"You can have the best strategy. You can even frame it and put it up on the wall, but if you’re not executing … it’s just artwork," management expert Tom Peters says.
It's not uncommon for a company to spend a great deal of time and money crafting its business strategy yet ultimately fail in turning that strategy into action. A recent report by The Economist shows that, in the past three years, only 56 percent of the companies surveyed were successful in executing their strategic initiatives to deliver results. Not surprisingly, this failure in implementation results in weaker financial returns.
"However beautiful the strategy, you should occasionally look at the results," Winston Churchill recommended long ago. So what if there was one tool that could readily keep you up to date on how well your business strategy is working? A tool that could easily be used by all your staff, whether they're in finance, marketing, sales or HR?
Such a tool exists. It's the balanced scorecard, created by Dr. Robert S. Kaplan of Harvard University and Dr. David P. Norton of the University of Florida. The co-authors' seminal 1993 article on the topic, "Putting the Balanced Scorecard to Work," is even included in HBR's 10 Must Reads: The Essentials.
Get the Balance Right
The balanced scorecard is a strategic planning and management tool that helps keep a business on track with the company's vision and strategy. It does this by defining strategic priorities and then designing indicators and measures to monitor how the strategy is executed.
The scorecard allows managers to look at their companies from four important perspectives. Here's an example of how the Balanced Scorecard Institute adapted these perspectives:
1. Learning and growth perspective: innovation, employee training and corporate cultural attitudes related to both individual and corporate self-improvement. Key question: How can we continue to improve and create value?
2. Business process perspective: internal business processes or operational priorities. Key question: What are the few key areas we must excel at?
3. Customer perspective: customer focus and customer satisfaction. Key questions: How do our customers see us? What can we do to increase our brand awareness?
4. Financial perspective: financial-related data, such as risk assessment and cost-benefit data. Key questions: What revenue and profit do we want to achieve? What costs do we have to cut?
The Institute's Nine Steps to Success™ strategy outlines the step-by-step process that allows you to make visible to everyone in the company the connection and progress between projects people are working on and the vision and strategy of the business.
Putting the Balanced Scorecard to Work
These six recommendations can help you use the balanced scorecard successfully:
1. Be very specific. Resist the urge to adopt easily available, generic metrics. Instead, spend the time to develop performance metrics that are specific to your company and can give you a competitive edge. For example, you don't need to use all four perspectives noted above and you may even have additional perspectives. If you're a not-for-profit organization, for instance, the financial perspective may not be your top priority. Use what's relevant to you to make your company successful.
2. Create a performance index. Organizational performance expert Cy Charney created a simplified format of the balanced scorecard known as the Performance Index. This can be implemented in an understandable and easy framework to engage and motivate people at all levels in your company. You can view a handy chart for how this is done in Charney's book, The Leader's Tool Kit: Hundreds of Tips and Techniques for Developing the Skills You Need.
Charney's eight-step process includes identifying the key performance indicators that are aligned with your mission and defining how the stakeholders will judge their level of satisfaction. Other steps include determining the ultimate goal and mini-goals, and establishing the relative value of the various items.
3. Educate everyone on strategy. Strategy isn't the sole domain of the top leaders in the company. By using a simple tool such as the balanced scorecard, you can help every employee learn to be more strategic. Encourage them to develop their personal objectives through the balanced scorecard. Promote the balanced scorecard system throughout your company, and let people know that rewards will be driven by their execution of the business strategies.
4. Take a long-term view. Approach the balanced scorecard as a long-term, ongoing process rather than a short-term initiative. The longer you use it and the more people you involve, the more it will help create a successful performance culture.
5. Approach strategy as a step in a continuum. Connect the dots from the high-level vision to the work performed by everyone in the company, including the front-line and back office employees. In The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, Kaplan and Norton provide an effective eight-step process for doing this.
The process starts with the high-level mission (why you exist), the core values (what you believe in), and the vision (what you want the company to be). It includes the strategy (your game plan), the strategic initiatives (what everyone in the company needs to do), and the personal objectives (what you specifically need to do). This process culminates with strategic outcomes, such as delighted customers and a motivated and prepared workforce. The balanced scorecard is the crucial step in this continuum that ensures implementation and focus.
6. Get help. If you need a little inspiration to get you started or to automate your balanced scorecard process, consider some of the digital balanced scorecard tools and use one of them. Here are a few: Spider Strategies, Corporater EPM Suite, IBM Cognos Business Intelligence and SmartDraw Balanced Scorecard Software.
There are many benefits to making the balanced scorecard a part of the way you do business. It's a quick way to help everyone understand the strategic priorities without having to delve through reams of paper that are often too complex for everyone but the top managers to understand and implement. The balanced scorecard quickly shows what's important and improves communication throughout a company. Above all, it gets everyone aligned toward the same critical business goals. And alignment is the holy grail of leadership—without it, attempting to meet your goals is an exercise in futility.
Bruna Martinuzzi is the founder of Clarion Enterprises Ltd., and the author of two books: Presenting with Credibility: Practical Tools and Techniques for Effective Presentations and The Leader as a Mensch: Become the Kind of Person Others Want to Follow.
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Photos: Getty Images, Balanced Scorecard Institute