Chris McAlary is associate vice president for facilities planning and management at California State Polytechnic University, Pomona, California. He can be reached at email@example.com. This article is based on research the author conducted while enrolled in an Executive MBA program at the University of Southern California.
Are you inundated with marketing brochures and e-mail messages from private vendors proclaiming they can save your school or university thousands of dollars while providing better services than your existing organization? Guess what? Maybe they can. Do you measure the success of your business enterprise? Do you measure anything in your business enterprise?
If you don't, you are a prime candidate for outsourcing. You can be sure that a few of the many criteria that private industry promotes in their marketing brochure are customer satisfaction and performance indicators that identify bottom-line savings and increased customer service. Although you may want to dispute the accuracy of their claims, any rebuttal without a plan of action will be labeled defensive, too little too late, myopic, or lacking a long-term vision for your unit.
Are you getting the picture? Well listen up! Have you heard of the balanced scorecard concept (BSC)? The BSC could have answers to some of these woes and will better position you to compete in the areas that make sense for your organization. The balanced scorecard approach reduces the dangers of over-dependence on "lagging" financial results by ensuring that companies take regular measurements of their customer base, internal business processes, and levels of internal learning and growth as strategic objectives are pursued. In addition, you will be able to properly reevaluate your operation to identify those areas that you can't compete.
There is evidence at several large campuses that suggest a balanced scorecard is a winning prescription that has added value to their organization beyond their original expectations. And APPA has adopted the balanced scorecard concept as the structural foundation for its Strategic Assessment Model, an important self-assessment and continuous improvement tool. [Ed. Note: The revised second edition of The Strategic Assessment Model will be published in July.]
What Services are at Risk?
Have you heard of "Bob from account temps" or "Jane from Collections.com"? Virtually every service provided at an educational institution could be outsourced. We are all aware of the facilities outsourcing in recent years at the University of Pennsylvania and the construction management services at Stanford. The ensuing reorganization at both universities included the loss of many white-collar professional jobs.
The primary driver in the outsourcing equation used to be cost associated with the bottom line. There are now other factors being identified that can be more valuable than just the bottom line. Some of these "other factors" that are considered in today's outsourcing equation include technology, expertise, and quality of service.
A recent survey administered by Cheryl Keown confirmed that the trend to outsource traditionally in-house services continues to grow. Her article in the November/December issue of Facilities Manager also notes that universities are not outsourcing as a means to reduce costs, but rather due to the expansion of existing facilities and the need for specialized skills that in-house employees lack as technology continues to advance.
In our complex world of rules, regulations, and laws, the expertise and quality of service provided from a private firm can add value beyond just price. What approach should you take to determine if your department is adding value for your campus stakeholders?
A Balanced Scorecard
The skills and competencies we are trying to master in our fast-paced environment today require a broader set of measures than the traditional financial performance measures that worked well in the past. The balanced scorecard concept of performance management is being recognized by organizations that are seeking a more well-rounded, forward-looking approach to guiding their businesses. According to Robert Kaplan and David Norton, the balanced scorecard "translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system." There is also strong evidence that suggests a successful implementation of the balanced scorecard concept can dramatically change the focus of your organization.
The balanced scorecard complements financial measures with operational measures on customer satisfaction, internal processes, and the organization's innovation and learning activities. It allows management to look at the organization from four linked perspectives:
The basic concept of the scorecard is to translate your organization's strategic plan to a set of specific, objective requirements (metrics on a scorecard) that are reviewed monthly. To balance the metrics, the scorecard should include both financial and non-financial metrics that reflect the overall business strategy. This ensures that attention is paid to each dimension of the strategy.
Scorecard Design and Implementation
The experiences from the for-profit sector suggest that the entire balanced scorecard design and implementation process can easily take up to two years or more. To avoid getting intimidated by the schedule it is helpful to take a holistic view of the entire process. Kaplan and Norton (1996b) suggested that designing and implementing a balanced scorecard comprises four related stages: (a) translating the vision and gaining consensus; (b) communicating the objectives, setting goals, and linking strategies; (c) setting targets, allocating resources, and establishing milestones; and (d) feedback and learning. These four stages should be representative of the organizations shared vision.
Ultimately, your measures should help to communicate the organization's strategies and goals, motivate actions to these, and provide guidance and feedback to their attainment. Thus, for an organization to reap full potential of the balanced scorecard process, it needs to first define its mission, determine major departmental objectives, and select strategies.
A faculty committee at the University of Southern California's Rossier School of Education recently adapted the BSC model to satisfy the central administration's need to know how the department is doing and how it measures up to other schools of education. One of their conclusions is that the processes through which people must work together in order to develop the scorecard will probably have latent benefits that contribute to organizational well being, like conversations that encourage the development of shared values.
A properly constructed scorecard should tell the story of the business unit's strategy through such sequences of cause-and effect relationships between outcome measures and the performance drivers of those outcomes. All balanced scorecards use certain generic measures, which tend to be core outcome measures. Outcome measures without performance drivers do not communicate how the outcomes are to be achieved. The performance drivers-the lead indicators-are the measures that tend to be unique for a particular business unit. A good balanced scorecard should have a mix of outcome measures and performance drivers.
A wide variety of for-profit organizations have benefited from using the balanced scorecard but only a few applications by educational institutions have been reported to date. A partial list of users includes AT&T, Brown and Root, Intel, 3Com, and Tenneco. In the insurance industry, Allstate Corp. has developed a balanced set of measures and achieved higher levels of customer satisfaction, employee effectiveness, process effectiveness, and innovation, which in turn have significantly improved corporate cash flows (Birchard, 1995). Several other companies (Cigna Insurance and Active Tools) have successfully linked compensation to balanced scorecard results.
The Business Affairs division from the University of California at San Diego in 1993 implemented the most notable BSC success story in higher education. Reported benefits and outcomes have included the payroll department reducing errors 80 percent over a three-year period. The time it took to receive travel reimbursement checks was cut from two months to as little as three days. Their dedication to the balanced scorecard program culminated in their winning both the NACUBO 1996 Higher Education Award and the 1999 RIT/USA Today Quality Cup for education. The University of California-Irvine has developed and implemented a similar but much more encompassing system to promote longlasting organizational change and process improvement. In addition there have been recent articles in Facilities Manager that identify Soka University of America, Emory University, and the University of Southern California as having recently implemented various combinations of the balanced scorecard concept.
Changing the Culture
The balanced scorecard can be the catalyst for stimulating and sustaining continuous improvement. It is a customer-based planning and process improvement system aimed at focusing and driving the change process. It does this by translating strategy into an integrated set of financial and nonfinancial measures that both communicates the organizational strategy to the employees and provides them with actionable feedback on attainment of objectives.
By clearly delineating the cause from effects, organizations can develop a new focus on what makes a difference, instead of that which consumes time and adds little in terms of value to business results, customer and employee satisfaction, and shareholder value. The organizational scorecard can serve as the starting point for a company-wide performance improvement system that pinpoints each department's key contributions to the overall strategy. Such a scorecard would align all employees with the organization's strategy, focusing employees on critical results that drive the strategy. Richard Quinn, vice president of quality at Sears, said: "You simply can't manage anything you can't measure" (Lingle & Schiemann,1996, p. 56). One recent survey has found that 80% of large American companies are seeking improvements in their performance measurement systems (Birchard, 1995).
A balanced scorecard is certainly not a panacea for all of the issues within your organization. The BSC cannot help an organization that lacks good leadership and good managers to carry out the mission of the organization. However, the BSC can become a very powerful tool enabling your organization to reach new levels.
Essentially, the BSC is a customer-based planning and process improvement system aimed at focusing and driving the change process. The "process" is the key element in the successful implementation of any comprehensive program. A balanced scorecard is no exception to that rule. Remember, the process includes developing your vision, mission, and strategic goals for your organization. More importantly, one might argue that the "process" is the very essence of the BSC. If the process is approached from a comprehensive perspective and is successfully presented to an organization that ultimately embraces the concept, you have begun the process of recasting the culture of your organization. You have also begun the process of identifying the strengths, weaknesses, opportunities, and threats (SWOT) of your organization. An additional outcome of this process is the identification of training needs throughout the organization.
Our facilities are expanding at break neck speed to keep up with tidal wave two. The technology in our new and renovated buildings is changing rapidly. The evidence points to increased outsourcing of our services. What position do you want to be in when you are ultimately asked how your organization measures up? The more important question is: do you want to take the time and properly evaluate your organization or do you want to wait and risk having someone else do it for you?
Jack Hug, assistant vice chancellor at the University of California/San Diego put it best when he said, "Today our customers tell us what they want, when they want it, and how much they are willing to pay for it. They also tell us that if we cannot provide what they want, then they will get it from somewhere else." A balanced scorecard will better position you to respond to the challenges of a continuously demanding environment. This isn't about financial performance measures. This is about systematically and fundamentally changing the culture of your organization and the way you do business.