What You Need To Know
Surely the balanced scorecard approach is just another fad invented by academics and delivered by consultancies. Does it really add value?
On the principle that what gets measured gets done, you can see that using processes like the balanced scorecard helps organizations to focus their energy and attention on business priorities. Research has shown that companies who measure their performance out-perform those that do not. The need to prioritize effort and initiatives is an important judgment call for organizations. Those businesses which use the balanced scorecard approach are more likely to be able to understand those business priorities.
This does not have to be designed or implemented by consultancies … it is an approach, rather than a strict methodology.
We have implemented a huge variety of new systems and processes already, but now the C.E.O. wants to drive through the balanced scorecard initiative too. How do I get my team to feel enthusiastic?
Use the systems and processes already developed to support the balanced scorecard initiative. What the balanced scorecard will do is help to ensure that there are feedback loops in place to reflect and learn from core activities in the business. Try and focus on the following:
- establishing the current position;
- communicating the direction/vision/strategy;
- stimulating action;
- facilitating learning;
- influencing behaviors.
Establish what is the correct behavior; do not try to develop enthusiasm until such time as results have been achieved. Correct behavior may include being open and exploratory, sharing information and ideas. Discourage behaviors that may be unproductive, such as negative commentary, directive management, and hoarding information.
Work with your team to create a more holistic approach, and ensure that you embrace what has already been achieved. Establishing the key priorities for the business and delivering results against these should produce a greater sense of accomplishment, and therefore motivation.
We have successfully put in place processes to measure key business indicators, but we are seeing little improvement as a result. All we seem to do is measure. What is going wrong?
Measurement is only one aspect of the balanced scorecard. Do ensure that processes align to the direction and strategy of the business; check that actions prioritized are being well managed, and make certain that time is created to reflect and learn about what is working and what is not. Performance is often the result of ensuring that the target is realistic and that there are enough initiatives in place to fuel activities.
What To Do
The underlying behaviors in the balanced scorecard are integral to the success of the approach. It is about working together to achieve goals, but also setting out clear areas of accountability and responsibility, and implementing a range of hard and soft measures that help to manage the business and drive overall performance improvement. Setting clear goals and keeping these simple and focused is important to generate and maintain motivation for achievement. There are several key stages in making it happen.
Understand
Creating a performance culture requires an understanding of what is needed and how employees will work to achieve goals. Training will therefore be necessary, to help orientate management and staff in the principles of business performance management. The key elements are cooperation, being prepared to explore new areas, and committing to performance and achievement when necessary.
Work Together
Set up workshops with employees and management to translate the strategy and vision into key performance indicators. Explore the teams' objectives and targets, and look at what success would be like both in terms of hard measures (financial, for example) or soft measures (such as level of customer delight). Work with groups to design and develop the framework for measuring operational performance through setting objectives, identifying targets, and putting in appropriate performance indicators. Embrace all options before focusing on the critical issues.
Implement
Implement the measurement system and report periodically to management, gathering response and feedback from others throughout the process. The first implementation will not be without teething problems, so build in time to ensure that you get it right.
Examine Performance Factors
Look at the performance factors to ensure that the four areas are covered: financial, customer, internal business process, and learning and growth. Often organizations find they have a bias towards one or two areas, but balance is important. You may need to manage expectation from others who will be used to predominance of, say, financial information.
Leave Time for Review
Do ensure that time is set aside to review the process. To many organizations this is the most difficult because it often feels the most unproductive. However, continuous improvement and learning is central to maintaining the balanced scorecard approach, and benefit will become clear as learning and growth gaps and opportunities are identified. Do look to see that the performance results have long-term effects through mentoring assistance.
Reward Good Performance and Behaviors
Having identified the right key performance indicators, designing, developing and implementing a reward system should be intrinsic—although this is often an afterthought. Motivation is fed by achievement and recognition, and reward systems need not only be about money.
Communicate
Establish strong communication systems so that employees and management are well informed. Taking action quickly on areas that need rectifying will ensure the long- term viability of the processes. By building a better understanding of what needs to be done, both tasks and behaviors are easier to align.
Encourage Employee Empowerment
Employee empowerment is an essential part of this process, although managers who are used to controlling agendas may find empowerment more challenging. Involvement of employees throughout the design and development process will enable ownership and boundaries across different processes to be defined, and the learning and reflection processes will help identify where help and support is required.
Emphasize Quality
Quality is an essential part of the balanced scorecard approach, being about doing things properly. Quality is in the eye of the customer, and gaining customer feedback and insight is important. This means that managers have to work hard at building enduring client relationships to ensure that expectations are well met and that communication becomes a two-way process. Working in a customer-focused way is therefore an important behavior to develop.
Actively Encourage Positive Behavior
Leaders and managers should actively encourage positive behaviors. Negative comments or attitudes should be discouraged, and objectors should be encouraged to be more involved. Often in situations where new approaches are being adopted the objectors, or those who are slow to adapt, are left out. Ideally these people should be targeted first and included in the process as early as possible.
Types of Behaviors that Support the Approach
| Behaviors to encourage Leadership/management style which support the behavior | |
|---|---|
| Inclusive | Embracing—working as a team |
| Collaborative | Collegiate—shared responsibility |
| Exploratory | Open—not always having the answer |
| Strong Results Focus | Focused—awareness of results and how they were achieved |
| Learning | Participatory—working with and sharing information and knowledge |
| Reflective | Strategic—look back and look forward to what needs to be done |
| Decisive | Authoritative—when there are a number of options available, leaders and managers need to be decisive about the action |
| Ownership & Responsibility | Clear—setting unambiguous lines of ownership and responsibility for issues |
| "Can do" Attitude | Open—keeping possibilities open |
What To Avoid
A Lack of Commitment and Understanding
New initiatives are often great fun to engage with, but unless there is real understanding and commitment from the senior management teams, it can be challenging to drive these initiatives through to a successful conclusion. Without proper support, the business can quickly be fatigued by such activity...it needs top- down commitment, as well as bottom-up input.
Trying to Do It All at Once
Deciding to have a balanced scorecard right across the business may look attractive but it is likely to be much more successful implemented in stages. Getting initial buy- in from a smaller group likely to benefit from the initiative will help ensure success in the long-term. Balanced scorecard does require a mind-set change: establishing the loop of measuring, managing, and improving as a way of working requires an ability to explore, question, and innovate, which can be challenging.
A Lack of Communication
Communication is critical to the balanced scorecard approach, but it can be difficult to get it right at the outset. Remember that it is better to over-communicate than under- communicate, and that making goals explicit is critical to the success of the approach.
Where To Learn More
Books:
Becker, Brian E., Mark A. Huselid, and Dave Ulrich. The HR Scorecard: Linking People, Strategy, and Performance. Boston, MA: Harvard Business School Press, 2001. Niven, Paul. Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results. New York: John Wiley, 2002.
Web Sites:
Procurement Executives' Association—Guide to a Balanced Scorecard Performance Management Methodology: http://oamweb.osec.doc.gov/bsc/guide.htm The Balanced Scorecard: www.balanced.scorecard.org/basics/bsc1
