Becoming a performance driven organisation with balanced scorecards

Introduction

A lot of effort goes in developing sound strategies and to get them endorsed by the board and the executives. Initially there is a flurry of activities and new initiatives. But a few months down the track, the day-to-day operations seem to take over and the strategy is relegated to the bookshelf.  Bulk of the organization continues to do what they did before. What is typically missing is the process for turning the broad thrust of strategy into specific measurable performance goals and assigning accountability right through the organization.

Kogekar Consulting has helped clients with effective execution of strategies using balanced scorecards. Here we summarise key learning from our experience. For more information on this topic please contact us.

Executive Summary

Strategy describes where the organisation currently is and where it aspires to be. It also describes the broad initiatives that the organisation plans to take. It may describe key focus areas, process changes or capability-building initiatives or projects that are necessary for the achievement of goals. Strategy execution needs the ability to take a very broad-brush strategy and identify, prioritise and implement the key things that need to be done to put that strategy in practice. A successful execution means that the goals are set, accountability is assigned and the results reviewed on a regular basis.
A balanced scorecard (BSC) is a one-page document that outlines an organisation’s key performance goals and indicators (KPIs), usually covering financials, customers, execution and people.  These KPIs are driven from the company’s strategic intent. A BSC is critical for a performance-driven organisation as it creates a common view of performance across a range of objectives. For the business, KPIs are the “guiding force” that link strategic goals with day-to-day execution. This allows managers to have a better understanding of how to improve the business. Across and down the organisation, business units and teams then define supporting targets and KPIs, which results in a hierarchy of KPIs cascading down from the corporate strategy.

Why balanced scorecards?

• We all know that ‘what gets measured gets done’. Organisations are faced with multi-dimensioned challenges (e.g. how to improve service and reduce costs?). Balanced scorecards cater for many dimensions by allowing for simultaneous focus on multiple performance areas.  


• Organizations expect the strategy execution to happen in parallel with the ongoing service delivery. Just tracking strategy execution progress can result in too much attention on strategy and not service delivery. Also different managers have different accountabilities for delivery and strategy execution. Balanced scorecards enable addressing these competing demands in a rational manner.  


• Balanced Scorecards also provide the ability to assign joint accountability to multiple teams in the areas where joint effort is required to achieve results. Silo behaviours result where managers are held accountable for only the direct performance of their internal processes. External service or customer satisfaction outcomes result from end-to-end process execution. BSC makes this clear and enables teams to be jointly held accountable for the overall outcome.  


• In many organizations balanced scorecards are only used for the senior managers or the executives. In fact scorecards that cascade down many levels of the hierarchy are more effective. Here the KPI’s of executives are directly linked to their managers and team leaders. There is a clearer accountability for results. They provide better drill down capability allowing fast action on areas of performance issues.  


• For teams lower down the hierarchy this linkage shows how they are contributing to the overall performance or achievement of strategy. This can lead to staff feeling that  “my job matters”.

The goal of metrics is to enable managers to get a complete picture of the performance from multiple perspectives, and hence make wiser long-term decisions. As a management system, balanced scorecards enable regular feedback around both internal processes and external outcomes. Good BSCs capture feedback from the customer (or external) perspective and help analyse it with metrics from the internal processes. This encourages continuous monitoring and improvement by the teams as well as improvement in strategic performance across multiple areas.