BSC Alignment & Cascading KPI

HR Divisional Business Drivers and KPI Development Workshop

HR Divisional Business Drivers & KPI Development Workshop

Program AgendaDay One

• Introduction of Balanced Scorecard• Cascading of HR Performance Scorecard• Strategy Map Human Resources• Identifying Department Key Performance Indicators

Day Two

• Writing SMART Key Performance Indicators• HR Performance Appraisal Form• Performance Appraisal Process (September till December

2009)



At the highest conceptual level, the Balanced Scorecard is a framework that helps organizations translate strategy into

operational objectives that drive both behavior and performance.

What is a Balanced Scorecard?


…a management and measurement system whose purpose is to…

• “translate strategy into• a limited set of measures that• uniquely communicate• your vision to the organization”

– Kaplan and Norton

...its key management perspectives are ...

A Balanced Scorecard is


What is the Balanced Scorecard?

• It addresses four basic questions:

• Financial Perspective: How are we faring with shareholder returns?

• Customers Perspective: How do customers see us and value our services?

• Internal Process Perspective: What must we excel at to meet customer needs?

• Learning & Growth Perspective: How can we develop our people and their capabilities?


Alignment & Cascading Business Agenda


The “Balanced Scorecard’ concept…..Finance

Objectives Measures Targets Initiatives

Learning and Growth


Customer


Internal Business Process


VISION AND STRATEGY

HR



• Profitability• Growth • Shareholder Value

The Strategy

• Price• Service• Quality

• Capability enhancement

• Continuous Improvement

• Employee Engagement

“If we succeed, how will we look to our shareholders?”

“To achieve our vision, how must we look to our customers?”

“To satisfy our customers, what management processes must we excel at?”

“To achieve our vision, how must our organization learn and improve?”

• Infrastructure

• Productivity• Cost• Technology

Financial Perspective

Customer Perspective

Internal Perspective

Learning & Growth PerspectiveThe BSC is comprised of themes, objectives, measures, targets, and initiatives.

The BSC represents the cause and effect relationships in your strategy.

Translate Strategy: The BSC Translates Strategy into the Four Perspective Framework

Outcomes

Drivers

Financial PerspectiveFinancial Perspective


KRAs

STARSTAR

HRA Division HRA Division

IndividualIndividual

Measures KPIs

Complete Framework for YOUR COMPANY

The Importance of Alignment

Financial Perspective

Sustained Shareholder Value

Increase Asset Utilization

Improve Cost Structure

Enhance Customer Value

Expand Revenue Opportunities

Productivity Strategy Revenue Growth Strategy

Customer Perspective

Internal Perspective

Price Quality Availability Selection Functionality Service Partnership

Customer Value Proposition

Brand

Product/Service Attributes Relationship Image

Processes that produce and deliver products and services

Operations ManagementProcesses

Processes that enhance customer value

Customer Management Processes

Processes that create new products and services

InnovationProcesses

Processes that improve communities and the environment

Regulatory & Social Processes

CREATING ALIGNMENT

Learning & Growth

Human Capital Information Capital Organization Capital+ +• Skills• Training• Knowledge

• Systems• Databases• Networks

• Culture• Leadership

• Alignment• Teamwork

CREATING READINESS

Strategic Job Families

Organization Change Agenda

Strategic IT portfolio

The Strategy Map Aligns Processes and Intangible Assets to Customer and Financial Outcomes


The Conclusion

Measurement Must Be Linked To Strategy

StrategyBalancedScorecard

Measurement To Communicate, Not To Control

Measurement Communicates Values, Priorities And Direction

The Premise

The Premise Behind the Balanced Scorecard Is that Measurement Motivates Behavior


Objectives

• Fast ground turnaround

Statement of what strategy must achieve and what’s critical to its success

Target

• 30 Minutes• 90%

The level of performance or rate of improvement needed

• Cycle time optimization

Key action programs required to achieve objectives

InitiativeMeasurement

• On Ground Time• On-Time

Departure

How success in achieving the strategy will be measured and tracked

Strategic Theme: Operating Efficiency

ProfitabilityFinancial

Learning

Morecustomers

Ground crew alignment

Lowest prices

Fewer planes

Customer

Internal

Fast ground turnaround

Strategy Map: Diagram of the cause-and-effect relationships between strategic objectives

Flight Is on time

Balanced Scorecard Example


• % Ground crew trained

• % Ground crew stockholders

Objectives Measurement

• Market Value

• Seat Revenue

• Plane Lease Cost

• FAA On Time Arrival Rating

• Customer Ranking (Market Survey)

• On Ground Time• On-Time

Departure

Strategic Theme:Operating Efficiency

Initiative

• Cycle time optimization program

• ESOP

• Ground crew training

• Quality management

• Customer loyalty program

Target

• 30% CAGR

• 20% CAGR

• 5% CAGR

• #1

• #1

• 30 Minutes• 90%

• yr. 1 70%yr. 3 90%yr. 5 100%

ProfitabilityFinancial

Learning

MoreCustomers

Ground Crew Alignment

Lowest Prices

Fewer Planes

Customer

Internal

Fast Ground Turnaround

Flight Is on Time

• Profitability

• More Customers

• Fewer planes

• Flight is on -time• Lowest prices

• Fast ground turnaround

• Ground crew alignment

Balanced Scorecard Example


4. Financial LinkageEvery objective can ultimately be related to financial results

1. Executive InvolvementStrategic decision makers must validate and own the strategy and related measures

2. Cause-and-Effect RelationshipsEvery objective selected should be part of a chain of cause and effect linkages that represent the strategy

3. Balance between outcome and leading measures There should be a balance of outcome measures and leading measures to facilitate anticipatory management

5. Linkage of Initiatives and Measures: Each initiative should be based on a gap between baseline and target.

A good Balanced Scorecard will “tell the story” of your strategy inactionable terms.


Group ActivityGroup Activity

Identify what are the HR objectives complements:Identify what are the HR objectives complements:

1)1) Finance Finance

2)2) CustomerCustomer

3)3) Internal ProcessesInternal Processes

4)4) Learning & GrowthLearning & Growth

Work in Groups of 4Work in Groups of 4


“STAR Corporate Role”

Department Derived Value (Synergy)

Scorecard Cascade

HR PERFORMANCE

SCORECARD

The process of “cascading” creates synergy. It must be based on a clear understanding of the corporate role.

Perspective Strategic Objectives Strategic Measures

Customer Perspective C1 Improve on internal customer satisfaction • Rating vs. internal satisfaction (survey)

Targets

Internal PerspectiveI1 Review and improve the effectiveness of HR internal

control systems• Percentage of reviews within specified timeframe

Learning and Growth L1 Develop skilled workforce

• Fulfillment of specified number of training hours per employee

• Improvement in performance evidence in annual appraisal

• Variance of actual against organizational and departmental training budget

Finance Perspective

F1 Monitoring HR operating expenses • Variance of actual against departmental budget

F2 Monitoring Employee Costing• Employment cost per employee• Recruitment cost per employee• Employee cost over/budget/revenue/profit/operating cost

F3 Monitoring the administrative costing activities• Admin cost per employee• Admin cost over budget/revenue/profit/operating cost




Targets

Internal PerspectiveI1 Review and improve the effectiveness of

HR internal control systems• Percentage of reviews within specified

timeframe





Finance Perspective

F1 Monitoring HR operating expenses• Variance of actual against

departmental budget

F2 Monitoring Employee Costing

• Employment cost per employee• Recruitment cost per employee• Employee cost

over/budget/revenue/profit/operating cost

F3 Monitoring the administrative costing activities

• Admin cost per employee• Admin cost over

budget/revenue/profit/operating cost

The Balanced Scorecard for Human Resource Division


HR Performance

Scorecard

Select and Determine relevant HRA KPIs

Use the HR Performance Scorecard to Select and Manage Individual InitiativesPerspective Strategic Objectives Strategic Measures


Targets

Internal PerspectiveI1 Review and improve the effectiveness of HR internal

control systems• Percentage of reviews within specified timeframe





Finance Perspective




Head of Human Resources

& Administrations


& Administrations

Organizational

Development & Training

Organizational


Compensation

& Benefits

Compensation

& BenefitsRecruitmentRecruitment

Industrial & Employee Relations


Administrations

Administrations

The Balanced Scorecard aligns priorities throughout the enterprise.



& Administrations


& Administrations

Organizational Development & Training


Compensation & Benefits

Compensation & Benefits RecruitmentRecruitment



Administrations

Administrations

Human Resources & Administration Department Structure


Head of Human Resources & Administrations

Head of Human Resources & Administrations



Compensation & Benefits

Compensation & Benefits RecruitmentRecruitment



Administrations

Administrations

Human Resources & Administration Department KPIs

• Training cost • Skill Workforce• Training

Process improvement

• HR cost• Process

improvement

• Recruitment cost

• Process improvement

• Employee relation

• Process improvement

• Admin cost• Process

improvement

• Departmental Cost Efficiency• Employee Cost• Admin Cost• Process Improvement (HR

policies, procedures, processes)

• Customer Satisfaction• Skilled Workforce


“Corporate Role”

Balanced Scorecard Cascading Process

HR PERFORMANCE SCORECARD



Targets

Internal PerspectiveI1 Review and improve the effectiveness of HR internal control

systems• Percentage of reviews within specified timeframe


• Fulfillment of specified number of training hours per employee• Improvement in performance evidence in annual appraisal• Variance of actual against organizational and departmental training

budget

Finance Perspective





& Administrations


& Administrations

Organizational


Organizational


Compensation

& Benefits

Compensation

& BenefitsRecruitmentRecruitment



Administrations

Administrations

Individual Prioritized List of

KPIs and Initiatives

• Vision

• Mission

• Values

• Business Strategy

• Performance Outcome

By Whom Cascading Process OUTCOME


The Value Drivers provide the glue between the four perspectives of the Balanced Scored by outlining the ‘cause and effect: relationships

Value drives provide the ‘cause and effect: between the four perspectives

Example: Identify the intermediate drivers that link training and development

programs and behaviours to business priorities and financial performance

Training

LEADING INDICATORS

Training

Employee Morale

Responsiveness to Clients

CustomerSatisfaction

Increased Sales

TotalReturn

TotalReturn

LAGGING INDICATORS

Cause Effect

Correlation

Leads to, …….


Some Goals of the Balanced Scorecard

The Balanced Scorecard is a framework that helps organizations translate strategy into operational objectives that drive both behavior and performance

Create a systems approach to form an integrated Strategic Management Process

Provide a clear line of sight to the vision and strategy of the company

Provide a tool for cascading the communication processes:

• strategy, and

• processes and systems required for implementing the strategy

Draw a cause and effect roadmap to stakeholder value – shareholder, customer, and employee.


What gets measured gets done.

If you do not measure results, you cannot tell success from failure.

If you cannot see success, you cannot reward it.

If you cannot reward success, you are probably rewarding failure.

If you cannot see success, you cannot learn from it.

If you cannot recognize failure, you cannot correct it.

If you cannot demonstrate results, you cannot win stakeholders support” is used here.


Personal Action Work


Program AgendaDay One

• Introduction of Balanced Scorecard• Cascading of HR Performance Scorecard• Strategy Map Human Resources• Identifying Department Key Performance Indicators

Day Two

• Writing SMART Key Performance Indicators• HR Performance Appraisal Form• Performance Appraisal Process (September till December

2009)


What is Performance Management?It is a communication process that enables the

employee and his/her manager to foster a partnership to improve performance throughout the

year


Purpose of Performance Managemet

• The Performance Management Process is a continous cycle that supports a cultural of excellence in service delivery and productivity.

• It enables us to link business objectives to individual objectives and focus on priorities.

• It is a major part of the on-going process of managing people and not merely the completion of forms.

• Formal process to measure performance, give feedback and document performance.

• Identify training and development needs.• Identify special talent and provide support for

advancement.


Purpose - continued

• Identify weaknesses in work processes• Recognise strengths and motivates employees• Make assessments about salary increases based on

performance• Direct work and behaviour of a unit or team towards

achieving business targets• Clarify expectations – performance and others –

between the manager and the individual

Performance DefinitionWHAT an Individual achieves

(Results/Individual Key Performance Indicators)

+HOW the Individual achieves it

(Competencies)

= PERFORMANCE


Writing SMART Key Performance Indicators


Key Performance Indicators Defined

• Key – Only a subset of all possible viewpoints, those which best reflect the state of an asset, organization or financial entity

• Performance – Metrics related to performing ones job, or adhering to a agreed standards

• Indicator – Not a closed-loop function, KPIs are to be used by people to help them take correct action


Benefits of Performance Management

• Opportunity to receive feedback on performance

• Enhanced working relationships between Manager and Employees

• Helps Employee focus on meeting needs of business

• Helps Employee grow and develop skills => training needs identified

• Employee can highlight career ambitions/aspirations

• Explore and resolve problems/differences

• Reduce Employee turnover


What makes an Objective Effective?

• SPECIFIC (both parties know exactly what needs to be

achieved)

• MEASURABLE (it will be possible to say if the number has reached 100)

• ACHIEVABLE (presumably this is within the realms of possibility from the current base)

• RESULTS-ORIENTED (targeted towards achieving the desired outcome)

• TIME-BOUND (the goal has to be achieved by end of Quarter 2)

Setting Targets - Performance Objectives


Criteria for Well–Written Objectives

• SpecificSpecific• A specific objectives is one that is understandable, clear,

concise and explicit.

For example:Recruitment of management trainees.

To be clearer, the objective can be rewritten as:

______________________________________________________________________________________________________________________________________________________________________________________________________________________________________



• SpecificSpecific• A specific objectives is one that is understandable, clear,

concise and explicit.

For example: Recruitment of management trainees.

To be clearer, the objective can be rewritten as:

Develop an action plan for the recruitment of management trainees by shortlisting and assessing the candidates within 75 days time (from date of advertisment in the newspaper.


• MeasurableMeasurable

• A measureable objective defines how it will be measured. This can be in terms of quantity, cost, timeliness, and/or quality.

Example: Deploy HRIS as the main database of employee records.

Well written objective________________________________________________________________________________________________________________________________________________________________________________________



• MeasurableMeasurable

• A measureable objective defines how it will be measured. This can be in terms of quantity, cost, timeliness, and/or quality.

Example: “Deploy HRIS as the main database of employee records“.

Well written objective

Deploy HRIS as the main database of employees’ data (personnel, history, career training and etc) been updated to current month by October 2009 according to blue print of the master document plan. (evidence: all filing of paperwork cleared / no back log & ease to access personnel data of any employee) without any error.



• AchievableAchievableAn achievable objective defines how realistic it will be achieved and not beyond your reach.

“Achieve a higher rating in Customer Satisfaction Survey“

Example: Well written objective:________________________________________________________________________________________________________________________________________________________________________________________________



• AchievableAchievableAn achievable objective defines how realistic it will be achieved and not beyond your reach.

“Achieve a higher rating in Customer Satisfaction Survey“

Example: Well written objective:

To achieve rating of 4 or higher on a 5 point in Customer Satisfaction Survey conducted by an outside agency by 31st December 2009.



• Result – Oriented

The objectives set must be able to reflect the results of the objectives.

A less SMART objective might be:

Continuous performance awareness briefing for all employees.

Example: Well written objective____________________________________________________________________________________________________________________________________________________________________________________________________



• Result – Oriented

The objectives set must be able to reflect the results of the objectives.

A less SMART objective might be:Continuous performance awareness briefing for all

employees.

Example: Well written objective

Conduct at least 3 briefing sessions by November 2009 with

a minimum of 80% results reflected in the assessment form.



Time BoundTime Bound• The results of your efforts need to be evident to the people

who provide you with feedback.• Need to be done within a certain time frame.

Example: Support team members’ development plans

Alternative way to state the objective:

_____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________



Time BoundTime Bound• The results of your efforts need to be evident to the people

who provide you with feedback.• Need to be done within a certain time frame.

Example: Support team members’ development plans

Alternative way to state the objective:

Identify and complete a specific number of staff development actions to support each team member’s development yearly plan by end of December 2009 with a minimum of 48 hours of trainings.



Performance RatingsRating 1 : Performance significantly below expectation => Not

achieved • Objectives are not met and the person is not responding to Training,

Development or Coaching. A decision on future employment is required.

Rating 2 : Opportunities for further improvement exist => Partially achieved

• Objectives are met but does not use the competencies to the required standard. Does not meet all objectives but works hard to use the competencies.

Rating 3 : A well rounded and solid performance => Fully achieved • All objectives are met and the competencies are used to the required

standard.

Rating 4 : An excellent performance => Partially exceeded • All objectives are met and some are exceeded as the competencies are

used to a high standard.

Rating 5 : An exceptional performance => Significantly exceeded • All objectives are significantly exceeded and the competencies used to a

very high standard on a regular basis. The person takes on initiates / new objectives during the year which are also met.


THANK YOU FOR YOUR PARTICIPATION

Documents

BSC Alignment & Cascading KPI