Wednesday, 8 February 2012

Management Reporting - Defining Measures that Matter ... A Balanced Scorecard

Reporting the performance of a function or department to senior stakeholders is an opportunity to highlight the value or contribution made.  The challenges lie in how to:

  • Get away from issuing a monthly 'database' that collates every input and output in detail
  • Provide just a handful (or two) of measures that really indicate the overall health of the function
  • Report measures that reinforce the value of the function to the organisation, not just what it costs to operate.


Keeping the needs or the audience or recipients in mind at all times, consider how they may be helped to:

  • 'See at a glance' how things are doing, helping them prioritise their time to focus on exceptions
  • Understand how the function or department contributes value to the organisation.

An approach that borrows from the balanced scorecard method can help to identify measures of real interest to the target audience.  There are four steps:

  1. Shaping
  2. Objectives
  3. Measures
  4. Targets.

1. Shaping

Reflect on the purpose of the function - what does it contribute, what are its priorities?

What does success look like, what objectives really matter? 

What are the interests of the target audience, over and above cost control, for instance?

What are the four or so Perspectives that reflect what is important?

Typically the Perspectives will include:

  • Customer Requirements or Satisfaction
  • Internal Processes
  • Employee Learning and Skills; Innovation
  • Financial Performance

Additional Perspectives may be included, for instance where a Change Programme is under way a 'Realisation of Benefits' Perspective might be included.

image2. Objectives

In this context think of objectives as being the ongoing purpose or value to be delivered, rather than that maybe used for an annual appraisal.

Taking the context provided by 'Shaping', for each Perspective identify one or two objectives.

Identify objectives that focus on the purpose, success and interests of the target audience.

The objectives should be indicators of the health of the function as seen from the perspective of the target audience, i.e. what your CEO believes is important.

What Outcomes do these Objectives suggest (don't measure the inputs and outputs - measure the Outcomes)?

3. Measures

For each Objective, identify a Measure.

Measures should be numbers - quantitative - where possible.

Think laterally - monitoring the status of a given area might involve, for instance, measuring the status of a basket of items (a bit like the FTSE share index).

For an area where compliance or audit is critical, it might be really useful to report 'the time since last review, inspection or audit' rather than to just keep reporting 'audited'.

Aim for less than 10 Measures ... certainty no more than 20 or you are back to providing a 'database' again.

image 4. Targets

Assign Targets to the Measures against which you can report achievement or otherwise.

Identify the values you will use for the RAG (Red, Amber, Green) status of each Measure based on achievement of the Target.

Where you may be uncertain as to a sensible Target, only begin using Targets where you have experience of performance with the Measures for some time.

Alternatively, set a reasonable Target to begin with and adjust this over time in the light of experience.



Mind maps are available that summarise the approach and that may also be used as a template or checklist. 

At Biggerplate there is a MindGenius map and a MindManager map

The MindManager map is also available at MapsforThat.



Some of the images used in this post were created using MindGenius.  If you would like to know more about MindGenius, do visit the web site and try the product free for 30 days.

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