We are already in 2018. Are you ready to dramatically change your business and get breakthrough results? …now how do you do it?
A Balanced Scorecard (BSC) approach can give you a lot of answers. Balanced Scorecard translates a company’s vision and strategy into a coherent set of performance measures. A balanced scorecard is a widely recognized and accepted performance measurement tool that is currently used in thousands of organizations around the world.
Is your organization using a balanced scorecard performance measurement?
BSC can transform your organization. It is the No 1 strategy execution tool as it allows an organization to depict and communicate their strategic plan in a very simple and graphical way as well as monitor and manage the delivery of the plan.
So why are so many of the scorecards in use today not as effective as they could be? The reasons for this because companies take shortcuts or forget vital components when developing their own BSC. Here are some of the key pitfalls I see in practice:
- Not having buy-in and understanding of the tool across the company before you implement it.
- Starting the BSC development with metrics and KPIs instead of the strategy. Measures cannot be relevant if they are not firmly based on the strategic objectives. The Strategy Map is the first and most important component of any BSC, KPIs follow once the strategy is clear.
- Using the generic strategy map as a template you simply populate or copying a strategy map from another company. A strategy map has to be a unique representation of your company’s strategic objectives at this point in time. It has to be developed with close senior executive engagement and represent the distinctive challenges of your company.
- Not revising and refreshing the Strategy Map, KPIs or Action Plans. We all know that your company’s priorities shift over time and therefore the Strategy Map, KPIs and Action Plans have to reflect that.
- Only using oversimplified KPIs to track progress. It is important that the KPIs help to track your strategic objectives but instead of developing the most relevant KPIs companies often chose the ones that are most easy to measure or the ones everyone else seems to be tracking. More effort has to go into developing truly relevant and meaningful KPIs.
- Not having an Action Plan linked to the BSC. A strategy without a plan to deliver it will always remain a trip to fairyland!
The four perspectives of the scorecard–financial measures, customer knowledge, internal business processes, and learning and growth–offer a balance between short-term and long-term objectives, between outcomes desired and performance drivers of those outcomes, and between hard objective measures and softer, more subjective measures.
A BSC is a strategy execution tool that, at the most basic level, helps companies to:
- Clarify strategy – articulate and communicate business priorities and objectives
- Monitor progress – the measure to what extent the priorities and strategic objectives are being delivered
- Define and manage action plans – ensure activities and initiatives are in place to deliver the priorities and strategic objectives.
- It also keeps the long-term strategic goals visible.
- Improve organizational performance by measuring what matters
- Increase focus on strategy and results
- Align organization strategy with workers on a day-to-day basis
- Focus on the drivers key to future performance
- Improve communication of the organization’s Vision and Strategy
- Prioritize Projects / Initiatives
Implementing the Balanced Scorecard system company-wide should be the key to the successful realization of the strategic plan/vision.
A Balanced Scorecard should result in:
- Improved processes
- Motivated/educated employees
- Enhanced information systems
- Monitored progress
- Greater customer satisfaction
- Increased financial usage
The metrics set up must be SMART (Specific, Measurable, Achievable, Realistic and Timely) – you cannot improve on what you can’t measure! Metrics must be aligned with the company’s strategic plan.
Last, but not the least Strategy execution is not just a matter of owning the adequate management tools and techniques, but also of making them to work. Various organizations pride themselves on having implemented the Balanced Scorecard as their main tool for effective performance measurement and successful strategy implementation.