Article by Dr. Pratik P. SURANA
Ph.D. ACTP, EQ i 2.0 certified practitioner
Chief Mentor and founder,
The ability of an organization to execute its strategy is directly proportional to its ability to understand and communicate the strategy. The most successful tool for articulating, implementing, and managing the overall business strategy is the Balanced Scorecard. The Balanced Scorecard (scorecard for short), developed in 1992 by Drs. David Norton and Robert Kaplan, has gained global acceptance as a powerful framework to help leaders define and rapidly implement strategy. This is accomplished by translating the corporate vision and strategy into a set of strategic objectives that drive behavior and performance
There are several questions you have to keep in mind when you’re determining your Balanced Scorecard approach: Do you start from scratch, or do you modify what you have? Do you do it yourself, or do you get help from an outside source? Let’s walk through some of these questions and scenarios.
Starting From Scratch
If you start from scratch with a BSC, you need to figure out your overarching mission and vision (or your Objective, Advantage, & Scope (OAS) statement) and your key goals. Then you need to determine how you’re going to pull that together into a strategy map that tells your organization’s story, how you’ll measure it, and how you’ll manage it. When you start from scratch, you’re assuming there’s not a lot of documentation for your organization that will help you through this process.
Here’s a short list of what you’ll need to be successful with your Balanced Scorecard approach:
- Leadership buy-in. If you are trying to implement a BSC without the full commitment of your leadership team, you are wasting your time. The BSC is ultimately a change in approach to the way people manage, not a project. If the leadership team is not committed to change, this process will not work.
- A common visionof what you’re actually trying to get out of a scorecard among the members of the leadership team. Is it smoother management? Or improved performance around key measures? In other words, you’ll need to determine why you’re doing this.
- If you’re doing it yourself, you need to have:
- Strong communication skills—you’ll need to figure out where your leadership team is on the same page and where their views differ. Then you’ll need to figure out how to sort through these differences.
- The ability to work across all departments—a good rapport throughout the organization is important.
- Ideally, some experience in the BSC or performance management.
- If you’re getting help, you need to look for:
- Someone who understands your business and your industry.
- Someone who is a great facilitator and has the ability to work with your leadership in the timeline you’ve set.
- Someone who has built a Balanced Scorecard before.
- Someone who has the flexibility to meet your needs, because not every BSC is the same. (Sometimes strategy maps have five objectives and sometimes they have 25 objectives—you’ll want your outside help to be able to manage this process regardless.)
Have a look at this video as well.
Modifying What You Have
If you’re not starting from scratch, the other option is to modify what you already have. This is a recommended approach if you already have a strategic plan, a set of goals, a regular measurement process for the leadership team, etc. You can turn any of these “initial ingredients” into a BSC. If these things have already been established, it’s likely that your leadership team agrees that these measures are important—thus, the strategic plan is already validated.
Why put them into a BSC? Great question. Primarily because the framework lends itself to include a little more logic than most other frameworks, it creates some connections across your perspectives, and it will allow you to see how the different elements of your strategic plan link together into one story. The BSC becomes a cohesive story for your leadership team and the rest of your organization.
If you are a chief strategy officer (or you’re responsible for the strategy within your organization), you can probably modify the BSC yourself. You might need a little outside help
Constructing it right:
Don’t fall in love with someone else’s strategy map and try to copy it—your strategy should reflect the strategy at your organization and tell your story.
The Balanced Scorecard Strategy
Now that you have your Balanced Scorecard approach down, you need to think about two major areas:building your scorecard and managing with a scorecard.
You may use the framework in the white paper here:
The thing to keep in mind while looking at your Balanced Scorecard strategy is that building a BSC is simplynot enough. Yes, you do get your leadership team to start talking in the same language once your scorecard is created, but outside of that, you don’t get any benefits from the act of simply building it. The real benefits come into play once you manage it—so keep that in mind.
Moving forward, there are two approaches to building your Balanced Scorecard:
- Try to get it 100% right the first time.This entails spending a lot of time trying to make sure every single piece is perfect, getting the measures determining your five-year targets, and getting your ownership and accountability perfectly in place.
- Try to get it up and going quickly.To do this successfully, you’ll need to feel very comfortable with what we call the “80% solution.” The idea behind it is that by getting to your first strategy review meeting very quickly (even though you don’t have a lot of data to discuss), you’ll gain a lot of clarity.
The danger of trying to get your scorecard perfect before you start managing with it is that you’ll run into what we call “scorecard fatigue.” That means you will have already spent so much time managing your scorecard and so little time managing your strategy that everyone in your organization will start to hate your scorecard—even though you haven’t started using it yet! So if you can begin using it as quickly as possible, then you can modify it properly from the get-go and make it work for your organization.
Managing With The Balanced Scorecard
Managing your scorecard means simply using your scorecard.
On a regular basis (usually monthly), you should be reviewing components, themes, or critical success factors. Or, every quarter, you should be reviewing your entire strategy. (This part works differently depending on the organization, so we don’t have an opinion on which is better.)
The Balanced Scorecard management process ought to be looked at from an objective or “goal” level. You need to be asking:
- “How are we doing with our goals?” To answer this question, look at measures, charts and analysis.
- “What are we doing to improve performance?” To answer this question, look at projects, initiatives, and action items.
Your measure results will tell the story of how you’re doing and if you’re achieving your objectives. During your strategy review meetings, you should be keeping track of your action items and decisions. If you know ahead of time that you’re going to need to make a decision, you should send out information regarding that choice, which will help you through this process.
Every six months (or at least every year), you need to take a pulse of your organization’s use of the BSC.You’ll want to determine if you’re spending more time managing your scorecard than you are managing your strategy.
Phew! You made it to the end. Hopefully reading this article has helped you learn more about the Balanced Scorecard and you’ve been able to note some hints and tricks along the way. Let’s quickly summarize our three main points:
- Balanced Scorecard Approach: You don’t have to start from scratch—use what you have in your organization as it results to your goals, key measures, and projects.
- Balanced Scorecard Strategy: Get a consensus around your strategy map or key goals, and then start using the BSC in your leadership team meetings as you build out the rest.
- Balanced Scorecard Management: Make sure your scorecard is delivering value for you—be sure to perform regular checks (via strategy review meetings) to ensure that you’ll meet your long-term goals.
In conclusion, remember that the act of setting up a Balanced Scorecard doesn’t actually get you anywhere. You’re setting it up in order to change the way you manage.