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The New Accountability:
Part 2
Using the Balanced Scorecard to Align Accountabilities for
Results
by Brian Ward
Developing and implementing strategy is a messy affair. In an attempt to
put some workable structure and process around strategy development and deployment,
back in 1993 Kaplan and Norton introduced the concept of the Balanced Scorecard.
Since then, organizations of all types have adopted, or more appropriately,
adapted this concept to help them get a grip on strategy, accountability and
organizational alignment.
Governing Beliefs
More than a report card, the Balanced Scorecard is a collaborative approach,
aimed at helping an organization achieve success at strategy development,
implementation and evaluation. The Balanced Scorecard is based on a number
of governing beliefs, including:
- ‘Management for results’, which is forward looking, will outperform
‘management by results’, which has been likened to driving your car by looking
in the rear view mirror;
- Financial outcomes alone will not tell you whether your organization
is or will continue to be successful. There are other perspectives to consider,
including customer outcomes (satisfaction, market share, etc.), process
excellence and learning & growth;
- An organization is a system, and understanding mission critical cause-and-effect
relationships, especially between the four perspectives on a scorecard,
is key to crafting and re-crafting successful strategies;
- Strategy development and implementation requires the active involvement
of all stakeholder groups to be successful.
Challenges in Adapting the Balanced Scorecard
At first glance, the logic in a Balanced Scorecard seems self-evident. In
fact, it really is a process model (or for those of you who manage programs,
a logic model) that looks at an entire enterprise, and attempts to illustrate
a strategic or forward looking managerial hypothesis.
The difficulties that organizations experience include:
- Swimming in a sea of data, with no sight of the shore. Organizations
have great difficulty in pulling information together into a Balanced Scorecard
format that will demonstrate the strength or weakness of many of the cause-and-effect
relationships proposed in such a managerial hypothesis. Very often, a significant
realignment or overhaul of management information systems, and the thinking
that goes with them, is required.
- Leaving it to the ‘measurement experts’. While it is essential
for any measurement system to have integrity, leaving it to ‘experts’ takes
it out of the hands of those who can effect the changes that are necessary
for any strategy to succeed. The scorecard system needs to be owned and
understood by those responsible for strategy implementation. More than just
a measurement system, it is a management system that tells the story of
your strategy.
- Too many measures. Kaplan and Norton suggest that successful
scorecard implementations tend to have around 20-21 measures, with the majority
concentrating on the Internal Process perspective…not surprising, since
that’s where the action is. But even this many measures can be overwhelming.
It really is a case of ‘less is more’.
- Over reliance on software solutions. There are over thirty commercial
balanced scorecard software packages on the market. While software can help
ease the number crunching and communications tasks, it is no substitute
for the hard work of convincing people that strategy development and implementation
is necessarily messy. Don’t be fooled by the fancy graphics and gee-whiz
capabilities of such technology based ‘solutions’.
- Culture shock. Shifting to a Balanced Scorecard approach very
often requires a dramatic shift in attitude and behaviors. For example,
experimentation and hypothesis testing will help you refine your scorecard
and strategy, but if your organization has a history of command-and-control
or management by results style of leadership, then get ready for one big
culture shock.
Overcoming the Challenges
The senior leadership team need to buy-in fully to the concept of a balanced
scorecard. To do that, they need to approach the exercise with their eyes
fully open. It’s no walk in the park. If you are such a team, here are some
basic tips to help you over the hurdles:
- Don’t expect perfection from day one. Hypothesis testing requires
that you face reality. If your initial strategic thinking is flawed, face
it squarely and revise it so that your strategy, and your credibility, are
enhanced.
- Build your management information systems around the cause-and-effect
paradigm of the scorecard.
- Throw out your tired old performance management systems that attempt
to focus attention on the individual performer. We live in an interconnected
world, where none of us are so detached that our personal contribution to
organizational success can be reliably isolated and measured. Performance
appraisal systems that focus on individual performance are notoriously ineffective
at improving overall organizational performance.
- Learn from others. See the list of sites at the end of this article
for more information.
- Use the correct balanced scorecard framework for your type of business.
Not-for-profit models are different than for-profit in the cause-and-effect
relationships they seek to explore…don’t get them confused.
- Understand that strategy is not a spectator sport. Engage your
entire organization in developing tactics to support the strategy and feed
into the scorecard system.
The balanced scorecard is an effective, dynamic process for making strategy
everyone’s everyday job. It requires hard work, lively debate, innovative
thinking and a willingness to challenge and discard old ways of thinking about
performance management.
Above all, it requires focused and courageous leadership. Are you up to
the challenge?
Balanced Scorecard Sites of Interest
The BetterManagement.com Authority - http://www.bettermanagement.com
The Balanced Scorecard Collaborative - http://www.bscol.com
City of Charlotte, NC Balanced Scorecard - http://www.ci.charlotte.nc.us/cibudget/perfmgmt.htm
Procurement Executives Association: Guide to a Balanced Scorecard Performance
Management Methodology - http://oamweb.osec.doc.gov/bsc/guide.htm
Brian Ward is a principal in Affinity Consulting and the author of Lead
People...Manage Things: Master the 5 Key Facets of Quality Leadership & Become
a GREAT Leader. He has over 25 years of experience working with all levels
of management and staff as a leadership coach, facilitator and consultant.
He can be contacted at brianward@affinitymc.com
.
Many
more articles in Performance Improvement in The
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