Strategy in uncertainty: what tools are useful?

At an Institute of Director's economic briefing in November, the Chief Economist of the IOD said that we are still facing uncertainty, its just that the uncertainties are changing. I think the uncertainty continues to change, especially with impending elections and economic fog. Therefore I find two tools most useful in this time of uncertainty (and changing uncertainty):

1) Value chain analysis (cf Michael Porter) to understand the landscape around the organisation. Once I understand the landscape, then the strategy (in its various forms should make sense - or at least you can see better the implications of the strategies). (To use a metaphor, it addresses the question - where on our map has this hurricane blown us?)

2) A simple question and listening to the response. The question is, "What uncertainties are your customers facing?". (Again to use your metaphor, It addresses the question - how big is this hurricane, where is affected, where is a safe port and are we near some rocks?")

The reason for this is that if you understand what is making people uncertain, then you have a chance of working out when those uncertainties will change and disappear (or soing something about them yourself). That means you can monitor the changing environment and its implications for the landscape and therefore make sensible strategic decisions. (You will know when the hurricane changes direction)

I have been doing talks and presentations on this subject (Managing Strategy in uncertain times) to various clients and groups - it seems to make sense to them, goes down well, and give them practical tools to address the (changing) uncertainties they face.

I call this approach "intelligence led strategic questioning" - you might call it "Talking to your customers about what worries them and matters to them".

Phil
Managing strategy in uncertain times

Why benefit management fails in the NHS

The NHS IT delivery programme has a dreadful track record. It is not surprising when you look at their methodology and the techniques the NHS and the ISIP programme recommend for benefit mapping, benefit management and benefit realisation. They are fundamentally flawed.

Here are some of the many reasons why they fail:

1. They ignore the landscape and context, confusing benefits at different levels


2. They ignore impact and consequence


3. Being uncluear where change needs to happen


4. They treat enablers as the same as impact


5. Projects and enablers are confused


6. It makes following the timing and tracking deliverables difficult

First lets look at the NHS benefit management material. You can either look at the approach in the NHS ISIP benefits mapping or look at the alternative approach in the ISIP Benefit dependency network masterclass material.

1) Understanding the landscape and context

The first thing you will notice is that although the talk about benefits to particular parties, they are not specific about those parties and how they relate.

Imagine you are in a PCT. You are delivering technology to GPs so they can access a more complete view of patient records for a particular care pathway. It is important to realise that there are dependencies across that pathway that will involve other healthcare professionals such as tests in pathology labs, x-rays, hospital discharge records, and perhaps even records in Social services and district nurses. It is only when you have all of these in place that you will start to give benefits to patients. Until then you need to be clear who is involved and how they interact. Without this complete view of the landscape, the next step is impossible.

What you have is a sequence: PCT, GP, patient. What you need is to be clear about the benefits at each level.

2) Distinguishing between impact and benefit.

The second mistake that the NHS benefit approach makes is not to distinguish the difference between impact and benefit at each level. So for a GP, you can implement the system but other pieces of work will be necessary to ensure that the benefits for the GP and at the GP level, are implemented. So you actually need two levels of "benefit" for each body: "How am I affected/What is changed for me" and (separately) "What is the benefit for me".

Notice there is ALWAYS a timing difference here. You implement a system and the benefits of that implementation at the point of implementation come later (if at all).

It is the same at the patient level. There are always two "benefits". The first is the impact, "I can now make my own booking" and the consequence "Which means I can choose when I want and appointment". These are often assumed to be the same but they are not. The patient may be able to make their own booking but something in the system may stop them getting the appointments they want (or even getting through). If this is the case the "benefit" of being able to make your own booking becomes more of a nuisance than not being able to.

It is "impact" and "consequence" at each level, for each party, that needs to be considered. The models within the ISIP and NHS benefit maps do not make this clear. Again you have to have the NHS landscape clear here as well, to do this.

3) Enablers vs impact.

This is a really important distinction. Again confused by the way the material is presented and the lack of context in any examples.

If I am in a PCT and am introducing a Long Term Conditions system across multiple healthcare providers then I am putting in place some enablers of this technology, perhaps software, training, new hardware or infrastructure, interfaces between systems, protocols, new working practices, that are used across multiple healthcare professional groups (Acute, GPs, Social services, community nurses, polyclinic, etc.) .

These are enablers that work across the various parties involved, BUT ARE NOT directly impacting those involved. For instance the link between the GPs systems and the central Long Term Care system is an enabler. The impact is that GPs can then see the more complete pathway and other Health care professionals can also see what the GP has put on their referral forms more easily (provided you have also rolled it out to all the GPs, given them access and trained them).

It is an enabler. Think underlying capability or common infrastructure.

4) Being clear where change work needs to occur

Now everywhere there is an arrow between these enablers, impacts and benefits and then onto further impacts and benefits, you need action and change.

So why does the ISIP benefit dependency network go:

Enabler -> Projects (and Actions to change) -> Outcome -> Benefit -> Priority objective?

It does not make sense. Projects deliver enablers. Actions turn outcomes into benefits. All operate at different levels.

What we have been drawing is clearly a set of dependencies where actions for change are needed at many levels across the NHS landscape and environment. In fact everywhere an arrow exists, some change intervention is required. If you don't think about this you are at best leaving things to chance and at worst destroying any chance of the project actually delivering the benefits at any level.

5) Projects and enablers are confused

Lets be clear here. Projects do need enablers (give me some funding, resources, technology and an enthusiastic clinician to make things happen). But the enablers are different at different levels. This whole model seems confused about this.

However it is useful to talk about enablers. It is the Infrastructure or common enablers that are delivered by projects. The project will also deliver impact on the health care professionals or care pathways and help then enable their own benefits.

Another example of strange labels is Priority objectives. The way they draw the sequence of boxes there is "priority objective" at the end. In other words the sequence should ultimately lead to this priority objective. I agree, but that is not how to represent things.

What you will have when you develop these benefit maps across the landscape is perhaps several for the Long Term Care priority objective. One set of projects for Diabetes, another for heart conditions, another for COPD etc etc. What we are doing here is explaining how a priority is delivered by the chains of enablers, impact, immediate benefit across the various levels . By the time you reach the benefits for the patients you may have 4-6 ultimate significant benefits (that result from the impact of the project on their care). Now you don't want to have to draw a link from each of these to a box called "priority objective".

The whole benefit map is a description of how the priority objective will be delivered. So it should be a label on the benefit map, rather than a linked ultimate outcome. Think of the wrapper around the benefit map, or simply its title.

6) The implication for phased delivery and timing

So this is a more structured approach that is sensitive to how the impact and benefits work at any level of the health landscape. This is where the real advantage comes in. With this richer picture you can track the stated benefits at any level across the landscape you have drawn.

First have you got the enablers in place? Then have you put in place that which will immediately impact the care professionals? What are you doing about the benefits you promised for them? Have they occurred or are they not using the system because it is a pain, slow or "just another system to log out of and into". And when will it be delivered?

Having this clear cause and effect model in your benefit map enables you to clearly show what has been delivered and what is holding up progress. Having a muddle that mixed outcomes and benefits at each level makes it impossible to draw, impossible to use and impossible to manage.

I have been using such benefit maps in the NHS for over 5 years now. Whenever i present them I first get them to check the landscape before showing them the benefit model laid over the top. This way they agree the landscape before they start to think about the benefits, consequences and impact of the project. It works.

Shame they did not do this before they wasted $6bn on the programme for change and subsequent NHS IT programmes.

By the way, you will have realised that this approach is basically strategy mapping. Therefore it is really easy to make the step to "How would we measure this" and developing a modern NHS balanced scorecard for the operation of the care pathway or service. Really easy, but to find out how to do this you'll have to talk to me.

Phil Jones

End or Means?

At this time of goal setting and new year resolutions we often face a problem. We set a goal or objective, (stop smoking, make more money, lose weight, change job, etc etc) and within a few days or weeks, the goal has been dropped. Good intentions melting away like snow when the sun rises.

Good intentions have been sacrificed on the altar of expediency and reversion to existing practices and patterns of behaviour (I'll just nip to the fridge, have another cigarette, etc).

The problem is often that we have put our attention on the end rather than the means. It is far more important to concentrate on the change that is required in behaviour rather than the goal. Its about how we behave on a day to day basis (walking instead of using the car, drinking some water instead of heading for the fridge, eating consciously rather than whilst reading a paper).

This is true for organisational goals as much as individual ones. Think of the organisation's strategy as a persistent pattern of behaviour. It is this persistency of behaviour that is creating results. Therefore to change strategy you don't simply change goals - you have to address the behaviour and ensure the new behaviours persistently replace those of the old strategy.

This is one reason why the learning and growth perspective is so important in the balanced scorecard. It is about identifying and then signalling to the organisations that behaviours need to change. Then actively ensuring that the new behaviour is encouraged and the old ones are dropped. I use the expression "permission" at this point. People, individually and in their social groups, have to be given permission to drop existing behaviours - ones that might have served them well for a long time, and be allowed to use, and learn how it feels to use, new ones.

Take flexible working and working from home, for example. The idea has been around for ages. the technology is readily available and has been available for ages. It is not a constraint. No, the constraint is often the reluctance to let go the command and control associated with "trusting" people to work. It is no longer about time served, but tasks achieved. The staff of the Director magazine tried home/flexible working and were surprised how hard it was to let go of the existing practices. In the same edition they interviewed Steve Shirley (Dame Stephanie) who set up FI in the early sixties so that women with children could still have a career in computer programming and yet work from home. As she put it, the issue is as about trust and control. People have to learn new behaviours and norms. The objective is not to have people working from home, but to learn new ways to help people be productive by trustiung them and giving them the chance to use their time to in the most appropriate way.

Sure, think about the end, but concentrate on the means. And signal that new behaviours are acceptable, appropriate and now the expected norm.

Phil Jones

Judgement and Evidence: Audience Q&A

Using Judgement and Evidence in Modern Balanced Scorecards: the use of subjective and qualitative measures.
Audience questions and responses

I presented a BetterManagement webinar on this subject, on 14th October, and it received a lot of interest. You can listen again to the webcast on the better management site (See link at the end)

Here are all the questions that those listening asked at the time, but not all were answered in the time available. I have published them here so you too can get the insight these questions raise.


Atena asked:

Q: If staff are not trusted on qualitative measures, wouldn't this be the same for quantitative measures?

A: The premise in your question is not that the data is wrong, but that people are giving you false information. There are documented examples in UK hospitals where staff simply reported better information to central government than was actually the case to hide problems and avoid punishments. Of course you will need to sort out this trust questions, before you address judgement. But I would ask you some questions:
a) Is it the data you don’t trust, or the people? And why?
b) Why don’t you trust them? Do you trust them for other things? How do you know you can’t trust them on this? And why this?
c) Is it possible that they are using their judgement? The information you are asking for may not reflect the real situation: perhaps they are using their judgement. I am trying to expand your thinking here – give it some thought.
d) What is it about the way these people have been managed or are being managed that is encouraging them not to tell you the truth or the whole picture?

Fadi asked:

Q: I do a lot of business intelligent software, and the success of these application implementation depends a lot on making the collection of data as automatic and with minimal effort as possible, and that is very hard when collecting judgemental data, how can I deal with that?

A: Absolutely right. Business intelligence is about collecting large volumes of data and analysing it. It provides the evidence. Judgement is about how you are interpreting the data and what you are doing about it. I am sure you know that the balanced scorecard is about decisions and performance management – not just measurement. Let me explain with an example.

First do not be afraid of volume: in the case study each service may have been evaluated on up to 100 items once a year. So on that basis there were 3,000 (100x30) potential items of data, for each of the 14 regions. So first, remember you do not need a judgement for every single piece of evidence. We have an overall assessment and judgement score for all the statutory reports for a region across their 30 services. The assessment and judgement came from the regional director looking across all these and asking, “How well have we done and what do I need to pay attention to across all my services?” A manager of an individual service could do the same for the 100 items within their control. Judgement operates at a higher level and so there is less to capture.

Secondly we are looking at change, over time. That statutory analysis was done once a year, but the Regional director was working through the year to address any issues. So you are looking also at how well the actions that RD has put into place are working and their judgement of whether these are fixing things, before the next assessment. So the judgement could be about, “Is our response to the evidence, effective”

Just on example, but all this is easy to record manually, is relatively low volumes of written assessments and should be being assessed and discussed each month anyway.

Valerie asked:

Q: Is data available to mine (Data Mining)?

A: Typically the data is not available to mine because it is not in computer systems, it is in people minds. However their minds are available to mine. How do you do this? You can use the sort of techniques I explained (eg score out of 10 followed by questions) to understand what people are basing their judgement on.

If you collected a large number of people’s assessments, over a period of time, you would have some information on which you might be able to mine using textual analysis. But I would not recommend this above simply talking to people.

Se also my answer to the BI question from Fadi above.

Barbara asked:

Q: How do you address subjective measures in a culture that primarily values what you can measure quantitatively (financial, output, etc.)?

A: There is nothing wrong with valuing what you can measure quantitively. Remember it is judgement AND evidence. Two thoughts though:

First, sometimes, a strength overdone, can become a weakness. I did work for an organisation with a background from pharmaceuticals that was extremely rigorous in its analysis of information and markets. However they sometimes over-analysed things and missed opportunities because it was over-lengthy and over-rigorous. They didn’t trust their judgement to go with what they had, test it and learn. They wanted it “Right”.

Secondly I would say, go with what you have and exploit it. You say ”they primarily value…” but I suspect they “they also value…” judgement, and are unlikely to dismiss it altogether. Your staff will be making judgements based on the evidence all the time, and they will naturally be thinking the about capabilities, culture, skills, knowledge and behaviours of people that drive performance and outcomes. It may be that management are focusing attention of outcomes, quite rightly and for good reason. The reporting systems are not looking (explicitly) at the culture, skills and behaviours (Leading indicoto4rs or drivers of change). Evidence dominates judgement in discussions and decisions. So, go with what you have and, build on it. Perhaps start by capturing commentaries and assessments of the information they have looked at. This way you start to expose judgement, based on evidence. Remember someone is making a judgement about what is good evidence. It is always there.

Valerie asked:

Q: How long has the process of Judgement analysis been available?

A: Well people have always been using judgement and evidence. So it is not new at all.

It is not new to explicitly look for judgement statements and elicit them to create a conversation, but it is less common in many organisations. Remember in this case study we were pushing against an open door – they trusted their staff to use their judgement, and like any organisation recruited, developed and rewarded good judgement.

It is certainly far less common to find any use of it in the performance management, management information or software solution. In fact let us go back a step. Since 1994 balanced scorecards have been designed with objectives, before measures. Yet so many systems are incapable of expressing an objective and its measures. Yet the approach for measure design has always been, objective first, then characteristics, then, what to measure and how to measure it. But the systems concentrate on the answer – and record just the measures.
So I believe the thinking and approach has always been there. The software providers and designers of performance measurement and management approaches, in general, tend to ignore or dismiss it. Good managers naturally encourage it and develop it.


Paul asked:
Q: Doesn't the use of subjective measures require the alignment of judgments?

Do you mean before or afterwards? It is absolutely not a pre-requisite. In fact the advantage of the approach is that it exposes differences and helps people share and align their judgement. Think of it as encouraging a conversation where people can express their judgement, learn from other’s views, discover why they think like they do or believe what they do, in a safe environment.

The Regional Directors here (and managers in every workshop on strategy and balanced scorecard development I have ever run, all say that the exposure of the deeper thinking of people, the sharing of ideas and the discussion was the most important part, because we came out aligned and understanding where and why differences occurred.

I have done this in an organisation where the people we brought together were from quite different departments and had never met, yet all tried to support the same outcomes. Obviously we were staring further back there but the conversation still helped understanding and eventual collaboration and progress.

If there was alignment of judgement everywhere you would have an organisation of clones. Just think about the credit crisis – Hardly anyone one questioned the situation with excessive exposure to hedge funds and potentially defaulting mortgages. You had a form of social acceptance of the norm, without question.

You want to encourage debate, and this approach does that.

Emre Asked

Q: Even if there is conversation between people, they may not be in the same opinion about the subjective judgements. In this case the disagreement may result in reactive behaviour of the people who was evaluated negatively. What is the correct approach to ensure smoothness of operations after the evaluation?

This question follows on nicely because it raises the topic of the culture that surrounds the conversation, the context, and what people might believe about the motives of people and consequences.

Isn’t it a shame that people feel they cannot speak openly because they will be criticised! In the presentation I talked about the difference between a context where failure was punished, (which will cause people to not say anything) vs a context where a failure to cooperate and learn, was punished (which is designed to encourage conversation and learning).

I go back to the two thoughts of “Explicitly gibing people permission” and “persistently signalling a difference in the culture”. Remember what you see is a learnt behaviour, and therefore it can be un-learnt and re-learnt. But that requires work, explicit change, repetition, practice and time.


Jean-Pierre asked:

Q: What relationship do you see with installing "culture of performance"?

I see what we are discussing as one of the ways to encourage the development of a culture of performance. But we should be clear what we mean by that phrase. I have a longer definition of what I mean by a culture of performance.

A visible and explicit pattern of behaviour, actions and values…
Working to achieve the organisation’s overall objectives…
That encourages honest evaluation, feedback and appraisal…
And informs decision making…
Built upon collective and individual responsibility…
Responsive to changing circumstances…
That encourages self regulation, trust and learning…

Given this, you can see where I am coming from. This is entirely about creating a culture of performance.

If you missed the webcast you can listen again here via the Bettermanagement website http://www.bettermanagement.com/seminars/seminar.aspx?l=15139

Comments welcome

Phil

The jargon of CSF, KPI, and Measures

Clean up your jargon.

Are you, like me, confused by the way people use KPI, PI, Measure, CSF etc apparently interchangeably. I am.

People often ask, what is the difference between KPI, CSF , measures, performance indicators? Frankly people use them interchangeably and loosely. I recently saw a definition of a KPI on a forum that made me angry and so posted this reply: A posting for all those literalists out there!!!!!

"KEY PERFORMANCE INDICATORS: Key Performance Indicators (KPIs) represent a set of measures focusing on aspects of organizational performance that are the most critical for the success of an organization." It was actually quoted from David Parmenter's book on KPIs' which is actually quite good. But this definition is terrible.

You see, here is a classic problem with the definition cited: “Key Performance Indicators (KPIs) represent a set of measures…” ie it defines "an indicator" as "a measure". In cact a set of measures. Ummm?

For goodness sake – what is the difference? Why not call them “key performance measures” then? And frankly what is the difference between KPIs and good old “Critical Success Factors” which is what he later goes on to define them as, as well!!!! This seems like muddled thinking to me and the source of all these problems.

Try this. Go back to basic plain English, Please!!!!!

1) If I “measure” something I have a tool for measuring and units. Think of a ruler and a table. Its 3 foot by 6 foot using a ruler. I have measured it.

2) In contrast in common parlance, we use “Indicator” in two ways:

a. If I have an “Indicator” then that is “indicating” something. Its indicative – (ie it points towards something, but is not necessarily accurate). So an “indicator” of the size of the table would be that I could fit a small pool table on it or it is large enough to seat six people. It is indicative of its size, but not a measure.
b. Likewise we have “Indicators” on cars to show where we are about to go, rather than where we are. So an indicator can be used to mean “it indicates direction”, or intention.
c. In other words, indicator, is not the direct measure but an approximation, surrogate or precursor to the real measure. And in all these cases is clearly distinct from a direct measure. I can tell whether I have a measure – or an indicator. I can test the difference.

3) Factor: An influence. One of a number of influences on something that makes up the whole. A variable, from a set of variables, under examination in a study. As in “which factors will improve sales and which of those factors are most critical to success? – Ah ah, they must be the most critical success factors”. Neither an indicator nor a measure. Clearly something different. Which oddly enough is why, in English, we have three different words for these three ideas. Surprise, surprise.

Unless we can get back to this simple form and stop cluttering up the conversation with jargon that is self referral, (measure = indicator) then we will all be in a mess.

As I always say in these situations, “Jargon should be between consenting adults in private”. Clearly we are neither all consenting, nor in private in this forum.

I was once asked to talk on “Strategic KPIs” Yes “Strategic key performance indicators” Those KPIs that are strategic (as opposed to tactical), from amongst those Performance indicators that were key (to something unspecified), as opposed to those that were not key (to something again unspecified). See what I mean. And we haven’t even got to performance, indicator and measure yet. I spent the first 10 minutes pointing out the stupidity of the title of the talk, which went down well.

Plain English please – it saves a lot of problems with jargon.

Finally a useful linguistic trick. Given anything “jargonised phrase” such as “Key performance indicator”, it always makes more sense if you turn it into a proper sentence with verbs and subjects and objects. eg A Key performance indicator is an indicator of performance that is more key (in some way) that others. Or CSF – A factor that is critical to success. See what I mean – it makes the meaning much clearer, already.

Hail Plain English, sorry, I mean “English that is plain (and uncomplicated)”

Phil

What is the correct balance of measures across perspectives

A recent forum posting asked "What is the correct balanced of measures across the four perspectives of a balanced scorecard?" They wanted to see if any academics had researched whether it should be 25% each or some other ratio.

This is a massively mistaken question which goes straight to the heart of why many balanced scorecards fail and it is easy to end up with many measures that are not relevant to driving performance.

The purpose of balanced scorecards is not balance.

I'll say that again. The purpose of a balanced scorecard is not "balance". Rather, "balance" is a consequence of getting the thinking right.

The purpose of the thinking underpinning a balanced scorecard is to define causality and drive performance (and resulting balance of measures across the perspectives is a consequence).

So for example you would say that improving this skills and knowledge improves the process which gets better results for our customers and therefore better money for us. If you only measures the consequences, and not the drivers, you won’t be balanced.

Therefore an academic would look at an organisation that was measuring those drivers of change (in the learning and growth perspective) and be asking
a) Are they drivers of performance
b) Are they the right ones
c) Did they help bring about change.

The fact that you end up with a balanced set of measures is a side effect. So a sensible academic would not investigate this issue. Yes having 25% in the L&G perspective is more balanced but are they the right 25%? That is the real question. And so they drive performance so that there are changes to the higher perspectives?

Don’t confuse “the balance of a scorecard” with the causality it contains and the purpose of the measures . You are trying to get better at identifying (and measuring) what drives good performance and then influencing it. It is not about having a balance. Its about cause and effect which shows up as balance.

It is this sort of mistaken thinking that causes people to rush around trying to “Balance” the lower perspective by finding a few more learning and growth (usually people) measures to fill it up. Of course when the criteria is, “Are they in the perspective” rather than, “Are they useful in influencing performance” you end up in a mess and don’t actually improve performance.

So please don't fall into this trap.

If you need it, have a look at this article for an explanation of how cause and effect works.

http://www.excitant.co.uk/pages/bsc_balanced_history.html

Phil

How you frame performance management discussions

Do be aware how you frame a performance management discussion

I often encounter clients whose experience of performance management discussions is that they are a game of scoring the maximum amount and justifying a high score or protecting against the potential consequences of a low score.

The conversation is dominated by the consequences.

In contrast, when working with a recent client implementing fourth generation balanced scorecards, at this stage, we encouraged the teams to score their performance and discuss why they had scored them as they did. Not so much justify - as explain. In doing so they learnt about what each other were thinking and also how they were doing relative to others, given the contexts they were each in. As a result some moved scores up – others down and others were pleased to find their judgement confirmed by others.

It was about quality of conversation and learning. The teams were doing this in “learning sets” rather than “performance reviews” which created a different frame around the discussion. Of course they later used it to explain their performance to themselves, the people they supported, their staff and the management and the board. However by then they were confident that they knew how they were performing relative to peers and why, so these explanations were much more that-an explanation – rather than a justification which is what many can become.

So as much as anything it is how you “Frame” the discussions that influences what goes on within them.

So do think about how you frame performance management discussions. What hidden agenda or even explicit consequence is sitting behind the meeting?

Even if you do not have it, others may perceive you have it from past experience. So be aware of these and explicitly mark out ways in which you are breaking this thinking and encouraging conversation and learning, rather than evaluation and game playing.

Phil Jones
Excitant Ltd
Where balanced scorecards work properly and make a difference

Rapidly evolving and changing strategy

How do you handle rapidly evolving and changing strategy with a balanced scorecard?

Today I opened my email and found out that my "BT yahoo search is now powered by the nations favourite search engine - Google!". Yes Yahoo uses Google. It is hard to believe that these rivals from only a few years ago are now in such close cooperation. But that is the nature of Internet technology.

The environment and the strategy are changing rapidly and you need an approach to strategy planning, communication and implementation that can accommodate this rate of change.

Likewise with the credit shortage (I refuse to call it a crisis). Again it came upon us quickly and probably more severely that we expected. We also still have the uncertainty of when it will recover and how it will recover. Again thick business plans will be hard to change.

This is why I like strategy maps. They describe the strategy in short (1 page) documents. You can easily put a business plan behind them that sets out the details of the financials, markets, competitions, competitors and what you are going to do.

When I was on the management team of a dot.com the strategy completely flipped inside six months. We moved from a net market providing auctions for commodities in an industry, to a collaborative supply chain solution in the same industry. The strategy map could see that coming: On the main strategy map for the net market auction model, we introduced the supply chain capability, initially as a small theme to the right. Over six months the auctions business slid into a thin sliver of a theme on the left as the collaborative supply chain solution took hold with the customers and became the focus of attention (and the source of money).

The business plans, finances, resources, staff all followed behind as the organisation rotated through 90 degrees to provide a completely different solution to the same customers.

Strategy mapping helps you explain startegy as it evolves. It provides a quick and effective way to describe the strategy, that is rich and powerful in its description yet at the same time can also change and evolve far more easily than a written document.

That is why strategy maps are often used to describe alternative strategies when they are being tested and thought through. It is also useful to develop a strategy map when acquisitions are on teh horizon. It means thatyou concentrate on the main business whilst developing your startegy for the acquisitions and can then feed the integration often two businesses into the strategy map.

Having the staretgy map allows you to then develop the measures, targets, projects, actions and responsibilities (The balanced scorecard) beneath the startegy map. That way as the strategy map evolved you can more easily refine the balanced scorecard with reference to the strategy map.

For more on strategy maps and balanced scorecards, read our introduction to strategy maps on the main website http://www.excitant.co.uk/pages/strategy_mapping.htm

Phil Jones

The importance of accountability

The importance of accountability.

I am a great fan of the "Undercover Economist" series of articles by Tim Harford, that appears in the Saturday Financial Times. This week Tim asks why would people so poor that their weekly wage would not even cover the cost of the newspaper put their children into private school, when there is a free public school. Also why would poor people in poor and developing countries with free healthcare choose to pay to go to private doctors that are in these countries less qualified than their public sector free ones.

Seems bizarre. The answer according to studies by Das and Hammer that Tim Harford quotes is that these doctors give their patients much more time and attention. In other work by James Tooley, the teachers pay more attention to their pupils. In contrast some public sector teachers were asleep in the classroom when a film crew arrived, even though they knew the film crew were coming.

The answer they say, is accountability. If you are paid directly by your patients or pupils' parents, even though the amount is really small, you have to demonstrate care and attention, otherwise they will not come back or use your service.

In contrast, the disconnection between the source of the income and the people they serve in these free public sector leads to a lack of accountability. The conclusion from the article is that a little accountability goes a long way. It also concludes that low-cost private sector services should be nurtured.

If we consider how this maps across to the UK public sector we get an interesting contrast. The accountability to the UK government departments is often about penalties for failing to reach targets, rather than accountability to the people being served. This is being redressed through surveys from the populations of users, but this is not accountability, but feedback. The accountability is still through a third party (or third parties) rather than to the "customers".

If we look at private sector responsibilities, there is or course an accountability to management and the owners (shareholders) but that is only served if the public themselves are served as well and continue to come back and use the services.

So think about the links you can make between people's actions and their accountability to the
people they serve: The public, the customers and even other parts of the organisation, for back office functions.

Contrast the thinking of "Service level agreements" vs "service" and "accountability". SLAs may encapsulate part of the issue but certainly not all of it.

And think through the thoughts of the private sector doctor in these poor nations who are taking the time to listen to their patients, understanding their needs and helping them as much as they can. In contrast a UK NHS Hospital Consultant I spoke with was extremely frustrated to be told that he had only 5 or 7.5 minutes in which to conduct an appointment.

Where is the accountability in that?

Where is the accountability in your services?

Phil Jones

The failure of single point targets: A tragic NHS story

A tragic story of targets and "Incentives"

When explaining how poor targets and measures destroy common sense, I often cite the case of Accident and Emergency (A&E) times in UK NHS hospitals.

The government (through the Department of Health & Social Services DHSS) were concerned that patients were having long waits within A&E. So, to reduce the time, they imposed a target of 4 hours waiting on all hospital A&E waiting times. Hospitals that failed to meet this target were to be penalised.

Now you can see the logic: We want to reduce waiting times for patients, so lets create a target and incentivise the hospitals to achieve it (or threaten them with punishment for not achieving it.

However, what happened? Well arrivals at A&E are very volatile. Sunday lunchtime is a lot quieter than Saturday night. Its in the nature of A&E that emergencies happen. Demand and supply don't fit well together. So, to avoid punishments and to achieve the targets with the limited resources they had available, the highly rational doctors, managers, nurses in A&E resorted to ways to achieve the targets (and avoid the punishments).

I am sure there were many rational moves to achieve the targets which were not reported. (The BMJ reports on some short term actions in this article). To avoid the punishments some seemingly irrational behaviours occurred. One solution was to cancel operations to ensure beds were available for A&E patients. Another was to have a patient to stay on the ambulance instead of being admitted. That meant that the clock did not start counting. Of course, it tied up a valuable ambulance, but someone judged that penalty was less that the penalty from the DHSS.

Another solution was to address the discharge end of the problem . You see you need to discharge a patient from A&E (either sending them home or being admitted into a bed) to stop the clock. If beds are not available the patient waits in A&E and the (arbitrary) clock keeps ticking. The solution: Put the patient on a trolley but take the wheels off it and designate it a bed. They are still in A&E but effectively not according to the target. Creative yes. Bizarre no.

I have told these stories many times,. They are rational people trying to do their best in a ridiculous situation that does not consider the whole problem - that of patient care.

However last week I was chatting to an ex-nurse. I asked why she left the NHS and she told me a story that make this even worse.

She said that whilst on a ward she had two critical patients who needed a Doctor's (Consultant's) attention. They were critical. Life threatening. However, the doctor choose to serve a non-critical patient in A&E, instead of seeing to the critical ones on the ward, because he was driven by the Governments A&E targets (and punishments) to save a target rather than save a life. She was so appalled by this that she left the NHS.

There are some important things to realise about this story:

a) All the actors in this story are rational and have good intentions.

Yes. I know it sounds daft, but they are. The problem is that the context and situation they have been put in has forced them to act irrationally when the bigger context is considered.

b) Each is trying to improve the piece of the picture that is in their control.

Each player has limited resources, influence and control. The DHSS believe that all they can do is impose targets and penalties. It is all they have in their control and influence. They also believe targets work and change behaviour - and they are right!

The Doctors can only work within the context of A&E and can't magic beds up. The hospital has only so much time and resource available.

c) They all care desperatly about the patients.

Yes, they all care about the patients. It might not seem it, but they do. Think of the dilemma that that Doctor was in: The hospital loses a large amount of its funding if a target is not met which will affect many patients, for a long period, (and that Doctor gets the blame as it was on his shift) or two patients wait for 45 mins whilst a person is A&E gets attention. Think about it.

Again he is acting rationally in the context in which he has been put.

It is not the hospital that has created this situation, it is the DHSS and to some extent the Hospital management. Perhaps the hospital management could have addressed the problem more effectively earlier - we don't know.

The others players in this story are doing the same

So what is going wrong and what are the solutions?

Have athink while you wait for a later posting, where I will reveal my analysis.

Phil Jones, Excitant
Balanced Scorecards that work

How Incentives and punishments affect measures

A recent forum discussion I was involved in centred around how you should engage people with measures and the effect of incentives, on the culture of performance.

In my experience there are several aspects that alter the culture of performance, of which incentives (at the normal levels in organisations) is one of the least influential. One of the more dominant is:

Punishments, penalties and the culture of failure:

People will distort measures, or resort to dysfunctional behaviour, to avoid poor ones if there perceive (rightly or not) that they will be punished for them (and whether the punishments are implicit or explicit). It also applies when the messenger gets punished. When the need/urge/peer pressure/management pressure to avoid these penalties supersedes their common sense, you get the sort of silly situations that the NHS had with patients waiting in ambulances to stop the watch starting on 4 hour waiting times.

They will hide information, distort it, be economical with it, or report it differently to avoid this.

A (not THE only) way around this is to retrain the behaviour and address the underlying belief about failure and punishment. If the staff realise that they can learn from the information and it is a failure to learn that will be seen as poor performance you are starting to change the game. Again this relies in explicit messages and actions from management.

Again it comes back to local utility and understanding its value at that level, so people can make informed, sensible judgement and decisions with the information (not necessarily measures) they have at their disposal. They can also refine their judgement as they learn from the situation.

In other words, all of this is about the culture, messages and context that surrounds the discussions about measures. Understanding what is the current norm. HOW you invite people into the discussions, the baggage they bring, the context they have learnt their existing cultural norms from and the extent to which you can signal changes.

For this reason I have no "favourite way" to engage teams in measure discussions. Only questions I ask, and signs I look for, that tell me what the situation might be like. In many cases it can be excellent - in others, more problematic, and I apply different tools in different situations.

Phil Jones
Excitant Ltd
http://www.excitant.co.uk/

Trusting staff to develop and provide measures for you

Do you trust your staff?

A post on the PMA forum reminded me of a conversation I once had with a client's middle management team. It was during the balanced scorecard measures design workshop.

I suggested they talk to their staff about the measures and targets and even use some subjective measures.

They back peddled rapidly and said "No way!".

I asked why?

They said, "We don't trust them to do that honestly!"

I asked - "So how did you as managers create a culture where you employ people but don't trust them, and have trained them to lie to you?"


Long pause.....


".....And what are you going to do about it?"


Even longer pause....


Oh, such fun.

Phil Jones

Cascading balanced scorecards

I saw a question on cascading balanced scorecards recently and here was my reply

Here are some simple rules that I employed when I worked with Norton & Kaplan and have applied since

1) Cascade objectives rather than measures.

While some measures cascade many do not naturally translate across organisational boundaries or down through the organisation. However by cascading objectives you cascade the characteristics you want to measure and can allow each to use measures that are relevant and meaningful at that level. (Having objectives before measures was a basic improvement that moved balanced scorecards from measurement systems to a more strategic tool and should be your standard approach. - we adopted then in 1994)

2) Cascade themes of the strategy map.

In other words make sure you cascade the cause and effect model from your strategy map. Think of this as a vertical slice. So for the marketing department you want to cascade the financial impact (revenue and costs) the customer impact, the marketing processes and the learning and growth objectives that will improve the marketing process, influence the customer and deliver revenue whilst managing the costs.

If you cascade objectives in perspectives in isolation then you lose the performance driver model that the strategy map and the cause and effect model describe. The objectives and measures lose context and the whole philosophy breaks down.

3) Choose your pivot point of cascade

This is more subtle. If your strategy map is primarily designed around processes then they become the point of cascade. So divide up the strategy map into themes for each process. The cascade is sliced into the processes identified in the strategy map.

If your strategy map is more subtle than that and you have linked the organisation around customer objectives or customer groups, then cascade around them. This means that each department will have to ask, how do we support this customer objective and it will force (encourage/facilitate) joined up thinking and working.

If you follow these basic rules you won't go too far wrong

Some examples that will help.

You can see examples of cascades on the strategy mapping pages of my website http://www.excitant.co.uk/pages/strategy_mapping.htm

The Local government case study shows a cascade by customer objectives that achieved joined up working. http://www.excitant.co.uk/pages/case_studies_access.htm

The Dimensions fourth generation balanced scorecard case study is a cascade that is straight forward for regions in a company.

The Princess of Wales Diana Memorial Fund case study is where the overall Fund strategy is cascaded into each of the fund's "Initiatives" and where each initiative adopts the overall strategy. However as the initiatives are at different stages of implementation and maturity, each initiative has a different emphasis.

The cascade through a technology group on the first page of the strategy mapping pages shows how the group's overall strategy was adopted and refined slightly for each of 5 companies in different countries that made up the group. This one is a case where synergies were identified from the strengths and weaknesses of each company against the overall group strategy.

Some warnings

a) Beware cascading measures especially where the are not consistent

b) Do not aggregate measures into meaningless ratios and combined composite measures (eg we are at 76%) as these hid any meaning and cause and effect that drives performance

c) Ensure you communicate what you are trying to achieve as well as how you plan to measure it so people do not have to mind read what you thought of when you create a measure.


d) Don't dictate but look for ownership. If people understand what they are being asked they will find ways to achieve it

Hope this helps

Phil

Eight ways your balanced scorecard should be helping you in the economic climate (Part 2)

Eight ways your balanced scorecard should be helping you in the economic climate (Part 2)

This article provides four more ways that a good balanced scorecard should be helping you. It also includes a checklist you can action immediately.

In the last article I explained four ways in which your balanced scorecard should be helping you in the current economic climate. This is by:

1) Supporting governance and decision making
2) Knowing what drives costs and revenues for better decision making
3) Helping you to focus on the right investments
4) Helping you find more suitable measures as the situation changes

This article covers four more ways:

5) Providing advanced warning of internal problems and change
6) Provide advance warning of external change
7) Communicating priorities so they are clear
8) Evolving as your strategy changes and you adjust to the economic climate

Let us cover these four in sequence:

5) Providing advanced warning of internal problems and change

Your balanced scorecard should act as an early warning system for you. Within your scorecard lead and lag measures should be telling you whether your strategy is still on course or whether things are going wrong with your strategy.

One client used this to identify projects that were off track. Another looked for regions that were missing opportunities compared with other similar regions. A third ensured the capabilities were being developed and the organisation’s values continued to be adhered to.

It is too late if your measures simply tell you that things have gone wrong. To operate properly these lead and lag measures should exist within objectives and between perspectives. To design these you need an explicit cause and effect model in your strategy map and scorecard. Omit that cause and effect model, and you may be missing out on signals that things are going wrong.

6) Provide advance warning of external change

As you built your strategy map you would have made a note o the assumptions about the market. Also about those trigger signals that would suggest when your strategy might need to be revised. For instance did you assume a particular oil price level, cost of money or level of sales. When you have trigger signals built into your strategy map and scorecard you are monitoring the external environment for warnings that things might change.

7) Communicating priorities so they are clear

The advantage of communicating both objectives AND measures is that you make it clear what matters and people can clearly understand it, even when the measures become redundant.

When people know what is important (as well as how you are trying to measure it) they can help you achieve it. Also the combination of objectives helps explains tensions and conflicts. When you are trying to reduce costs and also protect revenues, you have to balance the tensions of costs reduction whilst maintaining the focus on revenues. It is not either/or. It is both.

8) Evolving as your strategy changes and you adjust to the economic climate

Your strategy may have evolved over the last few months. I have one client who has recently chosen to focus on the next 9-12 months, to position them for the future. In another client they are taking the chance the economy provides to build longer term capability. Another is ensuring it has a sound base of information on the business, and focusing on professionalism to provide assurance of delivery and to reduce costs.

One of the biggest problems you may find with your measurement system is that many measures become less informative over time: Especially when the environment is changing. In contrast, the strategy map and its objectives, describes the strategy. When the strategy needs revising you can revise the capabilities in the learning and growth areas, you can adjust the process objectives, you can refine customer needs and revisit the financial objectives. You could even add a new theme.

Then the balanced scorecard underneath the strategy map can be re-visited and re-designed or updated to reflect the new strategic imperatives. It’s a lot easier than revising the whole strategic plan. It is far better than leaving outdated measures in place. You might even save some money by removing the redundant ones. You will be able to communicate the revised imperatives, direction and how your staff can help.

So what now?

Go through the eight ways in which your balanced scorecard should be helping you. Do a simple appraisal:

1) In the current climate, is our balanced scorecard helping us in each of these aspects

2) What are the gaps?

3) What do we need to change?

4) How quickly do we need to make these improvements?

5) What help do we need?

You’ll find advice and resources on the excitant website, and when you need to make progress quickly, simply give me a call.

Phil Jones
For balanced scorecards that implement strategy
http://www.excitant.co.uk/

Balanced Scorecard for Charities

Balanced Scorecards for Charities

Over the last few years we have done quite a lot of work in the area of charities, foundations, not for profit and social enterprise balanced scorecards.

This week, Trust and Foundation News, June 09, The journal of the Association of Charitable Foundations, published a case study of the balanced scorecard work we have done for the Diana, Princess of Wales Memorial Fund.

You can find out more about the ACF on their website. You can read the article "Demonstrating and managing performance in a charity"on the Excitant website. Follow this link for both the article and to find an even more detailed version "A modern balanced scorecard approach to demonstrating performance in a charity"


Phil Jones
For modern balanced scorecards that improve performance in charities, foundations, and third sector organisations.

Balanced Scorecards in uncertainty and recession (Part 1)

How your balanced scorecard should be helping you in this economic climate (part 1)

The current environment is an excellent test of your balanced scorecard. Does it still serve you well as the economy changes, with credit tightening, interest rate and exchange rate changes, with concerns over governance (just ask a banker), as you need to find ways to change costs, or as you seek ways to maintain existing revenues or find new ones?

There are ways of doing well in this environment? Given all the doom and gloom in the car industry I have a friend in the trade who has never been busier. Why? He is exporting UK cars to people who are finding the pound so cheap that it is worth buying cars here. In every cloud, as they say. Of course it’s a change of strategy but you do have to spot opportunities and grasp them and youir balanced scorecard should be helping you. Here’s how:

1) Supporting governance and decision making

The first thing that your balanced scorecard should do is provide your board and your management with good quality governance and assurance. To do this it needs to provide a clear overview of performance across the balanced scorecard’s perspectives (Financial, customer, process & learning & growth). The relationships between perspectives provide lead and lag indicators of success so you know you are staying on track or something is going wrong that will lead you off track. You have the ability to drill into detail as you need it. The well presented information should promote and encourage informed discussion, backed up with evidence. Overall this should provide your board with information they can trust so they understand the risks, can act with confidence, or be assured that things are in control.

2) Knowing what drives costs and revenues for better decision making

If you are going to make decisions about costs and revenues you have to be clear what drives them. Your balanced scorecard’s cause and effect model that crosses the perspectives should be telling you what drives costs and what drives customer behaviour and revenue. If it isn’t, particularly if you have measures in perspectives that don’t have any relations between perspectives, you won’t be able to make informed decisions about which levers to pull to change costs of revenues. You might cut costs that undermine quality or sales.

As an example, some colleagues of mine have recently been using lean management practices to eliminate waste from processes and activities. The lean principles map well onto the cause and effect model of the balanced scorecard. In one case (from financial services) they identified savings of £300,000 per annum, in just one department. This was in an organisation with a total operating costs of only £11m. That is nearly 3% improvement in profits. In another example (from the public sector) a customer’s application took 3 months and travelled 1.5 miles to get processed. This was reduced to 45 minutes and 1 yard. You can imagine how this improved both services and costs. In each case it is the underlying capabilities that drive processes, to serve customers and deliver revenues, economically: that is the cause and effect model of the balanced scorecard.

3) Focusing on the right investments, Eliminating the wrong ones

One danger at the moment is across the board cuts. Perhaps cuts to discretionary spend or perhaps 10% across the board in every department. Of course some costs, such as rent or IT system costs, are fixed and indirect. They are hard to cut. Others, like training, marketing and even wages, are easier to cut. However these might not be the right things to cut, they get cut disproportionately because they are softer targets and the internal dictate dominates the logic of business performance.

In one organisation we worked through their projects aligning them to their strategy map. From a total project spend of £100m we found £40 that were not directly contributing to their strategy. That is potentially a £40m saving. In another organisation the simple process of exposing their project portfolio (over 130 projects in an organisation with a cost base of only £150m) and allowing that portfolio to be seen as a whole, provided the management team with the incentive to get a better grip on project approval, project costs overrun and, most importantly, the delivery of promised benefits.

4) Refining measures, whilst maintaining objectives

Modern balanced scorecards don’t start with measures. They start with objectives. This means you know what you want to achieve and the characteristics of the objective help you to tell what you should be measuring.

When things change, and some measures have become inappropriate you don’t just want to add more measures, do you. That will add cost as well. When your approach is anchored in objectives, it is far easier to refine your measures, and targets, whilst still communicating your overall objective. Your balanced scorecard should be able to adapt like this.

Only four tips today: There will be some more in a week or so time. While you are asking these questions you might just wonder how out of date or “modern” your balanced scorecard is. To read about how the approach introduced some vital and fundamental developments between 1992 and 1994, have a read of my new article, “What really makes a balanced scorecard balanced?”.

I hope your balanced scorecard is as least as good as those from 1995?

Phil Jones

Strategic Balanced Scorecard Specialists
Excitant Ltd

A culture of performance

A culture of performance

Good performance should develop a culture of performance, rather than one of “Measure mania” and “The tyranny of targets”.

This uinderpins how we implement balanced scorecards that make a difference to an organisation

I define a culture of performance as:

A visible and explicit pattern of behaviour, actions and values,

working to achieve the organisation's overall objectives,

that encourages honest evaluation, feedback and appraisal,

and informs decision making,

which is built upon collective and individual responsibility.

It is responsive to changing circumstances and

encourages self regulation, trust and learning.

The approach is designed to embed performance based on trust, evidence and judgement. Each of the principles of the approach and the techniques used are designed to develop and build judgement, trust and evidence; to engage staff, promote conversation about what performance means and how to achieve it. Building that a culture of performance will not happen overnight.

Phil Jones
Strategy & Performance Specialist
www.excitant.co.uk

Strategy maps and the tangible future

Balanced scorecards need a strategy map to orientate them towards the strategy. Strategy maps need a tangible future to describe the future that the strategy will deliver in a way that is tangible and clear.

Strategy is fundamentally how you move towards your future: What choices do we make to achieve our ambitions? What timescale do we have to implement? What else will happen that we have to take account of? The previous chapters have lay down the basis of strategy thinking into strategy maps. In this chapter future thinking and level ambition is explored more explicitly using a “Tangible future”.

Strategy involves mission and vision statements. Whilst useful and symbolic, these are of limited value for knowing what specifically will be different in the future. To assist the development of strategy maps, a more explicit, tangible future is developed. This describes what the organisation expects the future to be like, at set points in time, specifically. What will the markets be like, the competition, what size will it be? How will our channels to market have changed? What technology will have developed? How will regulation have changed? What impact will the environment have had? What will we be like as an organisation, by this time? Also there are uncertainties and risks. What assumptions have we made? What might change? What are we uncertain about? This detailed thinking is captured in a tangible vision that sits alongside the strategy map.

The tangible future serves three purposes. First, it describes the level of ambition in a way that is more tangible and measurable that mission and vision statements. This provides a vital base from which to detail the balanced scorecard. Secondly it generates conversation and discussion about what individual members of the team believe. This helps to identify and capture any assumptions, risks and uncertainties. It also it helps management teams understand how each other are thinking, individually and collectively, about the future. Finally it makes specific the speed of change and level of ambition required. This is then incorporated into the strategy map and subsequent balanced scorecard.

Phil Jones Fourth generation balanced scorecard specialist

Excitant Ltd

www.excitant.co.uk

Strategy maps are about cause and effect

Strategy is about change and improvement, so Strategy maps have to reflect that change and balanced scorecards have to be able to track that change to manage performance. Modern, third and fourth generation, balanced scorecards have strategy maps. These contain the objectives from which balanced scorecards can develop their measures, targets, actions, responsibilities.

Strategy is fundamentally about change. So it is vital to describe what will bring about that change. The strategy map’s cause and effect model teases out and describes how these changes will occur. How will the market and competition change in the future? How will we influence and affect that market and customers? How will we change in the future? How can we profit from these changes to improve our finances and overall value? These are all questions that are explored and answered during the strategic thinking and planning process and are embodied in the cause and effect model.

The great advantage of strategy maps is that they explain how the strategy will come about; what will be different by the end of the strategy and where the focus of attention should be to achieve it. They explain how the organisation will be different from various perspectives and how the change will come about. Failure to explain how change will come about is called “Strategy by hope and magic” The strategy map helps to avoid this.

The cause and effect model provides a predictive model of business performance. Rather than tracking whether you have achieved the result, eventual results, the cause and effect model tells you whether you are making progress towards the end result. It moves the emphasis of tracking strategy from, how will we know we have succeeded, to how will we know we are succeeding? This cause and effect model is fundamental to strategy and strategy mapping, so we build it into the design from the start.

Phil Jones, Fourth Generation Balanced Scorecard specialist
Excitant Ltd
www.excitant.co.uk

The difference between strategic and operational balanced scorecards?

Are BSC implementation for building Strategy Execution and BSC for Performance Management issues actually two different projects?

Do they actually have different agenda, work flow, stakeholders involved, pitfalls, and require different expertise and skills from consultants?


This was a recent question on a forum: Here is my answer:

The ambiguity is in the question because you are comparing "Strategic performance management with "Performance management". So I will assume you mean operational performance management and strategic performance management.

In that case there are differences, but bear in mind that strategy happens at each level in an organisation (so IT have a strategy just as the organisation has.
The simple answer is that "Strategic balanced scorecards" ask the question, "What are the few things that make the biggest difference, what are we focusing attention on and parts are our strategy rather than the operational detail". So the process is more selective - and the process is about ensuring that you have consensus over the strategy , articulate it and describe the drivers: “What matters most and will bring about the biggest change" from amongst the mgt team. You are also carefully teasing out the cause and effect relationship across and between the objectives in each perspective.

"Operational" balanced scorecards that are used to manage performance tend to be less discriminating. That is they may look at a process and try to identify ALL the characteristics of that process. This is where you end up with 200 measures rather than 25. Of course if you are seeking to improve performance in that operational area and have a strategy then all of the above applies.
Have a look at my article on the differences between operational and strategic management at http://www.excitant.co.uk/pages/bsc_types_of_performance.htm

The distinction I am making is between operational and strategic.

What this means is that, in essence the same approach gets applied where you are looking to change performance: that is the approach is one of selection of the elements that drive performance and that you wish to manage and track.

But if you want operational detail (for instance you want to be sure you know what is going on and have all the facts BEFORE you choose your strategy) then you are likely to apply a wider net and gather operational FACTS non-judgementally without even targets.

Many so called "Balanced scorecards" are really the latter - large collections of operational measures put together in perspectives (if you are lucky) and presented as operational data.

More selective strategic balanced scorecards or at least ones that are interested in improving performance will have an EXPLICIT cause and effect model. It is this model across the perspectives that make the biggest difference. See also my article on developments of balanced scorecards by Norton & Kaplan between 1992 and 1994 where the ideas of the cause and effect model first emerged that later turned into strategy maps.
http://www.excitant.co.uk/pages/bsc_balanced_history.html

The answers to all your other questions flow from this difference.

I hope this helps.

Phil

How do you measure sustainability using the Balanced scorecard and an Environmental Strategy Map

This question actually raises two separate questions

• How best to measure sustainable and environmental activities and strategy?
• How do I represent them on my strategy map and in my balanced scorecard?

An Environmental Balanced Scorecard

I often get into discussions about how the Balanced Scorecard needs another perspective in addition to financial, customer, process and learning and growth to represent the environment. If you are trying to do an environmental scorecard read this, because it explains why doing so will cause you to make many mistakes and miss a real opportunity. We started developing these over ten years ago, so know what works and what misses the point.

Adding an extra environmental perspective to your balanced scorecard seems an obvious thing to do, but can cause two problems. It means you will lose the drivers of sustainable activity. It will also cause you to look at sustainable activities in isolation rather than as a part of what everyone does. Both create problems for organisations and undermine sustainable and environmental activities.

As you will discover reading further, you can represent any environmental strategy for an organisation within the balanced scorecard framework as a theme, which does not destroy its structure and increases the impact of your environmental strategy, objectives, measures and initiatives. It also makes it easier to tell the story of your environmental strategy: and that must be a good thing.

Some argument you need a dedicated environmental perspective in the scorecard otherwise it does not address the significance of Kyoto (or other environmental legislation) and its impact on management reporting. For instance with Kyoto:

Chapter 40 of the Kyoto agreement sets out some national level PI's related to the environment and sustainability. Kyoto Chapter 40 defines Performance Indicators for use at Government level, and Government will pass the necessary measures into law that will force organisations, profit and not-for-profit, into reporting on them. Chapter 40 effectively demands such reporting be placed on the statute book of signatory nations with much the same level of precedence as financial reporting. The UK Government and other signatories have already implemented a number of measures as a direct result of Kyoto. Other Governments are doing the same kind of thing.

Does sustainability reporting, as a global issue, fit into the Norton & Kaplan scorecard model? Isn't this balanced scorecard model ultimately profit driven? Doesn't sustainability address a wider social impact? Therefore it seems legitimate, if only on a practical data management basis, to have "Environment" as a fifth perspective.

This is all true, but leads to a wrong conclusion. Trying to argue for a separate "Environmental perspective" misses a fundamental understanding of the balanced scorecard model.
Why this thinking is wrong? Lets us look at some examples that demonstrate how sustainability as a strategy is best represented.

Sustainability and environmental strategy are themes, not perspectives.
Your sustainability or environmental strategy is a theme of your strategy that spans the existing balanced scorecard perspectives. It is a (vertical) theme of your strategy map.

To understand this, just for a moment think of all the other similar aspects of a business. You could introduce new (horizontal) perspectives for financial compliance, Health and safety, Innovation, Customer service, Sales, Cost reduction and every other potential theme of the strategy (as people amazingly do).

Guess what? When you then ask "How are these related to the other perspectives in a cause and effect framework?" there is not a simple answer. Why? Because what they are doing is lumping anything associated with the environment into a single perspective of the strategy map whether they be related to values, capability (learning and growth), process, customers and their needs, financial impact or CO2 emissions. Therefore you lose the causal nature of the thinking and relationships between perspectives. They lose anything that drives and tells the story of the strategy. You also lose the ability to ask, questions about how the strategy happens.

There are at least five potential themes in a sustainability strategy map that illustrate how they should work. All of these illustrate how all the Balanced Scorecard's perspectives apply. Along side an organisation's strategic themes of making some sales, managing costs, complying with health and safely, etc, there are possibly another 5 themes to do with the environment.

To find out what these 5 theme might be visit our website and read the rest of this article

http://www.excitant.co.uk/pages/bsc_environmental.htm

Phil Jones

How to get buy in for Balanced Scorecards and Performance Management

The question is very current as I had the most amazing compliment from a Balanced Scorecard client last month. When we first met, this Director was as sceptical and cynical of poor measurement approaches as any person I have met. We have just exptended the pilot balanced scorecard programme to a full roll-out. After a recent presentation to the board, he said:

“I have never come across an approach where there is so much acceptance. If fact I cannot think of a single person who is against the approach. You have overcome all resistance.”

I must admit it took me by surprise. I knew it had gone well, but this, as I am sure you will agree, is an exceptional comment. This isn’t a one-off. Going back another balanced scorecard client’s Director said,

“I have never come across an approach that has produced so much change inside six months”.

This was the Director of a City Council that had a reputation for being difficult to change.

This most recent quote came from work with a lovely and fascinating organisation. They are a third sector organisation that supports people with learning difficulties so is an interesting combination of a commercial, social service, that cares passionately about helping the people they support, and keeps a sharp eye on the money as well. It’s a very interesting organisation.

They had also chosen some managers for their pilot regions that were very different in style of management and approach.

I was thinking what I had done (quite deliberately) to achieve such buy in to the balanced scorecards with these varied regional directors. It came down to:

1. Draw the sting of bad measurement systems, poorly designed balanced scorecards, measures mania and the tyranny of targets. The poor experience of bad implementations and poorly executed “scorecards” needs to be over-ridden with a more modern, strategic and positive approach, as I use.
   
2. Explain how there are different types of performance management for different needs (see types of performance management) and make sure we are using the right approach for this client’s needs
   
3. Ensure I address the simple logic of the business and the cause and effect model
   
4. Don’t start with measures, but start with what they want to achieve and their objectives. Use this to describe their strategy in their words.
   
5. Position the approach and performance management as something to learn from that will evolve.
   
6. Ensure it is useful to those on the ground who are using it. (In this case we were primarily addressing Regional managers and it had to make sense to them and their staff. This was so successful that other regions demanded to join the pilot and some regions started to cascade to their staff and individual services with no prompting.
   
7. Mix judgement and facts (measures). Acknowledge the experience of managers and tap into it. Go further and demonstrate trust by acknowledging their judgement and helping them build it.
   
8. Use the approach to encourage dialogue and conversation. Even before we reached the measures they were having dialogues and discussions between the regional managers and within the regions that were rich, valuable to the managers and helped them to share ideas. They also helped them to assess and compare their own judgements and to learn from each other.
   
9. Tap into the multiple thinking styles and patterns that people use. If you fail to do this with the approach and with the way it is introduced you will lose many of the team.
   
10. Develop champions and influential advocates. Find people in the organisation who will champion the cause. The more sceptical to start with the better. Not just the high and mighty, but those who are respected managers in the organisation who are listened to by others. You can’t pick them, they will choose themselves, but you can develop them.
    
11. Use models of change and improvement, explicitly. There are many built into the balanced scorecard approach. Leaving them implicit means that they are often missed or not managed. Explicitly managing them, and being aware of the stages of thinking and ownership that people are going through, helps immensely. In other words, know the process and trust the process.
    
12. Recognise that needs will evolve. For instance boards demand more info and then once they have built trust and confidence step back, so their demands on the strategy map and balanced scorecard will change, naturally. It is expected.
    
13. Some final tests:

• “Does it make sense?”
• “Can I explain it to my staff?”
• “Do I want it on my wall to remind me and others what we do?”
• “Is it useful?”,
• "Does it help me?”, and
• “Can I be a better manager, with a wider view, concentrating on what matters, better?
  

These are not one off comments. Being systematic about change and helping people understand how and why it will improve things, make the approach a success. So our clients tell us.

To embed your balanced scorecards so they make a difference, just contact the Balanced Scorecard specialist consultants.

Phil Jones,

Excitant Ltd

Principles of Effective balanced scorecards part 8

"Who cares? It better include the Chief Executive"

Now you can certainly do scorecard projects without the strategy: Without a strategic intent. What happens is that the "Do a scorecard" message comes down from the top, but there may be little guidance as to what is wanted. Involvement may be vocal rather than real. This is not an unusual pattern. In his excellent book, "The Rise and Fall of Strategic Planning", Henry Mintzberg describes how planning fails when it is delegated to planning departments. The same is true of performance management.

On the other hand when you can sit across the table from the Chief executive and ask, "What is the real problem here?". Then different things happen. In a recent engagement I was exploring how to design the strategy map with the Chief Executive. She was concerned that her team work closer together and think and act in a "joined up" manner. I offered her two choices.

• Silo based objectives. The objectives broadly corresponded with the existing organisational structure
• Objectives that they had to jointly own.
  

She said, "Well I suppose that we could start with the silo based ones and move to the joined up approach."

Now there is only one response at this point. It required looking her in the eyes and saying, "Well we both know that will never happen, will it?"

"You are right", she replied and from there we had backing from the top to change the thinking, practices and patterns of behaviour of that management team. The strategy was joined up services and the strategy map and performance management system reflected that.

So principle 11 of 10 (Yes I know, but we couldn't leave it out and you will remember it better for being 11. It worked for Spinal Tap so it works for me)

11 Get the Chief Executive on-board

You can do it without him or her, but it will be an operational scorecard.

So, look critically at your performance management project and your performance management reports. Ask yourself, and answer honestly:

• What does your Chief Executive really want? Are you solving a real problem for them?
  Are you making a difference to the strategy?
• Are you enabling it to happen or just measuring whether it does or doesn't?
• Will you make a difference to their performance and the way the team and organisation works?
• Or are you just measuring performance to see what is happening?

In contrast, I met someone recently who was in a performance manager's role. His responsibility was developing the measures and reporting pack.

However he was really frustrated. He knew that he wanted to make a big difference to the organisation: To drive into the information and provide stuff that would inform managers and help change and improve the organisation. Yet he was getting no support. Despite trying he was not getting managers' time and attention. He could look forward and think to himself, "This project will be a failure. At best it will be useful reporting. At worst it will create no change." He didn't want that on his CV.

He was stuck though. If he carried on with the level of support he was getting he would have a non-descript project on his CV. One where, despite his passion and effort, he wasn't going to get a result and be able to say, "I made a difference". If he left now, after 3-4 months of frustration, he would have a half finished project on his CV. He would have to explain why he left, and what he had not achieved.

I hope that is not you, is it?

If it is, then perhaps you are already thinking how external help would help you as well as the organisation. It's no coincidence that several of our Associates and many of the people in our network are clients and ex-clients. Moreover, they are people who we worked with as a part of the joint project team, developing their skills and getting them the exposure they sometimes lacked. Afterwards they were better positioned to work with their Directors and management team. Their credibility had been enhanced.

Why do we do that? Because it is a win/win. We get happier clients, you and your team develop and progress more, the work is more likely to persist and will make a lasting difference. That means happier clients all around and that means more referrals for us. Obvious really.

You know that you know how to do much of it. Sometimes it jus takes an external voice to get through the door.

In the meantime look critically at your own performance management approach, where it is used, how it is used and what it is used for. Is it giving them useful information? If you aren't getting the right sort of vibes, then you know what kind of experience you need to help you, don't you?

More soon

Phil Joneswww.excitant.co.uk

Principles of Effective Balanced Scorecard Part 7

"The ability to learn faster than your competitors may be the only sustainable competitive advantage." Arie de Geus

Whilst chatting with a manager of a largish organisation I suggested it was useful to think about organisations and how they learn, in the same way we think about people and how they learn. She said she would think about that and went off to her next meeting. Two weeks later we bumped into each other again and she said, "I thought about your idea. I came to the conclusion it was silly, as this organisation does not learn." So I asked, in that case if you met a person with such an inability to learn, how would you classify their learning disability? At that point she replied, "Oh err - highly autistic". The penny had dropped.

I use this analogy a lot, though most organisations would not have such a high degree of learning disability. Some organisations, plough on regardless of what the outside world is telling them. Some organisations do not listen to the inner voices of their people. Some appear to have split personalities depending upon which department or manager you are talking with. Some have invested so much time in their strategy that they believe it must be right.

Yet their strategy is "Just an hypothesis". It is not provable. It's an idea. It's a set of beliefs about what the environment is like, what the customers want, what the organisation is capable of delivering and how it can change. You can't guarantee it will work like a law of nature. It may be based upon research and experience, but its still a belief, and hopefully more than hope and magic.

So, like every hypothesis, making it happen is a test. A test of whether it really is true that implementing that system, changing that product, serving those customers, cutting those costs, will succeed.

So the quicker you get feedback on your hypothesis the better. This is because the sooner you get feedback, listen to it, evaluate it, make mode decisions, the sooner you will be able to refined, develop and update the strategy. You would not set sail across the Atlantic on the basis on the weather forecast at the time you left. You know the weather will change in that time and you may even come across a few storms. If you assume the wind is always in the same direction you are likely to end up way of course (if not sunk) by the end.

Likewise, strategy is a hypothesis. The sooner you test it and refine it the better.

You have probably already started to think about your strategy, scorecards, measures and targets. As you have realised they are just the same. They too start off with an initial design (and usually a lot of effort, energy and time goes into that stage). Yet with time those measures and targets, those strategy map objectives, will become wrong. Yet so many performance management systems start off with an initial scorecard and leave it in place. You find the same set of measures 1-2 years later. Ironically what often happens is that the use of the scorecard drops away as the managers realise it no longer serves their purpose. In reality the strategy has evolved and the scorecard has not evolved with it.

That is why it is really important to build into the management team meetings and performance management processes, the mechanisms to refine and update the strategy maps and scorecards as the strategy is executed. So out 10th principle is:

10 Strategy evolves, you learn from its execution: Management is about testing and learning from its execution. Performance management needs to reflect this.

But bear in mind who's job, who's responsibility it is to maintain this. It is not the role of planners and performance managers. It's the role of the management team. So the degree of ownership, understanding and usefulness they have is directly related to their ability to use it and maintain it. Which in turn is related to the life expectancy of the performance management approach.

You have probably realised that introducing performance management is a change management project. You have to be clear who needs to change, how that change is to be brought about and explicitly what you need to be doing to make that change happen. As you would expect, the skills of managing change have a massive effect.

In our next series of newsletters, we will explore how to make strategy happen, quicker. We'll also explore how the other practices, processes and systems in an organisation can undermine your performance management ambitions and what you can do about them.

In the meantime look critically at your own performance management approach, where it is used, how it is used and what it is used for. Ask around your management team to see if they believe in the strategy map and scorecard. Ask them are they using it, do they talk about it, do they expect their teams to use it and manage with it? Is it giving them useful information? If you aren't getting the right sort of vibes, then you know what kind of experience you need to help you, don't you?

More soon

Phil Joneshttp://www.excitant.co.uk/

Principles of Effective Balanced Scorecards Part 6

"Of course we have a scorecard. I designed it at home the other evening"

Very early on in my Balanced Scorecard career I heard a lovely story. Some of my colleagues had been to see a potential client about some scorecard work. It turned out he had one right there. He opened his draw and pulled a balanced scorecard out. Then he proudly announced, "I don't need any help. We have a Balanced Scorecard. I put this together one night after reading the book".

Now out of politeness my colleagues did not roll about on the floor laughing (or so they tell me). But the irony of the statement meant they could not resist asking the natural follow up question. Which was: "So, if you don't mind me asking, how many of your colleagues, fellow members of your management team, to whom this scorecard applies, were also involved in the choice and design of this scorecard".

I suspect you know the answer.

He certainly had a balanced scorecard: But no one else did. Now it might be that what he had produced was exactly what his colleagues would have produced. You know when that happens. When you bring a proposal to a meeting and everyone immediately says' "Yes, that is exactly what I was thinking. You are completely right; we need no discussion, debate or changes. It is perfect. Now lets go and implement it in our departments just as you proposed it."

Well maybe it happens often to you, but usually only if you are presenting a new idea to a room of people who do not care about it, as it will not affect them. Someone might even suggest that they are merely clones, dummies or puppies that like to have their tummies tickled. I couldn't say, but I don't see it happen very often in any management team I have dealt with or being on.
Things happen when people own the idea and feel they have either being at least a partial creator of the idea, involved or have tested it sufficiently that they think it is robust. Likewise, the Strategy map and Scorecard you produce needs to be owned by the rest of the management team who will use it. If they don't, then guess what, it won't get used.

The best of the Norton & Kaplan scorecard books is "The Strategy focused organisation". Whilst they are useful reference documents, you can read all of chapters and not find a section that describes how you get a management team to agree on the scorecard or strategy map (something we of course did with every engagement but never got written up in the case studies books). The trials and tribulations of getting them to agree which few objectives should be the ones to focus on. Chapter 3 is all about building strategy maps. It should be called "the technical design of strategy maps" for that is what it explains. Nowhere does it explain how you get those technical designs into people's heads so they want them, agree with them and believe in them.

The third book is similar. It contains four hundred pages of how to design a strategy map. Yet, no matter how hard you look there is almost nothing on how to get the management team walking out of a room all agreeing that the design of the strategy map is the one they all believe in. I'm sure somewhere I have seen the line, "Now get your management team to agree the startegy map" which sums up the approach in the books, but I can't lay my finger on it. This leads to principle number 9

9 It's a collective endeavour - its about collective understanding.

We all know stories of planning and strategy being delegated to a planner or strategist. We all know what the likely outcome is. Whereas when people do planning, the value lies in their understanding of the planning assumptions, drivers, background and reasons for the decisions. It is about people: Having a collective understanding, of what, of why, of how. People think in many different ways: So variety, diversity & versatility are needed to create understanding and collective ownership.

The act of discussing and designing and agreeing a strategy map and scorecard as a team has the effect of teasing out differences in understanding, assumptions and direction, creates consensus and means that the team all leave the room with the same story. You can do it as an individual. However all you have done is create another (individual) version of the story.

When clients are engaged in our strategic planning and strategy mapping workshops we are not only developing a view of the strategy with them but getting it into the collective heads of the management team. You'll recall our earlier principle, which was about being able to tell the strategy from the strategy map and scorecard. If you can't do this, there is something wrong. More importantly, if any member of the management team feels that it does not represent the strategy then you have either a division over the understanding of the strategy or a strategy map and scorecard that do not represent it. Either way you need some strong facilitation, change management and communication skills to help them bridge that gap.

Before the next newsletter, in which we will explore maintaining and evolving your strategy maps, be brave. Ask around your management team to see if they believe in the strategy map and scorecard. Ask them are they using it, do they talk about it, do they expect their teams to use it and manage with it? Is it giving them useful information? If you aren't getting the right sort of vibes, then you know who to talk to, don't you?

More soon

Phil Jones
http://www.excitant.co.uk/

Principles of Effective Balanced Scorecards Part 5

"Strategy is about what we choose to do, and what we choose not to do" Michael Porter

You'll recall, in a previous blog, we talked about a useful test of any scorecard or strategy map is, "Can I tell the strategy from this?"

You will have already realised that if you cannot, then that begs the question, "What purpose is this serving? "What effect it is having on the organisation?" Ouch!

I recall David Norton talking to us about a client of ours. He said that previously the CEO would not have been that worried if their strategic plan got lost on an aeroplane. Frankly it wasn't that useful to anyone. However if their new strategy map fell into a competitor's hands, then he would be worried. Not only that, but the strategy map was on a single page. He described it as the $1m powerpoint slide for that client. That was how valuable the client regarded the strategy map.

Now we all have a grip on the strategy. There are themes, decisions to do things and not to do things, ambitions, visions, mission investments and usually tensions.

So the acid test for your strategy map is, and our 7th principle is

7 "Are you sure you are explaining and communicating the strategy"

One of the things we do with clients is to coach the Directors and managers in the effective presentation of their strategy maps. Rather than leaving it as a lifeless page, that people have to read, these Directors present their strategy maps to their teams. I have seen a Chief Executive and her six Directors present the overall strategy and the implications for each of their Directorates to the whole of their middle management (in this case some 50-60 people) in under an hour. Moreover they did it in such a compelling and effective way that, even with the tensions and complexities, they got real understanding and engagement. It made sense to them. The middle managers were able to interact with the strategy maps, develop and build upon them and provide ideas as to where they could contribute to and help each other across the various departments.

Now I don't know how you are using your strategy maps like this, or even whether you are using them at all. Sooner or later you will have an idea of what value you could be missing out on. When you are using a strategy map you are probably already aware of how it improves understanding and communication when you design it well.

Strategy maps are about making a difference to the future: Making it happen. In six months time, or perhaps a year or even further out, when you are thinking about how much you have achieved, you will be able to look back and recall how getting the message across had been such a key element. How much a well-designed strategy map makes a crucial difference.

To do that you need to be clear about the strategy. There will be tensions, between costs and growth, between different market segments of customer groups, between making product available and cash flow.

You will also have to be clear about the difference between the perspectives of the strategy map (Financial, customer, process and learning and growth) and the themes of your strategy. As you realise they are quite different. Yet, I have seen so many organisations start to swap the perspectives with strategic themes such as sales, innovation, cost reduction, etc. When I see these sorts of strategy maps and scorecards I just stop and think to yourself, "This does not make sense".

As a test, just ask yourself this, "If I am to improve innovation which of the scorecard's perspectives do not apply?" Being smart you will notice that all apply. There are financial implications, implications for the customers, an innovation process and learning & growth pieces that will make the change happen. As you think this through, http://www.excitant.co.uk/Seminars_workshops.htm gives some alternative ways to open the discussions with your management.

8 "Be clear about the themes of your strategy and how they relate to Balanced Scorecard perspectives"

When clients are engaged in our strategic planning and strategy mapping workshops we are not only developing a view of the strategy with them but getting it into the collective heads of the management team.

While you are waiting for the next newsletter, in which we will emphasise how important this collective understanding is and how to develop it, take a good hard look at your strategy map. If you don't yet have one, then just think how much more effective your organisation could we be if it did use them?

More soon

Phil Jones
http://www.excitant.co.uk/

Principles of Effective Balanced Scorecards Part 4

"The person who says it cannot be done, should not interrupt the person doing it." Chinese proverb.

I'm reminded of this every time I work on measures for performance management in an organisation.

As you read this, just imagine you are in a workshop developing measures for your scorecard. Lets take a simple area like project management. You'll know there are standard measures for managing projects that usually revolve around time, cost, quality, and delivery. When you get a group of project managers in a room, there are lots of ways to measure this. I one case I had about 20 project managers and asked them to suggest measures we could use. They generated over 60 measures in less than 5 minutes. I could have kept them going and probably got to 100, but that was enough to prove the point.

Imagine what happened when I said, "OK we need just 12. Which ones shall we choose?" Well, of course, the arguments started.

The problem is, people will disagree on why the measures should be used. Which one is better for this or for that? Of course much of the reason for their choice is implicit and unstated. I simply asked them to give me measures we could use for project management.

You will see this again and again. How often do you hear people ask for "a standard set of measures" for say, logistics, sales, manufacturing, retail, health, child protection, employee motivation, customer satisfaction, or whatever.

You'll recall in the last newsletter we distinguished between diagnosing what is going on in an organisation and finding the few key points of motivation that will change the way people behave. When you are diagnosing what is going on, you measure all the characteristics that are useful or potentially informative.

So, why are you not measuring your heart rate at the moment? Its vital to your survival, it's a great diagnostic if you are ill and it if fails you and anyone else near you will know very quickly.

The answer is that you have left it your deeper systems to manage and warn you if anything is going wrong. Its called your autonomic system. You have delegated it.

So why would you choose to put the organisation's equivalent of its heart rate on a scorecard? Only if you were ill or expecting a heart attack. Alternatively you would if you could not trust your autonomic system to warn you if something does go wrong.

I'm sure you will agree that all those standard measures are really very useful: For diagnosis. However you will have recognised that if you are trying to change performance and motivate the organisation I suggest you do not start with measures. This is our 6th principle

6 "Never, never, never, ever start developing a scorecard with measures"

If you start with "What can we measure?" you will get the corporate equivalent of the output of the brainstorming of those project managers. Only it will take longer, cost a great deal more and be harder to stop.

If you start with, "What are we trying to achieve?" or even, "What behaviours are we trying to encourage?" you will get a completely different set of answers.

Now at this point I usually get, "So how can we measure Customer satisfaction, culture, behaviours, values, team morale, motivation, knowledge?". The simple answer is, don't worry about that yet. You see, if you start to think about how to answer the question before you have finished answering it you will never be brave enough to ask the question.

In fact there are lots of ways to measure all the things listed above. But most people start by believing it is either difficult or impossible. (As a hint ignore everything you ever learnt about SMART measures). It is this sort of thinking that stops people developing really useful measures that will alter behaviour.

You see people can measure these sorts of things and we have lots of clients who do. If you have any doubts, just think of someone who is feeling alienated from an organisation and looking to leave. How do you know? You do know, because you do. Yet I suspect you are not using a traditional measure, are you?

So many organisations are finding "innovative" and really informative measures that tell them what is really going on in the organisation.

Unfortunately, most people start off by believing that you can't measure these things. So they don't try. Take a look at the research. 80% of organisations have some form of "balanced scorecard". Yet of 2,400 companies surveyed, 70% of scorecards are failing their organisations because they do not provide concise, predictable, actionable information. Of these, the Average Senior Exec has 132 measures (83 financial, 49 operational): 62% of measures are financial. 76% are lagging (historic) measures. They are too late, lack customer information, make little use of the "Learning & growth" perspective and have lost focus on strategic goals and underlying drivers of performance. These organisations are trapped in this sort of thinking. Their scorecards are certainly not balanced.

Hence, why we started with, "The person who says it cannot be done, should not interrupt the person doing it." Unfortunately, what Einstein said also rings true, "The type of thinking that created the problem, can't be used to solve it"

You will appreciate the difference our approach makes when we tell you that we have clients that have maintained their strategy maps and scorecards for over 5-6 years. The creation of the scorecard is only part of the problem. Do it poorly and you will create a bigger maintenance problem.

As you think about the measures in your organisation, the mix and how they are used, you'll probably start to notice where they could be improved, enriched and that they could cover a wider perspective on the organisation. You are probably also aware of the praise our clients give us when we run such workshops for them, how quickly we have reached suitable measures. People who have already decided to bring our experience in, realise how much we transfer our skills to them as well as help them deliver results quickly.

Take a look at http://www.excitant.co.uk/Stimulating_performance.htm and our "Making the case" paper in our case studies for sources of our research. Using this sort of information in your organisation can help you to convince people of the best way forward and win support for making improvements and delivering results, won't it?

More soon

Phil Jones
http://www.excitant.co.uk/

Principles of Effective Balanced Scorecards Part 3

Like many organisations, this FTSE 100 Company's executive team had a vast amount of data at their fingertips. Their monthly report contained around 120 measures. The Chief Executive could drill down to individual retail outlets, and look at Saturday's product sales for all their categories, first thing Monday morning.

We had been brought in for a relatively common problem. As the Chief Executive put it, "They don't get the strategy". So we read through their strategy documents and interviewed the executive team to understand the strategy. At the first workshop it became clear that what was in the paperwork was not what they considered important. Like many organisations there were vast reams of documentation and thinking in some parts (retail offering in this case) yet very little about the store positioning (having the right offer in the right place).

Why they didn't get it is a story for another newsletter. By the time we had finished the Executive team were down to 26 measures to manage the strategy for their business. But here is the interesting bit: Only 12 of those measures were amongst the 120 in their monthly management report. The other 110 in their management report were useful diagnostics and detail, but they were not part of changing behaviour and driving the organisation forward. Performance measures vs managers of performance. Moreover the 14 missing measures were spread between

• Those concerned with the culture, skills and behaviours that would help to change the organisation and move it forward
• Measures of what the customers actually thought.

Aspects of the strategy that were not represented in the management report. In particular this covered the vital new product & service development pipeline and store portfolio management.
In other words they were now starting to measure what was important and what they wanted to change, rather than what they could measure. So principle 4 is

4 "Measure what you want to manage, (not manage what you can measure)"

Yet this behaviour is so common, so it is important to understand why. Why do organisations end up having so many measures that they cannot see the wood for the trees? Why do they tend to measure what they can measure, rather than standing back and thinking what should we measure.

Well there is a simple reason for this. They are doing it because it makes sense. Imagine for a moment you have just taken over a new role. It's a department, unit, organisation, product you do not know. So what will you do? You'll dig around, walk about, talk to people and gather as much information as you can. It makes sense when, as a manager, you are in a diagnostic and fact finding mode. You are trying to find out what is going on with a unit, department, product or process. You gather as much information as you can to piece together a picture and diagnose the underlying problems and causes. You put in place ways to measure what is going on.

But this is completely different to motivating someone. If you want to influence a person's, team's or organisation's behaviour how many measures would you use? 120? 100? 50? Of course you wouldn't. You would use maybe 3 or 4 or perhaps 6 at most. Any more and that would confuse the issue, wouldn't it. So this leads us to principle number 5:

5 "Be absolutely clear what you are using your scorecard for"

There are plenty of examples of this in the private sector but an interesting (but not amusing) example comes from the public sector. In the health service some measures are generated by parliamentary questions. An Member of Parliament asks a question and a measure is set up to answer the issue that is raised. All the hospitals in the land are not responding to the Department of Health's requirement to provide more information. So a measure is created. But what stops it being measures. The MP get their question answered and moves on. Yet now all these administrators are collecting this information, which is no longer required. They get added to. They do not get removed. When I was first told this story it included a room in Leeds where the printouts are piled up and locked away and no-one ever looks at them. Whether that is true or not is irrelevant. Most organisations have done similar things in the past.

So a useful test of any scorecard or strategy map is, "What am I trying to achieve?" "What purpose is this serving and what effect will it have on the organisation?"

You will appreciate that this is why we spend time with clients working on what the information is used for and helping them move from continual diagnosis to influencing behaviour and checking that it happens. You will of course recognise that as performance management.

As you think about how your organisation does these and what diagnosis would help you can think also about the workshops we can customise to suit your particular circumstances and needs. When you want more information on these take a look at
http://www.excitant.co.uk/Seminars_workshops.htm

By paying attention to just why you ar e measuring, you will start to improve the value of your balanced scorecard in your business. Of course, you realise, there are other key principles that will make a difference. In your next few newsletters we will look at how strategy, people, focus and ownership affect things. In subsequent newsletters we will also set out

"Ten top tips for successful implementation and operation".

Of course if you are impatient, we can do on-site seminars and workshops to help your organisation make sure your investment in performance management and its strategy make a real difference.

More soon

Phil Jones
http://www.excitant.co.uk/

Principles of effective balanced scorecards
Part 2

"Our Balanced Scorecard is an unfocussed mess."

Many years ago I was chairing a Balanced Scorecard conference. There were over 120 organisations represented and there seemed to be 120 different ways of doing the Balanced Scorecard being promoted. Over dinner I was sitting amongst a group of people when the person on my right said, "This Balanced Scorecard thing is a heap of junk". Intrigued I asked him why he thought that.
He explained that he worked for a large, public sector organisation and their scorecard had over 50 measures on it. It was impossible to work out what was important from it. There was no logic to it. It just created confusion.

So I asked him, "Why do you have so many measures on it?" He replied, "We were supposed to." Now I must admit I was puzzled at this point. I could not imagine where this "rule" of his had come from. As a guideline we used 4-6 objectives or measures in each perspective. That generally led to around 20-24 measures.

What puzzled me was that, unlike other approaches like, say, EFQM, there are no guidelines as to which objectives and measures you should have on a strategy map and scorecard. Whereas EFQM will ask about your capability in a number of dimensions of good practice, there is no such standard set of objectives and measures for the Balanced Scorecard (though many people have constructed them, of which more another time). Its good to think of the approach as a blank tableau: It's like a mirror to the organisation. The people who are designing the scorecard will be representing the thinking of the organisation, won't they. In other words, what you get is what you put there. What you put there is a reflection of the organisation's thinking.

In this case, I simply asked, "So if the scorecard is a reflection of the quality of the thinking and clarity of the strategy of your organisation, what does your scorecard tell you?"
A common example of this is where the scorecard is used to capture all the measures in particular perspectives. No selection is applied. In many ways it is simply a diagnosing tool, that says, "This is what we have available". Like me you probably come across management reports with 100, 120, 150 or even 200 measures in them. They are simply collecting and presenting the information that is available to them (If its there we shall have it). I know that many organisations do this. I also know that they benefit from the far simpler and clearer focus that high performing organisations use.

In the design process, people have somehow lost sight of the question "Why do I want this objective or measure on the scorecard?" and have drifted into, this is what we have available. It's a "manage what we can measure", mentality. This leads us to our third principle

3. If you don't know where you want to go, you are unlikely to get there.

By now you will have realised that this applies both to the design of scorecard projects and to the organisation itself. If there is no clear strategy, or as would be suggested from the earlier discussion, it has become so unfocused and muddled that no-one can work out what they should be concentrating on, then guess what you will get: An unfocussed strategy map and scorecard.

If on the other hand you are clear about what you are trying to achieve. If you are clear what you are doing and what you are choosing not to do, and how you will get there, then you are likely to be more focussed. This will be reflected in the strategy map and the scorecard.

So a useful test of any scorecard or strategy map is, "Can I deduce the strategy from this?" If not, then you should ask, "What purpose is this serving and what effect it is having on the organisation?" That can be quite scary, can't it?
You will appreciate that this is why we spend time with clients working on two aspects. What are they trying to achieve as an organisation? What are they trying to do with their performance management and decision making processes? You might want to think about how well your organisation does these.

That is why we have developed diagnostic tools and techniques that help us understand where an organisation is trying to get to and how it wants to manage performance. We also have standard workshops we can customise to suit your particular circumstances and needs. When you want more information on these take a look at
http://www.excitant.co.uk/Seminars_workshops.htm

By paying attention to just these two basic pieces, you will start to improve the value of your balanced scorecard in your business. Of course, you realise, there are other key principles that will make a difference. In your next few newsletters we will look at how strategy, people, focus and ownership affect things. In subsequent newsletters we will also set out

"Ten top tips for successful implementation and operation".
Of course if you are impatient, we can do on-site seminars and workshops to help your organisation make sure your investment in performance management and its strategy make a real difference.

More soon

Phil Jones http://www.excitant.co.uk/

You can access all the other case studies via:
http://www.excitant.co.uk/pages/case_studies_access.htm

P.S. As you think of others who would benefit from this report, please pass this on, or to get their own copy point them to this blog

You will appreciate our experience comes from many years of strategy, performance management and scorecard implementations. As we have seen the approach evolve, some techniques have fallen by the wayside as inefficient, whilst others have been refined and developed so that you can benefit from the experiences of others: To stand on the shoulders of successful implementations.

Principles of Effective Balanced Scorecards

Part 1

Have you noticed how you notice what you are paying attention to? Are you paying attention to the letter t in this newsletter? I doubt you were, but you are now, and you can stop if you want. Likewise, when you get a new car that you thought was unique in colour and model, suddenly every other car you see seems to be the same.

The opposite is also true. You tend not to notice what you are not paying attention to, unless it catches your attention. You probably didn't think about the punctuation in the last paragraph. You just read it and it passed you by. It didn't try to attract your attention.

You have probably noticed how the same is true with performance measurement and management. Recently we were working with a City Council, which involved helping them improve their planning processes and pay more attention to the quality of their thinking about strategy. As a part of the work, we took a look at the existing strategic plans and cast them as a strategy map, with interesting results.

Two things quickly became apparent: Firstly there were plenty of measures and activities around what they did. There were also many measures of how the council would tell whether things had changed for their community. There were, of course, plenty of financial measures.

Something was missing, though. We found few statements, let alone measures, of how the council would change. How would they change? What would make the difference? This was a council that was trying to improve the way it worked. Yet evidence of what they were going to do differently was sparse. In fact we had a completely blank "Learning & Growth" perspective.

Now, no doubt, they had been thinking about how the organisation needed to develop and how this would change overall performance and make the strategy happen. Yet that thinking was not clearly nor explicitly captured. They were not paying attention to it. Guess what. It wasn't happening much either. As the Chief Executive put it, "What is happening with our change programme? We seem to have forgotten it"

As you think about your organisation, you'll start to notice what it might not be paying attention to. For this reason our starting point for the Balanced Scorecard underlying principles are:

1. It is about balance

The reason it was called the "Balanced Scorecard" is precisely because that is what it was trying to address. Its origins back around 1992 were to get organisations to focus on more than the financial measures and the processes. To redress the balance with measures of what the customers think and want. To add to this measures that reflected how the organisation was to learn, develop, change and grow.

That council is not alone. Research indicates many organisations that say they have implemented a "balanced" scorecard have measures that are predominantly financial and process. As a consequence they are measuring what they are doing, rather than measuring what is making them change. Which lead us to the second key principle.

2. It is about cause and effect

It wasn't long in the development of the scorecard, that it was realised that the old four-box model was a mistake. You have probably seen it around.


Financial

Customer

Learning & growth

Process


This model of the scorecard is all over the web from people who think of this as a scorecard. But just ask yourself, "How do you choose what to put in each box?" "How do these boxes relate to one another?"

You are all smart people so you know, like, our client, that that changing what they did should end up affecting both costs and their customers. So a better way of thinking about things would be.



Of course this is what, by 1994 had become the basis of the strategy map. Sometimes, it was called the performance driver model in its early years.

As you will have spotted, this makes a major difference to how you think about the measures. For one, you are asking the question, how do these measures change behaviour and cause the higher pieces to behave differently? For another you start to ask what are the right measures in each of these perspectives?

We'll cover more of this in the next newsletter

If you want to move your balanced scorecard on, bring it up to date and make it more effective. Whether that is to change behaviours, focus people of strategy, make management meetings more effective or just get a clearer view of performance in your organisation, in just a day, you'll find more details here.

www.excitant.co.uk/Seminars_workshops.htm
By paying attention to just these two basic pieces, you will start to improve the value of your balanced scorecard in your business. Of course, you realise, there are other key principles that will make a difference. In your next few newsletters we will look at:
If you don't know where you are going you are unlikely to get there.
It's about the strategy It's about people 1: It's about behaviour, collectively and their understanding
It's about focus
Don't manage what you can measure. Measure what you want to manage
It's not actually about measures (honestly)

In subsequent newsletters we will explore:

"Ten top tips for successful implementation and operation".

Of course if you are impatient, we can do on-site seminars and workshops to help your organisation make sure your investment in performance management and its strategy make a real difference.

More soon

Phil Jones

You can access all the other case studies via:
http://www.excitant.co.uk/pages/case_studies_access.htm

Our MD worked for the originators, Norton & Kaplan, for over 4 years. As you can imagine, not all of the underlying keys to success are explained in the books. We have helped clients improve their strategy and performance in organisations ranging from FTSE100 and international companies to dot.coms and a whole variety of public sector organisations.