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Implementation Of The Balanced Scorecard
Question #1
• What is your experience level with the Balanced Scorecard in your firm?– Beginner (We know very little about it)– Intermediate (We have started but have stalled in
our use of the BSC)– Advanced (We are using the BSC successfully in
our firm
Today’s Agenda
• Historical Perspective• Future Thinking• Implementation• Your Plan
HISTORICAL PERSPECTIVE
Historical Perspective
• Partner Compensation drove the plan• Charge Hours• Performance What? • Once a Year… at the most
Why Change?
• Staff is changing….• You are changing…• Business model is changing….• Process must change….
FUTURE THINKING
Balanced Scorecard
• What is it?• Why are we interested?• How do we use it?• Where do we go from here?
Background
• “Harvard Business Review” 1992R.S. Kaplan and D.P. Norton
• Organizational Performance Measurement• Successful Strategy Implementation• Widespread Acceptance
4 Characteristics
1. Top Dow Reflection of the Firm
2. Forward-Looking
3. External and Internal Measures
4. Helps you stay focused!
Balanced Scorecard for CPA Firms
Myth -or-
Possibility
The Pay for Performance Theory
Outcomes
What we do to exist.What we believe in.
What we want to be.
Our Game Plan
Behavior Motivation
What we need to do.
What I need to do.
SatisfiedPartners
HappyClients
EffectiveProcesses
MotivatedEmployees
Facts of Life
• Fact #1:Most organizations do not successfully execute their strategy
• Fact #2To successfully execute your strategy, YOU MUST HAVE ONE!
Question #2
• Do You Have A Written Strategic Plan That Everyone In The Firm Knows About?– Yes– No
Steps to Success
• Step 1 - Clearly Defined BUSINESS Strategy– Written– Communicated– Supported by IT Plan
Steps to Success
• Step 2 - Find a way to:– Communicate Strategy– Measure Success– Motivate and Reward
So you can successfully execute your strategy!
Barriers to Success
#1 - The Vision Barrier
• Most employees don’t understand the business strategy
• Employees represent the key asset in a knowledge based business
• Communicating and understanding is a key to success
#2 - The People Barrier
• Is compensation linked to performance?• Is performance measured in the “right” way?• Does compensation reinforce achieving
strategic objectives?
#3 - The Resource Barrier
• How are budgets related to strategy?• Long term vs. Short term • Measures and evaluation
#4 - The Management Barrier
• Where is management attention?• What is being measured?• Financial results, and BEYOND!
Question #3
• Which Barrier does your firm suffer from?– Vision Barrier– People Barrier– Resource Barrier– Management Barrier– All of the Above– None of the Above
Breaking Down the Barriers
Overcoming the Barriers to Success
• The Vision Barrier– Translate Strategic Goals into tasks, performance
standards, and desired outcomes.
• The People Barrier– “Cascade” scoreboard down to individual level.
Reward value creation.
• The Resource Barrier– Budgets keyed to strategic objectives. Priorities
toward long term goals.
• The Management Barrier– Lead towards the strategy. Check the right things.
Balance among conflicting priorities.
Overcoming the Barriers to Success
Balanced Scorecard 101
Financial
• Increase firm profits• Increase client profitability• Increase leverage
– Personnel– Technology– Services
• Increase employee earnings
Client Development
• Define client profiles– Average revenue– Cost to obtain– Cost to retain– Lifetime value
• Client surveys• You are responsible for setting
the rules
Internal Operations
• Revenue per FTE• Days in WIP & AR• Turn around time• Maintain quality
Learning & Growth
• Define core competencies• Define standards, policies & procedures• Develop a training curriculum• Develop a personal training plan• Mentoring• Cross training
IT Is An Internal Business Process
• Only Part of One Out of Four Perspectives• Integrated With All Other Components• Driven By Business Objectives• Success Measured By Business Results• Evaluate Your Own Priorities and
Successes!
No more than FOUR
performance measurements in each category!
Measure – How?
Objectives and Measures
• Performance Objectives: Establish WHAT to measure
• Performance Measures: – Establish HOW to measure– Leading and Lagging
Objectives and Measures
Objectives Measurements
Increase Revenue per FTE Revenue per Staff
Increase client satisfaction and loyalty Client surveys and visitations
Improve staff training Individual training plans, tasks accomplished
Streamline internal processes Number of processes reviewed and documented
Cause and Effect
• Effect: Client retention in excess of 95%• Causes:
– Timeliness– Customer Service– Relationship Building
• If . . . . Then . . . (else)
Indicators
Cause Effect
# of proposals outstanding Net income
# of sales calls Reduced WIP/AR
Defined/Improved Processes Market Share
Absenteeism Sales
Employee Satisfaction
IMPLEMENTATION
Critical Success Factors/MeasurementsFinancial
• Revenue per FTE aligned with industry metrics
• Build New Revenue Source – External Consulting
• Average rates per hour that are at market average
• Increase Revenue Per FTE to $120
• Increase Revenue in Consulting Division by 25%
• Increase Rates Per Hour to an average of $80/hour
Critical Success Factors/MeasurementsClients
• Increase the Net Promoter Client Survey score of 5.8
• Increase time spent with top 20% of clients
• Increase service offerings to the top 20% of clients
• Improve Net Promoter Client Score to 7 in 2010
• Complete the DOS Conversation with top 20% of clients
• Cross sell one new service to 25% of firm's existing clients
Critical Success Factors/MeasurementsInternal Processes
• Consistent paperless processes implemented across the firm
• Owner/Manager Communication firm wide strengthened
• Increased ability to segment client market
• Develop written paperless process and decrease paper by 25%
• Implement a consistent Owner/Manager monthly meeting
• Research and implement a CRM system for the firm by 6/30/2010
Critical Success Factors/MeasurementsLearning/Growth
• Each team member has a learning plan
• Consistent ongoing training for all staff
• Team members have peer interaction and coaching
• Develop a learning plan for each team member by 4/30/2010
• Implement a monthly lunch and learn book club
• Assign a peer mentor for every staff member from a differing location
Cascading Scorecards
Translate Firm Goals, Objectives, and Measures to Individual Performance
Cascading Scorecards
Sample Firm Balanced Scorecard
PerspectiveObjectives Weight Score 1-
10 Value
Financial
Increase Revenue Per FTE to $120 8.33% -
Increase Revenue in Consulting Division by 25% 8.33% -
Increase Rates Per Hour to an average of $80/hour 8.33% -
-
Client
Improve Net Promoter Client Score to 7 in 2010 8.33% -
Complete the DOS Conversation with top 20% of clients 8.33% -
Cross sell one new service to 25% of firm's existing clients 8.33% -
-
Internal Processes
Develop written paperless process and decrease paper by 25% 8.33% -
Implement a consistent Owner/Manager monthly meeting 8.33% -
Research and implement a CRM system for the firm by 6/30/2010 8.33% -
-
Develop a curriculum for each employee 8.33% -
EmployeeHire a learning coordinator 8.33% -
Learning & GrowthProvide a training facility 8.33% -
-
Firm Totals 100.00% -
Sample Partner Balanced Scorecard
PerspectiveObjectives Weight Score
1-10 Value
Financial
Delegate 20% of managed book 8.33% -
Manage head count to $120k per FTE 8.33% -
Manage the increase of the consulting division for 25% growth
8.33% -
-
Client
Insure client surveys are completed quarterly 8.33% -
Complete DOS survey's with 20% of personal clients 8.33% -
Sell an additional service to 25% of current clients 8.33% -
-
Internal Processes
Learn the paperless office and lead by example 8.33% -
Lead the monthly manager meeting for stronger communications
8.33% -
Identify reports within the CRM system for firm sales opportunities
8.33% -
-
Attend 40 hours of internal training 8.33% -
EmployeeLead the initiative of hiring and promoting a learning professional in the firm
8.33% -
Learning & GrowthDevelop and teach a module for the managers leadership program
8.33% -
-
Firm Totals 99.96% -
Sample Staff Balanced Scorecard
Perspective
Objectives Weight Score 1-10
Value
Financial
Increase productions to $175,000 8.33% - -
Identify cross sales for 25% of current clients 8.33% - -
Target 5 new clients of $5,000 or more 8.33% - -
-
Client
Complete satisfaction surveys on 5 clients 8.33% - -
Complete DOS Worksheets on top 5 clients 8.33% - -
Identify 1 community service to be involved with in a leadership position
8.33% - -
-
Internal Processes
Serve on paperless committee 8.33% - -
Attend the monthly owner/manager meetings 8.33% - -
Learn how to use CRM system and use the system as required
8.33% - -
-
Attend 40 hours of internal training 8.33% - -
EmployeeComplete Boomer P3 Management Training 8.33% - -
Learning & GrowthComplete individual learning plan 8.33% - -
-
Firm Totals 100.00% -
Firm NameAdministrative Staff
Name_____________________Office_________________Date____________
Perspective Objectives Total
Points Score Value
Financial
Produce monthly reports and distribute to partners by 3rd of each month. 8.33 0.00%
Order office supplies and marketing materials - identifying ways to stay within the firms budget each month
8.33 0.00%
Send "welcome packets" to new clients within 24 hours of request 8.34 0.00%
Client Satisfaction
SUBTOTAL 25.00 -
0.00%
Answer all phone calls within 2 rings 12.50 0.00%
Complete the DOS worksheet on 5 clients per month 12.50 0.00%
Internal Processes
SUBTOTAL 25.00 -
0.00%
Serve on the firms Tax Processing Committee - attending monthly meetings 8.33 0.00%
Complete "back scanning" on clients identified by the partner level. 8.33 0.00%
Insure compliance on firm's policies and procedures 8.34 0.00%
SUBTOTAL 25.00 -
0.00%
Learning & Training
Attend internatl training on ProFX by 9/1/20XX 8.33 0.00%
Develop and deliver a training course on T&B procedures by 8/15/20XX 8.33 0.00%
Attend a quarterly function at the local Chamber of Commerce 8.34 0.00%
SUBTOTAL 25.00 - 0.00%
TOTAL 100.00 - 0.00%
What’s Next
• Decide whether this approach has value for your firm
• Additional learning and research• Decide to implement, and take action
YOUR PLAN
1. Start with your strategic plan2. Don’t start without the total commitment of the MP or
CEO3. Commitment is different than support4. Use a facilitator5. Start with the partner group6. Use the positive focus and game plans to reduce time7. Schedule quarterly meetings in advance8. Insure performance funds9. Focus on limited objectives10. Use graphics for positive visuals around the office
Resources
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• CPE Webinars – Attend webinars on management and leadership of accounting firms.
• CPA Leadership Report – A comprehensive exploration of new ideas in the accounting world. It
is a monthly review of the best management and leadership articles published in the accounting press.
• Leadership Forum Report – Commentaries from the profession’s thought leaders.
• Best Practices Tips – Best management ideas of the month.
• Directory of Resources for Accounting Firms – Find what you need.
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