In their ground-breaking work The Balanced Scorecard authors Robert Kaplan and David Norton said 16 weeks was time enough to set up balanced scorecard (BSC) process in an organisation. Given that the organisations they had in mind would typically be larger and more complex than New Zealand organisations, two questions need to be answered. Why is it that many Kiwi organisations stumble in this process, turning 16 weeks into 16 months? If the balanced scorecard process has revolutionised organisations, why haven’t more Kiwi enterprises with, say, more than 20 staff got one?
The problem, I suspect, starts at the top and is connected to lack of understanding, commitment and prioritising of the process. Many organisations make half-hearted attempts to set up balanced scorecard, fitting the project around other competing and less important fire-fighting activities. The resulting BSC is well and truly overcooked with changes made as each member of the senior management team (SMT) applies varying levels of mental horse power and their latest brain waves to the project.
To implement balanced scorecard in 16-week timeframe management needs to adhere to 10-point plan.
1. SMT commitment and education
2. Focus on the critical success areas
3. Focus on magic 20 KPIs
4. Select small team avoiding members of the SMT
5. “Just do it”
6. Don’t get too flash
7. In reality it is not one balanced scorecard
8. You need to know your KPIs even if you do not implement balanced scorecard
9. Balanced scorecard designs (are an art form not science)
10.The balanced scorecard is far too important to be left on an individual’s performance agreement.
SMT commitment and education
The SMT must be committed to the scorecard to drive it down through the organisation. It will create dynamic environment if implemented properly. The SMT must be sold on the concept and fully understand why they should treat it as their highest priority allowing other fires which could divert their attention to burn themselves out.
I suggest at least half-day workshop where the entire executive team meets to hear presentations by experts, organisations with balanced scorecards, and an in-house team of recognised candidates to lead the project. After this meeting the SMT will be in position to either commit to it, or leave it simmering on the organisational stove.
Commitment means the SMT setting aside time each week to perform exercises including giving feedback on suggested measures, being available to the BSC team for interviews, visiting other balanced scorecard sites, approving balanced scorecard investment proposals all in tight timeframe.
One organisation that did much of the homework but failed to bring the SMT members in on the process started work on their balanced scorecard more than two years ago. It is probably still unfinished.
Benefit of this actionThe SMT gets buzz from being involved in dynamic project, enhancing their understanding of the business, developing the organisation’s business strategies.
Focus on the critical success areas
Too often time is spent debating the ‘quadrants’, their names, the design of the scorecard. The SMT might enjoy the intellectualising but it doesn’t create much value. Don’t get carried away with debate, spending months on ascertaining the quadrants and making little progress on the critical success areas.
Why not just adopt the four quadrants from Kaplan and Norton? Alternatively there are wide range of balanced scorecards available through books and articles one of which could be used as better practice template (for quadrant titles and design only) for the first six to 12 months. After 12 months the SMT and staff will be in position of experience, knowledge and understanding to hone the scorecard and better meet organisational needs.
Too much time can be spent debating whether there are four or five sections and their names. Let me save you some trouble.
• Call the one on financials – “financials”
• Call the one on staff – “learning and growth”
• Call the one on customers – “customer focus”
• Call the one on internal business processes – “service delivery”.
Focus on magic 20 KPIs
Kaplan and Norton suggested 20 measures. Nature provided us with 20 digits and four limbs so balanced scorecard with four sections with five measures each, does have some natural symmetry which might even appeal to Lord Robert Winston. The hard task is to whittle down the hundreds of measures that crop up during such an exercise to those 20 measures that really matter. Lord King, chairman of British Airways, focused on one measure to make significant difference to the company, “late planes”.
The top 20 measures need to be KPIs. Many people confuse result indicators with KPIs. Sales, profit before tax and interest are not KPIs. They are result of critical success factors occurring. Look at these events and dig deeper to find the appropriate KPI measures.
No matter how complex your organisation, such as council, district health board, or diverse manufacturer, do not get sucked into consolidating unit measures unless they really fit in the top 20.
Benefit of this action: The KPI team will immediately focus on the end product and not try to edit 80 measures from 200.
Select small team avoiding members of the SMT
Balanced scorecards can be designed successfully by small team. Kaplan and Norton claimed they had seen balanced scorecards designed successfully by an individual or small teams, without large consultations, provided that the individuals had an in-depth understanding of the business.
It is important to select the right two to three people for the BSC team – preferably those with excellent presentation skills, track record for innovation, project completion, knowledge of the organisation and sector, good communication skills and the ability to bring others onboard.
The SMT may fit the above criteria but, with the best will in the world it will not be able to concentrate enough on the project in the short time frame required. Find the oracle in your organisation and team them up with your top guns, your young, fearless and precocious leaders of the future who willingly go where angels fear to tread, and are not constipated with day-to-day drama.
Benefit of this action: The project won’t be cluttered with too much intellectual procrastination.
“Just do it”
Like many great works of art, the balanced scorecard is rarely “right first time”. Kaplan and Norton agree with Nike and say “Just do it”. The SMT and BSC project team should ensure that the balanced scorecard project culture is “just do it” culture.
You need one manual so I suggest Translating strategy into action the balanced scorecard, by Robert S Kaplan and David P Norton. ISBN 0-87584651-3 Harvard Business School Press.
With “just do it” culture comes belief that “we can do it”, that “we don’t have to rely on experts to run the project”. Experts, like artists, may not necessarily produce the sculpture you want or need.
All the team needs is access to balanced scorecard database to help provide information on measures quickly and, proven facilitator on development and reporting of performance measures. The facilitator acts as mentor to the project team, keeping low profile at BSC presentations.
Benefit of this action: You probably have better chance of getting scorecard that works in 16 weeks than you have in 16 months.
Don’t get too flash
CEOs are often ‘gun-shy’ of large projects that they perceive are run by expensive international consulting firms. The last decade is littered with six and seven figure consulting assignments that have not delivered the goods. The BSC is simple concept which can, and should, be largely carried out in-house. Like piece of artwork, you can be