Strategic Performance Management Using Balanced Scorecard, KPI and KRA

Overview Performance Management

Globalization and Information Technology are placing different, challenging demands on leaders and organizations in the area of organizational performance. Having a sound business strategy in place is the first step to achieve organizational success.

Many organizations have tried to incorporate the Balance Scorecard (BSC) approach and the KPIs and KRAs frameworks into their Performance Management System (PMS). However, many organizations struggle to implement the BSC successfully and too often end up with a diluted version that fails to deliver the full benefits of this management tool.

Did you know that 70% of scorecard implementations fail to deliver the objectives and Why?

The key to the successful implementation of any strategy is in the execution.

Organizations must be able to drive, translate and execute the strategy into operational terms at every level throughout the organization.

Overview – Performance Management

Success is not about constructing over-complex measures; it is about developing a practical and pragmatic management tool that senior management will use with confidence and understanding.

The ability to tie operation outputs to strategy and the means to track the performance measures at all levels as well as the cascading linkages from one level to the next, is perhaps, the most important factor in the successful execution of the strategy. The meaningful understanding in the link between the various measurements either directly or indirectly to the organization performance measurements will ultimately lead to increased productivity and efficiency.

Hence, this is the required formula if organization wants to see to it that the corporate strategy is executed effectively and achieve the desired outcome.

The above has identified and highlighted the importance of the performance measuring & cascading mechanism and the next important step is to develop and put in place a framework to drive operation performance that links to strategic requirements to complete the transformation process from the corporate strategy into operation outputs.

Operation outputs are all about people performance. Organization must go back to the basics, that is, to manage its most important assets – Its Human Capital. What would it mean if all the people in the organization knew how their job performance affect corporate strategy? What if they knew how their activities affected their colleagues and managers performance? What if they saw their jobs not as a collection of unrelated tasks but as a sequence of activities forming the value chain that contributes to the organization performance?

The Key Results Area (KRA) development framework is an effective way of creating this knowledge and understanding for all jobholders. Once that is achieved, each individual can begin to see the bigger picture on the importance of their contribution and how meaningful it is to the overall corporate performance measurement.

Introduction

Managing the performance of an organization or individual is always a challenge to all CEOs and leaders. This involves not only the understanding on Performance Management, but acting on performance issues at each level of the organization, from individuals, departments, teams and business units, right through to the organization itself.

As well as involving performance measurement and tracking, systems and processes, performance management is about managing people and the way people within an organization operate and work together. Issues such as leadership, decision making, motivation, innovation, involving others and risk taking are just as important to bring about improvement.

The problem of how organizations should assess their performance has been challenging management practitioners and consultants for many years. Financial measures have long been used to evaluate the performance of organizations. However, there was a growing realization that given the increased complexity of organizations and the markets in which they compete, owing to ICT age and globalization, it was no longer appropriate to use financial measures as the sole criteria for assessing success.

These shortcomings of traditional measurement systems have given rise to a revolution in the field of performance management. The work of Kaplan and Norton has given rise to the development of the Balanced Scorecard (BSC) as a strategic management tools to measure performance and was first introduced in 1992 and has since then evolved somewhat.

The BSC performance framework helps organizations to identify an appropriate set of criteria against which to assess and manage their performance. This BSC tool not only enables organizations to use the traditional financial measures but incorporates criteria that measure performance from the perspective of customer, internal business processes, and learning and growth.

Therefore, it enables the organizations to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets needed for future growth and long-term survival. The BSC combination of measuring through a variety of indicators and interactive communication about strategic goals is the kind of PMS system that organizations need to survive in this information age. It helps organizations react more quickly and anticipate circumstances so that they can plan rather than react.

This is the advantage of BSC has over other PMS systems framework. It forces managers to focus on a handful of measures that are the most critical and brings together a single management report consisting of many disparate elements of the organization operational measures and letting them see whether improvement in one area was achieved at the expenses of another.

Research has reported that 70% of BSC implementation failed to deliver the objectives. So often, management understands the concept but demands answers to the question:

“How Can I Make It Work Effectively In Practice?”

Our Approach

Our approach is one of using the KRA & KPI FrameworksTM, as ‘tools’ in driving individual as well as organizational performance.

Our Methodology •  •  •  •

Our Proposed Solution  •  •  •  •

Our proposed Strategic Performance Management Solution adopts the Strategic Outputs Approach and using our KPI & KRA Frameworks methodology.

For any organization that is serious about driving performance, there is a need to overcome two fundamental problems:

1.    Effectively measuring performance across the whole organization;

2.    Successfully implementing strategies.

The whole idea is to translate your business strategy and vision into operational objectives, measures and targets.

It is important that for an organization to successfully implement balanced scorecard, organization must address two important issues

Are the strategies “right” in the first place?

In other words, organization will not be able to successfully implement Performance Management / Scorecard if the organization has not even got their strategic elements in place. If the organization strategic measurement is not “right” in the first place, going through the whole process of implementing scorecard is just a waste of everyone’s time. Establishing the “right” vision, mission and strategies have to be the number one priority in any Performance Scorecard implementation.

If the strategies are “right” – Is every single individual, department and teamtable to establish direct link between what they do and the overall corporate goals?

Organization needs to help each individual “see” their direct contribution to the overall organization goals through establishing measures and quantification that make sense to the individual. This means that each individual must know what his Areas of Focus are in relation to the key perspectives as well as strategies and the overall action plan. At the same time, each individual must also be able to track his own areas of focus, initiatives, measurements, key activities and action plan.

With this understanding, our proposed solution is designed with the intention to help organization to resolve both issues in a very systematic and orderly manner.

A typical implementation roadmap looks like the following :

The implementation consists of five stages and each stage is designed to act like a checkpoint. It makes sure that the necessary performance components and elements are already being resolved and established by the time the next module is being introduced. This also ensures that all the “Critical” information is already established from one stage to next preceding stage. This is crucial and many BSC implementation failures are due to the inability to meaningfully develop and follow these stages and not due to the BSC tool itself.

The 5-stage methodology is designed in such a way that the key strategies will eventually be translated and aligned into operational outputs. It provides a check and balance mechanism ensuring that if there are any information discrepancies between each level of development during the implementation, it will be easily identified from the next preceding stage.

Xcel-Power

Overview

Xcel-Power (XP) is a simple yet powerful management tool that can be used strategically to achieve the following objectives:-

  • Clarity of roles and responsibilities
  • Alignment to organizational, departmental and individual goals and objectives
  • Inculcating and instilling job ownership
  • Tracking and monitoring organizational, departmental and individual key performance areas
  • High visibility and transparency
  • Timely interventions to insure success of key action plans

Our Proposed Solution

•  •  •  •

Benefits

When taught and implemented successfully in an organization, business owners, senior management, and managers can expect to reap the following benefits:-

Precision Clarity

  • Big picture
  • Desired outcomes
  • Precise actions

Connected Ownership

  • Accountability
  • Empowerment
  • Self-directed teams

Planning Effectiveness

  • Time and cost savings
  • Less fire fighting
Aligning People to Business Goals

  • Vertical
  • Horizontal

Better Communication

  • Clarity
  • Effective
  • Definitive

Teamwork and Team Play Excellence

  • Collective intelligence
  • Check and Balance

Investment and Learning Time

Xcel-Power is relatively low cost and affordable to implement in any organization. It does not require high capital investment in technology or need for programming skill sets.

However the critical success factors required in adopting and applying Xcel-Power besides SOLID commitment from the top leadership are 3H’s:

  • Head
  • Heart
  • Hands

This management tool is most effective when used jointly and collaboratively with any performance management system such as Balanced ScoreCard, KPAs (KRA)/KPIs, Forced Rankings, etc.

Our Proposed Solution

•  •  •  •

Outlined below will be a typical 2-day workshop itinerary which is normally customized to the client’s business needs and requirements after a pre-workshop consultation:-

[PHASE 1] – STRATEGIC PLANNING RETREAT – “JOURNEY TOWARDS EXCELLENCE

FOR WHOM? DURATION PROGRAM OUTLINE
Heads of

Div. / Dept. / Key managers

2 days Phase 1 – Workshop – STRATEGIC PLANNING RETREAT

Day 1 – Diagnostic / Strategic Review

Review of Corporate Strategy

  • Strategic elements
  • Key ingredients for each perspective
  • Strategic themes, measurements and initiatives
  • SWOT Analysis
  • Strategy map

Alignment Exercise

Aligning the Div./Dept. measurements to the corporate measurements

Prioritize Initiatives

Strategic Focus

  • Develop Key Result Areas (KRAs)
  • Objective statement/s for each KRAs
  • KRAs link to the BSC perspectives

Strategic Measures / Targets  /Initiatives

  • Understand the Key Performance Indicator Methodology
  • Identify the different types of measurements
  • Selection of the different types of measurements
  • What are the different types of targets
  • How to select the right quantification of a target

Consensus and Approval

  • Presentation and approval of the Corporate scorecard
  • Finalize key information in the Corporate scorecard

FOR WHOM? DURATION PROGRAM OUTLINE
Heads of

Div. / Dept. / Key managers

Day 2 – Implementing the Scorecards

Monitoring / Tracking / Reporting

  • Tactical Action Plan

  • XCEL-POWER tool

Reviewing Performance

  • Review Meetings
  • Trouble-shooting
  • Intervention
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