Balanced Scorecard Basics http://www.balancedscorecard.org/BSCResources/AbouttheBalanc edScorecard/tabid/55/Default.

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The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance. While the phrase balanced scorecard was coined in the early 1990s, the roots of the this type of approach are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950s and the work of French process engineers (who created the Tableau de Bord literally, a "dashboard" of performance measures) in the early part of the 20th century. The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. The new balanced scorecard transforms an organizations strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies. This new approach to strategic management was first detailed in a series of articles and books by Drs. Kaplan and Norton. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective. The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise. Kaplan and Norton describe the innovation of the balanced scorecard as follows: "The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."

Adapted from Robert S. Kaplan and David P. Norton, Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review (January-February 1996): 76.

Perspectives
The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives: The Learning & Growth Perspective This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization. Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems." The Business Process Perspective This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants.

The Customer Perspective Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups. The Financial Perspective Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives. There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

Strategy Mapping
Strategy maps are communication tools used to tell a story of how value is created for the organization. They show a logical, step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a cause-and-effect chain. Generally speaking, improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up), which in turn enables the organization to create desirable results in the Customer and Financial perspectives (the top two rows).

Balanced Scorecard Software

The balanced scorecard is not a piece of software. Unfortunately, many people believe that implementing software amounts to implementing a balanced scorecard. Once a scorecard has been developed and implemented, however, performance management software can be used to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information. The Balanced Scorecard Institute formally recommends the QuickScore Performance Information SystemTM developed by Spider Strategies and co-marketed by the Institute. More about Software >> Why Implement a Balanced Scorecard?      Increase focus on strategy and results Improve organizational performance by measuring what matters Align organization strategy with the work people do on a day-to-day basis Focus on the drivers of future performance Improve communication of the organizations Vision and Strategy

Prioritize Projects / Initiatives

balanced scorecard http://www.businessballs.com/balan ced_scorecard.htm

kaplan and norton's organizational performance management tool

In the beginning was darkness. We went to work, did our job (well or otherwise) and went home - day in and day out. We did not have to worry about targets, annual assessments, metric-driven incentives, etc. Aahh life was simple back then. Then there came light. Bosses everywhere cast envious eyes towards our transatlantic cousins whose ambition was to increase production and efficiency year-by-year. Like eager younger siblings we trailed behind them on the (sometimes) thorny path to enlightenment. Early Metric-Driven Incentives - MDIs - were (generally) focused on the financial aspects of an organization by either claiming to increase profit margins or reduce costs. They were not always successful, for instance driving down costs could sometimes be at the expense of quality, staff (lost expertise) or even losing some of your customer base. Two eminent doctors (Robert S Kaplan and David P Norton) evolved their Balanced Scorecard system from early MDIs and jointly produced their (apparently) groundbreaking book in 1996. Many other 'gurus' have jumped on the Balanced Scorecard wagon and produced a plethora of books all purporting to be the Definitive' book on Balanced Scorecards. Amazon.com shows over 4,000 books listed under Balanced Scorecards, so take your pick - and your chances!

balanced scorecard - definition

What exactly is a Balanced Scorecard? A definition often quoted is: 'A strategic planning and management system used to align business activities to the vision statement of an organization'. More cynically, and in some cases realistically, a Balanced Scorecard attempts to translate the sometimes vague, pious hopes of a company's vision/mission statement into the practicalities of managing the business better at every level.

A Balanced Scorecard approach is to take a holistic view of an organization and coordinate MDIs so that efficiencies are experienced by all departments and in a joined-up fashion. To embark on the Balanced Scorecard path an organization first must know (and understand) the following:
y y

The company's mission statement The company's strategic plan/vision

Then
y y y y

The financial status of the organization How the organization is currently structured and operating The level of expertise of their employees Customer satisfaction level

The following table indicates what areas may be looked at for improvement (the areas are not exhaustive and are often company-specific):

balanced scorecard - factors examples

Department Finance Areas Return On Investment Cash Flow Return on Capital Employed Financial Results (Quarterly/Yearly) Number of activities per function Duplicate activities across functions Process alignment (is the right process in the right department?) Process bottlenecks Process automation Is there the correct level of expertise for the job?

Internal Business Processes

Learning & Growth

Employee turnover Job satisfaction Training/Learning opportunities Customer Delivery performance to customer Quality performance for customer Customer satisfaction rate Customer percentage of market Customer retention rate

Once an organization has analysed the specific and quantifiable results of the above, they should be ready to utilise the Balanced Scorecard approach to improve the areas where they are deficient. The metrics set up also must be SMART (commonly, Specific, Measurable, Achievable, Realistic and Timely) - you cannot improve on what you can't measure! Metrics must also be aligned with the company's strategic plan. A Balanced Scorecard approach generally has four perspectives:
1. 2. 3. 4. Financial Internal business processes Learning & Growth (human focus, or learning and development) Customer

Each of the four perspectives is inter-dependent - improvement in just one area is not necessarily a recipe for success in the other areas.

balance scorecard implementation

Implementing the Balanced Scorecard system company-wide should be the key to the successful realisation of the strategic plan/vision. A Balanced Scorecard should result in:
y y y y y

Improved processes Motivated/educated employees Enhanced information systems Monitored progress Greater customer satisfaction

Increased financial usage

There are many software packages on the market that claim to support the usage of Balanced Scorecard system. For any software to work effectively it should be:
y y y

Compliant with your current technology platform Always accessible to everyone - everywhere Easy to understand/update/communicate

It is of no use to anyone if only the top management keep the objectives in their drawers/cupboards and guard them like the Holy Grail. Feedback is essential and should be ongoing and contributed to by everyone within the organization. And it should be borne in mind that Balanced Scorecards do not necessarily enable better decision-making! Here's a helpful webpage for further in-depth information on Balanced Scorecards.

http://hbswk.hbs.edu/item/4938.html

The Balanced Scorecard introduced customer metrics into performance management

systems. Scorecards feature all manner of wonderful objectives relating to the customer value proposition and customer outcome metricsfor example, market share, account share, acquisition, satisfaction, and retention. Yet amid all these measures of customer success, some companies lose sight of the ultimate objective: to make a profit from selling products and services. In their zeal to delight customers, these companies actually lose money with them. They become customer-obsessed rather than customer-focused. When the customer says "jump," they ask "how high?" They offer additional product features and services to their customers, but fail to receive prices that cover the costs for these additional features and services. How can companies avoid this situation? By adding a metric that summarizes customer profitability.

Consider the situation faced in the 1990s by one of the nation's largest distributors of medical and surgical supplies. In five years, sales had more than tripled to nearly $3 billion, yet selling, general, and administrative (SG&A) expenses, thought by many to be a fixed cost, had increased even faster than sales. Despite the tripling in sales, margins had declined by one percentage point and the company had just incurred its first loss in decades. Rather than SG&A costs being fixed or even variable, these costs had become "super-variable." The experience of this company is hardly unique. Companies often capture additional business by offering more services. The list is wide-ranging: product or service customization; small order quantities; special packaging; expedited and just-in-time delivery; substantial pre-sales support from marketing, technical, and sales resources; extra post-sales support for installation, training, warranty, and field service; and liberal payment terms. While all of these services create value and loyalty among customers, none of them come for free. For a differentiated customer intimacy strategy to succeed, the value created by the differentiationmeasured by higher margins and higher sales volumeshas to exceed the cost of creating and delivering customized features and services. Unfortunately, many companies cannot accurately decompose their aggregate marketing, distribution, technical, service, and administrative costs into the cost of serving individual customers. Either they treat all such costs as fixed-period costs and don't drive them to the customer level, or they use high-level, inaccurate methods, such as allocating a flat percentage of sales revenue to each customer to cover "below-the-line" indirect expenses.

Companies become customer-obsessed rather than customer-focused. When the customer says "jump," they ask "how high?" The remedy to this situation is to apply activity-based costing (ABC) to accurately assign an organization's indirect expenses to customers. Many companies, however, have tried ABC at some time during the past twenty years and abandoned it because it did not capture the complexity of their operations, took too long to implement, and was too expensive to build and maintain. Fortunately, a new approach is now available that is far simpler and much more powerful than traditional ABC.

"Time-driven" ABC, introduced in a recent Harvard Business Review,1 requires obtaining information on only two parameters: the cost per hour of each group of resources performing work, such as a customer support department; and the unit times spent on these resources by specific activities for products, services, and customers. For example, if a customer support department has a cost of $70 per hour, and a particular transaction for a customer takes 24 minutes (0.4 hours), the cost of this transaction for this customer is $28. The approach has been successfully applied in more than 100 organizations and readily scales up even to companies with hundreds of thousands of products and services, dozens of operating departments, and thousands of customers. The end result is the ability to measure individual customer profitability accurately and in a system that is easy to implement and inexpensive to maintain and update. The payoff: BSC customer profitability metrics The ability to measure profitability at the individual customer level allows companies to consider new customer profitability metrics such as "percentage of unprofitable customers," or "dollars lost in unprofitable customer relationships." Such customer profitability measures provide a valuable signal that satisfaction, retention, and growth in customer relationships are desirable only if these relationships contribute to higher, not lower, profits. BSC customer profitability metrics are also highly actionable. If a company finds that an important customer is unprofitable, it should first look internally to see how it can improve its internal processes to lower the cost-to-serve. After all, we can't expect customers to pay for our inefficiencies. For example, if important customers are migrating to smaller order sizes, the company can focus on reducing setup and order handling costs. The company can ask the customer to use electronic channels, such as Electronic Data Interchange (EDI) and the Internet, that greatly lower the cost of processing large quantities of small customer orders. Customized pricing policies should be at the heart of any strategy to manage customer profitability. The company can set a base price for a standard product or service, with standard packaging, delivery, and payment. The company also provides customers with a menu of options representing variations from the standard order, such as a customized product or service, special packaging, expedited delivery, or extended credit terms. Each menu item has a price that at least cover its cost, as measured by the ABC model, so the company no longer

suffers losses from offering customized services. The menu prices also motivate customers to shift their purchasing and delivery patterns in ways that lower total costs to the benefit of both the company and its customers.

Customer profitability metrics provide a link, otherwise missing, between customer success and improved financial performance. Finally, perhaps a customer is unprofitable because it is purchasing only a single service. As an alternative to raising the price for this single service, the company can encourage the customer to purchase a wider range of services, expecting that the margin from a comprehensive set of services will transform the customer into a profitable relationship. Figure 1 shows how one insurance company managed its customer relationships once it understood its full costs of serving them. It ranked customers on the horizontal axis, from most profitable to least profitable (loss). The vertical axis represents cumulative customer profitability. The shape of the curve in Figure 1 occurs in virtually every customer profitability study ever done, in which 15 percent to 20 percent of the customers generate 100 percent (or more) of the profits. In this case, the most profitable 40 percent of customers generate 130 percent of annual profits; the middle 55 percent of customers break even, and the least profitable 5 percent of customers incur losses equal to 30 percent of annual profits. With its most profitable customers, the company worked harder to ensure their continued loyalty and to generate more business from them. For customers in the middle break-even group, it would improve its processes to lower its cost of serving them. It focused most of its attention on the 5 percent-loss customers, taking actions to reprice services and asking them for more business in higher-margin product lines. If the company could not transform these customers into profitable ones by these actions, it was prepared to drop the accounts. Customer profitability metrics provide a link, otherwise missing, between customer success and improved financial performance. Many companies have experienced profitless revenue growth. Scorecard measures of the incidence of unprofitable customers and the magnitude of losses from unprofitable relationships focus the organization on managing customers for profits, not just for salesthus making the customer focus align with financial objectives.

INTRODUCTION - http://www.hsaj.org/?fullarticle=4.3.2

Starting in the early 1990s, Robert S. Kaplan and David P. Norton advocated a balanced scorecard as a top-down management system. The system would translate an organizations mission and existing business strategy into a limited number of specific strategic objectives that could be linked and measured operationally. 1 The balanced scorecard stressed the few critical drivers of future organizational performance capabilities, resources, and business processes and the results of those drivers outcomes for customers and the growth and profitability of the organization. Specific objectives were linked in cause and effect relationships derived from the strategy, measured, and communicated to the organizational members for strategy implementation. Many public, private, and not-for-profit organizations have adopted the scorecard as part of their strategic management approach. 2

This article describes and illustrates the balanced scorecard as a tool to better implement homeland security strategies. In the following sections, the article (1) introduces the balanced scorecard approach, (2) describes an extended enterprise public sector balanced scorecard that can be used by individual organizations or in partnership with other organizations, (3) advocates and illustrates a homeland security scorecard and homeland security strategy mapping, and (4) concludes with a discussion of basic ingredients for successful scorecard implementation.

THE BALANCED SCORECARD APPROACH

In their many articles and books, Kaplan and Norton advocated the balanced scorecard as a management system designed for organizations to manage their strategy. Specifically, the scorecard was a way to (1) clarify and translate vision and strategy; (2) communicate and link strategic objectives and measures; (3) plan, set targets, and align strategic initiatives; and (4) enhance strategic feedback and learning. The scorecard was primarily intended for a closed system a strategic business unit responsible for an entire value chain in producing and distributing products for defined customers. Departments and functional units within the strategic business unit would produce their own mission and strategy to support that of the strategic business unit. However, the scorecard was also useful for implementing strategy with other organizations, such as suppliers. 3

The heart of the balanced scorecard is a framework of four major categories or perspectives for strategy implementation financial, customer, internal business, and innovation and learning:

The financial perspective asks how the organization should appear to shareholders so that the company can succeed financially. This perspective indicates if the business is improving the bottom line, measuring items such as profitability and shareholder value. Financial objectives reflect economic consequences of actions already taken in the other perspectives.

The customer perspective asks how an organization should appear to customers to achieve the organizations vision. Customer objectives identify customer and market segments where the business would compete and what performance would be expected for these targeted segments. The scorecard focuses on customer concerns primarily in four categories: time, quality, performance and service, and cost.

The internal business perspective asks what business processes the organization should excel at to satisfy shareholders and customers. This perspective measures the internal business processes, core competencies, and technologies that would satisfy customer needs.

Lastly, the innovation and learning perspective asks how the organization would sustain its ability to change and improve to achieve the organizations vision. The learning and growth perspective identifies the organizations infrastructure needed to support the other perspectives objectives. This perspective measures a companys ability to innovate, improve, and learn, such as the ability to launch new products.

Kaplan and Nortons books and articles through 2004 evolved the balanced scorecard from a set of measurement techniques, to a management system, and then to an organization and change framework for what they called a strategy-focused organization. A strategy-focused organization would follow five principles: (1) translate the strategy to operational terms, (2) align the organization to the strategy, (3) make strategy everyones everyday job, (4) make strategy a continual process, and (5) mobilize change through executive leadership. In subsequent books published in 2006 and 2008, they provided additional guidance on aligning all organizational units to an enterprises strategy and establishing strong linkages from strategy to operations. They posited that strategy should come from choosing the businesss market and customer segments, critical internal business processes that delivered value to the targeted customers, and selecting individual and organizational capabilities in support. Companies could also choose strategy by exploiting their unique capabilities, resources, and core competencies.

According to Kaplan and Norton and others, 4 scorecard success relies on crafting clear cause-and-effect relationships across the four perspectives, creating a balance among the different measures of performance drivers and results, and communicating strategy and the processes and systems necessary to implement that strategy. Strategy mapping makes explicit the cause-and-effect links by which initiatives and resources tangible and intangible create outcomes at the top of the scorecard, such as financial and customer expectations for private sector organizations. Kaplan and Norton point out that simply building scorecards and bucketing initiatives and measures into the discrete balanced scorecard perspectives without understanding the linkages is invalid. The power of strategy mapping lies in systematically and logically linking across the perspectives to create value. The initiatives and resources (and related measures) must show how outcomes will be achieved through the initiatives in the individual perspectives.

Constructing strategy maps based on Kaplan and Nortons scorecard perspectives started with a clear hierarchical relationship framework. The hierarchy began with defining financial objectives, then determining the target customers and their requirements to achieve the financial outcomes. Those determinations were then followed by defining the activities in internal business processes that would create the desired customer outcomes. Then the learning and growth factors were identified to execute the internal business processes. Every measure in the cause-and-effect relationships ultimately ties to outcomes. The hierarchy and a portion of a strategy map derived from Kaplan and Nortons 2001 and 2004 work is shown in Figure 1 to illustrate more robust linkages in the cause and effect relationships.

Figure 1. Sample Strategy Map Portion

In this simplified example, organizational learning efforts such as improving customer information efforts serve as inputs to internal business processes such as understanding customer segments, leading to customer value for financial advice and subsequent financial returns. In their 2004 book, Kaplan and Norton expanded on strategy mapping for the learning and growth perspective (also called intangible assets) and internal business processes. Strategy mapping, in their view, should pay particular attention to these two perspectives and the individual categories under each as they were so important to the lagging financial and customer outcome areas. Learning and growth described the organizations intangible assets in terms of human capital such as employee skills, information capital such as information systems, and organization capital such as culture. Internal business processes included operations management, customer management, innovation, and regulatory and social constraints.

TAILORING THE PERSPECTIVES TO THE PUBLIC SECTOR

Kaplan and Norton recognized that balanced scorecards for pubic sector organizations would not necessarily mirror those of private companies. Government and nonprofit organizations would rarely place the financial perspective at the top of the hierarchy. For the public sector, the value creation process targeted public sector customers and taxpayers and fiduciary outcomes. They recommended placing financial and customer perspectives at the top in a co-equal status, both dependent on the mission of the organization. This framework is shown in Figure 2.

Figure 2. Nonprofit/Public Sector Scorecard

Kaplan and Norton defined mission as a concise, internally-focused statement of the reason for the organizations existence, the basic purpose toward which its activities are directed, and the values that guide employees activities. 5 Kaplan, in his 1999 work, noted that for a government agency, financial measures did not indicate if an agency was delivering on its mission. Placing the mission at the top of the scorecard oriented the objectives in the four perspectives toward achieving the mission. 6 He replaced the customer and financial perspectives with three areas at the same level: the direct and indirect cost of providing service, the value and benefit of service to citizens, and the support of legitimizing authorities such as the legislation and ultimately taxpayers. Internal processes and learning and growth would support all three areas and complete the hierarchy. 7

Other authors have taken a similar tack with public and nonprofit sector scorecards, but with additional variations. For example, Niven placed mission at the top of his scorecard, followed by the customer perspective. Financial and internal processes perspectives supported the customer perspective, but at an equal, horizontal level. Employee learning and growth was at the bottom of the scorecard, viewed as the central driver in meeting mission goals. 8 Rohms basic design emphasized mission as the key driver, with a customer and stakeholder (government mandates and limitations) perspective directly under mission and the financial perspective and employees and organizational capacity (employee skills and information technology) perspective at the same level, underneath the customer and stakeholder perspective. Internal business processes were at the bottom. 9

AN EXTENDED ENTERPRISE PUBLIC SECTOR BALANCED SCORECARD

These public sector scorecards speak to application to a single organization. Kaplan and Norton devoted much of their work to applications within a single company where the scorecard would cascade from the corporate level to strategic business units, then to departments and functional units, and then to employees. However, Kaplan and Norton saw the merits of using the balanced scorecard for joint ventures or strategic alliances. In their view, the scorecard could define the goals for a shared agenda and relationships, make explicit the strategic linkages integrating the performance of multiple organizations, and define how to measure the contribution and performance of each party. An alliance-balanced scorecard was seen as mitigating alliance partner conflict by bringing the partners together to clarify the alliance goals and the strategy for achieving those goals. However, what might be improved perspectives for a public sector scorecard that could, for an individual organization or for strategic alliances or a network of organizations, more fully integrate roles, responsibilities, and contributions for strategy implementation? 10 This is an important question as homeland security strategy implementation requires both individual independent effort as well as the interdependent actions of other mission delivery partners.

Drawing on the described private sector and public sector scorecards, an extended enterprise scorecard that considers independent and/or interdependent action might include five perspectives, described in Table 1. These include (1) public stewardship, (2) clientele 11 impact, (3) day-to-day processes, (4) human capital support, and (5) enabling support. For each scorecard perspective, several topics can be considered to determine objectives and then subsequent measures and initiatives for strategy mapping. For example, public stewardship would include understanding and balancing key stakeholder needs and expectations; day-to-day processes would consider the evaluation and enhancement of delivery partner capabilities. Such a scorecard could aid in designing the objectives and measures for implementing independent and shared strategy and clarify and communicate what activities and tasks are jointly linked or individually performed.

Table 1. Extended Enterprise Balanced Scorecard Perspectives

Perspective and Question Public Stewardship: To meet the legislative intent, how should we provide effective policy and resource stewardship for our stakeholders and society at large?

Topics Mission in line with legislative mandates. Key stakeholder needs and expectations understood and balanced. Needs and expectations of the society at large defined and satisfied within funding constraints. Management and program policies translated to implementation goals and actions and results communicated. Financial and investment performance constraints and compliance needs managed. Investment management in line with strong financial integrity needs.

Clientele Impact: To achieve our mission, how should we serve and impact our clientelethose who receive our products, services, funding, regulatory intervention, or guidance?

Legal, regulatory, and ethical policy requirements for clientele results. Clientele clearly defined. Clientele responsibilities in achieving results. Clientele satisfaction with program products, services, or regulatory interventions. Clientele involved in defining goals, targets, measures, and strategies within legislative or policy parameters.

Day-to-Day Processes: To meet our commitments, how should we identify, secure, and sustain employee and delivery partner (strategic alliance) commitment, knowledge, and skills?

Core processes and their value chains identified, managed, and improved internally and externally. Multiple/duplicate programs integrated for best policy results.

Perspective and Question

Topics Emphasis on comprehensive processes and interrelationships, instead of stovepiped functional tasks. Delivery partner roles and their contributions in processes identified from alliances to transactional roles.

Human Capital Support: To meet our commitments, how should we craft the right organizational alignment and technological support?

Workforce skills and competencies aligned with program goals and human resource systems. Employee skills managed for retention and any necessary development. Delivery partners empowered in program human capital decisionmaking. Delivery partner capabilities evaluated and enhanced, if necessary.

Enabling Support: To meet our commitments, how should we craft the right organizational alignment and technological support?

Organizational structure and design effective, including the impact on, and integration with, delivery partners. Organizational roles adequately clear, with a strong commitment to carrying them out. Leadership to develop and sustain an organizational climate centered on results. Access to information resources within the organization and in extended business processes. Capital assets optimized for expectations. Other adequate technological investment to support program mission goals.

The hierarchy for the extended enterprise balanced scorecard, shown in Figure 3, places public stewardship and clientele impact at the top directly under mission, with day-today processes in the middle, and the final two human capital support and enabling support as the foundation of the scorecard.

Figure 3. Extended Enterprise Balanced Scorecard Perspective

DEVELOPING THE HOMELAND SECURITY OBJECTIVES AND STRATEGY MAPPING

However, the next question is how to use these five perspectives for homeland security. What might be homeland securitys scorecard objectives, and cause and effect relationships to implement the strategy across the five perspectives, whether for a single organization or for several delivery partners? There are several sources of information available to develop the extended enterprise homeland security scorecard, including publicly published national homeland security strategies and preparedness guidelines.

NATIONAL STRATEGIES FOR HOMELAND SECURITY

The first source of information is the content of the 2002 and 2007 National Strategy for Homeland Security. 12 At present, these two national strategies provide the common language and coordinating mechanisms across all parties involved in homeland security federal (defense and civilian), state, local, public, private, nongovernmental, and international. The 2002 National Strategy included the definition of homeland security and its missions, what should be accomplished, and the most important goals, current accomplishments, and recommendations for non-federal governments, the private sector, and citizen action. The 2007 National Strategys stated purpose was to guide, organize, and unify the nations homeland security efforts, building on the earlier strategy.

Both the 2002 and 2007 national strategies defined homeland security in terms of preventing or mitigating terrorist attacks, minimizing attack damage, and recovering from attacks. The 2002 version further defined these as three overarching goals. For example, prevention included deterring potential terrorists, detecting terrorists, preventing them and their weapons from entry and eliminating the threats they pose. These goal areas were addressed through six mission areas, including domestic counterterrorism, catastrophic threat defense, and emergency preparedness and response. In addition, the 2002 strategy posed initiatives for four foundational areas law, science and technology, information sharing and systems, and international cooperation that covered all of the six mission areas. The 2007 National Strategy included the same three goals, but formally added a fourth of continuing to strengthen the foundation to ensure long-term success by creating and transforming homeland security principles, systems, structures, and institutions.

The goal areas in both national strategies included specific initiatives and related activities. For example, one 2002 national strategy major initiative for border and transportation security is to create smart borders. Activities to meet this initiative included screening and verifying the security of goods and identities of people, improving the quality of travel documents and their issuance, assisting other countries to improve their border controls, and improving administration of immigration laws. The initiatives and activities in both of the national strategies can be sources of overarching objectives that address the five perspectives and the topics described in Table 1 for an extended enterprise public sector scorecard. Table 2 presents a few examples of possible balanced scorecard national security homeland security objectives and sub-objectives.

Table 2. Homeland Security Scorecard Objectives and Sub-Objectives Examples

Public Stewardship: Effective policy and resource stewardship.

y

Invest in resources that eliminate, control, or mitigate risks according to a risk-based approach. y Institutionalize a comprehensive homeland security management system.

Clientele Impact: Serving and impacting clientele.

y

Ensure the continuity of government operations and essential functions in the event of crisis or disaster. y Secure borders against terrorists, means of terrorism, illegal drugs, and other illegal activity.

Day to Day Processes: Working internally and externally.

y

Develop and disseminate accurate, timely, actionable, and valuable information to homeland security partners and the public and resolve information gaps. y Periodically assess threats and vulnerabilities to critical infrastructure and key assets.

Human Capital Support: Securing employee and delivery partner commitment, knowledge, and skills.
y

Rebuild analytical, language, surveillance, and other human resource capabilities of those organizations involved in homeland security. y Prepare health care providers and citizens for catastrophic events.

Enabling Support: Crafting organizational alignment and technological support.

y

Harness the scientific knowledge, analytical and modeling tools, and technology to prevent and counter terrorism. y Make organizational changes to support homeland security.

Expanding this table out to define a fuller set of objectives and sub-objectives for each perspective is useful for the scorecard design phase of strategy mapping. As discussed earlier, a strategy map provides clarity regarding the relationships between and among the perspectives. Figure 4 illustrates a simplified, very high-level national homeland security strategy map.

Figure 4. Illustrative High-Level National Homeland Security Strategy Map

Figure 5 shows a more detailed strategy map for the intelligence and information sharing and dissemination component of the 2007 National Strategy information. The public stewardship, clientele impact, day-to-day processes, human capital support, and enabling support examples are specific to intelligence and warning. The strategy mapping in the figure draws on objectives and sub-objectives in pertaining to intelligence and warning. For example, day-to-day process objectives target the intelligence and warning process, from identifying data needs to partnerships with other delivery partners.

Figure 5. Intelligence and Information Sharing and Dissemination High-Level Mapping

HOMELAND SECURITY PRESIDENTIAL DIRECTIVE 8 IMPLEMENTATION

However, much more strategy map granularity is required to confirm and verify necessary and sufficient relationships in the balanced scorecard hierarchy beyond that provided by the national strategies. For example, a strategy map would describe what is needed to develop necessary and sufficient human capital capabilities in supporting the effective functioning of day-to-day processes. Perhaps more importantly, such a mapping would expose any gaps in objectives and sub-objectives in each perspective that do not have a cause-and-effect relationship from the drivers of future performance day-to-day processes, human capital support, and enabling support to the results of past performance public stewardship and clientele impact. These strategy maps would communicate specific individual or shared tasks to employees of a single organization or delivery partners to determine shared or individual efforts.

Robust tools for building out a homeland security balanced scorecard are the various policy and operational documents developed to implement Homeland Security Presidential Directive (HSPD) 8. Issued by the president in December 2003, HSPD-8 called for the secretary of the Department of Homeland Security (DHS), in coordination with other federal officials and in consultation with state and local governments, to develop a national domestic all-hazards preparedness goal. 13 The directives intent was to establish measurable readiness priorities and balance threats and consequences with resources required to prevent, respond to, and recover from them. The goal would include readiness measures, standards for preparedness assessments and strategies, and a system to assess the nations overall preparedness to respond to major events, especially terrorist acts. Responding to the HSPD-8 mandates, DHS issued the Interim National Preparedness Goal in March 2005 that established the national vision for homeland security and priorities. The Goal was to be used in concert with the planning tools of national planning scenarios and a target capabilities list. According to the Goal, capabilities-based planning would provide those capabilities needed to address riskbased target levels of capabilities. 14 , 15

In September 2007, DHS replaced the interim Goal with the National Preparedness Guidelines. The Guidelines explain that capabilities set critical tasks and specific performance standards, depending on conditions, to achieve the mission areas and are derived from all-hazards scenarios mission areas. Mission areas include prevention, protection, response, and recovery, with common mission areas of communications, community preparedness and participation, planning, risk management, and intelligence/information sharing and dissemination. 16 Further explained in an updated Target Capabilities List, capability definitions speak to outcomes as well as elements that drive of future performance. 17 For example, the capability definition for on-site incident management is the capability to effectively direct and control incident activities by using the Incident Command System (ICS) consistent with the National Incident Management System (NIMS). The outcome is that an event is managed safely, effectively and efficiently through the common framework of the Incident Command System. 18 Each capability has related tasks and measures. Capability elements, according to the Guidelines and List, define what resources are needed to perform critical tasks to the specified levels of performance. These elements include the following: 19

Personnel: Paid and volunteer staff who meet relevant qualification and certification standards necessary to perform assigned missions and tasks.

Planning: Collection and analysis of intelligence and information, and development of policies, plans, procedures, mutual aid agreements, strategies, and other publications that comply with relevant laws, regulations, and guidance necessary to perform assigned missions and tasks.

Organization and Leadership: Individual teams, an overall organizational structure, and leadership at each level in the structure that comply with relevant laws, regulations, and guidance necessary to perform assigned missions and tasks.

Equipment and Systems: Major items of equipment, supplies, facilities, and systems that comply with relevant standards necessary to perform assigned missions and tasks.

Training: Content and methods of delivery that comply with relevant training standards necessary to perform assigned missions and tasks.

Exercises, Evaluations, and Corrective Actions: Exercises, self-assessments, peerassessments, outside review, compliance monitoring, and actual major events that provide opportunities to demonstrate, evaluate, and improve the combined capability and interoperability of the other elements to perform assigned missions and tasks to standards necessary to achieve successful outcomes.

These capability elements can be seen as the drivers of future performance in the extended enterprise scorecard day-to-day processes, human capital support, and enabling support. For example, personnel and training elements provide human capital support and equipment and systems provide enabling support. An organization or group of delivery partners could take each mission area described in the Guidelines and build out a scorecard at the mission or capability level. A simplified example of such a buildout of a scorecard from the target capabilities is shown in Figure 6 for the prevent mission area capability of information gathering and recognition of indicators and warnings.

Figure 6. A Capability Level Scorecard Example

Whether national strategies or the guidelines and capabilities are used separately or in conjunction with each other, building the scorecard can quickly highlight gaps and duplication. For example, at the capability level, is the full set of tasks provided for human capital support and enabling support adequate to support the effective and efficient operation of the day-to-day processes for information gathering? By their very nature, developing goals and objectives and capabilities independent of a scorecard framework that makes explicit relationships and linkages are highly likely to have implementation difficulties.

Ingredients for Successful Implementation of a Balanced Scorecard

The above sections discuss the underlying concepts, frameworks, and other mechanics for developing a scorecard that might be useful for homeland security. These concepts and frameworks are not necessary and sufficient for successful implementation of a scorecard. Success will be dependent on pragmatic organizational factors as well. In their work, Kaplan and Norton have highlighted major organizational ingredients for a highly successful balanced scorecard program. In his 2000 work, Kaplan defined barriers in the public sector that need to be overcome if stretch performance targets are to be set and sustained through a balanced scorecard. Other authors such as Monahan, 20 Lundlin, 21 and Mathys and Thompson 22 also derived lessons learned germane to any homeland security balanced scorecard program. More recently, the Government Accountability Office described how partnerships might be enhanced in countering transnational terrorism. 23 Drawing on these sources, the organizational ingredients for success include (1) consensus on strategy and key performance expectations and requirements, (2) top leadership direction, (3) integrating the plan and related balanced scorecard into investment decisions, (4) making strategy a component of every day jobs and operations, and (5) ensuring strategy development and implementation is a continuous process.

EXPECTATIONS AND REQUIREMENTS

The first ingredient is organizational or partner consensus on the strategy and performance expectations to meet the strategy goals. Complicating the homeland security consensus process are delivery partners involving many levels of government, the private sector, nongovernmental organizations, international organizations, and multiple disciplines and functional areas. Many partners have different strategic and tactical agendas, resources, or perceptions of the extent of the problem that should be addressed and by what solutions. There are certainly differing interpretations as to what homeland security is. 24 However, agreement would be needed on the shared value of working together within and across organizations and resulting strategy and performance expectations. Defining common ground is one of the aims of the implementation of the national preparedness goal.

TOP LEADERSHIP

The second ingredient is leadership from the top, where the senior executive team directs the balanced scorecard effort, not a limited number of middle managers or inexperienced consultants. Senior executive leadership creates the climate for change and a common focus for the change activities. Leadership can align the changes and strategic initiatives with short and long-term resource allocations. For national homeland security, for example, senior executive leadership should come from the Executive Office of the President, the Homeland Security Council, and the Department of Homeland Security, with strong partnerships with state and local government and private sector national associations, as well as international actors. In turn, each organization involved in homeland security will need top leadership support and direction. This is particularly important to ensure consistency in policy and operational objectives.

INVESTMENT SUPPORT

The third ingredient is integrating the plan and related balanced scorecard into investment decisions through the budgetary process. This is in line with the growing use of performance-based budgeting at federal, state, and local levels. 25 In addition, federal homeland security grant processes and other budgeting decisions can serve to address building capabilities that are directly tied to the five perspectives of the public sector balanced scorecard. Lack of funding is a severe challenge to be overcome if strategy via the balanced scorecard is to be effectively implemented.

EVERYDAY USE

The fourth ingredient is making strategy a component of every day jobs and operations. This is accomplished by making strategy the reference point for all management processes within and across all delivery partners. These processes would include communication channels and modes across and down the organization; the alignment of organizational goals, individual incentives, and investments; work process design; and linkages across program and operational units and those of delivery partners. Public sector organizations will require incentives to take a longer-term view of their role and not take the lower hanging fruit of an operational excellence strategy. More and more public sector organizations now can provide incentive pay to employees to provide a lever to align employees to the scorecards strategic objectives and measures. Agreements reached for strategic alliances such as for homeland security will need to make strategy a component of the alliances. The balanced scorecard provides an ideal mechanism to set high-level, interagency homeland security objectives that should allow multiple organizations public and private to work together.

CONTINUOUS PROCESS

The final ingredient is to make strategy development and implementation a continuous process, not a one-time event. There should be a feedback loop that provides performance information across the perspectives for learning and adaptation. This is particularly important in the public sector as performance targets are a matter of public record. Organizations should anticipate that failing to meet the targeted performance will be very visible to the general public. For homeland security, a continual process of assessment and corrective action should be part of needs assessment, program objectives, and oversight.

CONCLUDING THOUGHTS

This article has dealt with the basics of the balanced scorecard and presented an extended enterprise scorecard that can be applied to homeland security. It has also discussed a limited number of the organizational factors important to successful implementation. The article is intended to prompt ongoing dialogues regarding applying the scorecard as a strategy implementation tool useful for a single organization and for shared efforts with homeland security delivery partners. In particular, focusing on the five extended enterprise perspectives and using the national homeland security strategies and national preparedness guidelines components for scorecard build-out should be emphasized. They can clarify independent and interdependent initiatives, relationships, and linkages for homeland security mission areas and capability development. The cause-and-effect relationships make strategy explicit to an organizations employees and to other delivery partners and provide a readilyunderstood framework for resource allocation and leveraging resources and capabilities. Lastly, the balanced scorecard makes much more transparent the process of assessing if there are gaps, duplication, or overlaps in initiatives and capabilities to implement strategy.

Future research is required to fully inform application of the balanced scorecard for homeland security strategy implementation. For example, are the five perspectives presented in the extended enterprise scorecard sufficient or are further enhancements or designs needed? Should homeland security scorecards start with national homeland security strategies or other strategy documents? What expertise and other resources are needed to develop and sustain complex homeland security strategy maps and their ongoing assessment? And, perhaps most importantly, what scorecard design and organizational factors can respond to the complexities of homeland security delivery partner relationships and responsibilities and resulting strategy agreement? These relationships include those across federal agencies, from federal to other levels of government, from state to local, and from local to local. Relationships also must be defined from national to international delivery partners.

Sharon Caudle is a faculty member at the Bush School of Government and Public Service, Texas A&M University. She currently teaches core classes in the Master of Public Service and Administration Program and in homeland security under the auspices of the Universitys Integrative Center for Homeland Security. Before joining the Bush School, she was with the U.S. Government Accountability Offices (GAO) Homeland Security and Justice Team in Washington, DC. She earned her masters and doctorate degrees in public administration from The George Washington University in Washington, DC, and a masters in homeland security and homeland defense from the Center for Homeland Security and Defense, School of International Studies, Naval Postgraduate School, in Monterey, CA. Dr. Caudle may be contacted at scaudle@bushschool.tamu.edu.

1.

R. S. Kaplan and D. P. Norton, The Balanced Scorecard Measures that Drive Performance, Harvard Business Review 70, no. 1 (1992): 71-79; R. S. Kaplan and D. P. Norton, Putting the Balanced Scorecard to Work, Harvard Business Review 71, no. 5 (1993): 134-147.

2. A. Gumbus and R. N. Lussier, Entrepreneurs Use a Balanced Scorecard to Translate Strategy into Performance Measures, Journal of Small Business Management 44, no. 3 (2006): 407425.

3. This article draws on the following Kaplan and Norton work: R. S. Kaplan, The Balanced Scorecard for Public-Sector Organizations, Balanced Scorecard Report, reprint B9911C (1999), 3-5; R. S. Kaplan, Overcoming the Barriers to Balanced Scorecard Use in the Public Sector, Balanced Scorecard Report, reprint B0011D (2000), 3-4; R. S. Kaplan and D.P. Norton, The Balanced Scorecard Measures that Drive Performance, Harvard Business Review 70, no. 1 (1992):71-79; R. S. Kaplan and D. P. Norton, Putting the Balanced Scorecard to Work, Harvard Business Review 71, no. 5 (1993), 134-147; R. S. Kaplan and D. P. Norton, The Balanced Scorecard: Translating Strategy into Action (Boston: Harvard Business School Press, 1996); R. S. Kaplan and D. P. Norton, Linking the Balanced Scorecard to Strategy, California Management Review 39, no. 1 (1996) 53-79; R. S. Kaplan and D. P. Norton, Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review 74, no. 1 (1996), 75-85; R. S. Kaplan and D. P. Norton, Having Trouble with Your Strategy? Then Map It, Harvard Business Review 76, no. 1 (1996): 167-176; R. S. Kaplan and D. P. Norton, The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Environment (Boston: Harvard Business School Press, 2001); R. S. Kaplan and D. P. Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes (Boston: Harvard Business School Press, 2004); R. S. Kaplan and D. P. Norton, Alignment: Using the Balanced Scorecard to Create Corporate Synergies (Boston: Harvard Business School Press, 2006); and R. S. Kaplan and D. P. Norton, The Execution Premium: Linking Strategy to Operations for Competitive Advantage (Boston: Harvard Business School Press, 2008).

4. N. Olve, J. Roy, and M. Wetter, A Practical Guide to Using the Balanced Scorecard (Chichester, Sussex: John Wiley & Sons, Inc, 1999).

5. Kaplan and Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes, 34.

6. Kaplan, Overcoming the Barriers to Balanced Scorecard Use in the Public Sector, Balanced Scorecard Report.

7. Kaplan, The Balanced Scorecard for Public-Sector Organizations, Balanced Scorecard Report.

8. P. R. Niven, Balanced Scorecard: Step-by-Step for Government and Nonprofit Agencies (Hoboken, NJ: John Wiley & Sons, Inc., 2003).

9. H. Rohm, A Balancing Act, Perform 2, no. 2 (2002): 1-8.

10. Strategic alliances typically combine the resources, skills, and knowledge of organizations that are viewed as full partners. A fuller discussion of strategic alliances and partnering can be found in Y. L. Doz and G. Hamel, Alliance Advantage: The Art of Creating Value Through Partnering (Boston, Harvard Business School Press, 1998). As Doz and Hamel point out, strategic alliances combine and leverage the resources, skills, core competencies, knowledge, and learning capabilities of organizations that benefit the alliance partners. Networked government is more fully described in S. Goldsmith and W. D. Eggers, Governing by Network (Washington, DC: Brookings Institution Press, 2004). Goldsmith and Eggers describe networked government as typically involving coordination between multiple levels of government, nonprofit organizations, and for-profit companies.

11. Clientele is used instead of customer as many recipients or targets of public services do not want the services in the traditional sense of customers. For example, prisoners or regulated industries often do not want government intervention.

12. Office of Homeland Security, National Strategy for Homeland Security (Washington, DC: Executive Office of the President, July 2002); Homeland Security Council, National Strategy for Homeland Security (Washington, DC: Executive Office of the President, October 2007).

13. The White House, Homeland Security Presidential Directive/HSPD-8 (Washington, DC: The White House, December 17, 2003).

14. Department of Homeland Security, Interim National Preparedness Goal (Washington, DC: Department of Homeland Security, March 31, 2005).

15. A discussion of homeland security capabilities-based planning issues can be found in S. L. Caudle, Homeland Security Capabilities-Based Planning: Lessons from the Defense Community, Homeland Security Affairs I, no. 2 (Winter 2005), www.hsaj.org.

16. Department of Homeland Security, National Preparedness Guidelines (Washington, DC: Department of Homeland Security, September 2007).

17. Department of Homeland Security, Target Capabilities List: A Companion to the National Preparedness Guideline. (Washington, DC: Department of Homeland Security, September 2007).

18. Department of Homeland Security, National Preparedness Guidelines, p. 5 and Target Capabilities List: A Companion to the National Preparedness Guidelines, p. 197.

19. Department of Homeland Security, Target Capabilities List: A Companion to the National Preparedness Guidelines, p. 9.

20. K. E. Monahan, Balanced Measures for Strategic Planning (Vienna, VA: Management Concepts, 2001).

21. M. Lundlin, When Does Cooperation Improve Public Policy Implementation, The Policy Studies Journal 35, no. 4 (2007).

22. N. J. Mathys and K. R. Thompson, Using the Balanced Scorecard: Lessons Learned from the U.S. Postal Service and the Defense Finance and Accounting Service (Washington, DC: IBM Center for The Business of Government, 2006).

23. Government Accountability Office, Highlights of a Forum: Enhancing U.S. Partnerships in Countering Transnational Terrorism, (Washington, DC: The Government Accountability Office, GAO-08-887SP, July 2008).

24. An excellent discussion of the various definitions of homeland security can be found in C. Bellavita, Changing Homeland Security: What Is Homeland Security, Homeland Security Affairs IV, no. 3 (June 2008), www.hsaj.org.

25. There are many excellent literatures sources on the spread of performance-based budgeting nationally and internationally. More comprehensive sources are P. G. Joyces, Linking Performance and Budgeting: Opportunities in the Federal Budget Process (Washington, DC: IBM Center for The Business of Government, 2004) and the Organisation for Economic CoOperation and Development, Performance Budgeting in OECD Countries (Paris: Organisation for Economic Co-Operation and Development, 2007).