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Managing with the Balanced Scorecard

Posted October 28, 2009 8:21 AM by Henry

Building a Balanced Scorecard is fun. We have been helping organizations determine what their strategy map, measures, and initiatives are for over 10 years. The process and the product are both enjoyable. Imagine spending time waxing on about your strategy and your objectives. Looking at your past performance and pondering the future opportunities. Your leadership team then gets together to debate the one-page view of your strategy, the strategy map, as Norton and Kaplan call it. This is fun stuff.

It is actually not all that bad to then determine key measures. What will drive the right behavior? How high or low of a target should we set? What initiatives are we working on today and what should we be focused on in the future? These are all intellectual challenges that a leadership team usually embraces. For the ambitious, there is a follow-on exercise to link the business units and support services to the strategy of the organization and create and alignment matrix with objectives and measures. While some of this takes more time than other things, this is stimulating work.

The real challenge is what to do after you have built your Balanced Scorecard. Many leadership teams will talk about the value they received during the "construction" phase of work, but if you stop there, you will fall short of the true benefits of the BSC. Organizations should begin the process of managing their strategy. Some people think that producing an annual report based on their Balanced Scorecard measures is the next logical step. This report many times is given to the board of directors or submitted to a committee of the board. I would argue that this is called reporting and not managing.

Managing with the Balanced Scorecard means that on a regular basis, the leadership team of an organization creates and looks at the information in a Balanced Scorecard, discusses what it means, what the impact is on the organization, and what actions should be taken as a result. This is a lot of work. With this work comes a reward. Members of your organization's leadership start acting like a team and have a good command of all of the components of the organization, not just their silo. Adjustments are made throughout the year, rather than just at budget time. The organization begins driving results, not just reacting to them. Meetings not only become interesting, they become important.

In the next few posts, I'll talk about some of the components of managing your strategy, and I don't want to discount the fact that building a scorecard is important. It is the first step. You just must not forget that there are several steps in the process.

Great information.... I would like to add more that Balanced scorecard is basically a tool for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy. A must tool for all the businessman. I got to know more about this topic on FINTEL's website. Subscribe to this site and update your knowledge.
# Posted By Business Scorecard | 11/10/09 6:53 AM
We are a 100 person firm and in July of 2009 implemented the BSC across our company. It represented the first time this had ever been done in the six year history of the company. Our firm is filled with Operations people and analysts with advanced math and statistical modeling skills. Measurement is in their blood. Communication is the area we find the most difficult. Consistently communicating the strategy and results and making it impactfull to every employee is a challenge. Insight on succesfull strategies there would be helpfull.
# Posted By Jay Heroux | 11/10/09 8:51 AM
Jay, Sorry for my late comment. Communication is critical. A commonly said mantra is "7 times in 7 ways." This means that if you want people to hear something, you must say it sever different times though different mediums. One of the most effective things that I have seen is just to get the leadership team to practice talking through the strategy map.

Then start getting your leaders to ask their direct staff how they contribute to the strategy. People start paying a lot more attention if their boss is comfortable with the framework and seems to be paying attention.
# Posted By Ted Jackson | 12/13/09 8:44 PM
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