Improving Tourist Development Tax Performance Through Use of a Balanced Scorecard

1. Improving Tourist Development Tax Performance Through Use of a Balanced Scorecard Douglas Katez Tax Auditor 2012 FTDTA Conference

3. Introduction • Why measure performance? • What is a Balanced Scorecard and why should I use one? • A brief history • How to build a Balanced Scorecard • How to use a Balanced Scorecard • Examples & Results

4. Why measure performance? Be able to answer these questions: Is my department performing better than it did last year? How will I know what good performance looks like? How do we know what we are doing well? How do we know what needs improvement? How can we justify resource requests? How can I show the taxpayers we are doing a good job?

5. What is a balanced scorecard? “A strategic planning and management system used to align business activities to the vision statement of an organization.” It attempts to translate the vision and mission into the practicalities of managing business at all levels.

6. Why use a balanced scorecard? Keeps the daily focus on strategic planning and the organization’s mission statement. Allows for a balance of financial and non-financial concerns of leadership. Provides a defined process and constant feedback for continuous process improvement.

7. Why use a balanced scorecard? A major consideration in performance improvement involves the creation and use of performance measures. A comprehensive set of measures tied to customer and/or organizational performance requirements represents a clear basis for aligning all activities with the organization’s goals. - Malcolm Baldridge Criteria

8. How did we get here? A brief history of balanced scorecard Chapter 1 – Prior to Kaplan and Norton Initially very minimal focus on quality. Focus was on producing quantity. Started to see the results being produced by overseas competitors through their work with quality innovators like Demming, Juran, and Ishikawa. Early attempts at metric driven planning focused solely on financial aspects. Increasing profits and reducing costs was main concern. Quality and employee morale took hits. Started to see loss of market share due to lack of quality.

9. How did we get here? A brief history of balanced scorecard Chapter 2 – Kaplan and Norton Quality experts started to focus on non-financial aspects of management. In the early 1990s, Dr Robert Kaplan and Dr David Norton collaborated on a better way to manage an organization. In 1996 published The Balanced Scorecard. Became the basis for management theories for years to come. Kaplan and Norton became known as the fathers of the balanced scorecard.

10. How did we get here? A brief history of balanced scorecard Chapter 2 – Kaplan and Norton Financial measures tell the story of past events, an adequate story for industrial age organizations for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation. - Kaplan & Norton

11. How did we get here? A brief history of balanced scorecard Chapter 3 – The next steps… The balanced scorecard gets updated multiple times. Reflects the idea of continuous improvement. The balanced scorecard becomes one of the main management systems of the last 15 years. Currently over 4,000 books available on Amazon if you search for balanced scorecard. The Baldridge and Sterling programs are established and incorporate many aspects of the balanced scorecard into their systems for performance measurement.

12. What does a balanced scorecard look like? 1st Generation Balanced Scorecard Linked individual measurements to 4 general perspectives. The perspectives were considered main topic areas to track. • Financial – How do we look to shareholders? • Customer – How to customers see us? • Internal Processes – What must we excel at? • Learning and Growth – How can we continue to improve and create value?

13. What does a balanced scorecard look like? 2nd Generation Balanced Scorecard Incorporated strategic objectives into the perspectives to better focus strategic planning. Developed a strategy map to show the interrelationships between the different strategic objectives and perspectives.

14. What does a balanced scorecard look like? 3rd Generation Balanced Scorecard Included a destination statement or vision statement into the strategy map. Tried to define what success looked like. Linked measurements directly to strategic objectives instead of perspectives. If a measure doesn’t affect the strategic plan, why is it being measured?

16. Measurements There are 5 main types of measurements: • Input • Output • Efficiency • Effectiveness • Outcome

17. Measurements Input Measurements Indicate the amount of resources used. Not a measure of performance but used as a basis for calculations. Examples: Number of FTEs Number of incoming phone calls Number of rental properties in county

18. Measurements Output Measurements Indicate the amount of work completed or services provided. Not a measure of performance but used as a basis for calculations. Examples: Number of returns processed Number of audits performed Number of phone calls answered

19. Measurements Inputs / Outputs Communicate what we did, but not how well we did it. Provide indicators of workload. Do not tell us how efficiently or effectively we have performed a service.

20. Measurements Efficiency Measurements Expressed as a ratio between amount of input and amount of output. Communicates how efficiently a service has been provided. Usually related to cost or productivity. Examples: Number of returns processed per FTE Processing cost per return Ratio of actual operating cost to budget

21. Measurements Effectiveness Measurements Indicates quality of service provided Measures customer satisfaction, timeliness, accuracy, and availability. Examples: Percent of customers satisfied with a particular service Average turn around time for applications Percentage of returns filed electronically

22. Measurements Outcome Measurements Measures mission accomplishment at a high level. Percent the strategic objective has been achieved. Answers the questions: So what? Is anybody better off? Examples: Percentage of citizens satisfied with the Tax Collector Economic impact from tourists Number of new jobs created

23. Measurements Efficiency / Effectiveness / Outcome Show how well we performed as opposed to what we did. Describe what has been accomplished as a result of the service. Demonstrate to what extent a goal has been achieved.

24. Measurements Characteristics of SMART Measures • S – Specific • M – Measurable • A – Achievable • R – Relevant (Realistic) • T - Timely

25. Measurements Analysis Types of analysis utilized: • Trends – Are we getting better or worse? Why? • Correlations – What is affecting what? Are two measures trending the same way because of each other • Comparisons – Are we doing better than we did last year? Are we doing better than our peers? • Benchmarking – How do we compare to the best of the best? How do we compare to our ultimate goal?

26. Managing with a balanced scorecard Management by balanced scorecard is management by fact. It is basing your decisions on reality not guesses. Measurements can only serve as indicators and do not show cause and effect. It is up to you to figure out why a result occurred and how to improve it. A scorecard is only effective if it is regularly communicated to all levels of the organization and if feedback from all levels contributes to improvements. A scorecard should be in a state of continuous review and improvement.

27. What It Is and What Its Not • What It Is: • Management Tool • Results Oriented System • Technique for highlighting service efforts and accomplishments • Method to identify success and opportunity for improvement • Method to assess customer satisfaction • What It Is Not: • Quick fix solution • Data collection exercise • Punitive system • Substitute for good management practices and in-depth analysis

28. Improving Tourist Development Tax Performance Through Use of a Balanced Scorecard **Screenprint from Active Strategy Enterprise 10**

29. Successful Outcomes In the year we have been using the balanced scorecard: • Delinquent accounts reduced by over 50% from 5.6% to 2.68% of total accounts • Customer Satisfaction being successfully measured for first time. Current customer satisfaction over 99%. • Returns being filed online increased from 25% to 45% with a large savings in processing costs and time.

30. Improving Tourist Development Tax Performance Through Use of a Balanced Scorecard Questions?