Balance Scorecards Best Practices
A Methodology to Implement Balanced Scorecards in Public Sector Organizations
Balanced Scorecards perspectives
What is Balanced Scorecards?
Balanced Scorecards is a comprehensive system to measure
performance from a strategic perspective whereby the
government organizations strategy is translated into clear
strategic objectives, targeted standards and values and
procedural steps. Balanced scorecards are also used to
introduce the organizations strategy to the various
administrative units and levels, and measure their
implementation.
Financial
What are the expected
financial results?
Internal business processes
Customers
Which customers the
organization should satisfy?
Why Balanced Scorecards?
What are the internal
business processes in which
the organization must excel?
Learning and Growth
A. Enhance the organizations performance.
B.
Increase customers satisfaction.
C.
Bridge the gap that exists in many departments between
their strategic aspirations and their executive programs,
as shown in Figure 1.
To what extent should the
employees be developed and
motivated?
Figure 2: The four perspectives of Balanced Scorecards
How to implement Balanced Scorecards
Vision
Scorecards?
Mission
Values
1. Determine the
project's
objectives
2. Develop a
strategic plan
3. Identify
performance
indicators
4. Prepare the
strategic map
5. Identify the
targeted values
and initiatives
6. Prepare the
performance
indicator manual
7. Prepare
balanced
scorecards
8. Implement the
balanced
scorecards system
Strategic plans
Strategic map
Performance measurement
indicators
Balanced
Scorecards
system
Initiatives
Corrective actions
Figure 1: The role of Balanced Scorecards in bridging the gap
between strategy and executive programs
The projects objectives are determined. They may include
one or more of the following:
-
Balanced scorecards perspectives are divided into four equal
parts as shown in Figure2.
Determine the projects objectives
Clarifying performance indicators by developing the
performance indicator manual and linking each indicator
with its strategic objective.
Increasing customers satisfaction by monitoring the
implementation of the strategy.
2
A.
Strategic objective
businesses
Develop a strategic plan
Operational
objectives
20%.
Develop the vision and mission
Developing the vision and mission is one of the most
important steps that any government organization should
take, and also the starting point of the balanced scorecards
project.
B.
Perspective
Learning
and Growth
Develop employees
capacities and
increase their
efficiency
- Engage 70% of the
organizations
employees in the
training
courses
available to the
sector employees.
Financial
Maintain the
organizations
financial stability
- Reduce
budget
deficit by 5%.
SWOT analysis
SWOT analysis involves identifying the strengths, weaknesses,
opportunities and threats as shown in Figure3.
Internal environment
Strenghts
Negativ
e
Positive
Weaknesses
Identify performance indicators
When identifying performance indicators, It is recommended
that performance indicators should be (SMART), as shown in
Figure 4.
Specific
Threats
Opportunities
Measurable
Achievable
External environment
Figure 3: SWOT Analysis
C.
Closely linked to strategy
Determine the departments final strategy
The final strategy includes strategic and operational
objectives that are determined based on the vision, mission
and SWOT analysis. The following table shows an example of
the strategic goals of a hypothetical organization specialized
in issuing ID cards for each perspective of the balanced
scorecards system.
Perspective
Strategic objective
Operational
objectives
Customers
Increase customers
satisfaction
- Reduce customers
complaints.
- Increase
customers
satisfaction by 4%.
Internal
Processes
Improve the
organizations
procedures and
organize its
- Reduce the time
taken to process
transactions
by
Time-bound
Figure 4: SMART objectives
The following table shows an example of the performance
indicators of one perspective of the balanced scorecards
system:
Perspective
Objective
Learning and
Growth
Develop
employees
capacities
and increase
their
efficiency
Indicators
- Number
of
annual
training
courses
available to employees.
- Number of employees
participating in training
courses per year.
- Employee performance
evaluation rates.
Perspective
Objective
Indicators
- Number of training
hours received by the
employee per year.
Types of performance indicators
The current and expected values.
The opinions of executive directors.
Internal and external evaluation.
Customers reactions.
Benchmarking.
Identify initiatives
Types of performance indicators are shown in Figure 5.
The project work team will identify a set of initiatives that will
support implementing the strategy and achieving or
exceeding the targeted values.
Cause indicators
Focus on the
operations that should
be done to achieve the
desired results
Focus on measuring
the achievement made
Steps of initiatives identification:
A. Prepare a summary of the initiatives currently in place in
the organization.
Effect indicators
Figure 5: Types of performance indicators
B.
Link these initiatives with the strategy of balanced
scorecards which has been determined or developed in
the beginning of the project.
C.
Eliminate the non-strategic initiatives and add a set of
needed initiatives.
D. Arrange initiatives by order of implementation priority.
The balanced scorecard system should contain a mixture of
cause indicators and effect indicators.
Link to strategy
Prepare the strategic map
The strategic map describes the relationship between the
objectives, from the customers perspective to the financial
perspective, based on the relations of cause and effect
indicators, which enables the work team to look at the
strategic standards as a series of cause and effect links
between the four perspectives rather than performance
indicators for four independent perspectives. This perception
can be facilitated through the strategic map, which reflects a
visual representation of cause and effect relations between
the components of the organizations strategic plan.
Identify the targeted values and initiatives
Identify targeted values
The factors that help the work team to identify the targeted
values are:
-
Asking help from the organizations employees.
Expected value of the revenues resulting
from implementing the initiatives
Total costs
Required resources
Time required fro implementation
Link to other initiatives
Figure 6: Adopted standards for arranging initiatives by order of
priority
Prepare performance indicator manual
The performance indicator manual contains detailed
information on indicator characteristics and offers brief
information on those responsible for evaluating the
indicators.
General
description
of the
indicator
Perspective
Performance
indicators
Unit of
measurement
Objective
Contents of
performance
indicator manual
Type (effect/
cause)
Current value
Measuremen
t method
Targeted
value
Person
responsible
for data
collection
Initiatives
Source of
data
Figure 7: Components of performance indicator manual
Prepare Balanced Scorecards
The process of preparing balanced scorecards involves filling
out the data that has been collected and allocated
throughout the project in order to demonstrate the
interdependence of all that has been prepared throughout
the project. These four scorecards are submitted to the
departments senior management at specified times of the
year to show the current situation.
The following is the performance card form for the
perspective of customers.
Objective
Customer card
Targeted
Indictor
value
Initiatives
Implement Balanced Scorecards system
For the purposes of implementing the system, the
department shall:
A. Collect data and measure the performance based on the
indicators that have been identified within a specified
period of time after implementing the initiatives.
B.
Analyze data and measure performance level based on
the indicators.
C.
Prepare performance measurement reports.
D. Honor and reward excellent managements.
