The Balanced Scorecard: A Framework for Accountability

Presenters:Presenters:

Maureen Pettitt, Skagit Valley College, WAMaureen Pettitt, Skagit Valley College, WA

Doug Whittaker, Washington State Board for Doug Whittaker, Washington State Board for Community and Technical CollegesCommunity and Technical Colleges

““Colleges and universities are moving into a Colleges and universities are moving into a period when they will be expected to period when they will be expected to provide not only data on the attainment of provide not only data on the attainment of defined outcomes…but also evidence that defined outcomes…but also evidence that results have been attained at a reasonable results have been attained at a reasonable cost. [They] will have to specify their aims, cost. [They] will have to specify their aims, stand ready to justify activities, demonstrate stand ready to justify activities, demonstrate their contribution to objectives, and defend their contribution to objectives, and defend the cost of the enterprise.”the cost of the enterprise.”

Berdahl & O’Connell (1999). American Higher Education in the Twenty-First Century.

External Accountability Accountability performance indicators are Accountability performance indicators are

developed for external audiences with developed for external audiences with limited areas of interest, resulting in limited areas of interest, resulting in measures that are “incomplete and one-measures that are “incomplete and one-dimensional views of performance.”dimensional views of performance.”

Desired improvements are unlikely to occur Desired improvements are unlikely to occur “until performance measures are linked to “until performance measures are linked to the drivers of institutional effectiveness in a the drivers of institutional effectiveness in a meaningful way.”meaningful way.”

State Performance Measures

Performance Measures Number of StatesGraduation rates 32Transfer rates 25Faculty workload/productivity 24Follow-up satisfaction studies 23External/sponsored research funds 23Remediation activities/effectiveness 21Pass rates 21Degrees awarded 20Placement data on graduates 19Admission stds & measures 18Total student credit hours 18Number & % of accredited programs 13

http://www.acct.org/policy/Accountability_Report.htm

Internal Assessment

To be useful internally, performance To be useful internally, performance indicators must be tied to institutional indicators must be tied to institutional values, goals, and objectives…values, goals, and objectives…

……and the objectives must be translated and the objectives must be translated into into specific research problemsspecific research problems that can that can be studied...and around which be studied...and around which strategies for improvementstrategies for improvement can be can be developed.developed.

Balanced Scorecard

After publishing After publishing several well-several well-received articles received articles in in HBRHBR, Harvard , Harvard professors Robert professors Robert Kaplan and David Kaplan and David Norton released Norton released their book in 1996their book in 1996

Definition

The Balanced Scorecard is a The Balanced Scorecard is a multidimensional framework that multidimensional framework that provides an ‘enterprise’ view of the provides an ‘enterprise’ view of the organization’s overall performance organization’s overall performance by integrating financial measures by integrating financial measures with other key performance with other key performance indicators.indicators.

“ “Think of the balanced Think of the balanced scorecard as the scorecard as the dials and indicators in dials and indicators in an airplane cockpit. an airplane cockpit.

For the complex task For the complex task of navigating and of navigating and flying an airplane, flying an airplane, pilots need detailed pilots need detailed information about information about many aspects of the many aspects of the flight...flight...

They need information about fuel, airspeed, altitude, They need information about fuel, airspeed, altitude, bearing, destination and other indicators that bearing, destination and other indicators that summarize the current and predicated environment. summarize the current and predicated environment. Reliance on one instrument can be fatal. Reliance on one instrument can be fatal.

Similarly, the complexity of managing an organization Similarly, the complexity of managing an organization today requires that managers be able to view today requires that managers be able to view performance in several areas simultaneously.”performance in several areas simultaneously.”

Kaplan and Norton, 1992

Balancing Perspectives

Too often bad strategic decisions are Too often bad strategic decisions are made in an effort to increase the made in an effort to increase the “bottom line” at the expense of other “bottom line” at the expense of other institutional goals. The BSC suggests institutional goals. The BSC suggests that financial performance should not be that financial performance should not be viewed as the viewed as the focusfocus, but as the natural , but as the natural outcomeoutcome of balancing other important of balancing other important goals.goals.

Four Strategic Issues

Customer Customer Internal business Internal business

process process FinancialFinancial Innovation and Innovation and

learninglearning

Customer Perspective

– responsiveness, responsiveness, timelinesstimeliness

– product/service product/service quality and costquality and cost

– meet client needsmeet client needs

““How do How do customers customers see us?”see us?”

Internal Business Process Perspective

““At what must At what must we excel?”we excel?”

– accurate and timely accurate and timely delivery of servicesdelivery of services

– effective systems effective systems and processesand processes

– environmental environmental sustainabilitysustainability

Financial Perspective

– budgetsbudgets

– revenuerevenue

– capital capital expendituresexpenditures

– debt to asset debt to asset ratioratio

““How do we look How do we look to our key to our key stakeholders?”stakeholders?”

Innovation and Learning Perspective

““Can we Can we continue to continue to improve and improve and create value?”create value?”

– employee skills and employee skills and trainingtraining

– use of technologyuse of technology– encouragement of encouragement of

innovationinnovation– continuous continuous

improvementimprovement

Ultimate Balancing Act

The ultimate balancing The ultimate balancing act in any organization is act in any organization is the one whereby the the one whereby the needs and requirements needs and requirements of multiple stakeholders of multiple stakeholders are reconciled and are reconciled and integrated.integrated.

Financial PerspectiveGoals Measures

Customer PerspectiveGoals Measures

Internal BusinessPerspective

Goals Measures

Innovation andLearning Perspective

Goals Measures

Vision

Examples

Ohio State UniversityOhio State University USC Rossier School of EducationUSC Rossier School of Education

Southwest UniversitySouthwest University Pacific Northwest CollegePacific Northwest College

Exercises

Strategic Planning

An effective scorecard will identify a set An effective scorecard will identify a set of strategic questions, objectives, and of strategic questions, objectives, and measures that address the issue of measures that address the issue of adding valueadding value--and doing so at a rate --and doing so at a rate that is better than the competition. This that is better than the competition. This is the essence of strategy.is the essence of strategy.

Strategic Planning (con’t)

A balanced set of A balanced set of indicators can indicators can systematically systematically stimulate better stimulate better understandings and understandings and deeper insights that deeper insights that can form the basis can form the basis for strategy.for strategy.

Four Key Processes

Translating the vision

Communicating and linking

Business planning

Feedback and learning

Four Key Processes

Translating the visionTranslating the vision helps managers helps managers build a consensus around the build a consensus around the institution’s strategy and express it in institution’s strategy and express it in terms that guide actionterms that guide action

Communicating and linkingCommunicating and linking lets lets managers communicate their strategy managers communicate their strategy institution-wide, and link it to unit and institution-wide, and link it to unit and individual goalsindividual goals

Four Key Processes (con’t)

Business planningBusiness planning enables the enables the institution to integrate its business and institution to integrate its business and financial plansfinancial plans

Feedback and learningFeedback and learning give institutions give institutions the capacity for strategic learning, which the capacity for strategic learning, which consists of gathering feedback, testing consists of gathering feedback, testing the hypotheses on which strategy was the hypotheses on which strategy was based, and making adjustmentsbased, and making adjustments