The article “Part 2: Features of the BSC/KPI automation project” continues the topic started in the article “Automation of BSC using QPR Suite 2012. Part 1: Strategic map of the company” . In this article we will talk about the features of the BSC automation project or management by KPI, as well as about the reasons that motivate the company’s employees to initiate this project. I will give examples from our corporate life.
Why do we need balanced scorecard management automation?
In principle, the answer is simple: reduce labor intensity and simplify work with indicators/KPIs, increase the convenience and visibility of goals and indicators for all employees involved in achieving KPIs, protect KPI data from accidental errors or intentional distortions, manipulation of indicators “for a bonus”. Managers are interested in a tool that allows them to quickly and clearly understand who should have done what, what the current status is, what the trends are, what the dynamics of indicator fulfillment are, to understand that the failure that occurred is not systemic, but accidental (a combination of circumstances), or vice versa. It is convenient when you log into the system and see everything, in different sections, all the key indicators of employees at different levels of the hierarchy in one system – this saves time, money, “nerves”.
When does the need for automation of BSC and KPI arise?
- When there are many indicators (hundreds and thousands – on the scale of a group of companies, including the decomposition of indicators to the level of senior and middle managers) and fatigue has accumulated from working with disparate files with goals and indicators of companies/divisions, when employees change the name, description of the algorithm, unit of measurement for the same indicator in different files
- When decision makers began to realize the real time costs in “man-hours” spent on the formation, approval, adjustment, re-approval, re-adjustment, approval of strategic maps, KPI maps of senior and middle managers, employees
- When fatigue has accumulated from copy-paste work on disparate files, since some goals and indicators are repeated, and it is necessary to control the immutability of the calculation algorithm, distribution of weights, planned values, responsible persons
- When preparing and coordinating plans with goals and indicators, and reports takes more time than it seems reasonable to spend on it, and there is not enough time for your immediate activities
Many will find the symptoms of such unproductive work with goals and indicators in the company described above familiar. Fig. 1 systematizes the problems of working with KPI in Excel. The described problems are compared with the factors that determine the quality of work with KPI in the company. A correctly selected and correctly implemented automation tool can fully guarantee the solution of a significant part of the listed problems.
Fig. 1. Features of the BSC practice in Excel on a holding scale
Any system must be configured to the company’s rules and any system will have its limitations. There are no ideal mass-produced systems, or they are made to order, longer and more expensive. Many limitations can only be understood in practice, after a long (over a year) use of the system. It should also be noted that many limitations cannot be identified at the start of the project, since new requirements will arise during the operation of the system that cannot be predicted in advance, and these new requirements may also run into limitations of the standard functionality of the mass-produced system.
I would highlight 2 extreme cases when a company has decided to choose and implement some kind of KPI or BSC management system:
- The company already has its own internal corporate BSC/KPI methodology (before automation)
- The company does not have a formalized BSC/KPI methodology, but there are traditions and habits of “how it is customary to do it here” – from a series of situations “when I came (to the company), this was already here”
Of course, it is important to have your own methodology to customize the system for yourself. But on the other hand, if you don’t have one initially, then, having become familiar with the correct tool, you will understand “what to want” from the system.
If we consider the “2 x 2” matrix: correct or crooked methodology, and correct or crooked instrument, then the “saddest” square of the matrix is the crooked methodology and crooked instrument.
An equally sad “square” is when a completely correct tool and a crooked methodology, which the company “believes” in as a ritual consecrated by a priest, are combined. In this case, it is very difficult to conduct a BSC automation project. But there is an interesting point: in most cases, software tools help employees with a constructive position to realize the redundancy and artificiality of previously established rules in the company.
The system settings, of course, depend on the BSC methodology, and in turn, any system influences the methodology, the influence is mutual. Ideally, we have a correct methodology for goal setting/use of BSC/KPI, initially formed, approved in the company’s regulatory and methodological document, and then, based on it, we select the right system. In the corporate methodology of goal setting based on BSC/KPI, as a rule, principles, rules, requirements and recommendations are defined on how to form goals and indicators, strategic maps, types of goals/indicators used, how to decompose goals and indicators down into departments, how to use weight, etc.
At the system selection stage , we conduct a primary expert assessment of the capabilities of different systems to meet the current and conscious prospective requirements of the customer for the automation of KPI management, BSC, the formation of strategic maps, strategic reporting, dashboards of indicators, and motivational KPI maps of employees.
We select a system and proceed to planning the project, its organization, and subsequent implementation. For example, we will choose QPR (in the future, articles on other systems are planned).
For simplicity, we will consider only 2 modules of the QPR Suite 2012 system: the developer module — QPR Metrics, and the module for collegial work with indicators — QPR Portal. You can read more about the product on the developer’s website www.qpronline.ru
In the project for automation of the BSC, I would propose to provide for the following important blocks of work:
- System training for user groups
- System training for developers of strategy maps and goal/metric models
- System training for managers, opportunities to conduct analytics are provided
- System training for employees – only watch, can enter a fact, rights to change are limited
- Basic initial settings and formation of the general architecture of the goals and indicators model (QPR Metrics developer module)
- setting up system directories taking into account the requirements of the corporate goal-setting methodology (examples below – Fig. 2, Fig. 3, Fig. 4, Fig. 5). The examples are given to clearly demonstrate what exactly is meant when talking about the connection of the directories settings with the BSC/KPI methodology
- setting up mathematical calculations (setting up the weighted average calculation of % of goals and indicators achieved, calculating the cumulative total, etc.)
- Setting up access rights for user groups for a pilot solution
- The module of collegial work — QPR Portal, is practically pre-configured, reflects in the web interface all the settings, reports, goals and indicators generated in the QPR Metrics developer module
- Setting up management report templates
- Setting up booklets (electronic dynamic reports)
- Analytical reports for quality control of indicators and goals
- Execution of test cases for the selected business area as a pilot solution
- Development of a test model of company goals/indicators, with test automation of calculations of % completion, etc.
- Data entry test
- Test of data integration into QPR from other accounting systems
- Test of calculation of related indicators*. Setting up mathematical calculations for related indicators, setting up calculation of final performance for the company, for department heads, etc.
- Setting up standard reporting of the system based on corporate templates of plans and reports on strategy maps, BSC, KPI for the pilot area
- Output test reports including strategy maps, table reports and dashboards
- KPI Employee Reporting Analysis Capabilities Test for Managers
- Updating the regulations for goal setting, planning, and reporting on strategic goals and indicators, taking into account the use of the system
- Formation of a model of goals and indicators for a selected time period (deployed pilot for a year, then the stage of “industrial” operation of the system)
* Linked indicators. ROS is an indicator linked by a calculation formula to the indicators: net profit, revenue. The customer chooses which path to take: 1) automatically calculate ROS based on the entered values of the indicators net profit, revenue, 2) do not establish a link, enter ROS values separately.
It is necessary to set aside at least a year for testing the system in a developed pilot area (business area, separate company in the holding), since a year is a full reporting and planning cycle, and during the year it is possible to catch all the problems and “bugs” in setting up the model of goals and indicators, in setting up formulas for automating calculations in monthly/quarterly reporting on KPI.
Setting up the system reference books should take into account the requirements and established rules of the corporate methodology of goal setting, for example, in Fig. 2, in the reference book of model elements it is necessary to create standard elements, from which the corporate model of goals and indicators will be formed. If the methodology provides for a certain classification of goals, then it must be reflected in this reference book – general corporate strategic goals (mandatory for all business areas, “cross-cutting”, present in all strategic maps of the holding’s subsidiaries), and strategic goals (specific, for each area – its own goals). It is also possible to enter several types of indicators, as shown in the example in Fig. 2 – general corporate indicators (measuring the achievement of general corporate goals), indicators (measuring the achievement of goals), project indicators.
Fig. 2. Setting up the directory of the Elements of the Model of Targets of the Company Indicators
For each type of model element (each type of goal, indicator, BSC perspective), you can set up visualization (via a layout) that will allow you to create visual reports, strategy maps and dashboards, see Fig. 3.
Fig.3. Setting up the Visualization of the Elements of the Target Indicators Model
The simplest reference book is a reference book of units of measurement of indicators, see Fig. 4.
Fig.4. Setting up the reference book of units of measurement of the indicator
The most complex reference book in the system is the reference book of standards and series… Why is it the most complex? Because it requires immersion in the problem of “how to simply manage something complex”. If there are 1000 indicators, and all the indicators are different, different in the sense that they belong to different types ( the typology of indicators is discussed in the practical seminar). How would it be easier to manage a database of 1000 indicators? Break them down into types, for example, indicators for increasing target values (600 indicators), decreasing target values (350 indicators), and stabilizing target values (50 indicators). And accordingly, it is easier to make changes to the settings of three types of indicators than to the settings of each individual indicator out of 1000. This is quite obvious. Let’s look at the example in Fig. 5.
In the example, the indicator type “Increase …. and a number of other characteristics in the name ” is highlighted by underlining . Revenue is an example of an indicator of this type. And all indicators assigned this type will have a similar set of properties (properties, or “rows” are highlighted with curly brackets). Each property (or “row”) of the indicator provides values that are either entered manually (weight, plan), or pumped through integration from other systems (fact) or calculated using a formula (for example, maximum plan and minimum plan – plus or minus 10% of the plan).
Fig. 5. Setting up typical properties for groups of indicators – Norms and Series
Fig. 6 clearly shows what possibilities are provided by certain properties (series) of this type of indicators.
Fig. 6. Why is it useful to set up typical properties of indicators?
Fig. 7 clearly shows the connection between the reference book of typical indicators (norms and series) and the settings of a specific indicator in the indicator card, where the necessary properties are essentially selected from previously created reference books. In general, everything is simple.
Fig. 7. Reflection of typical property settings in the card of a specific indicator
