Dr. Olivia Leung January 2014 1 Agenda (1)Balanced Scorecard (BSC) - PDF document

5/26/2014 Non ‐ Financial Performance Measures Dr. Olivia Leung January 2014 1 Agenda (1)Balanced Scorecard (BSC) and its 4 perspective (2)Key Performance Indicators (KPIs) (3) Social Impact Perspective (4) Benefits and Implementation Pitfalls of BSC 2 1

5/26/2014 Balanced Scorecard (BSC) and its 4 perspectives 3 What is a BSC ? • BSC is a performance measurement system that gives managers a fast but comprehensive view of their organizations. BSC translates an organization ’ s mission and strategy into a set of performance measures that provides the framework for implementing its strategy. 4 2

5/26/2014 Where is the balance? • BSC balances the use of financial and nonfinancial performance measures to evaluate performance. • BSC balances quantitative and qualitative performance measures • BSC balances objective and subjective measures • BSC balances discrete and scalar measures • BSC balances external and internal measures • BSC balances outcome and process measures 5 Where is the balance ? • BSC balances performance evaluation on 4 perspectives: Financial Resources Perspective Customer (Stakeholders) Perspective Internal Process Perspective Learning and Growth Perspective 6 3

5/26/2014 The Cause-and-Effect Relationships in BSC BSC’s Cause-and-Effect Relationships Mission, Vision and Strategy Financial Resources Perspective: Grow Revenues and Funding How Leads Customer (Stakeholders) Perspective: do I… to… Build Donor and Community Support Internal Process Perspective:  Efficiency, Create Services/Products Learning & Growth Perspective: Enhance Staff Training and Development Team Action Plans/ Personal Objectives 4 Basic Perspectives of BSC: BSC measures an organization’s performance from 4 perspectives: 1. Financial Resources Perspective 2. Customer (Stakeholders) Perspective 3. Internal Process Perspective 4. Learning and Growth Perspective 8 4

5/26/2014 Steps of implementing BSC Identify Key Stakeholders Assess Organization’s (Donors, Service/Product Define Strategic Objectives Mission, Vision, Strategy Users, Board Members) Assign initiatives and target Develop “Balanced” Build Strategy map performance performance measures (Using BSC perspectives) (Using KPIs) (The Action Plan) Identify and Communicate Implement initiatives and Improvement Evaluate performance Measure actual Opportunities (Using Scoring Approach) performance Example: A Non ‐ Profit Cantonese Opera House • Mission, Vision, and Strategies: To ensure long ‐ term future of Cantonese Opera in Hong Kong by: (S1) producing the highest quality professional productions, (S2) developing the next generation of opera talents, and (S3) educating the community about Cantonese opera. 10 5

5/26/2014 S1: Producing High Quality Professional Productions Strategy Objective Measures (KPI) Initiatives (Actions) Target Map Financial Revenue ‐ Grow ticket ‐ Annual ticket ‐ Online ticket +25% Growth revenue revenue growth sales ‐ Mailing service Customer High quality ‐ Improve ‐ Customer ‐ New Public 80% professional audience retention Relations shows satisfaction ‐ Media rating program 4/5 * ‐ Marketing Internal World ‐ class ‐ Improve ‐ Time to ‐ Production time 9 mths production quality and customer reengineering process productivity ‐ Injury rate ‐ Install safety >5% ‐ Use of measures technology ‐ Invest in In every technology play Learning Stable & ‐ Hire ‐ retention rate ‐ new compensation 95% Capable ‐ Train ‐ skill package production ‐ Retain specialization ‐ In ‐ house training 100% 11 talents Key Performance Indicators (KPIs) 12 6

5/26/2014 Common KPIs: OBJECTIVES: ‐ Staff training cost per head Managing ‐ Volunteer training cost per head Human Resources, ‐ No. of staff/volunteers attending training Organization Culture, ‐ Staff retention rate or turnover Information System. ‐ Staff vacancy ‐ Staff certification level ‐ % of annual reviews reflecting skill development ‐ % of directors involving in fundraising activities ‐ % of staff reaching (or exceeding) own performance Learning target ‐ % of staff, board members, and volunteers realizing and the strategic goals Growth Financial ‐ Availability of manpower & $ on R&D projects Resources ‐ Staff satisfaction ratings Strategy ‐ Outstanding staff awards Customer/ Internal ‐ No. of cross ‐ project sharing and communication process Stakeholders ‐ No. of technological upgrades in a year ‐ Accessibility of IT system Common KPIs: ‐ No. of “Client” complaints on the quality of the service ‐ No. of (or value of) administrative errors ‐ Time required to settle a complaint ‐ Ratings on quality on site by internal, external, professional Learning and Financial parties Resources Growth ‐ % of compliance to international/local/professional standards Strategy ‐ No. of quality control, review, report during the process Customer/ Internal ‐ % of programs rerun in a year Stakeholders process ‐ Client database established (Confidentiality issue resolved) ‐ No. of Clients attending ‐ No. of new services/products delivered ‐ Time required to develop a new service/product ‐ Amount of cost and manpower spent on R&D of new OBJECTIVES: services/products Managing ‐ No. of internal audits performed Clients, ‐ No. of reports submitted to Board Operation ‐ No. of board meeting in a year process, ‐ No. of board members attending board meetings Innovations, ‐ Feedback from external auditors Governance. 7

5/26/2014 Common KPIs: Learning Financial and ‐ Customer satisfaction ratings Resources Growth ‐ No. of new service users Strategy ‐ Donor satisfaction ratings Internal ‐ No. of press reference acknowledgement Customers / process ‐ % of subscription Stakeholders ‐ No. of collaborations/partnerships ‐ No. of name recognition in community survey ‐ No. of community activities involved in ‐ No. of trainings for users, community, board members OBJECTIVES: ‐ No. of reports to donors & funders & government Managing ‐ Review of compliance to governmental regulations. Service Users, ‐ % of board members participating in fundraising Community activities network, ‐ Donors, Funders, Board Members, Government, etc. Common KPIs: OBJECTIVES: ‐ Amount of Revenue (or Funding) Financing, ‐ No. of new Revenue Sources (or Funding Sources) Budgeting, ‐ % of growth in Revenue (or Funding or donations) Reserve, ‐ Growth in multiple ‐ year or secured funding Compliance. ‐ Donor retention % ‐ % or amount of costs to each service user ‐ Reduced unused capacity and its related costs ‐ Reduced budget variance (or a balanced budget) ‐ Amount of Deficit or Surplus Financial ‐ Achieve Breakeven Resources ‐ % of growth in reserve ‐ ROI Learning and Growth ‐ Finance Staff capability on budgeting, Strategy financial reporting, and investing Customer/ Internal ‐ Compliance with funder requirement process Stakeholders ‐ All other financial ratios in earlier session of this afternoon 8

5/26/2014 Social Impact Perspective 17 S2: Developing the next generation of opera talents Strategy Map Objectives Measures (KPIs) Initiatives Target (Actions) Social Impact: Increase no. of ‐ No. of new ‐ Publicize recruitment in + 100 /year Growing group of opera talents in students secondary schools young opera talents next generation Financial: Increase tuition ‐ % of growth in tuition ‐ Reasonable Tuition fees +20% Revenue & earned and earned, funding, ‐ Task force to obtain $ Funding/Donation Funding/donation donation from donors and Growth parents Customer: Increase public ‐ Student satisfaction ‐ Consultation for > 8/10 Public Performance performance ‐ On ‐ stage students opportunity performance ‐ Organize production by >= 1 / year students Internal: Increase training ‐ teaching/student ratio ‐ Small ‐ class design < 1:10 World ‐ class training effectiveness ‐ Up to international process ‐ international standards Accreditated recognition Learning : ‐ Hire ‐ teacher development ‐ New TD schedule $5,000/head Established team of ‐ Train cost ‐ New compensation professional trainers ‐ Retain ‐ teacher vacancy scheme < 10% ‐ retention rate > 90% 18 9

5/26/2014 Examples of KPIs on Social Impact Perspective: Objective: Examples of Social Impact Measure: Provide shelter to homeless No. of man ‐ day provided Change in % of homeless death in a region / shelter cost Provide training to jobless No. of users served Income difference after training/ training cost Provide private tutoring to No. of children served children in poor families Grade difference after tutoring / tutoring cost Provide financing to micro ‐ No. of owners served business owners to escape Family income difference / financing cost from poverty Social Return in Investment (SROI): SROI is a comparison between the social value generated from an investment in a SE or a program and the required investment. 19 Benefits and Implementation Pitfalls of BSC 20 10