Understanding PeopleSoft Enterprise Scorecard

This chapter discusses:

Balanced scorecard theory.
Key terms.
PeopleSoft Enterprise Scorecard components.
SetIDs, business units, and currency conversion.
Security considerations.

Balanced Scorecard Theory

This section contains an overview of balanced scorecard theory. While the Scorecard application was based on this theory, its design is flexible enough not to be limited by it. For a detailed discussion of the balanced scorecard theory, including examples and case studies, please refer to the book The Balanced Scorecard by Robert S. Kaplan and David P. Norton.

The balanced scorecard concept arose out of a recognized need to measure success on more than just financial statements. Focusing strictly on financial results doesn't provide an organization with the information that it needs to prosper in today's environment. Financial results provide an indication of past performance, but don't provide you with insight into your current status or where you'll likely be in the future. In addition, the balanced scorecard provides a framework and language that enable you to describe your strategy in a consistent, reliable manner.

The ultimate goal behind balanced scorecard theory is to measure the factors that create value for an organization and directly influence its ability to prosper. To do that, you must determine the answer to these questions:

Where is the organization going?
What is our strategy?
What do we need to do well to achieve our strategy?

Measuring Across a Range of Indicators

With a true balanced scorecard, strategy and corresponding measurements are balanced across four areas: financial, customer, internal, and learning.

Financial	The goals in the financial perspective should serve as the focus for the goals in all the other perspectives. They indicate the ultimate financial performance to expect for a given balanced scorecard. Some examples are return on investment, profitability, sales growth, revenue, and cash flow. Financial goals typically differ depending on the maturity of the organization, because younger organizations are usually focused on growth while mature ones are more likely to be interested in maintaining existing market share and increasing it over time.
Customer	In the customer perspective, you identify the customer and market segments within which the organization chooses to compete. Typical measurements within this perspective focus on market share, customer retention, customer acquisition, customer satisfaction, and customer profitability.
Internal	This perspective focuses on the processes within the organization that are most critical for attaining customer and shareholder goals. In most cases, the objectives and measures of this perspective are developed after the financial and customer perspectives are defined. Typical measurements within this perspective focus on innovation, operations, and post-sale service.
Learning	This perspective focuses on developing objectives and measures to drive learning within an organization. Typically, this perspective considers employee capabilities, information systems, motivation, empowerment, and alignment. The objectives in this perspective drive the success of those in the first three perspectives.

The Scorecard application enables you to define your own perspectives.

See (Optional) Establishing Additional Perspectives.

Each business determines its own performance indicators. A bank might look at customer-to-account ratios, for instance, while a hospital might consider numbers of doctor referrals and patient satisfaction surveys. The data can come from back-office applications such as enterprise resource planning (ERP) systems, datamining and customer analytics software, or competitive reports and industry averages.

Balancing Measures

In addition to balancing your strategy, the objects that you use to measure your success should be balanced, and you should take into consideration:

Performance drivers (leading indicators) and outcomes (lagging indicators).

An effective balanced scorecard needs a combination of both performance drivers and outcome measures. Without outcome measures such as profitability, market share, or customer satisfaction, among others, a scorecard does not provide an indication of how well the organization is performing. Without performance drivers, such as objectives that are categorized within the internal and learning perspectives, you don't have an indication of whether your strategy is working. Performance drivers also communicate what steps are required to achieve the strategy.
Internal and external indicators.

Try to balance measures across indicators internal to your organization, such as sales growth rate, as well as those that are external, such as stock price, or customer satisfaction rating.
Qualitative and quantitative measures.

Try to include measures that provide both qualitative information, such as employee satisfaction level, and quantitative information, such as sales amount.

Linking Objectives and Measures

Objectives and measures need to be linked through cause and effect relationships. Causal paths from all the measures on a scorecard should ultimately link to financial objectives. This not only indicates how each measure impacts the financial goals, but it also illustrates to all members of the organization what impact their actions have on the outcome of the overall strategy.

The following diagram shows an example of how objectives and measures link with cause and effect relationships:

Cause and effect example

Applying Balanced Scorecard Theory

We've aligned our application with the balanced scorecard theory established by Robert S. Kaplan and David P. Norton so that you can fully benefit from the knowledge upon which it is based. The Scorecard application provides you with the tools that you need to translate your strategy into a scorecard, communicate it throughout your organization, measure progress towards achieving defined goals, inform key individuals automatically about scorecard status, and determine why problems occur. The following diagram depicts the hierarchy of Scorecard elements and how they associate with your organization's strategic goals:

Measuring factors that create value for an organization

Key Terms

We use several terms regarding scorecards, strategy trees, and their components with which you need to be familiar. Because this terminology is still evolving and being standardized within the business community, you should understand the context in which we use each term.

Strategy or Strategy Tree	The hierarchical relationships of the objectives that your organization is striving to achieve. This is used as the foundation for a scorecard, and typically balanced across four major categories: financial, customer, learning, and internal. It is created from strategy components, which include vision, strategic thrusts, and critical success factors.
Vision	The overall mission of an organization. This is usually the highest level on a strategy tree. Vision is optional; you aren’t required to have a vision component on each strategy tree.
Strategic Thrusts	The main goals that your organization is striving to achieve. In your strategy hierarchy, strategic thrusts are directly subordinate to vision (the next level below vision on your strategy tree). More specific descriptions of what you must do to achieve each goal are defined by CSFs. KPIs may be attached to strategic thrusts as long as no CSFs are below them, but typically strategic thrusts are not directly associated with KPIs.
Critical Success Factors (CSFs)	The key factors or objectives that must be accomplished for a particular strategic thrust. These are the specific tasks that an organization must do well or excel at to achieve its goals. In your strategy hierarchy, they are directly subordinate to strategic thrusts. KPIs are attached to CSFs.
Key Performance Indicators (KPIs)	The data value or calculation from the Performance Management Warehouse tables upon which an assessment is determined. KPIs are calculated values by which you assess your critical success factors, strategic thrusts, and strategic initiatives. Defined using KPI manager, they link to specific data within the Performance Management Warehouse. KPIs are not attached as nodes on a strategy tree; instead, they are associated with a strategy component or strategic initiative by means of the Strategy KPIs page.
KPI Dimension Members	The discreet objects, or data rows, that are defined by a KPI. For example, for an employee base pay KPI, the KPI dimension members are employees (by employee ID).
Strategy Component	An element that is part of your strategy hierarchy. Vision, strategic thrusts, and critical success factors are all strategy components.
Perspective	The categories within which you classify KPIs and strategy components. Usually, four are available: financial, customer, internal, and learning. Some scorecard views display assessments that are grouped by perspective.
Strategic Initiatives	The actions that an organization must take to implement a critical strategic goal. Strategic initiatives may be temporary or short-term in nature; they are a scheme, program, or special project that your organization wants to undertake. They are not part of nor do they use a strategy tree, however, strategy components and KPIs are associated with strategic initiatives. For example, a project such as “Year 2000 Compliance” could be categorized as a strategic initiative. The system includes pages for defining and viewing strategic initiatives.
Scorecard	The views of a strategy tree’s components and KPIs and their assessment results.
Portfolio	A group of scorecards or KPIs that are related in some way.
Dimension	An attribute such as time, product, or location that is used to categorize or identify a particular piece of data. In the PeopleSoft Enterprise Performance Management product line, some examples of dimensions are product, customer, and channel.
Assessment	The outcome of comparing actual results with targeted goals. This is similar to a grading system. Assessments indicate how successfully an organization is achieving its goals. Assessment images appear on the scorecard.

This diagram shows the strategy components as they might typically appear on a strategy tree:

Strategy tree components

ST is used as an abbreviation for strategic thrust. Likewise, CSF is an abbreviation for critical success factor.

PeopleSoft Enterprise Scorecard Components

The Scorecard application has two main functional areas: KPI manager and the scorecard. You use KPI manager to define the KPIs that you want to measure. After KPIs are defined, you can use them in various Enterprise Performance Management applications. KPIs serve as the measures on your scorecard for your critical success factors, and indicate whether you’re successful at achieving your goals.

You use the scorecard to describe your strategy, define scorecards, and monitor assessments, which indicate the level of success that is attained towards achieving the targeted results. The scorecard itself is a visual representation of the assessments of your various scorecard components. It uses an interactive graphical interface with links to view different aspects of the scorecard.

Keep in mind that while you typically define the components of a scorecard from the top down, because of data interdependencies, you use the Scorecard application to depict your scorecard from the bottom up. In other words, you should determine the structure and related measurements for your scorecard before using our application.

SetIDs, Business Units, and Currency Conversion

SetIDs or business units are mapped separately in the Performance Management Warehouse and do not use the structure that is established in other PeopleSoft application tables. If the data that you import has a different base currency than the base currency for the data warehouse table to which you import the source data, you must define a currency conversion rule. Keep these basic principles in mind when you move data into the Performance Management Warehouse and when you work with the PeopleSoft Enterprise Scorecard system:

Every data warehouse table that is a fact table (*_F00) is keyed by business unit.

Fact tables contain monetary amounts in a given currency (CURRENCY_CD) and in a base currency equivalent amount (BCE_AMT) if the original data was in a different base currency prior to import into the system.
Every data warehouse table that is a dimension (*_D00) or reference (*_R00) table is keyed by setID.
Only one base currency code exists per setID.

Any setID that is mapped to another setID must have a common base currency code. Any business unit must map to a setID with a common currency code.
Only one business unit is allowed per scenario, and every business unit has one base currency.

So every scenario can have only one base currency.
The basic extract, transform, and load rule (ETL rule) for importing a PeopleSoft application’s source table data is to first find the base currency for a given setID from the corresponding business unit.

If the imported data currency code does not equal the base currency code for the Performance Management Warehouse SetID and business unit, the ETL system calculates and supplies the amount for the base currency equivalent field.
For employee-level tables, the rule is to find the employee ID on the Job table, and use the corresponding business unit and base currency.

For employee-level tables such as JOB_F00, base currency is derived from the business unit.
KPIs are keyed by setID; scorecards are keyed by business unit .

During KPI processing, to properly convert any monetary amounts that are not in a business unit’s base currency, the system uses a currency conversion rule named KP_CONVERT (for each setID). We provide this rule as part of the sample data within the SHARE setID. To review currency rules, access the Currency Conversion Rule page by selecting EPM Foundation, Data Enrichment Tools, Currency Conversion, Identify Rules. Unless you have specific reasons for configuring it differently, you should set up this rule with the selections shown in this example; Rate Type is the one field that you might modify.

When the rate type is blank, the system uses the rate type that is defined for each business unit. This enables each business unit that shares this conversion rule to use different rate types for the conversion. Therefore, you could set up one setID, and all business units within it could use this conversion rule.

If you enter a rate type, then all business units within that setID will use the rate type that is specified for KPI currency conversion. If you need to use a different rate type for a given business unit, it must be defined under a different setID. Therefore, when you enter the rate type, if you need to have any business units that use different rate types (and accordingly, different conversion rules), you’ll need to use multiple setIDs.

On the KPI Definition - Definition page, the Measure Type field should be set to Currency for any KPIs that involve currency amounts. Selecting this option instructs the system to automatically convert foreign currency amounts to the business unit’s base currency during KPI processing.

Security Considerations

Applications such as Scorecard may contain confidential and sensitive human resources data or corporate financial data, requiring an additional level of security to grant users access to sensitive system data on a discretionary basis. The Scorecard application uses the security that is defined in the Performance Management Warehouse application.

Users that enter KPI data must be granted security access to the PF_EXPR_DEFN_BC component interface.