BSC-Cliff Moser-PMC-10-05.16

Designing & Implementing A Balanced Scorecard for the Architectural Firm

Cliff S. Moser, AIA, MSQA

Cliff Moser, AIA, MSQA

Principal at RTKL, Los Angeles, Healthcare Studio

Education

Architecture at University of Utah, Salt Lake City

Quality Assurance at Cal State Dominguez Hills

Worked at:

Barker Rinker Seacat – Denver

Ewing Cole - Philadelphia

Wallace Roberts & Todd – Philadelphia

Moekel Carbonell – Wilmington

Perkins & Will – Los Angeles

who am I?

what is a balanced scorecard?

What & Why a Balanced Scorecard for the Architectural Firm

Three Types of Balanced Scorecards

Project

Initiative

Organized-Based

How to create measures

How to create success

what is an architect?

130,000 Licensed Architects in U.S.

15,000 Architectural Firms

$26 Billion in Annual Fees

30% Billings for Government

60% Billings for Private Business/Institutions

75% firms bill less than $500,000/20% of the work

2% firms bill over $10 million/25% of the work

why a balanced scorecard?

Identified by Kaplan and Norton as new way to measure

performance.

To ensure that all parts of the organization are measured

To identify, manage and leverage:

people, processes, customers, and financial perspectives

To capture knowledge and information

To identify and measure intangible assets

To align organizational goals to organizational strategy

Grew out of Total Quality Management

(TQM) Movement of the 1980’s.

Successful Companies measured success

as more than financial performance.

Kaplan and Norton identified Balanced

Scorecard as a way to diffuse new

performance metrics through

organizations.

80% of Fortune 1000 companies currently

utilize some form of Balanced Scorecard.



Measurement of Four Perspectives

People --staff attraction/retention, learning/growth.

Processes --what does the organization do best?

Customers --who are the organization’s customers?

Finance --identify new measures.

why a balanced scorecard?

Each Perspective Supports the Perspective Below

People – People support Processes

Processes – Processes support Customers

Customers – Customers support Finance

Finance – Finance supports the Organization

-Staff, Management, Administration

-Includes Employee Learning and Growth

People want to do a good job. Knowledge workers. Self-management.

Staff will seek to measure their own performance. There are key measures, strategies, or

policies that people will interpret and act to maximize, with or without a formal system. If

management doesn’t identify the measurement, strategy, or policy, staff will make up their

own, based on their perception of the objectives of the system.

Organizations who believe they have avoided the pitfalls of performance measurement

because they don’t have a formal system are in the worst case situation, because everyone

in the organization is self-defining what constitutes a good job from their own point of view.

Ask -What are you being paid for, and how much time do you spend doing that?

…then start measuring and changing (hire people to do the stuff the architects shouldn’t be

doing).

people

processes The things an organization uses to complete its work

CAD processes, Great design,

Forms and Procedures

Marketing, Accounting and Billing

If Processes aren’t measured, the organization is missing a

major competent success.

Recognizing and measuring processes uncovers hidden

performance issues.

How long does it take to plot a drawing?

How does a pursuit go through Marketing?

What are our billing procedures?

customers External and Internal Customers

External Customers

Clients, Users, Agencies

Create Metrics of Satisfaction

Internal Customers

Other Teams in the Office.

Admin, Marketing,

Consultants

Develop Measures that track, capture and measure Customer Satisfaction.

Identifying and recognizing an Organization’s Customers helps create metrics of Satisfaction.

financial The Traditional Measure of Success

Identify new metrics

Profit per principal

Sales per sf of office

Leading Indicators

Ratio of calls made to calls returned.

Lagging Indicators.

Booked projects to actual.

Try to define new metrics.

3 types of balanced scorecards

Project-Based Balanced Scorecard

Project Specific. Implement at particular project phase, or

through project start to finish.

Initiative-Based Balanced Scorecard

Build around a specific initiative: Examples -

Quality Assurance/Quality Control

Marketing or Business Development Initiative

Organization-Based Balanced Scorecard

Create new Holistic metrics for entire organization

project-based balanced scorecard

Implement at any project phase

First – Align Goals to Strategy

Establish Mission/Vision Statements

Create Goals

Identify Strategy

Create Tactics for Achieving Strategy

Identify and weigh indicators/metrics

Use People, Processes, Customers, Finance to Balance

Metrics and Performance

project-based balanced scorecard

Case Study

Construction Administration Project Phase

Identify Mission & Vision – Best Project, Safest Project…

Identify Leading/Lagging Indicators

Identify and Weigh by using Analytical Hierarchy Method

Determine Reporting Period – weekly, monthly, quarterly

Set goals – support measures

Measure/report goals – what is success? How to achieve.

Re-set goals – Continuous Improvement

Modify Measures (Plan, Do, Check, Act)

case-study - construction administration

Process Perspective –

Submittal Turnaround

RFI Turnaround

Error Free Drawings

Timely Field Decisions

Inspection Approval

Mix of Leading/

Lagging indicators

Subm

itta

l Turn

aro

und

RFI

Turn

aro

und

Err

or

Fre

e D

raw

ings

Tim

ely

Fie

ld D

ecis

ions

Insp

ection A

ppro

val

Submittal Turnaround 1 1 1/5 1/9 1/9RFI Turnaround 1 1 1/4 1/8 1/9Error Free Drawings 5 4 1 2 1Timely Field Decisions 9 8 2 1 2Inspection Approval 9 9 2 1 1

Rank each measure against each other in order to determine

which measure is more important.


Submittal Turnaround

RFI Turnaround

Error Free Drawings

Timely Field Decisions

Inspection Approval

Complete paired ranking and total each column

Subm

itta

l Turn

aro

und

RFI

Turn

aro

und

Err

or

Fre

e D

raw

ings

Tim

ely

Fie

ld D

ecis

ions

Insp

ection A

ppro

val

Submittal Turnaround 1.00 1.00 0.20 0.11 0.11

RFI Turnaround 1.00 1.00 0.25 0.13 0.11

Error Free Drawings 5.00 4.00 1.00 2.00 1.00

Timely Field Decisions 9.00 8.00 2.00 1.00 2.00

Inspection Approval 9.00 9.00 2.00 1.00 1.00Total 25.00 23.00 5.45 4.24 4.22


Normalize each issue to determine ranking against each other. Then normalize total. Rankings:

Submittal Turnaround .03

RFI Turnaround .04

Error Free Drawings .25

Timely Field Decisions .36

Inspection Approval .32

Subm

itta

l Turn

around

RFI T

urnaround

Erro

r Free D

raw

ings

Tim

ely

Fie

ld D

ecis

ions

Inspection A

ppro

val

Tota

l

Norm

alized T

ota

l

Submittal Turnaround 0.04 0.04 0.04 0.03 0.03 0.17 0.03

RFI Turnaround 0.04 0.04 0.05 0.03 0.03 0.18 0.04

Error Free Drawings 0.20 0.17 0.18 0.47 0.24 1.27 0.25

Timely Field Decisions 0.36 0.35 0.37 0.24 0.47 1.78 0.36

Inspection Approval 0.36 0.39 0.37 0.24 0.24 1.59 0.32

Total 1.00 1.00 1.00 1.00 1.00 5.00 1.00


Create Goals (90%) for Achievement and Reporting Periods.

Submittals 3% below the goal of 90%. Therefore the team multiplies

0.97x0.03=0.0291

RFIs were 5% below the goal of 90%.

0.95x0.04=0.038

Error Free Drawings were above the goal by 8%

1.08x0.25=0.27

Timely Field Decision. Unfortunately, this metric will bring down the

goal for the month. 65% creates a 25% gap: 0.75x0.36=0.27

Inspection. Again, a bad month leaves the team 20% shy of its goal

of 90% 0.8x0.32=.256


Adding the totals brings the month’s achievement goal as follows:

0.029+0.038+0.27+0.27+0.27+0.256=0.836 or 84% of the team’s process

goals for the month, which is close to the target of 90%.

Measuring against the AHP determined percentages & recognizing what

the team believes to be important (in other words a 100% win in Inspection,

Field Walks, and Error free drawings) deliver its results immediately.

Instead of arbitrary or immediate metrics, the team can begin to create and

implement stretch goals in order to create endorsed and sustaining

improvement.

exercise Identify measures for a project based scorecard.

Construction Document Phase –

People

Processes

Customers

Finance

Include leading and lagging Indicators

initiative-based balanced scorecard

More than an expanded Project-Based BSC.

Use to recognize and help solve Organizational Learning Disabilities.

Capture and disseminate Extrinsic and Intrinsic Knowledge, and Identify Intangible Assets.

Extrinsic Knowledge

Rules, Protocols, Established way of doing things.

Intrinsic Knowledge

Learning by doing, Trial and Error, Apprentice-ship

Intangible Assets

Creating Value by Innovation, identify, nurture, and leverage

Disruptive Processes within the firm.


Extrinsic Knowledge

Initiative-Based Scorecard to create and maintain standards:

Sheet numbering, standard details, general notes,

specifications, meeting minutes database. Anything that

establishes standards that capture, sort or transfer

information.

Lunch and Learn, Formal Training, Continuing Education

Requirement for everyone.

Use People, Process, Customer and Financial Perspectives

to align and support goals and understanding.


Intrinsic Based Knowledge

Initiative-Based Scorecard to create and share knowledge:

Lessons Learned, Marketing, Presentations. Intrinsic

knowledge can be captured by using People and Process-

Based Perspective Measures

Lunch and Learn, Formal Training, Cross-functional

mentoring/training, Story-Telling

Require managers to learn the processes their staff uses.

--Southwest Airlines managers hauling luggage.

Use metrics for the Perspectives to align and support goals

and understanding.

Intangible Assets

Branding, Innovation, Disruptive Processes & Technologies

Use BSC to identify, create, manage, and (most

importantly, leverage) Intangibles.

Branding Initiative

Use Perspectives to align goals:

People-----

Process----

Customers----

Financial----


Training

New Tools

Awareness of New Brand & Meaning

Adequate Funding of Initiative

Example -Disruptive Processes & Technology Initiative

Use perspectives to align goals:

People: Training, reward ideas or use of new

innovations.

Process: New Tools, Install discovery-based processes

to explore and test new ideas, tools and

processes.

Customers: Sell the ideas to all customers, make them

part of the process of exploration.

Financial: Adequate Funding of Initiative, build in Failure

allowances. Fund ideas that have greatest

risk/reward.


Initiative-Based Scorecard should Align Success behind the

Mission and Vision of the Initiative from people to financial.

The pieces of a successful Balanced Scorecard

Mission and Vision Statements

Used to create plans, ideas and goals for all types of BSC.

Most important for creating a successful Organizational-Based

BSC.

Mission Statement

Reason the firm exists.

Single Core Purpose

…but not too specific — allow room to grow.

organizational-based balanced scorecard

Mission Statement -continued

Identify and list the Firm’s Core Purpose

Idealistic reason for existing.

Use “Five Whys” to discover Core Purpose

Not selected but discovered as part of the process

Must be value truly held by organization

Mission Statement NOT list of goals/aspirations


Vision Statement

I have a Dream…

Make goals demanding, inspire & challenge stakeholders

Target – quantitative or qualitative goals such as a sales target or to

design the best hospital

Common Enemy – centered on overtaking another firm within the same

industry.

Role Model – to become like another firm in a different industry or market.

For example, the firm may want to become the GE of Healthcare.

Internal Transformation – especially appropriate for very large

corporations. The firm may set a goal to be the best stadium architect.

Once a Vision is achieved, replace. Completed goals stagnate the

firm. This frames the essence of continual improvement and

transformation.


Use a Balanced Scorecard to Identify and Organization’s Core

Capabilities

Employee knowledge and skill — People — Intangible

Physical technical systems — Processes — technical

competence in databases, extrinsic systems.

Values and norms —types of knowledge which are sought and

nurtured. Values serve as knowledge-screening and control

mechanisms.

Managerial and Customer systems — Customers and Financial —

monitored and supported by the company’s system of education,

rewards, and incentives.


Core Capabilities

How to use BSC to monitor Core Capabilities.

Physical technical systems —technical competence in databases,

extrinsic systems.

Managerial systems —monitored by the company’s system of

education, rewards, and incentives.

Values and norms —types of knowledge which are sought and

nurtured. Values serve as knowledge-screening and control

mechanisms.

Remember – Equilibrium in nature is a precursor to death – When

a living system is in a state of Equilibrium, it is less responsive to

changes occurring around it.

Living systems cannot be directed along a linear path. Systems

must be disturbed towards a desired outcome.


Use a Balanced Scorecard to Identify Core Rigidities

Why is it easy for Core Capabilities to become Rigidities?

Inertia —acquires a momentum of its own and becomes

difficult to overcome, even if it is now outmoded or excessive.

Path dependency —cultural lag, the power of the past. Rise

of the creative class —still paying out of the school staff

starvation wages, sense that we are limited by what we can

accomplish because that’s all we’ve done before.

Limited problem solving skills —unfamiliar with new

approaches or opportunities.


Core Rigidities

How to use BSC to battle Core Rigidities

Fight Inertia —Challenge firm to try new risks. Inertia comes

in many forms: Go/no-go propositions, new market, etc. Safe

bets sometimes means being left behind.

Counter Path dependency —think of new ways of doing

things. Leverage the extrinsic creative class knowledge from

younger staff into shared knowledge for older experiences

staff.

Develop New Problem Solving Skills —once content, a firm

stagnates and begins losing valuable intangible assets.


Summary: 3 types of balanced scorecards

Project-Based Balanced Scorecard

Project Specific. Implement at particular phase, or through

project start to finish.

Initiative-Based Balanced Scorecard

Build around a specific initiative:

Quality Assurance/Quality Control

Marketing or Business Development Initiative

Organization-Based Balanced Scorecard

Holistic metrics for entire organization

discussion

Documents

BSC-Cliff Moser-PMC-10-05.16