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Chapter 2: Creating A Strategic Scorecard

After completing this lesson, you will be able to: Use the strategic scorecard Check List to assist in the setup of a strategy. Define objectives for a strategic scorecard. Define the workflow for the strategy. Modify icon appearance. Add pop-up information to the icons of the scorecard for all periods to communicate strategy. Modify the display options of the strategic scorecard by changing colors, backgrounds, label names and other aesthetics.

Creating A Strategic Scorecard

Strategy summary steps:

What Strategy to Create


The strategies being developed for an organization and the actual display of the strategic scorecard can vary dramatically depending on what the overall strategy is. An organization may want to view their four perspectives, a cause an effect relationship diagram, an organizational chart, strategic value chains, process maps, etc. The strategies that you will be creating will just be a couple of these, since the actual creation depends on the organizational needs. You will first create a four perspective strategy and then create a cause and effect relationship diagram in the chapter exercise which will display your core customer perspective measures.

Case Study Background


In this relatively simple example, you will create a four perspective strategic scorecard for the Outback Warehouse/Service Center. At this location, two primary functions are performed: parts are kept in inventory and service calls are received from customers regarding the products being housed. At another location the financials are managed, you will add this to the strategic scorecard now, even though the actual data will be captured later. The last perspective is Learning and Growth, which the organization is currently unsure what Key Performance Indicators (KPIs) are to be monitored, but again you can include it in your perspective diagram. The Outback Warehouse/Service Center is currently monitoring four Key Performance Indicators (KPIs) for the organization % of Purchasing done on FPA(Forward Purchase Agreement), Inventory Value, % Resolved First Call, Issues Outstanding at EOM. The alignment of these four KPIs into their respective perspectives has been decided: % of Purchasing done on FPA and Inventory Value are internal measures, so they will be placed in the Internal Business Process perspective. % Resolved First Call and Issues Outstanding at EOM effect customer relations, so they will be placed into the Customer perspective. When evaluating the performance of the Inventory Area, two key indicators are reviewed: 1. % of Purchasing done on FPA (Forward Purchase Agreement) The companys goal is to purchase at least 15% of products based on pre-negotiated contracts with suppliers, called FPAs. The remainder of the purchases are negotiated on a case-by-case basis. 2. Inventory Value The company hopes to hold as few dollars in inventory as possible. The inventory value per month should never be greater than $15,000. Each of these measures is equally important to good performance in the Inventory area. When evaluating the Customer Service Area, two key indicators are reviewed:

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1. % Issues Resolved on 1st Call a well-trained customer service representative should be able to resolve most of the calls on the first contact with the customer. 2. Issues Outstanding at EOM periodically a customer will ask a question that requires some research and follow-up. To make sure that customer questions are being resolved, the company reviews the number of outstanding issues at the end of each period. There should never be more than 20 calls outstanding at the end of the month. Because the number of issues outstanding at the EOM could be dependent on when the call came in, or the particular nature of the calls that month, the first measure (% Resolved on 1st Call) is more important to the performance of the Customer Service area. The Customer Service manager has given an 80% weighting to the 1st KPI and only a 20% weighting to Issues Outstanding at EOM. Currently, this company is not particularly customer-oriented. In fact, Louise, the manager of the location has determined that the inventory performance is twice as important as the performance in customer service (!!) This information will be reviewed again later!

Creating a New Scorecard


When creating a strategic scorecard, a Check List pane will display showing the various steps involved in creating the scorecard. You can use this as a road map to guide you through the building process. The Check List will momentarily flash the next required step in red. Completed steps are shown with a check next to them. Incomplete steps are shown with an X next to them. Not all of the items in the check list have to be completed at the same time, since it is a progressive roadmap of completed items during the building process of a scorecard. The first step in creating a Strategic Scorecard is setting up the scorecard type and defining the periodicity that you will be using from the data for the inputs. This can always be decided later incase this is not known at the time during the strategic development. Complete the following steps to create a new scorecard: 1. Select the Balanced Scorecard icon from the CorVu Main Menu.

2. Select the Create New Scorecard icon from the toolbar.

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Creating A Strategic Scorecard

Strategy summary steps:

In your scorecard, all the information being reviewed is by period. Although there may be detail within the period, the scorecard will normalize scores from data that is summarized by period. When specifying that data should be summarized by period, the default is to Use Calendar (CorVu calendar) and to display Standard for the Date Format. The data files in this example have two dates in them: YYYYMM format and an actual full Standard date format. To facilitate summarizing scores across time periods, you will select the Standard date format. 3. Click the Date Format drop down box and select the Standard date format. 4. Click the Date Frequency drop down box and select Calendar Month.

5.

Click OK to continue.

Creating the Strategy


In this section you will build your strategy and add the objectives to your Strategic Scorecard. You will be building a four perspective strategic scorecard that will consist of the Financial, Customer, Internal Processes, and Learning & Growth objectives. Complete the following steps to create a strategy: 1. Right-mouse click in the scorecard pane and select Show Pane. Select the option to show the Strategy pane. The new strategy pane is displayed above the input pane. 2. Right-mouse click in the strategy pane. 3. Select Create Strategy.

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Creating A Strategic Scorecard

4. Right-mouse click on the strategy icon and select Rename Strategy. 5. Type in Four Perspectives for the new strategy name and click OK.

Since you will not be adding Inputs and Results to the strategic scorecard we will hide these panes.

Strategy Pane

Input Pane

Result Pane

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Creating A Strategic Scorecard

Strategy summary steps:

Complete the following steps to hide the Input Pane and Result Pane: 1. Right-mouse click in the Input Pane and select Hide Pane. 2. Right-mouse click in the Result Pane and select Hide Pane. Your scorecard should look similar to the one shown below:

Note: To identify which panes have been hidden, right-mouse click anywhere in the scorecard and select the option to show pane. The Input Pane and the Result Pane are listed since they were hidden. Now you are ready to add the objectives to the strategy. Complete the following steps to add objectives to the strategy. 1. Double-click on the Four Perspectives strategy in the strategy pane. This will update the check list to contain strategy information and allow you to start the development of your strategy.

2. Right-mouse click in the Design Pane/Scorecard Pane. 3. Select Add Objective. 4. Type in Internal Processes as the new objective name and select OK.
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5. Repeat steps 2-4 to create the other three objectives and rename them Customer, Financial, and Learning and Growth. The Design/Scorecard Pane should now look similar to the one shown below:

All of the objectives have all been added to the strategic scorecard. The next step in the check list is to Link Objectives.

Designing the Strategic Scorecard


You are now ready to connect the objectives to each other. The workflow between your objectives will determine how you link your objectives together. To make the work flow more apparent in the scorecard you will first change the appearance of the strategic links to display with arrowheads. Complete the following steps to change the link type between the strategic objectives: 1. Right-mouse click in the Scorecard/Design Pane. 2. Select Options. 3. Select the Strategy Links tab. 4. Change the appearance from Standard to Arrow Head. 5. Click OK to continue. Note: You will not see your strategy link appearance change until you add links to your scorecard.

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Strategy summary steps:

Complete the following steps to setup the workflow between your objectives. 1. Re-arrange the objective icons by left-mouse clicking on the objective and dragging it to the correct location in the Design/Scorecard Pane. Note: Do not drop one objective icon on top of another objective icon, since you are only moving the icons to the correct location for the process flow and not linking your objectives. After moving your icons your scorecard should look similar to the one below:

Now that the objectives are in the correct location you can create the links between the objectives. First you will need to determine what the workflow is between your objectives. Once the workflow is determined you can make the links by dragging and dropping an objective icon onto the appropriate icon. The linking between objectives depends on where you drop one icon on top of another icon. For example: If you drag and drop an icon to the left side of another icon, the link will be drawn from left side of the icon to the other icon. 2. Left mouse click on the Customer objective and drag it on bottom of the Financial icon.

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Your scorecard should look like the one below:

Dragging and dropping the Customer icon to the bottom of the Financial icon is setting up the map flow, indicates that the Customer perspective effects the Financial perspective. Complete the following steps to set up the appropriate links between objectives. 2. Left-mouse click on the Internal Process icon. Drag and drop the icon on to the bottom of the Financial icon. 3. Left-mouse click on the Learning and Growth icon. Drag and drop the icon on the bottom of the Customer icon. 4. Left-mouse click on the Learning and Growth icon. Drag and drop the icon on the bottom of the Internal Process icon.

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Strategy summary steps:

Your scorecard should look similar to the one below:

Complete the following steps to save the scorecard so far: 1. Click the Save Scorecard button on the Scorecard toolbar. 2. Type Service Center as the name of the scorecard and click on the Save button.

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Enhancing the Strategic Scorecard


Enhancements that will be added to the strategic scorecard depend on the layout of the strategy. Commentary should be applied to the scorecard that defines the mission/strategy of the scorecard, or other information that would make the strategy clear for the scorecard user. Background color, icon type, link type and other enhancements that aesthetically enhance your strategy will also be included.

Scorecard Commentary
The CorVu scorecard has five different types of commentary that can be added. Pop-up commentary (communicating the mission and strategy) Sticky-note commentary (miscellaneous comments) Commentary Pane commentary (gathering feedback and detailed comments) Global-note commentary (note of high importance or design assistance) Initiative commentary (communicating the initiatives behind strategic objectives) A couple of these commentary types will be addressed in this chapter and the remaining will be mentioned in the Creating a Tactical Scorecard chapter. The ability to add commentary is critical to the communication and feedback component of any successful balanced scorecard. The pop-up or mouse-over and the global note commentary allow the scorecard designer to communicate the strategy and vision behind each element of the scorecard. These comments are consistent over time and thus appear for every time period. The separate commentary pane is designed to allow scorecard users and scorecard owners to provide feedback and explanations regarding performance results. This feedback is associated with a particular measurement period.

Pop-Up Commentary
(Communicating Strategy, Vision, and Initiative) Pop-up or mouse-over commentary is designed to communicate the strategy, vision, and initiatives of the organization. Typical information included might be: 1) why the measure or objective was included, 2) why the objective has been added, 3) how the measures are inter-related, 4) who is accountable for each measure, 5) formulas or calculations used for each measure, 6) performance targets for each measure.

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Strategy summary steps:

Complete the following steps to add pop-up commentary to the Financial Objective: 1. Right-mouse click on the Financial objective in the Design/Scorecard Pane. 2. Select Edit Objective Text from the right-mouse click menu. 3. Type in the objective commentary to for this icon and select OK to continue: To obtain a high profit margin, increase return on investment, and maximize revenue productivity. Position the mouse pointer over the Financial objective to view the pop-up information in the strategic scorecard:

Note: Text entered in the Objectives box without and [ENTER] strokes will be displayed in one long line. If the information extends beyond one screen width, only the end of the message will be shown. Tip Pop-up information is retained as you view the scorecard for alternate periods. The second type of pop-up commentary is Initiative commentary. In Initiative commentary you may want to include information on how the organization is going to achieve the strategic objectives. Complete the following steps to add initiative commentary to the Customer objective: 1. Right-mouse click on the Customer objective icon. 2. Select Edit Initiative.

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3. Type in the following Initiative commentary and then select OK to continue: Monitor % Resolved 1st Call and Issues Outstanding at EOM to find if there is an issue with the department tech reps. You can view the initiative commentary by positioning the mouse pointer over the thunderbolt that is displayed on the Customer objective icon.

Note: Text entered in the Initiative box without and [ENTER] strokes will be displayed in one long line. If the information extends beyond one screen width, only the end of the message will be shown. Tip The Initiative Pop-up information is retained as you view the scorecard for alternate periods.

Adding Global-Commentary
Global-Commentary is used to display a note for every period. The global comment should contain very important information that is not time sensitive and can be useful to display titles, vision, mission, strategic themes, perspectives, separators or any annotation. Complete the following steps to add a Global-Note to the scorecard. 1. Right-mouse click in the Design/Scorecard Pane. 2. Select the option Add Global Note Here. 3. Type the content of the note to be viewed: Four Perspective Strategy. 4. Click OK to continue.

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Strategy summary steps:

A global note has been added to the strategic scorecard. This note can be formatted to have the desired appearance for the scorecard. Formatting the Global-Note 1. Left-mouse click on the global-note, drag and drop it to the top center of the scorecard. 2. Right-mouse click on the global-note and select Edit Icon. 3. De-select the Draw Background option. 4. Select the Description Font icon. 5. Change the Font to Times New Roman, Font Style Bold, and Size 16. 6. Select the Fixed X and Fixed Y option. 7. Change the Bevel to 0 and click on OK to continue. Your Scorecard should look similar to the one below:

The global-note has been added and modified in the scorecard, which notes the strategic theme. This note will be useful if you choose to hide the strategy pane after you are finished creating the strategic scorecard. Tip By selecting the Fixed X and Fixed Y options in the icon tab of the scorecard panel options, will enable you to resize the global-note icon by using the mouse. Tip Changing the Bevel to 0, will eliminate the border that appears around the global-note.

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Modifying the Background of the Strategy Elements


You can modify each pane of the scorecard to have a different background. The following list of background options is available: Solid Color Bitmap Tiled Bitmap Bitmap Once Linear Fade or Radial Fade Complete the following steps to modify the background of the Strategy, and Design/Scorecard panes to display tiled bitmaps. 1. Right-mouse click in the Strategy pane. 2. Select Options. 3. Select the Panels tab. 4. Select the Tiled radio button. 5. Select the Bitmap icon. 6. Select the bitmap named backgrnd.bmp and select Open. 7. Click OK to close the options window and see the modified background. 8. Modify the background panel of the Scorecard/Design pane by repeating steps 1-7 and tile the bitmap called staff1.bmp. The Strategy pane panel option dialog box should look similar to the one shown below:

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Strategy summary steps:

9. Save your scorecard by using the save button on the tool bar.

Modifying Icon Color and Appearance


The default color for a strategy or objective icon is a deep blue and the icon appearance is standard (rectangle). You can modify the default color and appearance by setting the Icon options. Complete the following steps to modify the color of the strategy icon(s) in the strategy pane: 1. Right-mouse click in the strategy pane. 2. Select Options. 3. Select the Icons tab. 4. Select the Default Color color button. 5. Select a color for your icons from the color panel and click OK to continue. Complete the following steps to modify the appearance of the strategy icon(s) in the strategy pane: 1. Right-mouse click in the Design/Scorecard pane. 2. Select Options. 3. Select the Icons tab. 4. Select the Icon Appearance of Bubble. 5. Select the Icon Size of Fixed Y. 6. Change the Y Size to 50.
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7. Select the Edge Styles of Use Fade and Gray Color, and click OK to continue. 8. Save your scorecard by selecting the save icon on the toolbar.

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Strategy summary steps:

1. The colors are now updated for your strategic scorecard. Your scorecard should look similar to the one below:

Tip The color of the icons in the Design/Scorecard Pane can be color coded to reflect threshold levels. The threshold levels can be assigned by changing the color coding option in the Options/Strategic Design Options. Then in the Icons panel of the Scorecard Pane Options the icon background color can be changed to coded. Tip Each icon can be changed individually by right-mouse clicking on the icon and then choose edit icon to change the icon instead of right-mouse clicking in the background. Note: At time of printing the Edge Styles of Use Fade and Gray Color options both need to be selected to display a gray edge style.

Quick Review: Creating a Strategic Scorecard


Select the Create New Scorecard icon from the toolbar or the File/New menu option. Right-mouse click in the scorecard pane and select Show Pane. Choose the Strategy Pane option. Right-mouse click in the strategy pane and select Create Strategy. Change the name on the strategy by right-mouse clicking on the strategy and select Rename Strategy. Double-click on the strategy to update the to update the check list and the scorecard pane.

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Right-mouse click in the scorecard pane and select Add Objective from the speed menu option. Continue this until all the objectives are added. Move your objectives to the correct location by drag and dropping them. Change the link type to arrowhead by right mouse clicking in the scorecard pane and select Options. Select the Strategy Links tab and change the Appearance to Arrow Head. Link the objectives by dragging and dropping one objective on-top another. Update the Icon Appearance by right-mouse clicking in the scorecard pane and selecting Options from the speed menu. Select the Icons tab and make the appropriate changes.

CONGRATULATIONS! You have completed this lesson on creating and enhancing a strategic scorecard by designing a scorecard, adding commentary and changing the aesthetics. Please continue to the exercises that follow to reinforce the concepts you just learned. In the next chapter you will learn about creating tactical scorecards that will later be the attached to the strategic scorecard.

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Chapter 2 Exercise
After rave reviews from the executives, they have asked you to create a cause and effect relationship diagram for the organizations customer perspective. The executives have already determined the objectives to be used and the work flow of the data. They have provided you with the information below. When evaluating a customer perspective cause and effect diagram the following objectives need to be considered: Market Share This objective will be needed so the warehouse/service center can add the total market share data which is obtained from industry groups, trade associations, government statistics, and other public sources that provide the size of the service centers market share. Customer Acquisition This objective will be used to track the amount of new business units/customers the service center attracts or wins. Customer Profitability This objective will display the net profit of the customers after expenses are deducted. Customer Retention This objective will display the rate at which the service center retains or maintains customer relationships. Customer Satisfaction Once the customer satisfaction surveys are retrieved from customers/businesses the information will be logged and be used for this measure. All of the data used for the customer cause and effect diagram is available from the warehouse/service center but only the setup of the process is currently required. To summarize the process flow the executives provide you with the following diagram:

The cause and effect workflow is from Customer Acquisition and Customer Retention to Market Share, from Customer Retention to Customer Profitability, Customer Acquisition to Customer Profitability, from Customer Satisfaction to Customer Acquisition, to
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Customer Profitability and to Customer Retention. Summary steps are listed on the next page if you need to refer to them for assistance.

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Strategy summary steps:

Strategy summary steps:


1. Create a new strategy. 2. Add the Market Share, Customer Acquisition, Customer Profitability, Customer Retention, and Customer Satisfaction objectives. 3. Change the link type to arrow instead of standard. 4. Create the links between the objectives: Drag and drop Customer Acquisition on to the side of Market Share. Drag and drop Customer Acquisition on to the side of Customer Profitability. Drag and drop Customer Retention on to the side of Market Share. Drag and drop Customer Retention on to the side of Customer Profitability. Drag and drop Customer Satisfaction on to the bottom of Customer Acquisition. Drag and drop Customer Satisfaction on to the bottom of Customer Profitability. Drag and drop Customer Satisfaction on to the bottom of Customer Retention.

5. Change the appearance of the objective icons to bubble and change the style to use the fade and gray color. 6. Add a global note that contains the text Customer Core Measurement Group. 7. Edit the global note icon and make the following changes. Deselect the Draw Background option. Select the Icon Size of Fixed X and Fixed Y options. Change the Bevel to 0. Change the Description font to Times New Roman, Bold, and 16 point size. Resize the global note by left-mouse clicking on its edges and drag to size.

8. Save your scorecard as Customer Core Measurement Group.pmm.

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Creating A Strategic Scorecard

Your scorecard should look similar to the one shown below:

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