4.1 Chapter 2 - Building a Strategic Scorecard

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Chapter 2: Creating A Strategic

ScorecardAfter completing this lesson, you will be able to:

Use the strategic scorecard Check List to assist in the setup of a

strategy.

Define objectives for a strategic scorecard.

Define the workflow for the strategy.

Modify icon appearance.

Add pop-up information to the icons of the scorecard for all periods to

communicate strategy.

Modify the display options of the strategic scorecard by changing

colors, backgrounds, label names and other aesthetics.


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Creating A Strategic Scorecard Strategy summary steps:

What Strategy to Create

The strategies being developed for an organization and the actual display of the strategicscorecard can vary dramatically depending on what the overall strategy is. An

organization may want to view their four perspectives, a cause an effect relationshipdiagram, an organizational chart, strategic value chains, process maps, etc. The strategiesthat you will be creating will just be a couple of these, since the actual creation dependson the organizational needs. You will first create a four perspective strategy and thencreate a cause and effect relationship diagram in the chapter exercise which will displayyour core customer perspective measures.

Case Study Background

In this relatively simple example, you will create a four perspective strategic scorecardfor the Outback Warehouse/Service Center. At this location, two primary functions areperformed: parts are kept in inventory and service calls are received from customersregarding the products being housed. At another location the financials are managed, youwill add this to the strategic scorecard now, even though the actual data will be capturedlater. The last perspective is Learning and Growth, which the organization is currentlyunsure what Key Performance Indicators (KPIs) are to be monitored, but again you caninclude it in your perspective diagram.

The Outback Warehouse/Service Center is currently monitoring four Key PerformanceIndicators (KPIs) for the organization % of Purchasing done on FPA(ForwardPurchase Agreement), Inventory Value, % Resolved First Call, Issues Outstanding atEOM. The alignment of these four KPIs into their respective perspectives has beendecided: % of Purchasing done on FPA and Inventory Value are internal measures, so

they will be placed in the Internal Business Process perspective. % Resolved First Calland Issues Outstanding at EOM effect customer relations, so they will be placed into theCustomer perspective.

When evaluating the performance of the Inventory Area, two key indicators arereviewed:

1. % of Purchasing done on FPA (Forward Purchase Agreement) Thecompanys goal is to purchase at least 15% of products based onpre-negotiated contracts with suppliers, called FPAs. The remainder of thepurchases are negotiated on a case-by-case basis.

2. Inventory Value The company hopes to hold as few dollars in inventory as

possible. The inventory value per month should never be greater than$15,000.

Each of these measures is equally important to good performance in theInventory area.

When evaluating the Customer Service Area, two key indicators are reviewed:

Page 2-2 CorVu Corporation 2000


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Strategy summary steps: Creating A Strategic Scorecard

1. % Issues Resolved on 1stCall a well-trained customer service representativeshould be able to resolve most of the calls on the first contact with thecustomer.

2. Issues Outstanding at EOMperiodically a customer will ask a question thatrequires some research and follow-up. To make sure that customer questions

are being resolved, the company reviews the number of outstanding issues atthe end of each period. There should never be more than 20 calls outstandingat the end of the month.

Because the number of issues outstanding at the EOM could be dependent onwhen the call came in, or the particular nature of the calls that month, the firstmeasure (% Resolved on 1st Call) is more important to the performance of theCustomer Service area. The Customer Service manager has given an 80%weighting to the 1st KPI and only a 20% weighting to Issues Outstanding atEOM.

Currently, this company is not particularly customer-oriented. In fact, Louise, the

manager of the location has determined that the inventory performance is twice asimportant as the performance in customer service (!!)

This information will be reviewed again later!

Creating a New Scorecard

When creating a strategic scorecard, a Check List pane will display showing the varioussteps involved in creating the scorecard. You can use this as a road map to guide youthrough the building process. The Check List will momentarily flash the next requiredstep in red. Completed steps are shown with a check next to them. Incomplete steps are

shown with an X next to them. Not all of the items in the check list have to be completedat the same time, since it is a progressive roadmap of completed items during the buildingprocess of a scorecard.

The first step in creating a Strategic Scorecard is setting up the scorecard type anddefining the periodicity that you will be using from the data for the inputs. This canalways be decided later incase this is not known at the time during the strategicdevelopment.

Complete the following steps to create a new scorecard:

1. Select the Balanced Scorecard icon from the CorVu Main Menu.

2. Select the Create New Scorecard icon from the toolbar.

CorVu Corporation 2000 2-3


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4. Right-mouse click on the strategy icon and select Rename Strategy.

5. Type in Four Perspectives for the new strategy name and clickOK.

Since you will not be adding Inputs and Results to the strategic scorecardwe will hide these panes.


StrategyPane

Result Pane

Input Pane


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5. Repeat steps 2-4 to create the other three objectives and rename themCustomer, Financial, and Learning and Growth.

The Design/Scorecard Pane should now look similar to the one shownbelow:

All of the objectives have all been added to the strategic scorecard. The next stepin the check list is to Link Objectives.

Designing the Strategic Scorecard

You are now ready to connect the objectives to each other. The workflow between yourobjectives will determine how you link your objectives together. To make the work flowmore apparent in the scorecard you will first change the appearance of the strategic linksto display with arrowheads.

Complete the following steps to change the link type between the strategic

objectives:

1. Right-mouse click in the Scorecard/Design Pane.

2. Select Options.

3. Select the Strategy Links tab.

4. Change the appearance from Standard to Arrow Head.

5. Click OKto continue.

Note: You will not see your strategy link appearance change until you add

links to your scorecard.



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Complete the following steps to setup the workflow between your objectives.

1. Re-arrange the objective icons by left-mouse clicking on the objective anddragging it to the correct location in the Design/Scorecard Pane.

Note: Do not drop one objective icon on top of another objective icon,

since you are only moving the icons to the correct location for the processflow and not linking your objectives.

After moving your icons your scorecard should look similar to the one below:

Now that the objectives are in the correct location you can create the linksbetween the objectives. First you will need to determine what theworkflow is between your objectives. Once the workflow is determinedyou can make the links by dragging and dropping an objective icon ontothe appropriate icon. The linking between objectives depends on whereyou drop one icon on top of another icon. For example: If you drag anddrop an icon to the left side of another icon, the link will be drawn fromleft side of the icon to the other icon.

2. Left mouse click on the Customer objective and drag it on bottom of the Financial

icon.



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Your scorecard should look like the one below:

Dragging and dropping the Customer icon to the bottom of the Financialicon is setting up the map flow, indicates that the Customer perspectiveeffects the Financial perspective.

Complete the following steps to set up the appropriate links between objectives.

2. Left-mouse click on the Internal Process icon. Drag and drop the icon on tothe bottom of the Financial icon.

3. Left-mouse click on the Learning and Growth icon. Drag and drop the iconon the bottom of the Customer icon.

4. Left-mouse click on the Learning and Growth icon. Drag and drop the iconon the bottom of the Internal Process icon.



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Your scorecard should look similar to the one below:

Complete the following steps to save the scorecard so far:

1. Click the Save Scorecard button on the Scorecard toolbar.

2. Type Service Center as the name of the scorecard and click on the Savebutton.



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Enhancing the Strategic Scorecard

Enhancements that will be added to the strategic scorecard depend on the layout of thestrategy. Commentary should be applied to the scorecard that defines the mission/strategy

of the scorecard, or other information that would make the strategy clear for the scorecarduser. Background color, icon type, link type and other enhancements that aestheticallyenhance your strategy will also be included.

Scorecard Commentary

The CorVu scorecard has five different types of commentary that can be added.

Pop-up commentary (communicating the mission and strategy)

Sticky-note commentary (miscellaneous comments)

Commentary Pane commentary (gathering feedback and detailed comments)

Global-note commentary (note of high importance or design assistance)

Initiative commentary (communicating the initiatives behind strategic

objectives)

A couple of these commentary types will be addressed in this chapter and theremaining will be mentioned in the Creating a Tactical Scorecard chapter.

The ability to add commentary is critical to the communication and feedbackcomponent of any successful balanced scorecard.

The pop-up or mouse-over and the global note commentary allow the

scorecard designer to communicate the strategy and vision behind eachelement of the scorecard. These comments are consistent over time and thusappear for every time period.

The separate commentary pane is designed to allow scorecard users andscorecard owners to provide feedback and explanations regardingperformance results. This feedback is associated with a particularmeasurement period.

Pop-Up Commentary

(Communicating Strategy, Vision, and Initiative)

Pop-up or mouse-over commentary is designed to communicate the strategy, vision,and initiatives of the organization. Typical information included might be: 1) why themeasure or objective was included, 2) why the objective has been added, 3) how themeasures are inter-related, 4) who is accountable for each measure, 5) formulas orcalculations used for each measure, 6) performance targets for each measure.



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Complete the following steps to add pop-up commentary to the Financial Objective:

1. Right-mouse click on the Financial objective in the Design/Scorecard Pane.

2. Select Edit Objective Text from the right-mouse click menu.

3. Type in the objective commentary to for this icon and select OKto continue:To obtain a high profit margin, increase return on investment, and

maximize revenue productivity.

Position the mouse pointer over the Financial objective to view the pop-upinformation in the strategic scorecard:

Note: Text entered in the Objectives box without and [ENTER] strokes will be displayed

in one long line. If the information extends beyond one screen width, only the endof the message will be shown.

TipPop-up information is retained as you view the scorecard for alternate periods.

The second type of pop-up commentary is Initiative commentary. In Initiativecommentary you may want to include information on how the organization is goingto achieve the strategic objectives.

Complete the following steps to add initiative commentary to the Customer

objective:

1. Right-mouse click on the Customer objective icon.

2. Select Edit Initiative.



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3. Type in the following Initiative commentary and then select OKto continue:Monitor % Resolved 1st Call and Issues Outstanding at EOM to find if

there is an issue with the department tech reps.

You can view the initiative commentary by positioning the mouse pointerover the thunderbolt that is displayed on the Customer objective icon.

Note: Text entered in the Initiative box without and [ENTER] strokes will

be displayed in one long line. If the information extends beyond onescreen width, only the end of the message will be shown.

TipThe Initiative Pop-up information is retained as you view thescorecard for alternate periods.

Adding Global-Commentary

Global-Commentary is used to display a note for every period. The global commentshould contain very important information that is not time sensitive and can be useful todisplay titles, vision, mission, strategic themes, perspectives, separators or anyannotation.

Complete the following steps to add a Global-Note to the scorecard.

1. Right-mouse click in the Design/Scorecard Pane.

2. Select the option Add Global Note Here.

3. Type the content of the note to be viewed: Four PerspectiveStrategy.

4. Click OKto continue.



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Modifying the Background of the Strategy Elements

You can modify each pane of the scorecard to have a different background. Thefollowing list of background options is available:

Solid Color

Bitmap

Tiled Bitmap

Bitmap Once

Linear Fade or Radial Fade

Complete the following steps to modify the background of the Strategy, and

Design/Scorecard panes to display tiled bitmaps.

1. Right-mouse click in the Strategypane.

2. Select Options.

3. Select the Panels tab.

4. Select the Tiled radio button.

5. Select the Bitmap icon.

6. Select the bitmap named backgrnd.bmp and select Open.

7. Click OKto close the options window and see the modified background.

8. Modify the background panel of the Scorecard/Design pane by repeating steps

1-7 and tile the bitmap called staff1.bmp.

The Strategy pane panel option dialog box should look similar to the oneshown below:



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9. Save your scorecard by using the save button on the tool bar.

Modifying Icon Color and Appearance

The default color for a strategy or objective icon is a deep blue and the icon appearance isstandard (rectangle). You can modify the default color and appearance by setting the Iconoptions.

Complete the following steps to modify the color of the strategy icon(s) in the

strategy pane:

1. Right-mouse click in the strategy pane.

2. Select Options.

3. Select the Icons tab.

4. Select the Default Color color button.

5. Select a color for your icons from the color panel and clickOKto continue.

Complete the following steps to modify the appearance of the strategy icon(s) in the

strategy pane:

1. Right-mouse click in the Design/Scorecard pane.

2. Select Options.

3. Select the Icons tab.

4. Select the Icon Appearance of Bubble.

5. Select the Icon Size ofFixed Y.

6. Change the Y Size to 50.



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Customer Profitability and to Customer Retention. Summary steps are listed on the nextpage if you need to refer to them for assistance.



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Strategy summary steps:

1. Create a new strategy.

2. Add the Market Share, Customer Acquisition, Customer Profitability, Customer

Retention, and Customer Satisfaction objectives.3. Change the link type to arrow instead of standard.

4. Create the links between the objectives:

Drag and drop Customer Acquisition on to the side of Market Share.

Drag and drop Customer Acquisition on to the side of Customer Profitability.

Drag and drop Customer Retention on to the side of Market Share.

Drag and drop Customer Retention on to the side of Customer Profitability.

Drag and drop Customer Satisfaction on to the bottom of Customer Acquisition.

Drag and drop Customer Satisfaction on to the bottom of Customer Profitability.

Drag and drop Customer Satisfaction on to the bottom of Customer Retention.

5. Change the appearance of the objective icons to bubble and change the style to usethe fade and gray color.

6. Add a global note that contains the text Customer Core Measurement Group.

7. Edit the global note icon and make the following changes.

Deselect the Draw Background option.

Select the Icon Size of Fixed X and Fixed Y options.

Change the Bevel to 0.

Change the Description font to Times New Roman, Bold, and 16 point size.

Resize the global note by left-mouse clicking on its edges and drag to size.

8. Save your scorecard as Customer Core Measurement Group.pmm.



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Your scorecard should look similar to the one shown below:

Documents

4.1 Chapter 2 - Building a Strategic Scorecard