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Information Management
Prof. Dr. Olaf Jacob

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Learning Objectives
Knows the foundation of strategic position and usage of IT within a company Knows several central application concepts, and is able to identify them in the own organization Knows the problems of handling data and integration Knows the concept of corporate performance management / Balanced Scorecard Hands-on: Is able to design a Balanced Scorecard with BSC Designer

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Agenda
Information Management Integrated Information Systems Planning and Design of Information Systems Corporate Performance Management Hands-On Tutorial with BSC Designer BSC Implementation

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Agenda
Information Management
Integrated Information Systems Planning and Design of Information Systems Corporate Performance Management Hands-On Tutorial with BSC Designer BSC Implementation

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Organizations and Information Systems

Source: Laudon

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Value of IT
In the emerging, fully digital firm

Significant business relationships are digitally enabled and mediated Core business processes are accomplished through digital networks Key corporate assets are managed digitally

Digital firms offer greater flexibility in organization and management

Time shifting, space shifting

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Impacts of IT

Operational excellence New products, services, and business models Customer and supplier intimacy Improved decision making

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Operational Excellence

Improvement of efficiency to attain higher profitability Information systems, technology an important tool in achieving greater efficiency and productivity Wal-Marts RetailLink system links suppliers to stores for superior replenishment system

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Example: The Order Fulfillment Process

Source: Laudon

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Examples of Business Processes

Manufacturing and production

Assembling the product Identifying customers Creating financial statements Hiring employees

Sales and marketing

Finance and accounting

Human resources

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Business Processes and Information Systems

Increasing efficiency of existing processes
Automating steps that were manual Replacing media changes by electronic data

Enabling entirely new processes that are capable of transforming the businesses
Change flow of information Replace sequential steps with parallel steps Eliminate delays in decision making

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New Products

Business model: describes how company produces, delivers, and sells product or service to create wealth Information systems and technology a major enabling tool for new products, services, business models

Examples: Apples iPod, iTunes, and iPhone, Netflixs Internet-based DVD rentals

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Customer Intimacy

Serving customers well leads to customers returning, which raises revenues and profits

Example: High-end hotels that use computers to track customer preferences and use to monitor and customize environment

Intimacy with suppliers allows them to provide vital inputs, which lowers costs

Example: J.C.Penneys information system which links sales records to contract manufacturer

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Improved Decision Making

Without accurate information:

Managers must use forecasts, best guesses, luck Leads to:

Overproduction, underproduction of goods and services Misallocation of resources Poor response times

Poor outcomes raise costs, lose customers

Example: Verizons Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc.

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What is the job of an CIO (Chief Information Officer)?

Business Strategy Business Processes
Alignment

IT-Applications

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Model of Information Management

Plan

Build

Run

Governance

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Information Management
Governance
IT-Strategy Standardization Standardization IT-Organization

of IT-Infrastructure of Applications

Information

Plan

Systems Planning Portfolio Management IT-Budgeting / Controlling

Project

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Information Management
Build
Building Project

of approved IT-Projects Management with Testing Training

Run

First

Level / Second Level Enduser Support (Help Desk) Change Management Infrastructure Management

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IM Processes
Govern

IT-Strategy

ProjectPortfolio

Plan

Project

Build

Operations/ Maintenance

Run

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Agenda
Information Management

Integrated Information Systems

Planning and Design of Information Systems Corporate Performance Management Hands-On Tutorial with BSC Designer BSC Implementation

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Information System

Information system: Three activities produce information organizations need

Input: Captures raw data from organization or external environment Processing: Converts raw data into meaningful form Output: Transfers processed information to people or activities that use it

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Functions of Information System

Source: Laudon

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User of Information System

Source: Laudon

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Types of Information System: TPS

Perform and record daily routine transactions necessary to conduct business

Examples: sales order entry, payroll, shipping

Allow managers to monitor status of operations and relations with external environment Serve operational levels Serve predefined, structured goals and decision making

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Example of TPS

Source: Laudon

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Types of Information System: MIS

Serve middle management Provide reports on firms current performance, based on data from TPS Provide answers to routine questions with predefined procedure for answering them Typically have little analytic capability

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Types of Information System: DSS

Serve middle management Support nonroutine decision making

Example: What is impact on production schedule if December sales doubled?

Often use external information as well from TPS and MIS Model driven DSS

Voyage-estimating systems Intrawests marketing analysis systems

Data driven DSS

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Example of MIS

Source: Laudon

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Example of DSS

Source: Laudon

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Types of Information System: ESS

Support senior management Address nonroutine decisions requiring judgment, evaluation, and insight Incorporate data about external events (e.g. new tax laws or competitors) as well as summarized information from internal MIS and DSS Example: ESS that provides minute-to-minute view of firms financial performance as measured by working capital, accounts receivable, accounts payable, cash flow, and inventory

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Example of ESS

Source: Laudon

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Example Management Cockpit

Source: Windhoff Software

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How Enterprise Systems work

Source: Laudon

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Integrated Information Systems

Source: Mertens Page 34

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Integrated Information Systems

Data Integration

Different IT-Systems use the same data

Process Integration

Process steps work together without media changes and manual interfaces

Horizontal Integration

Data and Process Integration between the core value creating processing

Vertical Integration

Data and Process Integration between the TPS and ESS

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Agenda
Information Management Integrated Information Systems

Planning and Design of Information Systems

Corporate Performance Management Hands-On Tutorial with BSC Designer BSC Implementation

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Information System Planning

Collection of ideas/proposals for new IT-systems for an organization

Project Ideas / Project Proposals

Sources:
Strategic business plan New processes / changes of processes Problems of current systems/situation Analytical framework, e.g. Value Chain
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Framework for identifying IT-Systems: Value Chain

Views firm as series of activities that add value to products or services Highlights activities where competitive strategies can best be applied Primary activities vs. support activities At each stage, determine how information systems can improve operational efficiency and improve customer and supplier intimacy Utilize benchmarking, industry best practices

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Business Value Chain

Source: Laudon

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Portfolio Analysis
Used to evaluate system projects Inventories all of the organizations information systems projects and assets Each system has profile of risk and benefit
High-benefit, low risk High-benefit, high risk Low-benefit, low risk Low-benefit, high risk

To improve return on portfolio, balance risk and return from systems investments

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Portfolio Analysis

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Scoring Models
Used to evaluate alternative system projects, especially when many criteria exist Assigns weights to various features of system and calculates weighted totals
CRITERIA Online order entry Customer credit check Inventory check Warehouse receiving ETC GRAND TOTALS 3128 3300
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WEIGH T 4 3 4 2

SYSTEM A % 67 66 72 71

SYSTEM A SCORE 268 198 288 142

SYSTEM B % 73 59 81 75

SYSTEM B SCORE 292 177 324 150

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Information system costs and benefit

Tangible benefits: Can be quantified and assigned monetary value Systems that displace labor and save space: Transaction and clerical systems Intangible benefits: Cannot be immediately quantified but may lead to quantifiable gains in the long run E.g., more efficient customer service or enhanced decision making Systems that influence decision making: ESS, DSS, collaborative work systems

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System Development
Activities that go into producing an information system solution for an organization Systems analysis Systems design Programming Testing Conversion Production and maintenance

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System Development Cycle

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System Analysis
Analysis of problem that will be solved by system
Defining the problem and identifying causes Specifying solutions Systems proposal report identifies and examines alternative solutions Identifying information requirements

Includes feasibility study

Is solution feasible from financial, technical, organizational standpoint Is solution a good investment? Is required technology, skill available?

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System Analysis (cont.)

Establishing information requirements
Who needs what information, where, when, and how Define objectives of new/modified system Detail the functions new system must perform

Faulty requirements analysis is leading cause of systems failure and high systems development cost

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System Design
Describe system specifications that will deliver functions identified during systems analysis Should address all managerial, organizational, and technological components of system solution Role of end users
User information requirements drive system building Users must have sufficient control over design process to ensure that system reflects their business priorities and information needs Insufficient user involvement in design effort is major cause of system failure

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Typical System Design Documents

OUTPUT Medium Content Timing INPUT Origins Flow Data entry USER INTERFACE Simplicity Efficiency Logic Feedback Errors DATABASE DESIGN Logical data model Volume and speed requirements File design PROCESSING Computations Program modules Required reports Timing of outputs MANUAL PROCEDURES What activities Who performs them When How Where CONTROLS Input controls (characters, limit, reasonableness) Processing controls (consistency, record counts) Output controls (totals, samples of output) Procedural controls (passwords, special forms) SECURITY Access controls Catastrophe plans / Audit trails
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DOCUMENTATION Operations documentation Systems documents User documentation CONVERSION Transfer files Initiate new procedures Select testing method Cut over to new system TRAINING Select training techniques Develop training modules Identify training facilities ORGANIZATIONAL CHANGES Process design Task/ Job design Organization structure design

Programming / Test
Programming:
System specifications from design stage are translated into software program code Software may be purchased, leased, or outsourced instead

Testing
To ensure system produces right results Unit testing: Tests each program in system separately System testing: Tests functioning of system as a whole Acceptance testing: Makes sure system is ready to be used in production setting Test plan: All preparations for series of tests

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Sample Test Plan

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Conversion
Process of changing from old system to new system Four main strategies
1. Parallel strategy 2. Direct cutover 3. Pilot study 4. Phased approach Requires end-user training Finalization of detailed documentation showing how system works from technical and end-user standpoint

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Production and Maintenance

System reviewed to determine if any revisions needed May prepare formal postimplementation audit document
Changes in hardware, software, documentation, or procedures to a production system to correct errors, meet new requirements, or improve processing efficiency 20% debugging, emergency work 20% changes to hardware, software, data, reporting 60% of work: User enhancements, improving documentation, recoding for greater processing efficiency

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System Design: Summary

CORE ACTIVITY
Systems analysis

DESCRIPTION
Identify problem(s) Specify solutions Establish information requirements

Systems design

Create design specifications

Programming Testing

Translate design specifications into code Unit test Systems test Acceptance test

Conversion

Plan conversion Prepare documentation Train users and technical staff

Production and maintenance

Operate the system Evaluate the system Modify the system

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Application Software Packages

Pre-realized software application ready to run Save time and money Many packages offer customization features:
Allow software package to be modified to meet unique requirements without destroying integrity of package software

Evaluation criteria for systems analysis include:

Functions provided by the package, flexibility, user friendliness, hardware and software resources, database requirements, installation and maintenance efforts, documentation, vendor quality, and cost

Request for Proposal (RFP)

Detailed list of questions submitted to packaged-software vendors Used to evaluate alternative software packages

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Agenda
Information Management Integrated Information Systems

Planning and Design of Information Systems

Corporate Performance Management

Hands-On Tutorial with BSC Designer BSC Implementation
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Performance Management
Performance management (PM) is the management processes, methodologies, metrics, applications, tools and infrastructure that enable users to define and optimize results to achieve personal or departmental objectives, as well as strategic objectives across multiple organizational levels.

Source: Gartner

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Challange: Make strategy a continual process

STRATEGY

60% of organizations dont link strategy & budgets

update the strategy Strategic Learning Loop

test the hypotheses

85% of management teams spend less than one hour per month on strategy issues

BALANCED SCORECARD

BUDGET

78% of organizations lock budgets to an annual cycle 20% of organizations take more than 16 weeks to prepare a budget

funding

Management Control Loop

reporting

PERFORMANCE Input (Resources)

Initiatives & Programs

92% of organizations do not report on lead indicators

Output (Results) Source: Balanced Scorecard Collaborative

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What Is a Balanced Scorecard?

At the highest level, the Balanced Scorecard is a framework that helps organizations put strategy at the center of the organization by translating strategy into operational objectives that drive both behavior and performance.

Source: Balanced Scorecard Collaborative

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Balanced Scorecard in Public Sector

SMDC Health System
Profitability up $23m Customer Satisfaction

City of Charlotte
Customer Satisfaction = 70% Public Official Award

Duke Childrens Hospital

Customer Satisfaction #1 Cost/Case 33%

Defense Logistics Agency

$130MM in Savings in FY2002 Processed $2.2B more requisitions for its customers

Source: Balanced Scorecard Collaborative

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Cause and Effect Logic of Business Performance

And Realize the Vision

Financial Results

To Drive Financial Success...

Customer Benefits

Needed to Deliver Unique Sets of Benefits to Customers...

Internal Capabilities

To Build the Strategic Capabilities..

Knowledge, Skills, Systems, and Tools

Source: Balanced Scorecard Collaborative

Equip our People...

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Example Strategy Map

Strategic Theme: Operating Efficiency
Financial Profitability More customers

What will drive operating efficiency? More customers on fewer planes How will we do that? Attract targeted customer segments who value price and on time arrivals What must the internal focus be? Fast turnaround Will our people do that? Educate and compensate ground crew regarding how they contribute to the firms success Employee stockholder program
Source: Balanced Scorecard Collaborative

Fewer planes Customer Flight Is on time

Lowest prices

Internal Fast ground turnaround

Learning Ground crew alignment

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Vocabulary
Diagram of the cause and effect relationships between strategic objectives (Strategy Map)
Strategic Theme: Operating Efficiency
Financial Profitability More customers Lowest prices

Statement of what strategy must achieve and whats critical to its success

How success in achieving the strategy will be measured and tracked

The level of performance or rate of improvement needed

Key action programs required to achieve objectives

Fewer planes Customer Flight Is on time

Objectives
Internal Fast ground turnaround Learning Ground crew alignment

Measurement

Target

Initiative

Fast ground turnaround

On Ground Time On-Time Departure

30 Minutes 90%

Cycle time optimization

Source: Balanced Scorecard Collaborative

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A Strategy Map Tells the Story of Your Strategy

The Revenue Growth Strategy Improve stability by broadening the sources of revenue from current customers The Productivity Strategy Improve operating efficiency by shifting customers to more cost-effective channels of distribution
Improve Returns Broaden Revenue Mix Improve Operating Efficiency

Financial Perspective

Increase Customer Confidence in Our Financial Advice

Increase Customer Satisfaction Through Superior Execution

Customer Perspective

Internal Perspective
Understand Customer Segments Develop New Products Cross-Sell the Product Line Shift to Appropriate Channel Minimize Problems Provide Rapid Response

Increase Employee Productivity

Learning Perspective
Align Personal Goals

Develop Strategic Skills

Access to Strategic Information

Source: Balanced Scorecard Collaborative

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Example Strategy Map Airline

Strategic Objectives
Financial
F1 - Improve Returns F2 - Broaden Revenue Mix F3 - Reduce Cost Structure C1 - Increase Customer Satisfaction With Our Products & People C2 - Increase Satisfaction After the Sale

Strategic Measurements
(Lag Indicators) Return on Investment Revenue Growth Deposit Service Cost Change Share of Segment Depth of Relation (Lead Indicators) Revenue Mix

Customer

Customer Retention

Satisfaction Survey

I1 - Understand Our Customers I2 - Create Innovative Products

New Product Revenue Cross-Sell Ratio Channel Mix Change Service Error Rate Request Fulfillment Time

Product Development Cycle Hours with Customers

Internal

I3 - Cross-Sell Products I4 - Shift Customers to CostEffective Channels I5 - Minimize Operational Problems I6 - Responsive Service

Learning

L1 - Develop Strategic Skills L2 - Provide Strategic Info L3 - Align Personal Goals

Employee Satisfaction Revenue per Employee

Strategic Job Coverage Ratio Strategic Info Availability Ratio Personal Goals Alignment (%)

Source: Balanced Scorecard Collaborative

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Sample Strategy Map: Consumer Bank

Our success comes from
Financial F2 - Maximize traditional revenue sources F3 - Grow nontraditional revenue sources F1 - Achieve sustainable doubledigit net income growth F4 - Manage financial resources for maximum risk-adjusted return

enduring value-added relationships

Customer C1 - Understand me and give me the right information and advice. C2 - Give me convenient access to the right products. C3 - Appreciate me, and get things done easily, quickly, and right. C4 - Be involved in my communities.

which is all about great products and personal service

Innovation
Communicate the full value proposition Internal Process

Customer Partnerships
Consistently deliver the full value proposition Migrate customers to the right channel Identify and recognize highpotential relationships Segment markets and target prospects

Operational Excellence
Provide premium service to delight and retain valuable customers

Broaden offering through internal & external partnerships

Maximize efficiency and quality of business processes

Develop attractive new products & services

Focus on the critical few activities

Learning and Growth

delivered by a motivated & prepared work force. L1 - We develop, recognize, retain, and hire great people. L2 - Im developing the skills I need to succeed. L3 - We understand the strategy and know what we need to do. L4 - We have the information and tools we
need to do our jobs.

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Sample Scorecard: Consumer Bank

Strategic Objectives Strategic Measures ThePerspective Balanced Scorecard for Consumer Bank
Financial Perspective F1 F2 F3 F4 Increase earnings per share Add and retain high value customers Increase revenue per customer Reduce cost per customer Net income (vs. plan) Revenue mix (by target segment) Revenue per customer Cost per customer Customer satisfaction (survey) Share of wallet Target customer retention Share of segment Channel mix change Cross-sell ratio Revenue from new products (%) Service error rate Request fulfillment time Diversity mix versus community Strategic job readiness Information portfolio readiness Customer survey 360 Survey (leadership model) Strategic awareness survey Personal goals aligned to BSC (%) KMS utilization/currency

Targets
+$100M 30%(A) 70%(B) $300 $75 90% 50% 90% 30% 40% 2.5 50% 0.% < 24hrs 1.0 100% 100% 100% 70% 90% 100% 100%

Customer Perspective

C1 C2

Become a trusted financial advisor Provide superior service

Customer Management

Internal Perspective

I1 I2 I3 I4 I5 I6 I7 L1 L2 L3 L4 L5 L6

Understand customer segments Shift to appropriate channel Cross-sell the product line Develop new products Minimize problems Provide rapid response Build diversity reflecting community Insure readiness of strategic jobs Insure availability of strategic info Create a customer-focused culture Build cadre of leaders Align the organization Best practice sharing

Product Innovation Operations Management Responsible Citizen

Learning & Growth Perspective

Human Capital Information Capital

Organization Capital

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Sample Strategy Map: Healthcare

Vision: SMDC is a values-driven, integrated organization which will be recognized for excellence in customer service, quality patient care, financial strength, and support of community health
Build a Strong Financial Base to Sustain our Mission and Achieve our Vision Implement Managed Growth Maximize High Margin, Market Opportunities 1 Deliver Cost Efficient Care

Primary Care Patients

Excellent service Personal relationships

Specialty Care Patients / Referring Physicians

Leading edge technology Leading edge expertise

Payers/Employers
Innovative programs Price competitive service

Provide Outstanding Customer Service

Continually Develop Sub specialized Clinical Excellence

Strive for Operational Excellence

Clinical Practice Management

Optimize Staff Efficiency

Easy Access

On-Time Service

Friendly, attentive interactions

Develop research opportunities aligned with targeted growth areas

Redesign operations for efficiency and effectiveness

Develop leading edge techniques and programs

Clearly communicate expectations and accountabilities aligned with strategic priorities

Create an environment to support employee engagement & commitment to the mission

Recruit & retain qualified staff

Implement technology & develop facilities & infrastructure to support internal processes

1 Cardiothoracic,

Orthopedics, Neurosurgery, Cancer, Gastroenterology, Surgery/Trauma

Develop Leadership & Management Talent

Copyright 2002 by St. Marys/Duluth Clinic Health System

Source: Balanced Scorecard Collaborative

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Strategy Map Example

Long-Term Sustainability
Improve the health opportunities for County residents
Through long term sustainability (including financial), we will seek to improve the health opportunities for county residents.

Patients and Community

Strive to provide the best rural healthcare services in a modern setting

In order to achieve long term sustainability, we will meet patient and community needs by providing the best rural health care services in a modern setting.

Clinical and Business Processes Staff and Infrastructure

Develop growth opportunities internally and externally

Improve the quality and safety of Patient Care

In order to provide the best services, we will develop business growth opportunities and provide the highest quality clinical and operation services. In order to support our processes for growing services and providing high quality care, we will be the employer of choice for a highly productive and motivated workforce. Source: RPM

Be the employer of choice by recruiting, developing, and retaining a highly productive and motivated workforce

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Focused Outcomes

Helps employees focus, coordinate and collaborate on meeting organizational goals Speeds and informs decision-making about prioritization of work and resource allocation Improves management effectiveness by having a shared plan for continuous improvement Communicates clearly and visually the alignment needed to execute hospital strategy across the organization.

Source: RPM

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Agenda
Information Management Integrated Information Systems Planning and Design of Information Systems Corporate Performance Management

Hands-On Tutorial with BSC Designer

BSC Implementation

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Balanced Scorecard Designer

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Overview

For every perspective and indicator you can write a note telling what this indicator is, how to measure it and what target values you are going to achieve. The tree represents indicators of the balanced score card (also known as KPI), each of which has a set of numerical values. Depending on the specified numerical values and weight of the indicators, the program calculates current progress. The generated balanced score card can then be exported to Excel for further analysis or to the HTML format with diagrams.

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Indicators and their properties

With Balanced Scorecard Designer one can create indicators and group these indicators into categories or sub-categories Each indicator has its own weight, e.g. relative importance of indicator User can describe the indicator, specify the min and max values, the method of calculating the performance The total performance of the scorecard depends on weights of categories, indicators and performance of indicators

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Time Points

The program can work not only with stoical indicators, but with indicators that change their values in a time User can specify indicators values for the past, for today or for the future. In this way planning and results analysis is possible If value of indicator is not specified then it is inherited from its previous values

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Strategy Maps

Strategy map is a great way to represent visually the Balanced Scorecard in the way you want it to appear. BSC Designer can automatically export the indicator objects into the map, creating necessary links. In addition, user can add some custom objects, such as text blocks, large arrows, different types of links.

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Connect Scorecards together

With Balanced Scorecard Designer one can combine several scorecards into one or use certain indicators in other scorecards Balanced Scorecard can establish connection to scorecards located on the web server or in a local network This is the way how managers can collaborate and use unified information from other scorecards

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Export to MS Excel

The program allows to export Balanced Scorecard into MS Excel This is a great way to do advanced analysis of the data When user have data exported to MS Excel, it is easy to link this data to some external data sources

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Export to HTML

HTML report is the most advanced report for your Balanced Scorecard It can covers any specified time period It can include full information about indicators, including their data values or it can be generated in a mini version and include only key information about groups and indicators The HTML report includes graphical charts that represent how performance change within time period

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Metrics Library

It is recommended that 70 to 80 % of the metrics used in an enterprise balanced scorecard should be standard, with 20 to 30 % custom. The official web-site of the product offers a rich commercial library of metrics, which are available in the proprietary file format and Excel. These metrics have been created based on the results of analyzing the indicators from various areas of business and allow executives or managers to create their own set of indicators, relying on the time-proved indicators that worked well in other companies from the similar business area. Metrics are designed for HR, Finance, Logistics, Project Management and many other categories

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Weighting indicators and calculating the total

It is possible that some of the key performance indicators included in a balanced scorecard is more important and vital for the performance of the business than the others. So in order to specify the relevance of vital components of a balanced scorecard and to differentiate from other components, key performance indicators are ranked in accordance to the relative importance in the business which is known as weighting. The key indicators which are more crucial than the other indicators are weighted more. Generally weights are given from a range of 1-10 and sum of the weights of all the indicators grouped under a single perspective should be equal to 10. For e.g. in case of financial perspective, two key indicators such as Accounts Receivable (days) and Research Grant (amount) would be weighted differently from each other. Accounts Receivable would be given more weight then Research Grant because accounts receivable is a form of income and research grant is an expense from a business point of view. Weighting of indicators totally depends upon the nature of business and criteria of the team associated with the development of balanced scorecard.
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Agenda
Information Management Integrated Information Systems Planning and Design of Information Systems Corporate Performance Management Hands-On Tutorial with BSC Designer

BSC Implementation

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Phases of Balanced Scorecard Implementation

1. 2.

3.

4.

5.

Model Synthesis - The organization seeks consensus about vision and strategy and derive the needed measures. KPIs are derived and organized in the form of a BSC. Technical Implementation - Vision, Strategies, Measures and CSFs are entered into the system. Involves installation of software, training, building of BSC, setting of target and alarm levels, explaining graphs and customized reports. Organizational Integration - Integrating BSC within the structure of the organization and communicating it in a clear and precise manner. Technical Integration - Incorporating the BSC in the ERP, CRM and Data warehouses of the organization. Operations - Data updation, analysis and reporting have to be done on a continuous basis. Also refining of BSC has to be done constantly. Though estimation of exact costs and time is not possible with this project a rough estimate for a typical project may be helpful: Time used by Customers own Resources 50% Outside Process Consultancy 25% Outside Implementation Consultancy 15% Software Licenses 15%

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Balanced Scorecard Implementation Scheme

Operation of the BSC system

Technical Implementation

Technical Integration

Organizational Integration

Source: AKS-Labs

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Steps of Balanced Scorecard Implementation

Technical Implementation. Since setting of KPIs and target values for them are covered during the design stage this process starts with technical implementation, which means the company should make necessary technical requirements in the form of arranging and implementing appropriate BSC software, providing necessary training to the staff for making them technically equipped and efficient. Organizational Integration. After clearing out the potential technical impediments, the next step in the process is of organizational integration. This step is intended to integrate the BSC in the processes, which comprises of defining and empowering them the persons responsible for measuring data, explaining the procedures for BSC handling and execution and restructuring and reframing the management and organizational processes as per the changes. Technical Integration. Technical integration means integrating the balanced scorecard with the technical systems for accurately collecting the measure data and results. Operational systems may consist of ERP systems and CRM systems. Operation of the BSC system. This is the last step in the chain of Implementation process. In this step the management is concerned with analyzing the results of the BSC and reporting it to the management for drawing conclusion on the basis of results. It also includes the tasks like updating the measure values and KPIs used in the balanced scorecard as per the needs.
Source: AKS-Labs Page 85

Case Study: Implementing Balanced Scorecard

Proto Auto Works* is a small auto parts manufacturing company situated in New Jersey, USA. The company supplies auto parts to many a big car manufacturing entities of United States of America. Four years back, the company was operating at breakeven for more than two years. And the management of the company decided to appoint Philip Brown as the new Operational Manager of the company. After his appointment with the company, Philip decided to take a deep analysis of the operations of the manufacturing unit with the help of a Balanced Scorecard. He suggested the solution to the Management and the Board members gave their due consent for the proposal. For implementing a Balanced Scorecard in the company, a five step BSC implementation process was finalized by the management. The five phases of the process comprised of Model synthesis, Technical implementation, Organizational integration, Technical integration and Operation. In the very first step of Model synthesis, it aimed towards forming a consensus in the management about the vision and strategies of the organization. The elements to be used in the BSC and the best suitable structure of BSC were decided under this step. The strategies were formulated and transformed into Key Performance Indicators (KPIs) so that they could be easily measured in quantifiable terms. Some of the KPIs included were idle time of workers, idle time of machines, number of training sessions for employees on key positions, percentage rise in operational costs, number of delivery delays, etc. The target values of the KPIs were also defined under this phase.
Source: AKS-Labs

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Case study. Technical implementation.

The Technical implementation consisted of tasks like installing the required BSC software for easy evaluation of performance, providing training for the employees responsible for conducting BSC operations, importing historical data for effective measurement, etc. The basic idea behind the step was to build technical expertise and capabilities for handling BSC related operations in the company. The third phase of BSC implementation is the Organizational integration. The Operational Manager of the company was of the opinion that BSC should not be carried out as a distinctive function and it must be firmly integrated with the processes of the company. While implementing a balanced scorecard consideration should be given to the fact that the concept of BSC is communicated through out the organization. The management carried out certain restructuring in the strategies and processes to best meet the needs of BSC. The next step in the process is of Technical integration. In this phase the management tried to identify the potential sources from which the measure data is needed to be extracted for the BSC. For measuring data a company is dependent on number of operational systems and other outside sources, so it is very crucial to analyze the database structure and define the procedure to get measure data from the different data sources like Enterprise Resource Planning (ERP) systems, Customer Relationship Management (CRM) systems. Operation of BSC system is the final step in the BSC implementation process. In this, the results of the balanced scorecard are analyzed and reported to the management. The management regularly focused at updating the measure values according to the changes and needs of the organization. With all these steps the management was able to implement the BSC in the day to day operations and current positive financial results does indicate that Philips attempt at implementing the BSC has borne rich dividends.
Source: AKS-Labs

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Process of technical implementation

Selecting the software vendor. This is the first step in the process of technical integration of the BSC. One should analyze the level of expertise in the solutions provided by various market players. Cost forms the other factor that plays an important role in choosing the most suitable vendor. Holding training sessions. Training has to be there not only for making people better at handling the software but also for explaining the need for doing this. This is to say that, both pre- and post- training sessions have to be organized. Installing the software in the organization. This would involve making arrangements for physical space to incorporate the systems. Employees should be comfortable in using them. Doing post-installation analysis. This plays an immensely important role in knowing the extent to which the effort has yielded results. One of the methods for this can be employee feedback. This in turn can be by forming a questionnaire. It should be carefully structured with questions that reflect the way software has been received by the work-force. A positive feed-back is definitely an indicator for the successful attempt. However, in case of negative results, improvements can be looked for. This also can be known from the data itself. So, further steps to bring improvements can be taken, on the basis of the analysis. If it is still not working, go for a revision of all the steps already taken to dig out the major mistake that has been overlooked.
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Source: AKS-Labs

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Technical Implementation Checklist

Software should be properly installed This is an essential pre-requisite to ensure the success of BSC implementation. Failure at this level can ruin the whole process. This is because employees can work on their operational efficiency but technical impairments are something the management needs to work on. A manual or a pamphlet that has all the rules to be abided by should be handed over to the employees. This may contain the guidelines regarding the privacy policies or other confidential matter. The training workshops have to be organized in a proper manner so as to make them fruitful. Sessions for interaction with people from organization who have already successfully implemented BSC should be arranged for. This will provide a real insight into this whole act, thereby helping in being as practical as possible with this approach. This will help in spotting the ailing areas. Further, corrective measures can be adopted.

Proper guidelines

Complete Training Session

Evaluate the workings after the BSC software has been stuffe Into the organizational Structure

Assistance for trouble shooting

Source: AKS-Labs

To answer queries accurately, trouble shooting procedures are to be deployed.

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Organizational implementation scheme

Reframing and Restructuring the reporting process

Reengineer and Reframe the management and strategy process

Tasks in Organizational Integration

Defining and empowering people responsible for measuring data

Explaining the roles and Responsibilities of employees

Source: AKS-Labs

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Organizational Implementation checklist

The role of each employee of the organization is clearly defined Every employee of the organization is empowered towards obtaining the strategic goals of the company It is to be seen the every employee of the organization should know about his roles he is required to do in the company. This would be helpful in avoiding any chaos. Every employee of the organization should be empowered and motivated towards his responsibilities and should align his efforts for obtaining the strategic goals of the organization.

Making sure that communication about BSC reaches every part of the organization Seeing the Balanced Scorecard is properly linked with the organizational strategies Proper alignment of BSC with the organizational processes

It is very important information about the balanced scorecard should be communicated to every possible part of the organization and making sure it is being wisely understood by everybody in the organization. Strategies form an important part of a business and while implementing BSC in the organization, care should be taken to link the strategies with the BSC properly. Care should be taken that the processes in the organization are appropriately aligned with the BSC. It requires creating a best match between the two.

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Technical integration

Extracting values for BSC. A small level of customization is needed in both the BSC and operating systems. To achieve this, technical integration is done. Identifying the potential sources of information. A large number of resources to provide data exist. One needs to discover these and create even more out of them, if possible. However, only those should be utilized in the long run which are reliable enough. Creating a link between system sources and BSC. Technical integration serves as the means to reach an end, the end being values for the indicators in the BSC. With the bridging of this gap, ways to arrive at the approximate values for BSC parameters is dug. Defining the procedures. This is done to identify, modify and index data in a tailored manner to make it fruitful for the organization. Specified procedures bring uniformity in the manner of working. Synergistic effects. BSC when assisted with systems like ERP and CRM produces more results than when not combined. This superposition principle enables harnessing the untouched benefits.
Source: AKS-Labs

Objectives
Extracting values for BSC

Identifying the potential sources of information

Creating a link between system sources and BSC

Defining the procedures

Synergistic effects

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Data Input into Balanced Scorecard

Source: Laudon

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Technical integration checklist

Search for the possible sources of data Appropriate measures are to be decided on Identification All the avenues are to be explored for this task. The suitable source will be decided by a number of factors, like the financial standing of the organization (the cost factor should not be too high that it falls heavy on the budget) Ways to obtain data have to be in place to define the procedures. This eases the whole process as one knows how to proceed with the task. Digging out the required data asks for a thorough filtering of useful data with the notso-useful ones. Appropriate measures are needed to accomplish this. However, once the means to spot the useful data from a sea of not needed pieces simplifies the job to a significant extent. If the database does not directly help in arriving at the desired values, refining has to be done. Proper ordering of data is yet another area to be focused on. This makes it more usable as with a suitable scheme, desired data can be easily obtained with less time and cost put in.

Modification in data Scheduling

Source: AKS-Labs

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Operation of the BSC system

By implementing a Balanced Scorecard in a company, it is able to achieve a deeper understanding about its crucial aspects and the major driving forces. After the technical implementation, organizational and technical integration of BSC, the last step in the process of BSC implementation is: Operation of the BSC system. Operation of BSC system includes tasks like regularly updating the measure/target values of the Key Performance Indicators (KPIs), analyzing the results of the Balanced Scorecard at regular intervals, reporting the results to the management of the company and refining the Balanced Scorecard as per the ultimate objectives of the company.

Source: AKS-Labs

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Objectives of operational management

Analyze. The first objective of Operation of the BSC system is to analyze the results of the company. The BSC system should appropriately measure the results in accordance to the procedure specified in the earlier steps of BSC implementation. Compare. The next objective is to compare the actual results with the past results and performances. This objective is important from the view point that it helps in finding the deviations in the results. Report. The next objective is to report the management about the results and the gaps in the performances so that necessary actions can be initiated by them to bridge the gap effectively. Reporting becomes important that if the results are not accurately reported to the management of higher levels, then the company will not be able to find out the major hindrances in the operations and can deviate from their path. Restructuring. This step also aims towards making necessary changes in the BSC approach to best meet the goals. The ultimate objective of balanced scorecard is to bring it into the day to day operations of the company and it can be achieved if the BSC is refined according to business changes.

Objectives

Analyze

Compare

Report

Restructuring

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Operations in Balanced Scorecard. Checklist

Results are measured properly One of the basic requirements in BSC implementation is the measurement of results of the BSC properly. Proper measurement of results calls for effectively following the procedures finalized for the task by the employees responsible for it. Another important factor which requires the company to give due consideration is the proper analysis of the of BSC results. The results of balanced scorecard must be properly analyzed in accordance to the target values. The care should be taken to make sure that results of the BSC are properly and timely reported to the management of the company. So that, management can draws out necessary conclusions on the basis of results to take important remedial measures to improve the performance of the company. While implementing BSC in the company, there is a possibility that some changes may occur in the business priorities and needs, which requires updating the target values of KPIs and some restructuring in the BSC model. So it should be kept in mind that the values should be rightly changed, while keeping them realistic and achievable for the company.

Results are measured properly

Correct reporting of results

Target values of KPIs and BSC model are rightly updated

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Literature

Laudon, K., Management Information Systems, 11th Ed., Prentice Hall 2010 Mertens, P., Integrierte Informationsverarbeitung, Gabler 2006 AKS-Labs, BSE-Toolkit, 2010

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