balance scorecard art of strategy execution

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DR WILFRED MONTEIROEXECUTIVE DIRECTOR

SYNERGY MANAGEMENT ASSOCIATESwww.synergymanager.net

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T h e m a t e r i a l i n t h i s P D FF I L E i s c o p y r i g h t 2 0 1 2

D R W I L F R E D M O N T E I R O –a l l r i g h t s r e s e r v e d

a n y c i r c u l a t i o n s h o u l d b ed o n e o n l y w i t h w r i t t e n

p e r m i s s i o n

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T h e m a t e r i a l i n t h i s P D FF I L E i s c o p y r i g h t 2 0 1 2

D R W I L F R E D M O N T E I R O –a l l r i g h t s r e s e r v e d

a n y c i r c u l a t i o n s h o u l d b ed o n e o n l y w i t h w r i t t e n

p e r m i s s i o n

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• The Balanced Scorecard is one ofmost influential management ideaswhich provides a framework fortranslating an abstract strategy intospecific, concrete objectives,measures, indicators and actions.

• It combines a ‘balanced’(cause/effect) view with a ‘scoring’(measuring/tracking) view. It focuseson aligning the goals of businessunits, teams and individualemployees with the company’soverall business strategy.

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• The Balanced Scorecard is one ofmost influential management ideaswhich provides a framework fortranslating an abstract strategy intospecific, concrete objectives,measures, indicators and actions.

• It combines a ‘balanced’(cause/effect) view with a ‘scoring’(measuring/tracking) view. It focuseson aligning the goals of businessunits, teams and individualemployees with the company’soverall business strategy.

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• A great Balanced Scorecard breaksa business strategy down intospecific and measurable chunks. Italso keeps the long-term strategicgoals visible on the radar. Theultimate goal of a BalancedScorecard is to experience StrategyExecution as a continuous process.

• Today, the Balanced Scorecardprovides much more than multi-view measurement; in manyorganizations, it’s an essentialmanagement system and acornerstone of successful StrategyExecution. .

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• A great Balanced Scorecard breaksa business strategy down intospecific and measurable chunks. Italso keeps the long-term strategicgoals visible on the radar. Theultimate goal of a BalancedScorecard is to experience StrategyExecution as a continuous process.

• Today, the Balanced Scorecardprovides much more than multi-view measurement; in manyorganizations, it’s an essentialmanagement system and acornerstone of successful StrategyExecution. .

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TWENTY YEARS OF THE BALANCEDSCORECARD...

why do people view it with caution if notwith cyicism & suspicion ???

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THE USUAL GROUSE ....• Many companies have gone through the process of introducing the

Balanced Scorecard. It’s a good idea to do some research to get a feelingfor your organization’s particular situation. This will help avoid some ofthe classic pitfalls. Typical mistakes that companies have made in the pastinclude:

• Senior management is not convinced and shows little commitment• The Scorecards are developed by ‘the happy few’• The internal/external project members have limited or only theoretical

knowledge• The Balanced Scorecard is only used by top management• The Balanced Scorecard stays too long at the development stage before

being launched and used• There are not enough links to the strategy and planning processes• The content of the Balanced Scorecard is unrealistic• The Balanced Scorecard is only used for remuneration purposes

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• Many companies have gone through the process of introducing theBalanced Scorecard. It’s a good idea to do some research to get a feelingfor your organization’s particular situation. This will help avoid some ofthe classic pitfalls. Typical mistakes that companies have made in the pastinclude:

• Senior management is not convinced and shows little commitment• The Scorecards are developed by ‘the happy few’• The internal/external project members have limited or only theoretical

knowledge• The Balanced Scorecard is only used by top management• The Balanced Scorecard stays too long at the development stage before

being launched and used• There are not enough links to the strategy and planning processes• The content of the Balanced Scorecard is unrealistic• The Balanced Scorecard is only used for remuneration purposes

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THE MAIN OBSTACLE

• Their main objection is thatit does not provide practicalguidance for deployment,and some executives view itas a "quick fix" that caneasily be installed in theirorganizations.

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• Their main objection is thatit does not provide practicalguidance for deployment,and some executives view itas a "quick fix" that caneasily be installed in theirorganizations.

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• The fault lies in making it a one-shotadventure when if fact Implementing abalanced metrics system is an evolutionaryprocess, not a one-time task that can bequickly checked off as “completed”. Ifexecutives do not recognize this from thebeginning and fail to commit to the long term,then the organization will realizedisappointing results.

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• The fault lies in making it a one-shotadventure when if fact Implementing abalanced metrics system is an evolutionaryprocess, not a one-time task that can bequickly checked off as “completed”. Ifexecutives do not recognize this from thebeginning and fail to commit to the long term,then the organization will realizedisappointing results.

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How to succeed inthe balance scorecard

implementation

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How to succeed inthe balance scorecard

implementation

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Manage the introduction of the BalancedScorecard as a change project

The Balanced Scorecard impacts the way yourmanagers manage – so the implementationeffort will therefore demand change effortfrom everyone. Increase your success ratedramatically by managing your BSCintroduction as a change project, rather thanthe introduction of an instrument.

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The Balanced Scorecard impacts the way yourmanagers manage – so the implementationeffort will therefore demand change effortfrom everyone. Increase your success ratedramatically by managing your BSCintroduction as a change project, rather thanthe introduction of an instrument.

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KNOW WHATYOU WANT TO ACHIEVE

• A Balanced Scorecard can serve manypurposes and offers four distinct benefits. Youwon’t be able to reap all of them in the firstyear, so choose carefully. Once you make achoice, stick to it and make sure you get thosebenefits before focusing on something else. Ilike to focus on the cascading and learningpart first, on the communication second,moving onto the measuring part last.

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• A Balanced Scorecard can serve manypurposes and offers four distinct benefits. Youwon’t be able to reap all of them in the firstyear, so choose carefully. Once you make achoice, stick to it and make sure you get thosebenefits before focusing on something else. Ilike to focus on the cascading and learningpart first, on the communication second,moving onto the measuring part last.

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KISS FORMULA (KEEP IT SHORT AND SIMPLE)

• You have to keep in mind that even though the balancescorecard is a big initiative, it’s okay to set basic measuresthat can evolve into something more meaningful as timeprogresses.

• This makes me think of the quote, “Perfect is the enemy ofgood enough.”

• Many times, people try to craft elaborate measures—butsometimes it’s best to keep it simple. You don’t want tooverburden everyone on the team so they start thinking ascorecard will be more work than it’s worth.

• In a sense, you have to collect data and be okay with the75% solution. As you go on throughout the years and collectmore data, you will be able to determine the bestinformation to collect and you’ll become better at themeasure-making process.

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• You have to keep in mind that even though the balancescorecard is a big initiative, it’s okay to set basic measuresthat can evolve into something more meaningful as timeprogresses.

• This makes me think of the quote, “Perfect is the enemy ofgood enough.”

• Many times, people try to craft elaborate measures—butsometimes it’s best to keep it simple. You don’t want tooverburden everyone on the team so they start thinking ascorecard will be more work than it’s worth.

• In a sense, you have to collect data and be okay with the75% solution. As you go on throughout the years and collectmore data, you will be able to determine the bestinformation to collect and you’ll become better at themeasure-making process.

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MANAGING CHANGE REQUIRESSTRONG DRIVING FORCE

• There is no change without strong leadership. It’s that simple.Create a strong core team that involves othersTake your timeselecting the people who will support the Scorecard’simplementation.

• Make sure you have people with a good level of businessunderstanding, excellent facilitation skills and the ability tomobilize people.

• Motivate the core team to involve as many people as possiblethrough workshops to ensure enough buy-in before you moveforwards. Critical mass is key to propel a transformationforward.

•

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• There is no change without strong leadership. It’s that simple.Create a strong core team that involves othersTake your timeselecting the people who will support the Scorecard’simplementation.

• Make sure you have people with a good level of businessunderstanding, excellent facilitation skills and the ability tomobilize people.

• Motivate the core team to involve as many people as possiblethrough workshops to ensure enough buy-in before you moveforwards. Critical mass is key to propel a transformationforward.

•

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EFFICIENT DATA COLLECTION AND REPORTING

• A primary reason that companies overemphasize financialmetrics at the expense of other important operatingvariables is the simple fact that systems already exist forcollecting and reporting financial measures.

• Companies that deliberately plan to define the vital fewmetrics and commit the resources to automate datacollection and subsequent reporting tend to achieve goodresults. Unfortunately, in most organizations, if collectingmetrics data consumes too much time and energy, theywill not be captured.

• That is why it is important to prioritize key performanceindicators so you can be confident that your investment inmetrics is spent on the information that will be mostrelevant to improving organizational performance.

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• A primary reason that companies overemphasize financialmetrics at the expense of other important operatingvariables is the simple fact that systems already exist forcollecting and reporting financial measures.

• Companies that deliberately plan to define the vital fewmetrics and commit the resources to automate datacollection and subsequent reporting tend to achieve goodresults. Unfortunately, in most organizations, if collectingmetrics data consumes too much time and energy, theywill not be captured.

• That is why it is important to prioritize key performanceindicators so you can be confident that your investment inmetrics is spent on the information that will be mostrelevant to improving organizational performance.

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EFFICIENT DATA COLLECTION AND REPORTING

• The mantra in business intelligence is toprovide the “right information to theright people at the right time.”

• Based on the key measurementsinvolved, analysts can dissect theinformation needs through techniquessuch as data modeling and dimensionalmodeling.

• Those approaches support the analysis,extraction and integration of the rightinformation to support the keymeasurements. The informationprovided could be historical, actionableand/or predictive. It would typicallyreinforce or change the course of actionor behavior of the people performingthe business process.

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• The mantra in business intelligence is toprovide the “right information to theright people at the right time.”

• Based on the key measurementsinvolved, analysts can dissect theinformation needs through techniquessuch as data modeling and dimensionalmodeling.

• Those approaches support the analysis,extraction and integration of the rightinformation to support the keymeasurements. The informationprovided could be historical, actionableand/or predictive. It would typicallyreinforce or change the course of actionor behavior of the people performingthe business process.

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COMMUNICATE PROCESS BEFORECONTENT

•start right away by communicating theadvantages, project timings, roles andresponsibilities of the Balanced Scorecard.Proactive, no-nonsense communicationprevents misunderstandings and creates buy-in. Take a look at some of the communicationbest-quite useful.

•

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•start right away by communicating theadvantages, project timings, roles andresponsibilities of the Balanced Scorecard.Proactive, no-nonsense communicationprevents misunderstandings and creates buy-in. Take a look at some of the communicationbest-quite useful.

•

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START WITH AN EXTERNAL FOCUS• One major criticism of the Balanced Scorecard is that it

encourages an internal focus. This is not as much an indictmentof the principle as it is the way companies put the principle intopractice. To help overcome this problem, you should ALWAYSstart with an external focus – the view of yourorganization’s external environment .

• The goal is to achieve a balance of enterprise level metrics asyou assess the organization’s market, shareholders, competitors,employees and stakeholders. Executives will use data about theirexternal environment to assess Strengths, Weaknesses,Opportunities and Threats (SWOT).

• This will then guide them to gaps in their enterprise levelmetrics. Then, all other levels of metrics are tested for alignmentwith the enterprise level metrics, thereby ensuring that eveninternal metrics link to external performance drivers.

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• One major criticism of the Balanced Scorecard is that itencourages an internal focus. This is not as much an indictmentof the principle as it is the way companies put the principle intopractice. To help overcome this problem, you should ALWAYSstart with an external focus – the view of yourorganization’s external environment .

• The goal is to achieve a balance of enterprise level metrics asyou assess the organization’s market, shareholders, competitors,employees and stakeholders. Executives will use data about theirexternal environment to assess Strengths, Weaknesses,Opportunities and Threats (SWOT).

• This will then guide them to gaps in their enterprise levelmetrics. Then, all other levels of metrics are tested for alignmentwith the enterprise level metrics, thereby ensuring that eveninternal metrics link to external performance drivers.

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DEFINE YOUR CASCADING PROCEDURE• It’s important to select a cascading approach upfront. You

have several options to cascade objectives, measures,targets and initiatives. Your choice depends on youroverall goal.

• For example, cascading by regions will help you empowera geographical approach, cascading by business lines willhelp you achieve higher autonomy and accountability foryour profit centers.

• Cascading themes, like innovation, customer experienceor green economy, will help you improve the coordinationbetween several apparently disconnected organizationalunits around a particular theme.

•

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• It’s important to select a cascading approach upfront. Youhave several options to cascade objectives, measures,targets and initiatives. Your choice depends on youroverall goal.

• For example, cascading by regions will help you empowera geographical approach, cascading by business lines willhelp you achieve higher autonomy and accountability foryour profit centers.

• Cascading themes, like innovation, customer experienceor green economy, will help you improve the coordinationbetween several apparently disconnected organizationalunits around a particular theme.

•

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DOES BSC COMMUNICATES YOUR STRATEGY

• Cascading strategy is all about thecollective understanding of theoverall company strategy. And whilethis strategy can be designed by justa few people, the Strategy Executiondemands effort from a much biggercrowd to succeed.

• Thanks to the visualization of thecause and effect relationships, theScorecard helps to get the strategyinto the Head, Heart and Hands of allyour employees. A strategy needs tocome alive at each of these threelevels.

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• Cascading strategy is all about thecollective understanding of theoverall company strategy. And whilethis strategy can be designed by justa few people, the Strategy Executiondemands effort from a much biggercrowd to succeed.

• Thanks to the visualization of thecause and effect relationships, theScorecard helps to get the strategyinto the Head, Heart and Hands of allyour employees. A strategy needs tocome alive at each of these threelevels.

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HOW MUCH DATA CRUNCHING IS GOOD?

• Kaplan and Norton’s balanced scorecardframework recommends no more than 20key performance indicators (KPIs) within 4perspectives: financial, customer, internal,learning and growth.

• Some other experts suggest enhancingkey measurements by removing thetraditional budget process recommendless than 12 KPIs. Some recommend the 4balanced scorecard perspectives plus 2more related to employee satisfaction andenvironment/community.

• Regardless of the approach you select, youshould adopt and communicate a strategicplanning framework that will fit yourbusiness and help identify the keymeasurements.

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• Kaplan and Norton’s balanced scorecardframework recommends no more than 20key performance indicators (KPIs) within 4perspectives: financial, customer, internal,learning and growth.

• Some other experts suggest enhancingkey measurements by removing thetraditional budget process recommendless than 12 KPIs. Some recommend the 4balanced scorecard perspectives plus 2more related to employee satisfaction andenvironment/community.

• Regardless of the approach you select, youshould adopt and communicate a strategicplanning framework that will fit yourbusiness and help identify the keymeasurements.

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• Be honest with your stakeholdersabout timing and results. Setting upthe basics may take a few weeks,but seeing real benefits will take farlonger. Don’t oversell yourself. Makeyour stakeholders aware upfrontthat implementing a BalancedScorecard is a transformationaljourney better approached as amarathon than as a sprint.

•

SET THE EXPECTATIONS RIGHTFROM THE START

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• Be honest with your stakeholdersabout timing and results. Setting upthe basics may take a few weeks,but seeing real benefits will take farlonger. Don’t oversell yourself. Makeyour stakeholders aware upfrontthat implementing a BalancedScorecard is a transformationaljourney better approached as amarathon than as a sprint.

•

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The Last word...

• TIME TABLE THE PROCESS: AVOID THE OVERKILL• Regardless of the size and complexity of the organization, 12-

16 weeks is sufficient time to establish key performancemetrics.

• The exact implementation of the key indicators is rarely rightthe first time, so it is better to establish a time table andreserve the opportunity to provide subsequent iterationsbeyond the initial 12 weeks.

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• TIME TABLE THE PROCESS: AVOID THE OVERKILL• Regardless of the size and complexity of the organization, 12-

16 weeks is sufficient time to establish key performancemetrics.

• The exact implementation of the key indicators is rarely rightthe first time, so it is better to establish a time table andreserve the opportunity to provide subsequent iterationsbeyond the initial 12 weeks.

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Dr WILFRED MONTEIRO

• is a nationally acclaimed stalwart in the field ofbusiness management with an illustrious careerspanning over 30 years

• He is a consultant and advisor to Board of Directorsof leading companies & Chambers of Commerce;

• a management trainer of high repute who hasconducted over 2250 seminars in India and abroadin areas of business strategy, marketing &organization development.

• a Visiting Professor to premier managementinstitutes and staff training colleges throughoutIndia.

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• is a nationally acclaimed stalwart in the field ofbusiness management with an illustrious careerspanning over 30 years

• He is a consultant and advisor to Board of Directorsof leading companies & Chambers of Commerce;

• a management trainer of high repute who hasconducted over 2250 seminars in India and abroadin areas of business strategy, marketing &organization development.

• a Visiting Professor to premier managementinstitutes and staff training colleges throughoutIndia.

website: www.synergymanager.net 23

If you have any questions at all please do not hesitate to send a note or call.My email address is: [email protected]

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CONTACT US

Dr Wilfred MonteiroTELE : 91 22 9819843927

EMAIL: [email protected]

website:

www.synergymanager.net

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SYNERGY MANAGEMENT ASSOCIATESsince 1993

Guiding strategic thinking;strategic planning &Strategic execution

balance scorecard art of strategy execution

Leadership & Management