A Balanced Scorecard Approach Incorporating Intangible Benefits Helps Articulate the Benefits of SCADA and Other Automation Projects
By Dave Kubel
SCADA projects frequently support strategic initiatives not focused on purely economic benefits. However, many utilities often look first to an economic return on investment (ROI) analysis to justify projects. Experience shows that using an economic evaluation, such as an ROI analysis, will often fall short of providing adequate justification to proceed on an automation project.
Most water/wastewater utility executives are quite familiar with calculating savings due to tangible benefits such as labor savings, energy savings, chemical costs, reduction in fines and other quantifiable factors. But difficulties often arise when trying to quantify intangible benefits such as increased reliability, emergency response capabilities, avoided cost due to enhanced maintenance, improved operations, business process improvement and better regulatory compliance.
One approach for incorporating intangible benefits is the use of a Balanced Scorecard, first introduced by Kaplan and Norton in their book “The Balanced Scorecard.” The Balanced Scorecard is a strategic management tool that provides a framework for organizations to break down and measure strategic goals, balancing both financial and non-financial elements. Once created, it can become a benchmark for evaluating projects. This methodology, although initially focused on the private sector, has been used successfully in the public sector.
Figure 1 – A balanced scorecard approach takes intangible factors into account. Courtesy of Tesco Controls, Inc., Copyright 2019.
The Balanced Scorecard approach breaks strategic goals down into four categories:
- Financial Impacts – are we investing responsibly and are there tangible benefits?
- Customer Impacts – are we providing good service and how do our customers view us?
- Business Process Impacts – are we efficient and providing value?
- Learning and Growth – are we improving as an organization?
Although not specifically created for evaluating SCADA projects, the Balanced Scorecard approach provides flexibility and can be tailored to the specific organization or issue being analyzed. An adaptation of the balanced scorecard concepts for automation projects is described in the AWWA Research Foundation book “Costs and Benefits of Complete Water Treatment Plant Automation.” The scorecard can be broken down into two parts when evaluating SCADA projects: organizational and project-specific considerations. Organizational considerations are customized for water/wastewater utility requirements, while project-specific considerations are added to assess how automation or technology projects impact overall utility objectives.
Each of the four categories for the strategic goals listed above are further broken down into the strategic objectives for the utility, starting with the vision and mission of the organization.
Figure 2 – Example of how financial considerations can be broken down for a particular water/wastewater utility. Courtesy of Tesco Controls, Inc., Copyright 2019.
Project specific considerations are then identified for associated strategic utility objectives, with each rated as to how it affects the associated strategic objective. Using the financial impacts listed above, a representative scorecard is depicted in Figure 3.
Figure 3 – Project-specific considerations can be grouped to match organizational objectives. Courtesy of Tesco Controls, Inc., Copyright 2019.
In the example, the project being considered results in minor staff and energy savings, but it is most important for supporting service area growth.
A Balanced Scorecard analysis would include the other consideration areas including customer impacts, business process impacts and learning and growth. Once the overall ratings are determined for the project, a more traditional life-cycle cost/benefit analysis is performed. The resulting Balanced Scorecard provides an understanding of the project’s strategic value to the organization, combining both tangible and intangible elements. This provides a much more holistic look at the business value than an economic analysis alone.
Dave Kubel
Vice President of Technical Services | Tesco Controls Inc.Dave Kubel, P.E., is vice president of technical services for Tesco Controls Inc. Kubel has more than 30 years of engineering, management and sales experience in plant automation and controls for the water industry.
