The Balanced Scorecard for Port Authorities

Presentation for

Associations Financial Institutions Healthcare Industrial

Golden Sunlight Mine Copper Development First Bank of Nigeria International Bank Association Of Moscow Not-for-Profit Workers Compensation Insurance Rating Bureau National Naval Medical Center Consulting Citizens National Mortgage Services Bank BearingPoint Deloitte Consulting Security and Intelligence Government Defense Department

Air Defense U.S. House of U.S. Dept. of Defense US Army CIOG-6 Information Armament Representatives Joint Interagency (Chief Information Systems Defense Energy Customs Bureau Federal Bureau Command - Chief Admin. Office U.S. Department of Task Force US Air Force Officer) Agency Support Center of Investigation Homeland Security SOUTHCOM Education

U.S. Marine Corps Software State and Local National Renewable Systems Command Energy Laboratory New York Office of General Memphis City Services Schools Institute University of Pinellas County West Indies Sheriff's Office Follett Corporation Mecklenburg Florida County NC Spectrum Royal Canadian Partners Mounted Police LLC Atlanta Public Muscogee County Franklin County, OH Greenville Utilities Commission Schools School District Pearson Educational Telecommunications Transportation Energy U.S. Government LukOil Department Oneida Tribe of Malaysia of Energy AMIRI Flight Abu of Wisconsin Croatian Telecom Dhabi, UAE

““PeoplePeople andand theirtheir managersmanagers areare workingworking soso hardhard toto bebe suresure thingsthings areare donedone rightright,, thatthat theythey hardlyhardly havehave timetime toto decidedecide ifif theythey areare doingdoing thethe rightright thingsthings..””

StephenStephen R.R. CoveyCovey

• The balanced scorecard is a strategic management system for establishing and communicating an organization’s vision, mission, and strategy to stakeholders and employees, and for aligning day-to-day work to the strategy

• The balanced scorecard provides a framework for planning and measuring strategy as viewed from different dimensions, or perspectives, of organizational performance

• The balanced scorecard uses performance measures to monitor strategic success and guide the selection of strategic initiatives. The measurements also provide guidance in budgeting and allow the organization to learn what works.

• 1990 - Nolan Norton Institute study on balanced measures of financial and non-financial performance in several organizations • David Norton, study leader • Robert Kaplan, academic consultant from Harvard • 1996 - “The Balanced Scorecard” book published • Introduced the BSC concept and rationale for balanced measures • 1997 - Foundation for Performance Measurement founded • 1998 - Balanced Scorecard Institute founded • Merged 2003, now incorporated as Strategy Management Group, Inc. • 2001 - “The Strategy-Focused Organization” book published • Introduced the strategy map • 2004 - “Strategy Maps” book published • 450 pages of strategy map examples and case studies • The BSC is now used by over 65% of Fortune 1000 companies; increasingly being adopted by Federal agencies, by state and local organizations, and internationally.

• Simplifies management by focusing attention on a few high-impact Strategic Themes • Communicates vision and strategy effectively by using Strategic Objectives and Strategy Maps • Uses performance measures to maintain alignment to strategies and reward the right behaviors • Provides agility and flexibility in the midst of rapid and continuous change • Helps everyone to maintain focus on the most important things

Where We Are:

Where We Want To Be:

• Alignment of the organization leads to:

• Identifying Strategic Performance Measures

• Customer focus

• Improved Communication

• Results-based justification for funding

• Mission effectiveness

IS: IS NOT: A strategic management Only a performance system measurement system A tool for evaluating A report card on my individual organizational performance performance A system for providing An executive information feedback where it is needed system for top leaders only Supported by software after A piece of software you can metrics are defined just buy and plug in A long-term journey A short-term project

Perspective Key Result Key Questions Through the eyes of our Customer/ customers and stakeholders: Stakeholder Satisfaction how well do our products and services meet their needs?

For businesses: how do we create value for our owners? Financial Increased revenues, For government and not-for- Stewardship Reduced costs profits: how do we maximize value and effectiveness of our mission?

How can our employees improve internal processes to deliver Internal Operational Processes our products and services Efficiency better, faster, and cheaper?

How can we support the internal Capacity Knowledge, Building processes through improved Tools & Innovation skills, technology, & leadership?

Mission

Vision

Customer/Stakeholder Perspective “To achieve our mission, what •Price customer needs • Speed must we serve?” • Quality

Financial Perspective “How can we • Productivity maximize the • Effectiveness value of our •Growth mission?

Internal Process Perspective “To satisfy our customers, at which • Cost business processes • Cycle Time must we excel?” • Efficiency

Capacity Building Perspective • Skills & Knowledge “To excel in our processes, what • Technology capacities must our • Culture organization • Leadership have?”

Values Mission Vision Enablers Challenges/Pains Sample Strategic Customer Value Proposition Themes Strategic Results

Customer /

End User Partnerships Operational Excellence Excellence Strategic Change Culture Financial Service

Internal Processes Capacity PERSPECTIVES Building

Engaged Leadership Interactive Communications

Strategic Result or Outcome

Customer

Financial Strategic Theme

Internal Processes

PERSPECTIVES Capacity Building

Strategic Result or Outcome

Customer

Financial

Internal Processes Strategic

PERSPECTIVES Objectives Capacity Building

Increase Customer Lower Satisfaction Wait Time

Financial / Reduce Stewardship Costs

Reduce Lower Internal Procurement Cycle Time Processes Steps

Capacity Upgrade Improve Building Equipment Strategic Skills

Mission: Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.

Vision: Continue building on our unique position -- the only short haul, low-fare, high-frequency, point-to-point carrier in America. Strategic Theme: Objectives Measures Targets Initiatives Operating Efficiency

Financial • Profitability • Market Value • 25% per year • Optimize Profitability routes • Lower costs • Seat Revenue • 20% per year • Standardize Increase Increased Plane Lease Lower costs • • • 5% per year planes Revenue revenue Cost

• FAA On Time • First in • Quality More management On-time • On-time flights Arrival Rating industry Customer Customers flights • Lowest prices • Customer • 98% • Customer Lowest • More Customers Ranking Satisfaction loyalty program Prices • No. Customers • % change

PERSPECTIVES • On Ground • Cycle time Reduce • Reduce Time • <25 Minutes optimization Turnaround turnaround 93% Internal Time • On-Time • program Process time Departure

• % Ground crew • Stock • yr. 1 70% stockholders ownership plan Align • Align yr. 4 90% Ground crew Capacity Ground ground crews • % Ground crew yr. 6 100% • training Building Crews trained

© 2007 Balanced Scorecard Institute - Do not copy without permission. 16 Building & Implementing A Balanced Scorecard: Nine Steps To Success™ •• OrganizationOrganization PainPain •• OrganizationOrganization EnablersEnablers • Vision & Mission • Performance Results • Vision & Mission • Revised Strategies •• ChangeChange ManagementManagement •• BSCBSC DevelopmentDevelopment PlanPlan

• Alignment • Value Proposition • Dept. & • Strategic Themes Support Unit • Strategic Results Scorecards

• Software • Performance • Strategy Action Reporting Components • Knowledge Sharing

• Cause-Effect Links

Customer/ Mission Stakeholder Vision Needs Values Step n Challenges, Enablers Customer Value 30,000 ft. Perspectives Step D Strategic Themes & Results o e ta il Strategic in Step c Objectives p re 15,000 ft. a se s Strategy Map Step a q s w e Performance Measures g e & Targets Step t r lo 5,000 ft. w e STRATEGIC ALTITUDE STRATEGIC ALTITUDE r Step StrategicStrategic s Activities InitiativesInitiatives Roll out Projects Ground Tasks

• Secure a mandate from senior leadership • Team must have representation across the organization • Cross-functional • Many ranks and roles • Stakeholders or their representatives • Desired attributes of team members: • Analytical thinker, visionary, change agent, internal process experts, proactive (“outside the box”) thinkers

z What are the facts? Current levels of performance Challenges, Enablers, Pains Internal Strengths, Weaknesses External Opportunities, Threats z Who are the customers? Primary customers Secondary customers

Cross-functional team Stakeholders Conducting an Organizational Assessment z What do customers need? Functions, services Timeliness Quality, reliability Relationship, communication Image, reputation

© 2007 Balanced Scorecard Institute - Do not copy without permission. 21 Step o Step 2: Identify Strategic Themes z Strategic Themes: Brief titles that indicate the “pillars of excellence” where the organization must excel to increase value for its customers Represent the main areas on which the organization must focus its efforts to achieve success Encompass all the major functional and support units of the organization Typically, three to five in number z Each Strategic Theme has one Strategic Result

• Theme: Build the Business • Result: Increased number of customers and sales per customer • Theme: Operational Excellence • Result: Improved efficiency in delivery of customer-facing services • Theme: Strategic Partnering • Result: Increased number of partners and quality of partnerships • Theme: Delight the Customer • Result: Increased customer satisfaction and retention • Theme: Life Cycle Management • Result: Reduced cost of ownership and improved reliability • Theme: Flatten the Organization • Result: Improved coordination; more efficient services • Theme: Good Governance • Result: Clean audits and increased accountability • Theme: Community Involvement • Result: Increased community involvement and satisfaction

Desired Result What Are We Trying To Accomplish?

Objective Owner Performance Measure Who Is Responsible Strategic How Are We & Accountable? Objective Performing?

What Strategic Projects What Specific Steps Must We Implement? Must We Take? Strategic Initiative Action Steps

© 2007 Balanced Scorecard Institute - Do not copy without permission. 24 Step p How To Write Strategic Objectives z 1. Start from the Strategic Results at the top of the Strategy Map. z 2. Work downward from the top asking the question “How can we achieve this objective?” z 3. Check by reading upward from the bottom asking the “Why?” question

Good Objectives: Brief; start with imperative quantitative verbs (e.g., “Improve, Increase, Reduce”); continuous improvement potential (no projects, or on/off activities; show innovation & creativity; linked to desired strategic results.)

“World – class Too high, “Provider of choice” Too vague “High-performance organization”

Risk: too vague to provide focus and direction

Strategic Objective STRATEGIC ALTITUDE Too low, “Train employees” Too specific “Build a new system” “Upgrade a program”

Risk: may miss better options

Good Objectives: Not-So-Good Objectives: z Improve knowledge of customer z Write a strategic plan (Better: requirements Improve employee z Reduce workplace accident rate understanding of our z Improve ability to estimate strategic direction) resource needs z Complete the IT upgrade z Lower cost per unit project (Better: Increase network reliability) z Improve employee morale z Train all employees (Better: z Reduce process cycle time Improve employee knowledge z Improve reliability of network and skills) z Increase critical employee skills z Secure more funding for XYZ z Increase “smarter/faster” program (Better: Improve headcount program cost-effectiveness) z Increase workforce diversity

A Strategy Map: z Defines the relationships among objectives that are causes (performance drivers) and objectives that are effects z Helps create a balance among objectives, performance measures, and initiatives z Helps define the logical consistency of the scorecard

Increased profits

Lower costs Increased revenues Financial

Increase More Customer customer customers satisfaction

Internal ShorterReduceEmployee turn- Processes Fewer trucks aroundtrainingtravel time time

Learning Increase and growth Improve employee route planning training

Leading the Way for a Safer County

PARTNERSHIPS QUALITY PEOPLE ACCOUNTABILITY & COMMUNITY SERVICES

INCREASE CITIZENS COMMUNITY CONFIDENCE

CULTIVATE FORGE SAFER COMMUNITY NEIGHBORHOODS PARTNERSHIPS INCREASE QUALITY OF SERVICES

FISCAL RESPONSIBILITY OPTIMIZE IDENTIFY FINANCIAL FUNDING RESOURCES OPPORTUNITIES

INCREASE EFFICIENCY & INTERNAL PRODUCTIVITY BUSINESS INTEGRATE INTENSIFY TECHNOLOGICAL PROGRAMS PROCESSES ENSURE INTERNAL/EXTERNAL & EFFECTIVE ACCOUNTABILITY MARKETING RESOURCE UTILIZATION AT ALL LEVELS DETER CRIME

PROPOGATE ASSESS COMMUNITY ENHANCE EFFECTIVE PROMOTE CLEAR CULTURALLY DIVERSE PARTNERSHIPS, CAREER DEVELOPMENT & EFFECTIVE WORKFORCE OF PROGRAMS & EMPLOYEES & PROGRAMS COMMUNICATION EXCELLENCE RESOURCES INNOVATION

ENSURE FOSTER POSITIVE PROMOTE COMPETITIVE WORK/TEAM EFFECTIVE PAY & BENEFITS ENVIRONMENT LEADERSHIP

z Provide a tangible way to see if our strategy is working z Focus employees’ attention on what matters most to success z Allow measurement of accomplishments, not just of the work that is performed z Provide a common language for communication

“What gets measured gets done.” “If you don’t measure results, you can’t tell success from failure, you can’t claim success or reward it, and you may be rewarding failure.” “If you can’t recognize success, you can’t learn from it; if you can’t recognize failure, you can’t correct it.” “If you can’t measure it, you can’t manage it and improve it!”

Points Level 1 Not very well 2 Somewhat 3 Quite a bit 4 Very well; outstanding

How well do your performance metrics: Score Help translate your business strategy into operational terms? Align all business units toward common strategic goals? Fully reflect what your customers and stakeholders care about? Provide the leverage to create change? Account for intangible value? Manage end-to-end results across departments and business units? Enhance your ability to compete in the future? Drive improvements in how work is performed? Include proper benchmarks to judge performance? Total Score

Adapted from: Measuring Performance, Dr Bob Frost, Fairway Press, 1998 © 2007 Balanced Scorecard Institute - Do not copy without permission. 32 Step r Performance Measures Are Derived from Strategic Objectives

EXAMPLE Strategic Theme: Sample Build The Business Performance Measures

Results Revenue Growth % Expand markets Cash Flow Financial Reduce Costs Customer satisfaction index Increase Increase Repeat customers Customer Customer Customer Confidence Retention Service error rate Internal Improve Reduce Delivery time Service Cycle Time Processes Quality No. trained & tested

Upgrade Increase Capacity Information Skills Average system age Building Technology Performance Drivers © 2007 Balanced Scorecard Institute - Do not copy without permission. 33 Step s Step 6: Select Strategic Initiatives

z New strategic projects identified during the scorecard development process z Widely recognized as solving significant organization problems z Prioritized and ranked by: potential alleviation of organization pain, cost and time to implement, benefits and time to realize the benefits z Schedule, deliverables, resource commitments and ownership defined z Dependencies and sequencing considered

Mission: Conduct counter-illicit trafficking activities to achieve an effective international effort. Vision: Leverage assets to cause major reductions in illicit trafficking.

Strategy Map Objectives Metrics Targets Initiatives Strategy: Improved Operating Efficiency Customer/ +15% in • Develop new Best Assets • Best assets • Asset Index • Stakeholder On-target, On-Time one year coordination initiatives • Improve • Coordination Index + 20% in Increase Partner Improved Partner Nation • Develop a effectiveness one year • Nation And Interagency Command effectiveness Coordination Capabilities Brief Internal • Increase • Capability • 10 new • Interagency roles and Processes field asset • Availability types by responsibilities Improved asset availability next FY study capability • Reduce • Quarterly & availability delays 10% tactical per year meetings Budget/ • Internal & external • Percentage • Command priorities covered Financial Strategy-driven resource allocation • 95% by next resource system • Resources received FY resourcing information • $20M by system next FY Organization • Improve training & • Employee • Integrated development • 90% Assessment Capacity Integrated Agreement on satisfaction score Assessment of needs/ • Develop cross- Capability Better tools shared Percent signatories • 95% Mission & common functional teams • Command and training better information • doctrines Increase leadership Team building • 85% by orientation • training accessibility index next year

z Automation: Applying performance measurement software to get the

right performance information to the right people at the right time to be used

for effective feedback. z There are now over 100 vendors of “Balanced Scorecard” software z Prices range from free to several $100K, depending on requirements z Popular vendors include:

ActiveStrategy, CorVu, Cognos, Hyperion, Microsoft, OpenRatings, Oracle,

PerformanceSoft, Pilot, Rocket Software (CorVu), SAP, SAS, etc. z Call us to discuss recommendations to fit your requirements.

Tier 1: Enterprise-wide Tier 2: Business and Support Units Tier 3: Teams & Individuals Aligned Balanced Scorecard Objectives:

SI1: IT enhancement plan TierTier 11 Improve SI2: Knowledge library program Ease Of PM1: % of processes Customer Access Automated

SI3: Identify internal customer needs TierTier 22 Improve My SI4: Develop report delivery standards Department’s PM1: % of on-time Ability To Assist reports to Customers internal customers

SI3: Error identification TierTier 33 Improve My training course Customer Service PM1: Change in test Skills score after training Step 9: Evaluation

z Real data are necessary in order to understand organizational performance z Evaluation requires comparisons of BSC data: With past performance Between organizational units Between processes in different organizations z All aspects of the organization can be questioned z Tie evaluation to budget decisions z Repeat the cycle

1. Lack of engaged leadership 2. Lack of strategic thinking 3. Using different definitions of common terms 4. Communicating only with the special few 5. Thinking it’s a sprint, not a marathon 6. Thinking it’s only about performance measures 7. Bad software decisions 8. Weak facilitation skills 9. Not planning for and managing change 10. Losing momentum and not following through

StrategyStrategy ++ OperationsOperations ++ ChangeChange A cost-effective Efficient Effectively game plan, processes run by managing the communicated empowered, complexities of and executed satisfied people, tools, well employees innovation and action

InIn otherother words,words, learninglearning toto dodo thethe rightright thingsthings right,right, better.better.

© 2007 Balanced Scorecard Institute - Do not copy without permission. 41 TheThe BalancedBalanced ScorecardScorecard Institute,Institute, a Strategy Management Group company An organization of highly experienced professionals providing instructional, development, and implementation services in strategic management and performance improvement through:

PublicPublic WorkshopsWorkshops On-SiteOn-Site CustomizedCustomized TrainingTraining BalancedBalanced ScorecardScorecard ConsultingConsulting && Re-BalancingRe-Balancing BalancedBalanced Scorecard-Baldrige-ISO-SixScorecard-Baldrige-ISO-Six Sigma-LeanSigma-Lean IntegrationIntegration StrategicStrategic PlanningPlanning ExpertExpert FacilitatorFacilitator andand ChangeChange ManagementManagement ConsultingConsulting PerformancePerformance Management/MeasurementManagement/Measurement SoftwareSoftware IntegrationIntegration

VisitVisit UsUs OnOn TheThe WebWeb –– We’re We’re thethe No.No. 11 InternetInternet SiteSite forfor BalancedBalanced ScorecardScorecard andand PerforPerformancemance ManagementManagement Information!Information! www.balancedscorecard.orgwww.balancedscorecard.org

Paul Arveson

The Balanced Scorecard Institute

Core Values: Our guiding principles; what we believe in. Customers: Direct beneficiaries of our services or products. Input: A resource consumed in work activities and processes, such as money, labor, time, equipment etc. Logic Model: A basic description of a work process in terms of inputs, activities, outputs, and outcomes (or results). Mission: What we are about; our purpose for existence as an organization. Outcome: Results that are desired by producing outputs; accomplishments. Output: What is produced by a work process; immediate deliverables in terms of products and services. Performance Measure (Lagging): An indicator of past performance that show how successful we were in achieving our outcomes. Performance Measure (Leading): An indicator of performance that is a precursor of future success; a performance driver Perspectives: Different views of our organization; performance dimensions. Process: A chain of work activities that transforms inputs into outputs and thereby adds value. Stakeholders: The universe of people with an interest in our success. Strategic Initiative: Action program designed to achieve our performance goals. Strategic Objective: Strategy component; continuous improvement activity that must be done. Strategy: How we intend to accomplish our vision; a long-term approach, or “game plan”. Strategy Map: Cause-effect relationships among the objectives that make up a strategy. Strategic Result: Desired outcome for a strategic theme. Strategic Theme: Main focus areas of an organization’s vision; the organization’s “Pillars of Excellence”, used to focus staff effort on accomplishing the vision. Target: Desired level of performance for a performance measure. Vision: What we want to accomplish several years in the future; our “picture of the future”.