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Introduction to The Balanced Scorecard Approach

Presented to:
Cornell Advanced EMS Workshop

Presented by:
Brian Lesinski, E-A
EA Engineering, Science and Technology, Inc.

14 October 2004
®
It’s not what you can see…

It’s what you can’t!!!


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Performance Measurement: A Balancing Act

Performance measurement systems must achieve a balance


which supports progress against pre-determined goals

„ Is EH&S performance defined correctly and is it


RISKS COSTS consistent with policies/objectives?

„ Is EH&S performance improving?

„ How do we communicate our progress?

„ Are we capturing the right information?

„ Does the information we capture relate to key areas


like our customers and processes?
Development of Random or Non-Strategic Performance
Measures Actually Hurts an Organization!
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The Challenge: Operations/EH&S Integration
Management levels within organizations view EH&S
management differently

GENERAL
Provides • Compliance status
Direction • EH&S resource expenditures
Senior
Management

College or
Unit Level

Department/ SPECIFIC
Reports
Facilities/Operations • EPCRA
Management • DMRs Performance

A common language is needed to effectively communicate,


evaluate and report EH&S performance
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A “Balanced” Approach…
• Developed in early 1990’s by Robert
Kaplan and David Norton from Nolan
Norton Institute, a research Department “If you can’t measure it .
of KPMG you can’t manage it…”
• Key publications: - Kaplan & Norton
– “The Balanced Scorecard – The Balanced Scorecard
Measures that Drive Performance”,
Harvard Business Review, January-
February 1992, pp. 71-79.
– The Balanced Scorecard. 1996.
Harvard Business Press, Boston.
332 pp.

Represents shift from asset-based management to knowledge-based management


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The Balanced Scorecard Framework

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The Four Perspectives of The Balanced Scorecard

• Financial – the ability to provide


financial profitability and stability
(private) or cost-
efficiency/effectiveness (public)
• Customer – the ability to provide
quality goods and services, delivery
effectiveness, and customer
satisfaction
• Internal Business Processes – internal
processes that lead to “financial” goals
• Learning and Growth – the ability of
employees, technology tools and
effects of change to support
organizational goals

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Balanced Scorecard Supports EMS

• Policy – Creates a “playbook”


• Awareness - Integrates EH&S with
operations at multiple levels and
locations
• Objectives & Targets –
– Objective – what is to be
accomplished
– Target – the “value” of improvement
to be measured via a measure
• EMS Review - Drives continual
improvement throughout organization
• Communication – linked scorecards
enhance the “who” and the “what”

®
BSC Translates Performance at Multiple Levels

• Use of financial and non-


financial measurements
Vision
• Performance indicators are
linked to business objectives
Strategy
– operational and strategic
information
• Leading and lagging
Critical Success Factors
measures
• Focuses strategy on overall
Key Performance Drivers
improvement
Financial Customer Business Organizational
Perspective Perspective Processes Learning

Scorecard Perspectives
®
The Balanced Scorecard in Action
Measures designed to support
CORP
the policy
Warranty Claims,
Cost of Quality,
Customer Satisfaction

Warranty Claims,

EH&S DIV 1 DIV 2 DIV 3 Cost of Quality,


Ave. Supplier Quality Rating

Cost of Quality,

Policy
Cost of Quality, Manufacturing Manager Cost of Quality, Materials
Warranty Claims Manager Engineering Design for Manufacturability Management Ave. Supplier
Quality Rating

Plant Manager Vehicle Assembly Facilities Production Supplier


Plant Manager Stamping & Engineering Engineering Control & Management
Components Material Control
Design for Distance Traveled Certified/
Cost of Quality, Record Accuracy,
Warranty Claims, Manufacturability, Between Cells, Non-Certified,
PPM Defects % of Fool-Proof Schedule Stability
PPM Defects # of ECN's # of Vendors
Processes

Metal Facilities Maintenance Interior


Engineering Operations Chassis
Fabrication Superintendent Trim

PPM Defects, Distance from PPM Defects, P.M. Schedule Value Added Quality Function
% of People Receipt to Line, % of People Compliance, Operations, Deployment (QFD) Use,
Trained in Distance Trained in Unplanned # of ECN's # of ECN's
Problem Traveled Problem Maintenance Cost
Solving Between Cells Solving

Metal Materials
Assembly Management

PPM Defects, Scrap & Rework Cost,


% of People Material Handling F.T.E.'s
Trained in Problem
Solving

YTD
EH&S Manager Current Period Attributes of a World Class EH&S Manager
Rate of
Actual Objective Variance Rate of HIGHEST QUALITY Actual Objective Variance
Change Change

Regulator Recognition

Number of Environmental • Recognizes opportunity in changing


Incidents
environmental requirements
LOWEST COST
Waste Minimization
Lowered Indirect/Overhead
• Operationalizes EH&S goals
Labor

• Uses knowledge of operations to aid


Operational Flexibility
pollution prevention and waste
Material Substitution
minimization efforts.
Reduced Permitting
Requirements
• Drives EH&S learning throughout the
METRICS organization.
®
Where are we Headed????

CLIENT
METRIC

0 100% 0 100%
Financial Business
Measurement Processes
% of web
EH&S costs as a
solutions 0 50
% of Total Costs 100%
Waste
EVA Minimization 0 100%
0 100% $’s
100%

Innovation and Customer


Learning Satisfaction
% of Unit
Cost related 0 100%
Training
100% Organization X to EHS