divisional Business Drivers & KPI Development Workshop
Objectives
• Fast ground turnaround
Statement of what strategy must achieve and what’s critical to its success
Target
• 30 Minutes• 90%
The level of performance or rate of improvement needed
• Cycle time optimization
Key action programs required to achieve objectives
InitiativeMeasurement
• On Ground Time• On-Time
Departure
How success in achieving the strategy will be measured and tracked
Strategic Theme: Operating Efficiency
ProfitabilityFinancial
Learning
Morecustomers
Ground crew alignment
Lowest prices
Fewer planes
Customer
Internal
Fast ground turnaround
Strategy Map: Diagram of the cause-and-effect relationships between strategic objectives
Flight Is on time
Balanced Scorecard Example
HR Divisional Business Drivers & KPI Development Workshop
• % Ground crew trained
• % Ground crew stockholders
Objectives Measurement
• Market Value
• Seat Revenue
• Plane Lease Cost
• FAA On Time Arrival Rating
• Customer Ranking (Market Survey)
• On Ground Time• On-Time
Departure
Strategic Theme:Operating Efficiency
Initiative
• Cycle time optimization program
• ESOP
• Ground crew training
• Quality management
• Customer loyalty program
Target
• 30% CAGR
• 20% CAGR
• 5% CAGR
• #1
• #1
• 30 Minutes• 90%
• yr. 1 70%yr. 3 90%yr. 5 100%
ProfitabilityFinancial
Learning
MoreCustomers
Ground Crew Alignment
Lowest Prices
Fewer Planes
Customer
Internal
Fast Ground Turnaround
Flight Is on Time
• Profitability
• More Customers
• Fewer planes
• Flight is on -time• Lowest prices
• Fast ground turnaround
• Ground crew alignment
Balanced Scorecard Example
HR Divisional Business Drivers & KPI Development Workshop
4. Financial LinkageEvery objective can ultimately be related to financial results
1. Executive InvolvementStrategic decision makers must validate and own the strategy and related measures
2. Cause-and-Effect RelationshipsEvery objective selected should be part of a chain of cause and effect linkages that represent the strategy
3. Balance between outcome and leading measures There should be a balance of outcome measures and leading measures to facilitate anticipatory management
5. Linkage of Initiatives and Measures: Each initiative should be based on a gap between baseline and target.
A good Balanced Scorecard will “tell the story” of your strategy inactionable terms.
HR Divisional Business Drivers & KPI Development Workshop
Group ActivityGroup Activity
Identify what are the HR objectives complements:Identify what are the HR objectives complements:
1)1) Finance Finance
2)2) CustomerCustomer
3)3) Internal ProcessesInternal Processes
4)4) Learning & GrowthLearning & Growth
Work in Groups of 4Work in Groups of 4
HR Divisional Business Drivers & KPI Development Workshop
“STAR Corporate Role”
Department Derived Value (Synergy)
Scorecard Cascade
HR PERFORMANCE
SCORECARD
The process of “cascading” creates synergy. It must be based on a clear understanding of the corporate role.
Perspective Strategic Objectives Strategic Measures
Customer Perspective C1 Improve on internal customer satisfaction • Rating vs. internal satisfaction (survey)
Targets
Internal PerspectiveI1 Review and improve the effectiveness of HR internal
control systems• Percentage of reviews within specified timeframe
Learning and Growth L1 Develop skilled workforce
• Fulfillment of specified number of training hours per employee
• Improvement in performance evidence in annual appraisal
• Variance of actual against organizational and departmental training budget
Finance Perspective
F1 Monitoring HR operating expenses • Variance of actual against departmental budget
F2 Monitoring Employee Costing• Employment cost per employee• Recruitment cost per employee• Employee cost over/budget/revenue/profit/operating cost
F3 Monitoring the administrative costing activities• Admin cost per employee• Admin cost over budget/revenue/profit/operating cost
HR Divisional Business Drivers & KPI Development Workshop
Perspective Strategic Objectives Strategic Measures
Customer Perspective C1 Improve on internal customer satisfaction • Rating vs. internal satisfaction (survey)
Targets
Internal PerspectiveI1 Review and improve the effectiveness of
HR internal control systems• Percentage of reviews within specified
timeframe
Learning and Growth L1 Develop skilled workforce
• Fulfillment of specified number of training hours per employee
• Improvement in performance evidence in annual appraisal
• Variance of actual against organizational and departmental training budget
Finance Perspective
F1 Monitoring HR operating expenses• Variance of actual against
departmental budget
F2 Monitoring Employee Costing
• Employment cost per employee• Recruitment cost per employee• Employee cost
over/budget/revenue/profit/operating cost
F3 Monitoring the administrative costing activities
• Admin cost per employee• Admin cost over
budget/revenue/profit/operating cost
The Balanced Scorecard for Human Resource Division
HR Divisional Business Drivers & KPI Development Workshop
HR Performance
Scorecard
Select and Determine relevant HRA KPIs
Use the HR Performance Scorecard to Select and Manage Individual InitiativesPerspective Strategic Objectives Strategic Measures
Customer Perspective C1 Improve on internal customer satisfaction • Rating vs. internal satisfaction (survey)
Targets
Internal PerspectiveI1 Review and improve the effectiveness of HR internal
control systems• Percentage of reviews within specified timeframe
Learning and Growth L1 Develop skilled workforce
• Fulfillment of specified number of training hours per employee
• Improvement in performance evidence in annual appraisal
• Variance of actual against organizational and departmental training budget
Finance Perspective
F1 Monitoring HR operating expenses • Variance of actual against departmental budget
F2 Monitoring Employee Costing• Employment cost per employee• Recruitment cost per employee• Employee cost over/budget/revenue/profit/operating cost
F3 Monitoring the administrative costing activities• Admin cost per employee• Admin cost over budget/revenue/profit/operating cost
Head of Human Resources
& Administrations
Head of Human Resources
& Administrations
Organizational
Development & Training
Organizational
Development & Training
Compensation
& Benefits
Compensation
& BenefitsRecruitmentRecruitment
Industrial & Employee Relations
Industrial & Employee Relations
Administrations
Administrations
The Balanced Scorecard aligns priorities throughout the enterprise.
HR Divisional Business Drivers & KPI Development Workshop
Head of Human Resources
& Administrations
Head of Human Resources
& Administrations
Organizational Development & Training
Organizational Development & Training
Compensation & Benefits
Compensation & Benefits RecruitmentRecruitment
Industrial & Employee Relations
Industrial & Employee Relations
Administrations
Administrations
Human Resources & Administration Department Structure
HR Divisional Business Drivers & KPI Development Workshop
Head of Human Resources & Administrations
Head of Human Resources & Administrations
Organizational Development & Training
Organizational Development & Training
Compensation & Benefits
Compensation & Benefits RecruitmentRecruitment
Industrial & Employee Relations
Industrial & Employee Relations
Administrations
Administrations
Human Resources & Administration Department KPIs
• Training cost • Skill Workforce• Training
Process improvement
• HR cost• Process
improvement
• Recruitment cost
• Process improvement
• Employee relation
• Process improvement
• Admin cost• Process
improvement
• Departmental Cost Efficiency• Employee Cost• Admin Cost• Process Improvement (HR
policies, procedures, processes)
• Customer Satisfaction• Skilled Workforce
HR Divisional Business Drivers & KPI Development Workshop
“Corporate Role”
Balanced Scorecard Cascading Process
HR PERFORMANCE SCORECARD
Perspective Strategic Objectives Strategic Measures
Customer Perspective C1 Improve on internal customer satisfaction • Rating vs. internal satisfaction (survey)
Targets
Internal PerspectiveI1 Review and improve the effectiveness of HR internal control
systems• Percentage of reviews within specified timeframe
Learning and Growth L1 Develop skilled workforce
• Fulfillment of specified number of training hours per employee• Improvement in performance evidence in annual appraisal• Variance of actual against organizational and departmental training
budget
Finance Perspective
F1 Monitoring HR operating expenses • Variance of actual against departmental budget
F2 Monitoring Employee Costing• Employment cost per employee• Recruitment cost per employee• Employee cost over/budget/revenue/profit/operating cost
F3 Monitoring the administrative costing activities• Admin cost per employee• Admin cost over budget/revenue/profit/operating cost
Head of Human Resources
& Administrations
Head of Human Resources
& Administrations
Organizational
Development & Training
Organizational
Development & Training
Compensation
& Benefits
Compensation
& BenefitsRecruitmentRecruitment
Industrial & Employee Relations
Industrial & Employee Relations
Administrations
Administrations
Individual Prioritized List of
KPIs and Initiatives
• Vision
• Mission
• Values
• Business Strategy
• Performance Outcome
By Whom Cascading Process OUTCOME
HR Divisional Business Drivers & KPI Development Workshop
The Value Drivers provide the glue between the four perspectives of the Balanced Scored by outlining the ‘cause and effect: relationships
Value drives provide the ‘cause and effect: between the four perspectives
Example: Identify the intermediate drivers that link training and development
programs and behaviours to business priorities and financial performance
Training
LEADING INDICATORS
Training
Employee Morale
Responsiveness to Clients
CustomerSatisfaction
Increased Sales
TotalReturn
TotalReturn
LAGGING INDICATORS
Cause Effect
Correlation
Leads to, …….
HR Divisional Business Drivers & KPI Development Workshop
Some Goals of the Balanced Scorecard
The Balanced Scorecard is a framework that helps organizations translate strategy into operational objectives that drive both behavior and performance
Create a systems approach to form an integrated Strategic Management Process
Provide a clear line of sight to the vision and strategy of the company
Provide a tool for cascading the communication processes:
• strategy, and
• processes and systems required for implementing the strategy
Draw a cause and effect roadmap to stakeholder value – shareholder, customer, and employee.
HR Divisional Business Drivers & KPI Development Workshop
What gets measured gets done.
If you do not measure results, you cannot tell success from failure.
If you cannot see success, you cannot reward it.
If you cannot reward success, you are probably rewarding failure.
If you cannot see success, you cannot learn from it.
If you cannot recognize failure, you cannot correct it.
If you cannot demonstrate results, you cannot win stakeholders support” is used here.
HR Divisional Business Drivers & KPI Development Workshop
Personal Action Work
HR Divisional Business Drivers & KPI Development Workshop
Program AgendaDay One
• Introduction of Balanced Scorecard• Cascading of HR Performance Scorecard• Strategy Map Human Resources• Identifying Department Key Performance Indicators
Day Two
• Writing SMART Key Performance Indicators• HR Performance Appraisal Form• Performance Appraisal Process (September till December
2009)
HR Divisional Business Drivers & KPI Development Workshop
What is Performance Management?It is a communication process that enables the
employee and his/her manager to foster a partnership to improve performance throughout the
year
HR Divisional Business Drivers & KPI Development Workshop
Purpose of Performance Managemet
• The Performance Management Process is a continous cycle that supports a cultural of excellence in service delivery and productivity.
• It enables us to link business objectives to individual objectives and focus on priorities.
• It is a major part of the on-going process of managing people and not merely the completion of forms.
• Formal process to measure performance, give feedback and document performance.
• Identify training and development needs.• Identify special talent and provide support for
advancement.
HR Divisional Business Drivers & KPI Development Workshop
Purpose - continued
• Identify weaknesses in work processes• Recognise strengths and motivates employees• Make assessments about salary increases based on
performance• Direct work and behaviour of a unit or team towards
achieving business targets• Clarify expectations – performance and others –
between the manager and the individual
Performance DefinitionWHAT an Individual achieves
(Results/Individual Key Performance Indicators)
+HOW the Individual achieves it
(Competencies)
= PERFORMANCE
HR Divisional Business Drivers & KPI Development Workshop
Writing SMART Key Performance Indicators
HR Divisional Business Drivers & KPI Development Workshop
Key Performance Indicators Defined
• Key – Only a subset of all possible viewpoints, those which best reflect the state of an asset, organization or financial entity
• Performance – Metrics related to performing ones job, or adhering to a agreed standards
• Indicator – Not a closed-loop function, KPIs are to be used by people to help them take correct action
HR Divisional Business Drivers & KPI Development Workshop
Benefits of Performance Management
• Opportunity to receive feedback on performance
• Enhanced working relationships between Manager and Employees
• Helps Employee focus on meeting needs of business
• Helps Employee grow and develop skills => training needs identified
• Employee can highlight career ambitions/aspirations
• Explore and resolve problems/differences
• Reduce Employee turnover
HR Divisional Business Drivers & KPI Development Workshop
What makes an Objective Effective?
• SPECIFIC (both parties know exactly what needs to be
achieved)
• MEASURABLE (it will be possible to say if the number has reached 100)
• ACHIEVABLE (presumably this is within the realms of possibility from the current base)
• RESULTS-ORIENTED (targeted towards achieving the desired outcome)
• TIME-BOUND (the goal has to be achieved by end of Quarter 2)
Setting Targets - Performance Objectives
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Criteria for Well–Written Objectives
• SpecificSpecific• A specific objectives is one that is understandable, clear,
concise and explicit.
For example:Recruitment of management trainees.
To be clearer, the objective can be rewritten as:
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________
HR Divisional Business Drivers & KPI Development Workshop
Criteria for Well–Written Objectives
• SpecificSpecific• A specific objectives is one that is understandable, clear,
concise and explicit.
For example: Recruitment of management trainees.
To be clearer, the objective can be rewritten as:
Develop an action plan for the recruitment of management trainees by shortlisting and assessing the candidates within 75 days time (from date of advertisment in the newspaper.
HR Divisional Business Drivers & KPI Development Workshop
• MeasurableMeasurable
• A measureable objective defines how it will be measured. This can be in terms of quantity, cost, timeliness, and/or quality.
Example: Deploy HRIS as the main database of employee records.
Well written objective________________________________________________________________________________________________________________________________________________________________________________________
Criteria for Well–Written Objectives
HR Divisional Business Drivers & KPI Development Workshop
• MeasurableMeasurable
• A measureable objective defines how it will be measured. This can be in terms of quantity, cost, timeliness, and/or quality.
Example: “Deploy HRIS as the main database of employee records“.
Well written objective
Deploy HRIS as the main database of employees’ data (personnel, history, career training and etc) been updated to current month by October 2009 according to blue print of the master document plan. (evidence: all filing of paperwork cleared / no back log & ease to access personnel data of any employee) without any error.
Criteria for Well–Written Objectives
HR Divisional Business Drivers & KPI Development Workshop
• AchievableAchievableAn achievable objective defines how realistic it will be achieved and not beyond your reach.
“Achieve a higher rating in Customer Satisfaction Survey“
Example: Well written objective:________________________________________________________________________________________________________________________________________________________________________________________________
Criteria for Well–Written Objectives
HR Divisional Business Drivers & KPI Development Workshop
• AchievableAchievableAn achievable objective defines how realistic it will be achieved and not beyond your reach.
“Achieve a higher rating in Customer Satisfaction Survey“
Example: Well written objective:
To achieve rating of 4 or higher on a 5 point in Customer Satisfaction Survey conducted by an outside agency by 31st December 2009.
Criteria for Well–Written Objectives
HR Divisional Business Drivers & KPI Development Workshop
• Result – Oriented
The objectives set must be able to reflect the results of the objectives.
A less SMART objective might be:
Continuous performance awareness briefing for all employees.
Example: Well written objective____________________________________________________________________________________________________________________________________________________________________________________________________
Criteria for Well–Written Objectives
HR Divisional Business Drivers & KPI Development Workshop
• Result – Oriented
The objectives set must be able to reflect the results of the objectives.
A less SMART objective might be:Continuous performance awareness briefing for all
employees.
Example: Well written objective
Conduct at least 3 briefing sessions by November 2009 with
a minimum of 80% results reflected in the assessment form.
Criteria for Well–Written Objectives
HR Divisional Business Drivers & KPI Development Workshop
Time BoundTime Bound• The results of your efforts need to be evident to the people
who provide you with feedback.• Need to be done within a certain time frame.
Example: Support team members’ development plans
Alternative way to state the objective:
_____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Criteria for Well–Written Objectives
HR Divisional Business Drivers & KPI Development Workshop
Time BoundTime Bound• The results of your efforts need to be evident to the people
who provide you with feedback.• Need to be done within a certain time frame.
Example: Support team members’ development plans
Alternative way to state the objective:
Identify and complete a specific number of staff development actions to support each team member’s development yearly plan by end of December 2009 with a minimum of 48 hours of trainings.
Criteria for Well–Written Objectives
HR Divisional Business Drivers & KPI Development Workshop
Performance RatingsRating 1 : Performance significantly below expectation => Not
achieved • Objectives are not met and the person is not responding to Training,
Development or Coaching. A decision on future employment is required.
Rating 2 : Opportunities for further improvement exist => Partially achieved
• Objectives are met but does not use the competencies to the required standard. Does not meet all objectives but works hard to use the competencies.
Rating 3 : A well rounded and solid performance => Fully achieved • All objectives are met and the competencies are used to the required
standard.
Rating 4 : An excellent performance => Partially exceeded • All objectives are met and some are exceeded as the competencies are
used to a high standard.
Rating 5 : An exceptional performance => Significantly exceeded • All objectives are significantly exceeded and the competencies used to a
very high standard on a regular basis. The person takes on initiates / new objectives during the year which are also met.
HR Divisional Business Drivers & KPI Development Workshop
THANK YOU FOR YOUR PARTICIPATION