Alignment & Cascading - Which are your choices?

The five cases used for Alignment & Cascading of Objectives and KPIs

Š 2015 – Strategic Systems Consulting, All rights reserved Copyright notice: This document and its content cannot be copied, reproduced, or distributed, in whole or in part, without the written consent of the copyright owner. For copy licenses, please contact Mihai Ionescu, E-mail: mionescu@bscol.ro

CASE #1: FULL KPI CASCADING & AGGREGATION ● All Business Units Objectives’ status is calculated based on the same set of KPIs (*) ● The Objectives Alignment is based on full KPI Cascading & Aggregation

Level 0

Level 1

Level 2

Business Unit A

OBJ (D) = f (D[1],D[2],D[3])

OBJ (A)

OBJ (E) = f (E[1],E[2],E[3]) OBJ (F) = f (F[1],F[2],F[3])

KPI A[1]

OBJ (G) = f (G[1],G[2],G[3])

KPI A[2]

OBJ (A) = f (A[1],A[2],A[3]) A[1] = SUM(B[1],C[1]) or A[1] = AVG*(B[1],C[1])

Full KPI * Aggregation

= Data Entry

OBJ (B)

KPI B[1] KPI B[2]

A[2] = SUM(B[2],C[2]) or A[2] = AVG*(B[2],C[2]) A[3] = SUM(B[3],C[3]) or A[3] = AVG*(B[3],C[3])

AVG* = Weighted Average

Business Unit B

KPI A[3]

Business Unit D

KPI B[3]

Full KPI * Aggregation B[1] = SUM(D[1],E[1]) or OBJ (B) = f (B[1],B[2],B[3]) B[1] = AVG*(D[1],E[1])

OBJ (D)

KPI D[1] KPI D[2]

B[2] = SUM(D[2],E[2]) or B[2] = AVG*(D[2],E[2])

KPI [3]

B[3] = SUM(D[3],E[3]) or B[3] = AVG*(D[3],E[3])

Business Unit E OBJ (E)

KPI E[1] KPI E[2] KPI E[2]

Business Unit C OBJ (C)

KPI C[1] KPI C[2] KPI C[3] OBJ (C) = f (C[1],C[2],C[3]) C[1] = SUM(F[1],G[1]) or C[1] = AVG(F[1],G[1]) C[2] = SUM(F[2],G[2]) or C[2] = AVG*(F[2],G[2]) C[3] = SUM(F[3],G[3]) or C[3] = AVG*(F[3],G[3])

(*) The Child Business Units Full KPIs’ Aggregation has the same impact on the Parent Business Unit’s objective status as the Child Business Units’ objectives’ status aggregation © 2015 – Strategic Systems Consulting. All rights reserved

Business Unit F Full KPI * Aggregation

OBJ (F)

KPI F[1] KPI F[2] KPI F[3]

Business Unit G OBJ(G)

KPI G[1] KPI G[2] KPI G[3]

CASE #2: UNAGGREGATED OBJECTIVES ALIGNMENT ● Each Business Units Objectives’ status is calculated based its own specific set of KPIs ● The Objectives Alignment is based on Child Business Units Contributive Analysis ● The Objectives Alignment does not use Child Business Units Objectives statuses’ or KPIs Aggregation

Level 0

Level 1

Level 2

Business Unit A

OBJ (D) = f (D[1],D[2],D[3])

OBJ (A)

OBJ (E) = f (E[1],E[2],E[3])

KPI A[1] KPI A[2] KPI A[3]

OBJ (F) = f (F[1],F[2],F[3])

Contributive Analysis

OBJ (G) = f (G[1],G[2],G[3]) = Data Entry

Business Unit B

OBJ (A) = f (A[1],A[2],A[3])

OBJ (B)

KPI B[1] KPI B[2]

KPI B[3]

Contributive Analysis

Business Unit D

OBJ (B) = f (B[1],B[2],B[3])

OBJ (D)

KPI D[1] KPI D[2] KPI [3]

Business Unit E OBJ (E)

KPI E[1] KPI E[2] KPI E[2]

Business Unit C OBJ (C)

KPI C[1] KPI C[2] KPI C[3] OBJ (C) = f (C[1],C[2],C[3])

Contributive Analysis

Business Unit F OBJ (F)

KPI F[1] KPI F[2] KPI F[3]

Business Unit G For more details, see “Alignment - Using the Balanced Scorecard to Create Corporate Synergies”, Robert Kaplan, David Norton - 2006

OBJ(G)

KPI G[1] KPI G[2]

© 2015 – Strategic Systems Consulting. All rights reserved

KPI G[3]

CASE #3: AGGREGATED OBJECTIVES ALIGNMENT (1)

● Parent Business Units Objectives’ status is calculated based on Child Business Units’ Objectives statuses ● Each Parent Business Unit lists all its Child Business Units’ KPIs ● The Objectives Alignment is based on Child Business Units Objectives statuses’ Aggregation

Level 0

Level 1

Level 2

Business Unit A

OBJ (D) = f (D[1],D[2],D[3])

OBJ (A)

OBJ (E) = f (E[1],E[2],E[3]) OBJ (F) = f (F[1],F[2],F[3])

KPI D[1]

OBJ (G) = f (G[1],G[2],G[3])

KPI D[2] KPI D[3]

Business Unit B

KPI E[1]

= Data Entry

OBJ (B)

KPI E[2]

KPI D[1]

KPI E[3]

KPI D[2]

KPI F[1]

KPI D[3]

KPI F[2]

KPI E[1]

KPI F[3]

KPI E[2]

KPI G[1]

KPI E[3]

KPI G[2] KPI G[3]

AVG* = Weighted Average

OBJ (B) = AVG*(OBJ(D),OBJ(E))

Business Unit D OBJ (D)

KPI D[1] KPI D[2] KPI [3]

Business Unit E

OBJ (A) = AVG*(OBJ(B),OBJ(C))

OBJ (E)

KPI E[1] KPI E[2]

Business Unit C

KPI E[2]

OBJ (C)

KPI F[1] KPI F[2] KPI F[3]

Business Unit F

KPI G[1] KPI G[2] KPI G[3]

OBJ (C) = AVG*(OBJ(F),OBJ(G))

OBJ (F)

KPI F[1] KPI F[2] KPI F[3]

Business Unit G OBJ(G)

KPI G[1] KPI G[2] © 2015 – Strategic Systems Consulting. All rights reserved

KPI G[3]

CASE #4: AGGREGATED OBJECTIVES ALIGNMENT (2)

● Parent Business Units Objectives’ status is calculated based on Child Business Units’ Objectives statuses ● Each Parent Business Unit lists a selection of its Child Business Units’ the most significant KPIs ● The Objectives Alignment is based on Child Business Units Objectives statuses’ Aggregation

Level 0

Level 1

Level 2

Business Unit A

OBJ (D) = f (D[1],D[2],D[3])

OBJ (A)

OBJ (E) = f (E[1],E[2],E[3]) OBJ (F) = f (F[1],F[2],F[3])

KPI D[1]

OBJ (G) = f (G[1],G[2],G[3])

KPI E[1] KPI F[1] KPI G[1]

OBJ (A) = AVG*(OBJ(B),OBJ(C))

Business Unit B

AVG* = Weighted Average = Data Entry

OBJ (B)

KPI D[1] KPI D[2]

KPI E[1] KPI E[2]

OBJ (B) = AVG*(OBJ(D),OBJ(E))

Business Unit D OBJ (D)

KPI D[1] KPI D[2] KPI [3]

Business Unit E OBJ (E)

KPI E[1] KPI E[2]

Business Unit C

KPI E[2]

OBJ (C)

KPI F[1] KPI F[2] KPI G[1]

KPI G[2]

OBJ (C) = AVG*(OBJ(F),OBJ(G))

Business Unit F OBJ (F)

KPI F[1] KPI F[2] KPI F[3]

Business Unit G OBJ(G)

KPI G[1] KPI G[2] © 2015 – Strategic Systems Consulting

KPI G[3]

CASE #5: MIXED ALIGNMENT & CASCADING (a) Business Units’ Objectives’ statuses calculated based either ❶ on the statuses of the Child Business Units’ objectives ❷ on the statuses of the Child Business Units’ objectives and on own KPIs (w/o Child Business Units’ KPIs pass-through) or ❸ on a combination of Child Business Units Aggregated KPIs and own KPIs

Level 0

Level 1

Level 2

Business Unit A ❶

OBJ(D) = f (D[1],D[2],D[3]) OBJ(E) = f (E[1],E[2],E[3])

OBJ (A)

OBJ(F) = f (F[1],F[2],F[3])

Objectives status Aggregation

KPI A[1]

OBJ(G) = f (G[1],G[2],G[3])

KPI A[2] KPI B[4] KPI C[3]

AVG* = Weighted Average

Business Unit B ❷

KPI B[3]

KPIs Aggregation

= Data Entry

OBJ (B)

Objectives status Aggregation

KPI B[1]

KPI C[4]

KPI B[2] OBJ(A) = f (OBJ(B),OBJ(C)) A[1] = SUM(B[1],C[1]) or A[1] = AVG*(B[1],C[1])

Business Unit D

KPI B[3] KPI B[4] KPI D[3]

A[2] = SUM(B[2],C[2]) or A[2] = AVG*(B[2],C[2])

KPIs Aggregation

KPI E[3]

OBJ (D)

KPI D[1] KPI D[2] KPI D[3]

OBJ (B) = f (AVG*(OBJ(D),OBJ(E)),B[1],B[2]) B[3] = SUM(D[1],E[1]) or B[3] = AVG*(D[1],E[1])

Business Unit E

B[4] = SUM(D[2],E[2]) or B[4] = AVG*(D[2],E[2])

OBJ (E)

KPI E[1] KPI E[2] KPI E[3]

Business Unit C ❸ OBJ (C)

Objectives status Aggregation

KPI C[1] KPI C[2] KPI C[3]

KPI C[4]

Full KPIs Aggregation

OBJ(C) = f (AVG*(OBJ(F),OBJ(G)),C[4]) C[1] = SUM(F[1],G[1]) or C[1] = AVG*(F[1],G[1]) C[2] = SUM(F[2],G[2]) or C[2] = AVG*(F[2],G[2]) C[3] = SUM(F[3],G[3]) or C[3] = AVG*(F[3],G[3])

Business Unit F OBJ (F)

KPI F[1] KPI F[2] KPI F[3]

Business Unit G OBJ(G)

KPI G[1] KPI G[2] © 2015 – Strategic Systems Consulting. All rights reserved

KPI G[3]

CASE #5: MIXED ALIGNMENT & CASCADING (b) Business Units’ Objectives’ statuses calculated based either ❶ on the Aggregated KPIs of the Child Business Units (*) or ❷ on the statuses of the Child Business Units’ objectives or ❸ on a combination of the statuses of the Child Business Units’ objectives and own KPIs

Level 0

Level 1

Level 2

Business Unit A ❷

OBJ(D) = f (D[1],D[2],D[3]) OBJ(E) = f (E[1],E[2],E[3])

OBJ (A)

KPI A[1] KPI A[2] KPI A[3] KPI C[4]

KPIs Aggregation

AVG* = Weighted Average

= Data Entry

OBJ (B)

Objectives status* Aggregation

KPI B[1]

A[1] = SUM(B[1],C[1]) or A[1] = AVG*(B[1],C[1])

A[3] = SUM(B[3],C[3]) or A[3] = AVG*(B[3],C[3])

OBJ(G) = f (G[1],G[2],G[3])

Business Unit B ❶

OBJ(A) = f (OBJ(B),OBJ(C))

A[2] = SUM(B[2],C[2]) or A[2] = AVG*(B[2],C[2])

OBJ(F) = f (F[1],F[2],F[3])

Objectives status Aggregation

KPI B[2]

Business Unit D

KPI B[3] OBJ (B) = f (B[1],B[2],B[3]) or * OBJ (B) = AVG*(OBJ(D),OBJ(E)) B[1] = SUM(D[1],E[1]) or B[1] = AVG*(D[1],E[1])

Full KPIs* Aggregation

OBJ (D)

KPI D[1] KPI D[2] KPI D[3]

B[2] = SUM(D[2],E[2]) or B[2] = AVG*(D[2],E[2])

Business Unit E

B[3] = SUM(D[3],E[3]) or B[3] = AVG*(D[3],E[3])

OBJ (E)

KPI E[1] KPI E[2] KPI E[3]

Business Unit C ❸ OBJ (C)

Objectives status Aggregation

KPI C[1] KPI C[2] KPI C[3]

KPI C[4]

KPIs Aggregation

KPI F[3] KPI G[3]

OBJ(C) = f (AVG*(OBJ(D),OBJ(E)),C[3],C[4]) C[1] = SUM(F[1],G[1]) or C[1] = AVG*(F[1],G[1]) C[2] = SUM(F[2],G[2]) or C[2] = AVG*(F[2],G[2]) (*) The Child Business Units Full KPIs’ Aggregation has the same impact on the Parent Business Unit’s objective status as the Child Business Units’ objectives’ status aggregation © 2015 – Strategic Systems Consulting. All rights reserved

Business Unit F OBJ (F)

KPI F[1] KPI F[2] KPI F[3]

Business Unit G OBJ(G)

KPI G[1] KPI G[2] KPI G[3]