Thursday Oct 03, 2013

Practical Uses of Business Scorecards, from Company-Wide to Process Specific

Scorecards for business have been around for many years, but implementing them successfully and extracting big benefits from them is still elusive for many organizations. Recently, Greg Rippstein, Senior Director of Product Management for Oracle Business Intelligence Applications, gave me some insight on practical approaches to business scorecards during a podcast interview.

With all the scorecard consultants and scorecard vendors that exist today, why are so many companies still having such mixed results with their implementations?  Greg shared his opinion on this question saying,  “When it comes to Scorecarding, I think companies tend to focus on the theoretical and not the practical. They read books like “The Balanced Scorecard” by Kaplan and Norton and then try to implement the exact framework.”  Greg explained that one single approach simply will not work for ALL organizations everywhere – especially given the diverse nature of them all. He felt that organizations need to focus on pain points and organize their scorecards around KPIs that measure the pain so they can set achievable targets to reduce the pain. He further explained that it’s not that the Balanced Scorecard approach is a bad approach, it’s just an approach that most companies need to evolve into or strive towards rather than begin with.

His advice was to start off small and grow your knowledge.  Create “practical scorecards” that help a department or process in your company improve and show success. “Success breeds success, so when you show the organization that one area is experiencing success, the other areas will pay attention,” Greg said. Others will seek out the knowledge that was gained and then use that to duplicate their own success.

Some of the “practical scorecards” that Greg has seen implemented include:

+ Company-wide scorecards – These are scorecards that incorporate all the major functions of a company and are driven by the corporate strategy
+ Industry scorecards – These usually focus on KPIs that are industry specific (like Healthcare, Consumer Goods, or Retail) and typically incorporate industry benchmarks like hospital bed turnover or store sales per square foot (for a retailer).
+ Functional Scorecards – These are scorecards that focus on a specific business function or department within a company such as purchasing or shipping.
+ Process Scorecards – These are focused on critical processes within a company, like production in a manufacturing facility or, more broadly, a company’s supply chain.

Greg gave the podcast audience a good example of a process scorecard – in this case, a supply chain scorecard.  A  supply chain process might include a company ordering parts from a supplier, the supplier shipping the parts, the customer receiving the parts, consuming and selling the parts, and in some cases returning the parts.  This process is also sometimes referred to as “Source, Make, Deliver and Return.”  An industry standard representation of a supply chain model called SCOR (supply chain operations reference model) has been established by the Supply Chain Council. The SCOR model includes a series of KPIs that make up a supply chain scorecard. The KPIs are grouped into five major groups: Reliability, Responsiveness, Flexibility, Costs and Management. Reliability, for example, contains the KPI “Perfect Order Fulfillment,” which measures the percentage of time that a customer’s order can be delivered with no changes, no backlog, and no returns, while Responsiveness uses “Order Fulfillment Cycle Time” to measure how quickly the supply chain can deliver the goods. 

A company would set up a supply chain scorecard with these KPIs and set targets against each. The targets might be internally set or based on industry benchmarks. The entire scorecard allows the company to monitor and improve key aspects of their supply chain.

Finally, Greg talked about the need for good software to make it all work. Greg told our audience that Oracle Scorecard and Strategy Management is an application that gives Oracle customers a wide range of options and flexibility to implement any type of scorecard.

To listen to the entire podcast, click here.

To learn more about Oracle Scorecard and Strategy Management, click here.


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