HP Management Decisions Scoreboarding Pi Results Copyright 1995

Scoreboarding “Teams that don’t keep score are only practicing. ” --Tom Malone Milliken “Too often we measure everything and understand nothing. The three most important things you need to measure in a business are customer satisfaction, employee satisfaction, and cash flow. If you’re growing customer satisfaction, your global market share is sure to grow, too. Employee satisfaction gets you productivity, quality, pride, and creativity. And cash flow is the pulse -- the key vital sign of a company. ” --Jack Welch GE Page 2

Scoreboarding l We believe in the following principles: » Displaying scores (scoreboarding) is a great motivator – The very act of keeping track in itself increases productivity. – People want to succeed and given clear, achievable criteria for success, will work to succeed. – Publicly displaying scores evokes the competition factor. » The methodology of measurement is critical to produce desired results – The scorecard must be balanced, with measures representing all critical success areas. – The measures should balance financial with non-financial, internal with external measures. – Top level indicators should be displayed simply and Page 3 graphically, where possible.

Measurement Questions l A Measurement Program should answer: » » » » » What are the “vital sign” measures of the business? What should we be measuring to bring about desired results? Where do we get the data to measure? How do we gather the data for the scoreboard? How should we communicate results, demonstrating that we are meeting our constituent’s expectations? How do we communicate improvement or decline? How do we know if we’re succeeding? How can we get employee buy-in? How should we reward or punish for results? What motivators can we employ? Page 4

Strategic Plan l A measurement program must use the answers to the questions answered in the Strategic Planning process: » » » l Who are our constituents? What do they expect? How are we doing against those expectations? Where are we weak and strong? What are the results we want? The plan for the business unit lays out the roadmap for where the unit is going. . . its destination and routes. Page 5

Strategic Plan l l A measurement program then tracks the progress toward that goal. . . the speed, acceleration, the quality of ride, etc. Without the prerequisite pieces of a strategic plan, the measurement program must be prefaced with exercises from the Strategic Planning process: » » » Constituent Identification Constituent expectations and performance perceptions GAP Analysis Importance/Effectiveness Matrix Objectives Page 6

Measures l Vital Signs » The business unit’s “vital signs” are those 8 -12 measures that can display the general health of the unit in the same way a person’s blood pressure, heart rate, and temperature displays the general health of a person. l A Balanced Approach to Measurement » Measurement must look at results in relation to the key constituents of the business: the customers, shareholders, employees and senior management. » Balancing internally and externally focused measures, as well as financial and non-financial numbers. Page 7

Key Result Areas l Often called Critical Success Areas (CSA’s) » Those areas of performance deemed important to the stakeholders or constituents of your company – – l Customer Satisfaction Employee Satisfaction Productivity Cash Flow & Shareholder Value CSA’s in balance: Customers Shareholders External Customer Satisfaction Employees Cash Flow Productivity Management Internal Page 8

Expectations and Perceptions Perception Satisfaction = Expectation This means: You first need to know your external and internal constituent expectations. You then need to know their perception of your performance against those expectations. This information is best gained through surveying the constituents. . both internal and external. Page 9

The Scorecard l l Measures are assembled by CSA and type, on a one page “Scorecard”. Technology is the great enabler for measurement. A good Scorecard application can provide quick and accurate assembly and massaging of the data into meaningful figures for all to see. The Scorecard should be visible, frequent, competitive, and tied to local actions. Scoreboarding the resulting scorecards is the great motivator of a performance measurement program. Page 10

Results Analysis l To analyze the results of measures, several items should be considered: » » l Baselines and Trends Targets and Thresholds Early warning indicators Constituent perceptions The balanced scorecard gives a picture of not only how the revenue, profitability and market share growing, but also: » Day-to-day operation trends » Productivity and efficiency improvements » Experiments and innovation (and R&D) Page 11

Rewards l Reward programs » What measurement program, once defined and displayed, is complete without the added motivation of rewards and recognition for achieving excellence? » Reward programs need not be expensive. » Innovative ways to recognize are often cash free. l Carrots vs Sticks » People act to achieve rewards, and to avoid punishments » . . . but performance that is reward-based is always stronger, more creative, more durable, and certainly more positive Page 12