Many corporate managers have been introduced to a corporate management system called the sBalanced Scorecard. Developed at the Harvard Business School by David Norton and Robert Kaplan in the early 1990s, the Balanced Scorecard (BSC) represents the newest and most prolific performance measurement system since Total Quality Management (TQM) and Management by Objectives (MBO). A growing number of organizations are achieving great financial success through the BSC framework, thereby solidifying the BSC a “here to stay” rather than just another passing fad.
According to studies, the BSC is being implemented in nearly two-thirds of North American corporations. Indicative of the system’s growth, many of these implementations are less than six months old. Thus, as a manager, if the system has not yet been encountered, it most likely will be in the near future.
What does this mean to managers?
FIRST, recognize the Balanced Scorecard for what it really represents. Essentially, the BSC is a measurement framework through which organizations define strategic goals at every level in an organization with measures attached to each goal – thus enabling managers to review past and predict future performance and to take corrective improvement action. The BSC is significantly different than other management systems in that it forces organizations to measure only the top few strategic goals and to align every employee behind their interpretation of these goals. Ultimately, the BSC is a proven methodology to execute an enterprise strategy.
SECOND, embrace the power of the Balanced Scorecard. If managers can deftly create their divisional, departmental or team goals, identify useful measurements, and enable those working for them to take predictive action against performance shortfalls, the BSC can truly become a value-added manager’s tool.
THIRD, understand the big picture of enterprise strategy execution. Organizations that have successfully deployed a Balanced Scorecard framework and achieved notable results all followed these 10 steps:
Develop a solid strategy
A solid strategy is the keystone to business success. Without a solid strategy, success is unobtainable. Of course, without execution, a solid strategy is meaningless.
Translate the strategy into a scorecard of clear objectives
By translating a strategy into objectives (short verb-noun statements), managers and front-line employees are provided understand both what is expected and why. To achieve the best results, the scorecard should be focused on no more than ten strategic objectives.
Attach measures to each objective
After translating a strategy into objectives, managers and employees must know if and when the objectives are being achieved. Thus, each objective should be given at least one – but not more than three – measurements that are accurate milestones for achievement.
Cascade scorecards to the front line
Operational management and front-line employees do the actual work that makes strategies happen. Thus, organizations should ultimately develop scorecards at every level in an organization, allowing each person to see how his or her specific job duties align and contribute to the higher-level goals. By cascading scorecards, strategy then becomes “everyone’s” job.
Align existing core processes to objectives
As the scorecards are being deployed, managers need to re-examine their existing core processes and determine if they are linked to the corporate strategy. If such linkages are not found, the processes should be reconsidered. Aligned processes are often the best places to find appropriate measures for lower level scorecards.
Deliver measurement-based performance feedback
Managers should accord each employee in an organization periodic feedback on how his or her individual and corporate measures have progressed. Monthly reviews of scorecard content and related improvement initiatives are an ideal format for this feedback.
Hold people accountable for performance measures
When performance measures go below or above pre-determined thresholds, organizations must hold specific individuals responsible for explaining the reason(s) behind a measurement variance.
Empower work groups to implement improvement initiatives
Managers and employees must be empowered to take corrective action when performance is suffering and to replicate best practices when goals are exceeded.
Link initiatives to the budgeting process
As an organization tracks its performance measures and reacts to shortfalls, the improvement solutions often require budget support. Hence, a formal budget submission and approval process must be integrated into a strategy execution system to ensure that countermeasures are implemented.
Reassessment of the main strategy
As the closed-loop process returns to the overall strategy, it is important to gather the organizational knowledge and progress toward strategic goals, as well as to reassess the market, competitors, and customers to determine if the high level strategy needs to be adjusted or drastically changed.
FOURTH, managers should be aware that they possess the power to execute enterprise strategies. As illustrated in the ten steps above, managers and front-line employees translate the objectives and measures into different levels within an organization. The accuracy of these measures determines the effectiveness of the organization and its ability to achieve the overall goals. On the other hand, beware of becoming a bottleneck within a strategy execution system. Just as a manager’s role determines the ultimate success, his or her inaction or inattention to a system can also attract a swift and negative spotlight. Strategy systems like the Balanced Scorecard succeed only when the measures are recorded on time and accurately for each period. Thus, managers must maintain diligence in the area of system usage or risk turning the spotlight on themselves.
FIFTH, do not forget that a strategy execution system impacts all those being managed. Thus, it is the manager’s challenge to empower front-line employees with the collaborative tools necessary to encourage the swift implementation of improvement initiatives and the replication of best practices.
Finally, embrace technology. The marketplace for software solutions to automate the strategy execution process is rapidly growing. According to the Balanced Scorecard Collaborative (www.bscol.com) almost 75% of companies implementing a BSC will also implement a software solution to automate the process. If managers express interest and become involved in the selection and implementation process of these software solutions, the systems can be transformed into job enhancing tools – thus making managers even more effective and efficient in achieving strategies.