The Lean Six Sigma scorecard being proposed in this article has one major advantage over the Balance Scorecard (BSC) framework developed by Kaplan and Norton. The proposed scorecard enables the establishment of causality while the one developed by Norton and Kaplan is not guaranteed. Causality is critical in strategy execution. Without causality, it is nearly impossible to measure the impact of various strategic initiatives on a company’s overall goals; therefore, it would difficult to tell if an organization was headed in the right direction, similar to driving in the dark without the lights on.
Although the proposed Lean Six Sigma Balanced Scorecard uses the same theoretical framework as the one developed by Kaplan and Norton, there is a distinct difference in the execution of the framework versus that of Kaplan and Norton.
Here is the approach used in the execution of the proposed Lean Six Sigma Balanced Scorecard.
Implementation of the Lean Six Sigma Balanced Scorecard
Step 1 – Development of a Corporate Strategy Map and Scorecard
The Executive team along with a facilitator trained in the development of a Balanced Scorecard will define/develop the strategic objectives across the four perspectives outlined in the “original” Balanced Scorecard framework (Financial, Customer Service, Processes, and Learning and Growth).
One of the most effective ways is to teach executives how to develop a company strategy map by breaking them up into teams. The executives will then present the strategy map to their peers and follow by merging each of their strategy maps into a single one that everyone agrees on. This technique of “Learning by Doing” is particularly effective.
Once the company strategy map is developed, key performance Indicators and targets, which can be used to measure the overall effectiveness of its strategy highlighted in the corporate strategy map, will be developed.
Step 2 – Utilize the DMAIC framework to stabilize key processes
This step is where the proposed Lean Balanced Scorecard deviates from the original Balanced Scorecard. It is assumed that the organization will undertake a Lean Six Sigma project that will be used to i) identify some of the requirements to meet the objectives in the scorecard, and ii) stabilize any unstable processes.
As in any Lean Six Sigma engagement, the DMAIC (Define, Measure, Analyze, Analyze, Improve, Control) methodology is used. The Define phase of the project will be used to identify which processes will support the objectives in the strategy map developed in Step 1 and scope out the project.
Once the Define stage is complete, a project team along with a Lean Six Sigma (LSS) expert will go out and measure these processes to identify i) opportunities for improvement (primarily those that will support the objectives in the strategy map), and ii) root causes of any process instability.
Upon completion of the measurement phase, the project team and the LSS expert will analyze the results of the measurement. From this point, projects will be identified to meet the objectives in the corporate scorecard and stabilize the processes.
In the control phase of the DMAIC methodology, the project team and LSS expert will work with selected business units to develop their scorecard linked to the corporate scorecard. The improvement and stabilization projects will be implemented.
Step 3 – Implement a continuous improvement process and company-wide culture of continually improving
The project team works with the business units to develop a continuous improvement process that is aligned with their individual scorecards. Continuous improvement teams will monitor the scorecards and will launch performance initiatives to reverse the trend of the performance indicator within the scorecard when performance measures are not continuously meeting targets.
Step 4 – Establish causality
Once, the processes used to drive the objectives in the scorecard are stabilized, the company, as a whole, will start to measure the key performance indicators and targets within the scorecard. At this point, the company will start to establish the chain of causality across the various objectives within the scorecard to determine which strategies are effective and the drivers of those strategies. Causality will enable the company to truly determine which initiatives yield the highest Return on Investment (ROI).
This article outlined very briefly a proposed Balanced Lean Six Sigma scorecard. Though more detailed explanations are required, do you think the modifications we proposed would help overcome some of the limitations in the existing balanced scorecard?