Balanced Scorecards and Learning

To understand how learning fits in the balanced scorecard you have to have some history. Back when Norton formed Renaissance Worldwide with Kaplan as non-exec he had two other key directors (1994 I think). Harry Lasker and Dave Lubin. The motto was implementing strategy, rapidly, knowledgeably, quickly (as will become apparent).

Lubin provided the internet technology piece (and is not so relevant to this story). Harry Lasker came from Seseme street originally (so the story goes) and was into cognitive learning and latterly organisational learning. You can read more about him in this excellent interview Learning organisations & balanced scorecard: Harry Lasker
http://www.leadcoach.com/archives/e-journal/2006/2006_08_lasker.html

Renaissance was very strong on the management of knowledge as an enabler of performance. That is why we insisted on calling the lower perspective learning and growth rather than people. People is static. It does not imply knowledge and cultural change as strongly as “learning and growth” suggests improvement. Extremely important.

There was little about this in the first book. However in the “Strategy focused organisation” (book 2) where the real scorecard stuff got discussed, there is a chapter that introduced strategy as a continual process (pg 274) and includes a really important strategic learning diagram based on the work of Chris Argyris. You can find if expanded in a later form on my website http://www.beyondplanning.co.uk/ . Some other articles in my blog also cover aspects of this.

When I start the balanced scorecard story I start here, because it is about strategy in the context of learning and recognising that operational performance is primarily single loop learning whilst challenging the strategy is the second order loop. (Challenging the assumptions about operational performance are also second order).

So you have to understand
a) Double loop learning
b) Learning and growth as a driver of performance
c) Cause and effect between the perspectives (and learning about how that is working)

I hope this helps. You have struck a vein that is fundamental to how the strategy focused organisation works and strategy focused balanced scorecards. Take these pieces away and it becomes operational, measurement focused and deterministic (command and control ) rather than learning.

Phil Jones
Excitant Ltd
Strategic Performance Management
Doing Balanced Scorecards Properly

Strategy maps for different purposes

I recently spoke at a conference on the balanced scorecard and where Paul Niven was also speaking. When he did an explanation of strategy maps and did an exercise the audience produce three very different types of strategy map.

One version was the true cause and effect version where their is a clear cause and effect logic between the perspectives of the balanced scorecard. So money is driven by customers needs being met. Their needs are satisfied by what you do well which is driven by your skills knowledge, capability, culture etc (Learning & Growth).

The criticism of this was that they often contained too many objectives and arrows.

The second version the audience produced were much more symbolic. They were more pictures that showed the essence of the strategy, still had perspectives, but only perhaps six or nine boxes. No arrows. They were dramatically simplified strategy maps.

These were promoted as being useful to explain the strategy better.

The third type were almost metaphors. They were pictures in onto which the elements of the strategy were attached. For instance, dealing with an airline, the picture of the plane have the finances on the front, the two themes of the strategy as the wings, customers as passengers (naturally) and the learning and growth messages as the tail planes and fin.

As these were being presented it was obvious there was some value in all three. In fact all three are equally valid for different purposes and audiences.

The symbolic picture (Not really a strategy map) is good to get the message across in a friendly manner where people make The connection through the picture to the strategy. Clearly it is not the whole strategy. I know one client who used cartoon aircraft with their management moving from the pilot's seats to the wings to symbolise how managements role was to keep the plane airborne whilst others set the direction.

The simplified version of a strategy map is great for board members, and annual statements to shareholders. Here is a simplified picture of the shape of our strategy. Nothing two complicated. Including pictures to remind you of the important elements. Often useful to communicate the essence of the strategy to the staff.

The detailed strategy map is what the board and management team use. It has the richness and detail that they need and they know as the true complexity and complications of the organisation. It is also the one that gets cascaded through the organisation. because it is more meaty (and has detailed beneath it) it is easier to cascade to the various departments or divisions so they can develop their strategy map that explicitly supports the corporate version.

So it is not a case of either or for these types of strategy map. It is a case of horses for courses and asking, "What is the purpose of my strategy map?" I know of plenty of situations where compressing and forcing the richness of a detailed strategy map into a small number of objectives effectively lost the meaning and created a whole set of nominalisations that people could say "yes" to, but not know what specifically to do as a consequence.

So horses for courses, but do design teh detailed one first with the structure in mind so that you can move to teh others easier.

For more advice on developing strategy maps, that work for you and your organisation, just contact me

Phil Jones

How do you get joined up services in city councils that operate like silos?

I saw such a question on a discussion forum recently, and this was my reply. It relates to a balanced scorecard engagement with a UK City Council looking to create joined up thinking and working.

You have correctly spotted that city councils (we we call them in the UK) seem to operate like at least six different organisations. Eg social services, planning, education (children’s services) cleaning, Adult services, etc etc.

As a result they tend to adopt different cultures. They tend to be funded separately. To be measures separately. To have separate political ownership (different members). My experience is that in the board room, their discussions are often focused on their department rather than the collective as well. Hence silos.

So how to change this? One Chief Executive was willing to bite the bullet and insist that her Directors operate more cooperatively. The way we did this was three fold
a) Concentrate on objectives, not for the department, but for the community. Bear in mind, no user of their services sees them as separate departments. I just want the council to sort this out.

b) Then to ask which directors influence this. Classic customer faced thinking. So “I want to live in a safe community” was owned by the Adult services Director (who has drug teams etc,) the planning department Director (who design the environment that makes it feel safe), and the Contract Director (Who runs the street cleaning services that visit the street every week and clear up burnt cars and graffiti).

c) This meant that the three directors needed to talk to each other OUTSIDE the meeting and get their collective act together. It also meant that the Directors needed their staff to talk with other departments. Rather than re-organising (9 months work – elephants mating – large expense – no change) we insisted that the teams meet and worked together as well.

Another example is the corporate parent of a child in care. Again the responsibility is not just with Social services but adult learning and education and other parts of the Council. And in fact other services.

All this is about “Joined-up thinking and working”. We represented this in startegy maps for the council as a whole, before asking how each department contributed to the overall picture.

The client changed their business plans so that they were structured around these outcomes rather than departments. They actually realigned their political committees to reflect the same thinking and structure. They produced their business plans in 4 weeks after this engagement rather than 3 months with lots of effort and fighting in the previous year.

In the UK, the “Local Area Agreements” and “Local Partnership Boards” also encourages each of these departments of the Council to work with other agencies (eg Police, Health, Charities) as well. So this approach opens up the wider thinking.

However Central Government then scupper the idea. They may have similar objectives, but these parties (and departments) are given individual agendas to follow that are less joined up.

The catch is that central government often send out “strategies” and Incentives that are more silo based causing a localisation and separate approach to planning. For instance in one council I worked with the Children’s services insisted on following their own business planning approach “because we were so different and driven by the latest changes and legislation”. Of course this scuppers the issue and it takes a strong Chief Executive to say, “Oh no you don’t”

In addition budgetary pressures and the “10% cuts” approach causes each department to locally optimise rather than say, “If we did this it would save us both money and improve performance for our customers”. In one case I know Gershon (10% cuts by central gov) scuppered all discussion of cooperation between departments.

So a strong tension is not just between the departments but that caused by central gov pressures.

The Chief Exec I worked with used this to ask her team to step up to the mark of joined up thinking and working as well as thinking longer term. It was no surprise to me that within 9 months two directors had changed and three years later only three of the seven were still there. (No names – no pack drill).

Strong Chief Exec. Bigger picture. Collective ownership and responsibility and individual delivery. And a willingness to stick two fingers up to central gov occasionally.

Hope this helps. By the way, this was a balanced scorecard engagement….."

As you can see, it shows how looking at the bigger picture helps the organisation tackle the underlying performance management issues, with a strategic balanced scorecard.

Phil Jones

Balanced Scorecard:

Context - The missing perspective

Working with a client recently reminded me of the importance of context around a balanced scorecard. This organisation has many regional operations who all doing ostensibly the same thing. However they have different sized regions, different customer mixes, different major consumers, and are at different levels of maturity.



Just looking at the raw figures for the region's performance will not tell the whole story. It is quite right to look at the context as well as the operation. In fact it would be completely inappropriate to judge the regions without this context.

This is important for knowledge sharing as well. Regions can compare performance and share ideas better if they understand the context in which they are each operating: What might be a good approach or strategy for one region might be completely inappropriate in the context of a different customer mix.

Another reason for looking at context is simply the performance of an individual piece of data. If, for instance, detected car crime is rising in a region and is this a good thing or a bad thing. Well if car crime is also rising, but faster, the gap between demand and results is opening up. The police are not keeping up with the rate of increase. If actual car crime is rising by 10% per annum, but police detection is improving by 15% per annum, then the police are getting ahead of the crime wave.

Likewise in a recession or a time when costs are increasing, you may not be able to improve profitability, but improving your profitability more than your competitors suggests that you are actually doing quite well in an industry that is facing a down-turn.

So in all these cases performance measures must be viewed in the context in which they occur. I would go further. Performance can only be viewed in a context. To try and look at performance in some abstract absolute terms is a mistake and will lead to ill-informed decisions.

Always ask yourself, "what is the context?". Go further: Add extra pieces of information around your balanced scorecard that reflects the facts and context in which that performance is taking place.


Think of this as the fifth dimension of the scorecard - one that really acts to balance teh measures and results.



Phil Jones
Strategy and Performance Specialist
Excitant Ltd
Phil@excitant.co.uk

Balanced Scorecard perspectives:
Why call your balanced scorecard perspective "learning and growth"?

Because people who change it make three fundamental mistakes in their balanced scorecard design and use by re-naming the "learning and growth" perspective to something like "people" or "employees".

So often I come Publish Postacross “scorecards” that have re-named the learning and growth perspective people or employees. They think it is more representative. However these things have a reason. There are three good reasons for not changing the name.

First, names such as “employees” or “people” are fundamentally static. They suggest that the purpose of the perspective is to measure employees and people. The name, “learning and growth” was deliberately chosen and designed to suggest movement. What do we have to learn? What do we need to grow? It is about change, rather than being static. This explains why many organisations rename their learning and growth perspective employees and then place lot of static information and annual measures about their staff in the perspective. They are not thinking of the strategy and the change. They are providing a grip on where the organisation is now. In effect they are operating in either the compliance or operational perspectives. They are not asking, what needs to change, be learnt anew or grown as a capability, to deliver the strategy for the future.

Secondly, changing the name not only destroys the dynamic nature of the perspective, it changes its scope. If the name is changed from learning and growth to “People or employees”, what role is there for technology, data, or physical capability? What potential is there to discuss, learn about and develop alliances, suppliers and partners if only employees are considered? If the perspective is employees, where is the contribution of management? All of these can add to the organisations capability, and help to deliver its strategy. Basing the perspective only on people or employees narrows these aspects. Learning and growth opens up the scope.

Finally, changing the name also changes its relationship to the other perspectives. The name, learning and growth, begs the question, What do we need to learn and grow?” The title people or employee at best begs the questions what people or employees do we have or need? Learning and growth opens up the question to a wider set of answers.

So, unless you want a static, unrelated perspective full of merely employee or people measures, keep the name as learning and growth. This enables you to ask the right questions that makes your balanced scorecard more dynamic, wider in scope and relate to the higher perspectives.

Phil Jones
Strategy & Performance Specialist
Excitant Ltd

Lets remember Sir John Harvey Jones and keep his legacy alive:
Was he the ideal consultant?

Sir John Harvey Jones died earlier this month. Some will remember Sir John Harvey Jones as the Chairman of ICI who turned the organisation around. Some will recall his wild hair and his taste for "Tasteful" ties. Many will recall his pioneering BBC series "Troubleshooter" where he looked over a company, diagnosed their problems and offered advice to the management team to help them turn it around. Perhaps it was the combination.

The Trouble shooter series brought his name, face and ties to the populace. From that series, three things stick in my mind about his approach to diagnosing the problem in organisations.

The first was what we saw a lot of. He would walk around the company, look at the organisation, talk to the workers, understand the product and genuinely do wandering about. He had a keen eye for what was going on in the organisation. He had that fresh eye a consultant needs.

Secondly he would examine the finances. This was always underplayed in the programmes apart from cameos where he would talk about the finances. Yet it was clear he had done his research, carefully look at the numbers, understood the cash flow, looked at the trends, examined where the costs were and understood the levers of profit. He knew the finances as well as the management.

Thirdly he would understand the management team. He looked at how they behaved and how they worked. He looked at how they related to their staff and workers and how they related to their product. He looked at how they related to each other. I recall one where he clearly pointed out that having TWO Managing Directors running the company was a daft idea.

Of course he would never put it like that. He would always explain why something would not work and the consequences. He was always calm and considered. He explained his analysis clearly and with facts, yet with a passion and conviction in his story. He knew he was right and he knew how to explain and encourage others to take a better path.

In many ways Sir John Harvey Jones exemplified the perfect consultant. First understand the company or organisation that you are working with. Secondly ensure you have facts and evidence for your analysis and conclusions. Thirdly be clear what your recommendations are, but deliver them with as much tact as you have conviction.

These are important principles for any consultant or advisor.

When he did this you believed him. He may not have always being right. His recommendations may not always have been implemented or carried out to the full. But you knew that he cared about the future of the organisation and the management team he was working with. It came across in his disappointment when things were not changed, his conviction and support as managers took up his ideas, and his delight when improvements started to come through.

I often run the John Harvey Jones test for myself. Have I understood the company and its finances? Have I seen how it works? Do I understand how the management team work and play an important part in the situation? Then am I clear about my recommendations, supported by clear evidence and put forward with tact and conviction.

Yes, for me JHJ exemplified good consultancy. More that that he exemplified the Trusted Advisor to a management team. An advisor that the management team respected, trusted, and could relate to. An advisor that understood their position and wanted success for the organisation and for the management team. One whose observations, counsel, and advice was more than a quick fix: rather they helped the management team develop and improve themselves.

Long Live the legacy of Sir John Harvey Jones.

Phil Jones
Excitant Ltd
www.excitant.co.uk

Customers and the Balanced Scorecard

I recently came across an article on the balanced scorecard on the website mycustomer.com. However I think it missed an awful lot out about how to handle customers appropriately in a balanced scorecard. Here was my reply.

There are a few points I would add to from a customer perspective:

1) It is better to start with objectives in each perspective rather than measures. Develop the objectives and then ask - how to measure them. This way you measure what you want to manage. This is what strategy maps are about. If you start with measures you constrain your thinking to what you think you can/should measure. You end up managing what you believe you can measure, rather than measuring what you want to manage.

2) When developing Customer objectives (and measures) ask, from their perspective. You will get a much richer answer than asking, “what should we provide them?” As a rule, put “I want…” in front of the objective description. This forces you to think from the customer’s viewpoint. If you don’t you may describe what you provide rather than what the customer wants.

3) Think not only about the value proposition, but about the customer’s process. What is their process, to which you contribute? This opens up the thinking about how you could add value in different ways. Also different parts of their organisation will have different value propositions (eg purchasing vs operations).

4) Quite often you will have layers of customers where you product contributes through the supply chain. Ensure you represent these.

5) A great advantage of thinking from the customer perspective and then aligning the organisations objectives (and also later measures) around the customer perspective is that it concentrates attention on the customer’s needs. It also breaks down silos, to addresses what the customer wants, rather than the pieces we think they should provide. This leads to better customer orientation.

Getting the customer perspective clear is the key to good balanced scorecards and strategy maps. These principles work in both the commercial and public sector. They align the thinking and actions of the organisation. Done well you can read your strategy from them and you can use them to discuss strategy and service with your customers.

It you want to know more, go to www.excitant.co.uk or you can contact me directly Phil@excitant.co.uk or 07 711 711 123

Phil Jones, Strategy & performance Specialist
Excitant Ltd

Be careful what you believe

The other week I was talking with a consultant who works in a large-ish consultancy. He had only been working in the Public sector for two years and said he was surprised by what he found. His description astounded me. He said, "Public sector managers and staff are not very smart. The quality is poor and actually they are quite thick really". He continued that in his experience they found it difficult to take on ideas and as a result they had to do much more as a consultancy to get things implemented.

My reply was to say that I had found the opposite. My experience has been that public sector employees and managers are actually very bright, committed and enthusiastic people. The problem is that they have been beaten down by the system that stops them delivering the services that they care about.

He replied, that that could be a little bit true, but that it was not his experience.

Of course, it does not matter who is true here. (Of course I believe that what I believe is right in this case - but that does not matter for this discussion). What matters is the consequence of the belief. If you believe that all public sector people are a bit thick then you will act that way, treat them as if they are slow, and design consultancy that requires lots of consultancy effort to compensate for the fact that "they don't get it".

On the other hand if you believe that they are just as intelligent and committed as any other private sector people, but that the system is constraining them, then you act quite differently. You look for ways to unlock their potential, take away the shackles and allow them to perform. (Of course it you then find out that they are not up to the job there are several options available such as training, moving and the like - but that comes later.)

The other piece that worried me here is that if you start with the belief that they are a bit thick, then you will look for information that reinforces that belief. Of course if you believe they are intelligent you will also look for evidence to back it up. In both cases they are self fulfilling prophesies. However the belief that they are intelligent and it is the system that causes the problem is, I believe more useful again.

Also you have to ask the question, if they are having trouble taking on his ideas, is it possible that it is the way he is communicating them? I let him work that one out for himself.

This shows how much what we believe affects how we behave and how much it becomes a self fulfilling prophesy. It also shows how different approaches to consultancy affect the types of consultancy you provide and the sort of solutions you are looking for. Me i would prefer to unlock people's potential and solve the bigger problem than assume that I am dealing with thick people. It is much more useful and interesting.

So be aware of what you believe and notice how it affects how you act, what you look for and how you address problems. Interesting eh?

Phil Jones
Strategy & Performance Specialist
Excitant Ltd
http://www.excitant.co.uk/

Seeing what you look for:
The blindness of performance management

In the last blog we moved from using just one eye, to talking about how that limits your perspective. In the same way limited measurement systems limit your perspective of the business.

Last night I was introduced to some fascinating research from the University of Illinois, visual cognition Lab that throws further light on the implications of what we measure.

In this research groups of people are shown a video. The video contains a group of people - some in black shirts and others in white shirts. Both groups move around each other passing basket balls to each other. The white shirted ones to other white shirted people. The black shirted one to other black shirted people.

The question you are asked, is "How many times do the white shirted people pass the ball to one another." The observers had to press a key when they saw a pass.

You can watch this video on http://viscog.beckman.uiuc.edu/grafs/demos/15.html

(It does take a while to load and you need to press the green button to start it).

Watch the video otherwise the next piece will ruin it.

After watching the video, you are asked, how many passes there were? You are also asked, was there anything unusual about the video?

Actually these was something unusual. A colleague saw this video amongst a group of sixty people. Afterwards only one person spotted the unusual thing. A man dressed as a gorilla wanders into the picture, bangs his chest and wanders out.

Isn't that fascinating. By directing our attention to the detailed task of counting the passes which are quite intricate with both groups passing the ball amongst themselves, we completely miss the gorilla.

When told this story I was immediately struck by how this is similar to the sort of detailed analysis of measures that some organisations undertake. They are so focused they miss the other occurrences. Other events that might be very important. They call this "Inattention blindness" because they are not watching for it they can't see it.

Does that ring any bells? Have you noticed this in your organisation?

You can find out more about their research into inattention blindness at http://viscog.beckman.uiuc.edu/djs_lab/IB.html

On the other hand you could pay more attention to what you or others may be missing in your organisation, couldn't you.

Phil Jones
Strategy & Performance Specialist
http://www.excitant.co.uk/

Alliance and Partnership Balanced Scorecards
Lessons from the ASAP European Conference

At the end of April I was invited to talk at the ASAP European Conference on the subject of Balanced Scorecards in alliances and partnerships. So I chose the title, "How not to screw up your alliance".

What was wonderful about the conference was the way that the participants demonstrated the alliances and partnership culture in the way they shared information, presented and discussed topics and issues. There were representatives from companies as diverse as BT, HP, SAP, Phillips, Glaxo, Reckitt Benckiser, AMEC, BASF, proctor & Gamble, Rolls Royce, and many more.

Mike Nevin of Alliance Best Practice provided some fascinating examples of how the characteristics of aan alliance can be "benchmarked" so as to provide a basis for improvement. Improvements that immediately leads to revenue from alliances. There were also many examples of how alliances can work in different ways, from partnerships of equals to niche players teaming up with bigger players.

Professor Art-Pieter deMan from Eindhoven university presented research into alliance competencies and what makes them succeed. In if he listed five competencies that distinguished successful alliances from unsuccessful ones. There are:

1. Individual evaluation and learning from the Alliance
   
2. Joint evaluation and learning from the Alliance
3. Alliance Metrics (Scorecards)
4. Cross Alliance evaluation (Across the portfolio)

successful alliances had more than 60% of these characteristics in place. Unsuccessful ones had less than 40% in place. It is fascinating to note how the learning and metrics are mixed together in these research findings. I presented at the end of the second day. The tropic was called, How not to screw up your alliance, and covered the Organisational learning model of learning, balanced scorecards, strategy maps for alliances and alliance portfolio management as well as how power and influence affect strategy and choice. OK that is a lot in 45 minutes, but it provided a useful rounding off of the conference themes. Several things were clear from the Alliance Balanced Scorecard discussion

1. Its all about revenue - without that, alliances are a waste of time
2. You can measure alliance performance in a variety of ways, but choosing the right measures that suit the competencies and state of development of your alliance at that time has to be more careful.
3. It is about managing the portfolio and choosing the right alliances as much as managing the individual alliances.
   

From the strategy discussion it was obvious how power and influence in the market affected choice. It raised questions such as:

1. What power and influence do you have - and do you want to have?
2. How does power influence your choice of strategy (and revenues)?
3. What choices position you for more power and influence?
4. Choice of alliance partner comes before managing an alliance well.
   

A recording of the presentation is available, to ASAP members as are the slides. Better still I am happy to repeat the presentation and talk through the issues with clients. Both Mike Nevin and I are available to talk on the subject of Alliance strategy, best practice and performance measurement. Simply contact Phil on phil.jones@excitant.co.uk or Mike Nevin on mike.nevin@alliancebestpractice.com

Phil Jones
Strategy & Performance Specialist
Excitant Ltd

Getting a sense of perspective
Similarities between the balanced scorecard and how our eyes work


Yesterday I got something in my eye and it irritated the lens surface so much I was going around much of the day with one eye closed. Not only was it very painful and irritating, it made it difficult to see properly. As a result, with only one good eye, I only had my sense of distance if I moved my head around. I had lost my sense of perspective.



Our sense of perspective comes from having two eyes and merging the images together in our brains. When we look through only one eye it makes harder to tell the distance of objectives. In effect our vision moved from three dimensions to two.



Our views of our organisations can become afflicted with the same problem. If we look at a business as a set of financial data we are looking a just one dimension on the organisation. The accounts tell us nothing about the customers, personality, product quality, how they are made, the skills they have, the management talent they have developed.



It is the same if we look at the organisation just as the products it produces. I think of Sony, Apple, BMW and many consumer brands as the products I have seen (or the service I have received) rather than the bigger picture. This is just as important perspective, but it is not the whole picture as some companies manage to produce great products unprofitable and others perhaps unethically.

So an importance aspect of the "Balanced scorecard" is to provide the information in more than two dimensions. To get the information on the organisation that not only looks at the finances, but also looks at what the customers want. It looks at how the organisation produces those products or delivers those services with the processes that the organisation is using and it looks at the personality, capability and management of the organisation through the learning and growth perspective. You can even get a sense of the organisation's underpinning values and ethics as well.



So value comes from having these multiple perspectives on the organisation.

But this is not the whole story. Our sense of perspective comes not just from having two eyes. It comes from the ability of the brain to process that information and put it together to make sense of it. The eyes provide the information. The brain interprets it and makes decisions about whether that car is parked or moving towards us very quickly.



It is the same with the balanced scorecard and the interpretation of all the information that could be collected on the scorecard and reported to management. The important pieces in the scorecard are the relationships between the information in the perspectives. It is about how what you believe the customers will pay for. It is about how well you processes serve your customer's needs. It is about the cost of delivering the products and services. It is about how the organisations capabilities, knowledge skills and culture create effective and efficient processes. It is about how the values and ethics affect how you do business.



Just as the brain acts to integrate information from both eyes to create the whole picture it also works out where to pay most attention. What is moving, where are faces, what is a danger, how to coordinate our hands to type at the keyboard, gathering feedback from the outside world. So this interpretation is not just about creating the whole three dimensional picture but also what to focus on or what to concentrate our attention on.

Again our brains do this automatically. But do we as managers do this? If we only have part of the picture not only are we in danger on missing signs and not making connections. We are in danger of not concentrating on the right things.


So what acts as the analogy to the brain in the balanced scorecard. The answer is "The strategy map". It is the strategy map that asks the questions, "How complete is this picture, what are the connections between these parts, how does one piece of information affect other pieces in other perspectives and also, where should we focus and concentrate our attention to make sure we are addressing the most important parts.



It is in the design of the strategy map and the story of the strategy that the strategy maps contain that you will have this information. It helps you filter the important information from the rest. Like the brick in the wall opposite the detail in the picture is still available to me if I want it, but at the moment I am quite happy to be reassured that the building is still there. I can drill down into that detail if I want to, but I don't need to.



So the perspectives of the balanced scorecard act to give us perspective and ensure we have the whole picture. But this picture con contains a massive amount of detail and so needs interpretation in the same way that our brains can interpret the information our eyes gather to focus on what is really important or may become important. So too the strategy map provides the connections between the information in various perspectives on the organisation, so that a richer picture emerges. A picture that allows us to concentrate on what is most important, whilst keeping an eye out for those exceptions and issues that pop up occasionally.



So you have probably been asking yourself, as you read this, how much of a perspective you have on your whole business? How balanced is the information coming into your eyes (and ears and other senses for that matter)? And how well is your brain interpreting this information and working out what is most important to concentrate on?

I leave you with a final thought. We all see the same things. It is how we we choose to interpret them that makes the difference.

When you feel that your organisation could gather and interpret information better, get in touch with us.

Phil Jones
Strategy and performance specialist
Excitant Ltd

phil@excitant.co.uk

Prof Bob Kaplan:
Strategy maps and themes as aids to communicating strategy

Last night I attended Bob Kaplan's presentation in London on his latest thinking around scorecard development. His talk was entitled "Communicating strategy and managing the strategy execution process with strategic themes".

In the first part of his talk he explained how companies are using the strategy map approach together with getting the message out through a variety of rich channels, to get people to think strategically and act locally. He is still using the statistic that only 5% understand the strategy, that I like from the survey conducted back in 1997, when I worked with him.

He was explaining how good management teams are doing at least five things when communicating the strategy:

a) Getting the strategy onto a single page with a strategy map so it is easy to understand and explain

b) Getting the message out using multiple rich channels. As he (and many others) say, communicate it "seven time in seven ways"

c) Ensure you help people relate the strategy to their jobs.

d) Reinforce the message with your actions to ensure people realise that their role is to contribute to the strategy.

e) Having clear strategic themes and programmes of change.

I am going to pick up two elements from this today and return to the others in a later posting. These two are the strategy map and the strategic themes, as they are closely related.

The strategy map is a really powerful tool in the Balanced Scorecard approach and one which many seem to miss out on. In the room, many organisations had "Balanced Scorecards" but when asked how many used strategy mapping, barely a third raised their hands. Yet strategy mapping has been around since 1997 or so. I have completed around 50 of them in a whole variety of organisations and their power is characterised by a conversation I had with an IT Director last month.

I was showing him a draft strategy map that one of his IT Account managers had developed in our workshop. It was only a first cut and had taken about a couple of hours to put together. I was using it to illustrate the output and the process we had been following. However he immediately jumped in and started talking about the strategy of this business unit, how whilst some parts were reflected in the strategy map, others were missing and that we needed an extra objective or two to represent that. It was a classic illustration of how strategy maps get the strategy across very quickly and explain it in a rich picture. I had barely had the sheet of paper out for 15 seconds before he started.

The IT Director quickly realised how powerful a technique this was for creating conversations with his fellow directors about the strategy; conversations that he had previously described as difficult to hold easily.

The strategic themes point links closely to the strategy map. If you can tease out the major themes of the strategy you start to orientate the organisation around the delivery of these programmes of change instead of thinking in functional departments, products or silos.

Examples of strategic themes might be cost reduction and revenue growth, or refining existing products whilst developing new ones. Another set of themes might be safety, operational excellence and planning for tomorrow. These themes transcend the perspectives of the strategy map. Each theme should contain elements of each perspective: the financial implications, the implications for customers, the processes and the learning and growth components.

Many people identify themes and start substituting these for perspectives so you end up with a innovation or quality perspective. This misses the cause and effect part of what capabilities do we need to develop to improve innovation or quality, what objective does this achieve for our processes, how will innovation or quality affect the customers and what are the financial implications in terms of revenue or costs?

Once you have these themes clear, it is far easier to communicate the strategy. It is also easier to manage as you are able to orientate the thinking of the organisation and the management of the strategy, around the strategy rather than the existing organisation.

I have come across at least eight different ways to categorise and represent strategic themes, depending upon how you are thinking about them and where the emphasis is on your strategy. Each approach has its pros and cons, depending on the focus of your strategy and what is important for you.

If you would like to know more about the power and value of strategy mapping and strategic themes please contact me.

I'll return to the important topic of communicating strategy (which is also the subject of a forthcoming book) so people get it in my next posting.

Regards

Phil

phil@excitant.co.uk

Charles Handy and "The New Philanthropists"

This was the second time I had met Charles Handy in person and he is one of the most charming and gentlemanly people I have come across. He is a prolific author of at least 19 books and regarded as Britain's most respected management writer.

He is also unassuming. When he joined me and a lady I was talking with, he enquired with interest what we both did. After answering, the lady I was with then asked Charles what he did. Obviously she did not realise who he was, even though Charles was speaking at the conference we were at. Nonetheless, Charles took it in his stride and simply described himself as a management writer.

Charles Handy's new book, "The new Philanthropists" is both beautifully produced and a joy to read. Even though 87% of Brits thought managers were in it for themselves, Charles has researched and written up 23 case studies of successful people who are (often quietly) putting something back into society. Apparently philanthropy is becoming fashionable in both the US and in Britain.

This book has been produced with his wife Elizabeth Handy who seems as charming as Charles. Amongst other things she is a photographer and the book includes some fascinating insights into the people through the photographs.

As well as a portrait, each case study is accompanied by a small still life containing six objects that are important to the subject. Each object represents aspects of, and provides insights into, that person's life. Accompanying the lecture I attended was a display of other photos associated with the subjects of the book. The subjects include a wide variety of people such as:

• Gordon Roddick, who set up the Big Issue in the UK,
• Mohamed Ibrahim, who invests in African businesses to create jobs, sets up breast cancer clinics and invests in education
• Tony Adams the ex footballer, who set up the sporting chance clinics to help athletes addictions, and when their playing days are over.
• Daniel Petre, once the youngest Vice-president in Microsoft who is seeking to change the meaning of success in modern society.
• Peter Lampl, who has helped the under privileged get their proper share of higher education in Britain,

Also at the lecture were a series of photos that were not in the book. These, again by Elizabeth show the same scene, yet shows the person appearing three times within it. Elizabeth's view is that there are often more than one side to us: Outside work there is the family, hobbies, or whatever. By showing the same person in three of their guises you are getting a deeper insight into the person, that just the single picture provides.

It is clear that the role of Charles' wife Elizabeth, both in the book and in his life, have been substantial.

This book is an excellent and inspiring read. He brings together a collection of cameos of the new philanthropists and what they have achieved. At the same time he brings out their human side in a easy to read and delightful style.

Charles said, "If you want to understand a subject, try writing a book about it". Likewise, if you want to understand a person, try writing about them as well.

Well worth a read.

Phil Jones
Strategy & Performance Specialist

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

The Balanced Scorecard in small and owner managed businesses

I often get asked about how applicable the Balanced Scorecard is in small and owner managed (family) businesses. The answer is very, but not primarily as a set of measures; more as a strategic focus, thinking and planning tool.

You have probably realised I have changed the emphasis from Balanced Scorecard to strategic planning. I have helped a lot of small and/or owner managed businesses use the "Balanced scorecard" but not for performance measurement. These have ranged from £70,000 businesses to £4-5m organisations employing 70-100 people.

Let me explain the process:

a) I use a future picture to help the owner understand and picture what they believe the future will be like.

b) I develop with them a strategy map that works all the way from what do they want to achieve financially, through the implications for customers, to the operational focus and then the underlying capabilities. The objectives on these strategy maps provide things that help then discuss their objectives (and if they want measure them).

It is this common understanding of what we are trying to achieve in the business, (rather than how we shall measure it) that is most important.

Also, I see many owner managers who are so operationally focused (fiddling with the business) that they prevent their people managing their bit. Actually, they start by telling me they are operationally focused. The effect is that the owner is not "strategic" and their managers are dis-empowered: not trusted (their words, not mine).

So for me, the advantage of the strategy map (not the measure orientated balanced scorecard) is to help the whole team, but especially the owner, keep a perspective on the big picture and allow them to step back from hand-on operational control. "Help me be more strategic" "Help them take more responsibility" are the two pleas I hear from these organisations. Actually it is usually about trust, but that is a far longer posting.

The third piece is usually not the scorecard of measures, but the investment profile of projects that need to be implemented to move the organisation forward, and the resource demands upon the organisation to deliver this.

Finally, the measures are useful, but only once presented in the context of the strategy as articulated by the future vision of the environment and industry, the strategy map and the programme of investment. They naturally fall out at this stage.

If you try and start with the measures (the Balanced Scorecard) the business thinks it needs, you end up down a rabbit hole of measures and targets that start to resemble the problems the NHS has created for itself: managing by measures, not measuring what you want to manage. You have to do all the thinking that I have described above, but it is never articulated, recorded or discussed. All that comes down is a control mechanism of measures without a context (but of course we were not trusted to know the the so that is just more of the same).

So, yes, yes, yes, the Balanced Scorecard can be used very effectively in small and owner managed businesses.

But, no, no, no, do not start with measures, otherwise you will just perpetuate the problems that the owner is trying to solve, such as how can I work on the business, and not in it? How can I trust my team? How can I be more strategic?

Am happy to discuss this with people if they want.

Phil

www.Beyondplanning.co.uk
www.excitant.co.uk
phil@excitant.co.uk
0870 420 7978

Human Capital: The disenfranchisement of employees

For a while now, the phrase "Human Capital" has replaced "Human resources" as the buzz phrase to refer to people in an organisation.

I suspect the well intentioned people within the "jobtitle and department naming" department were thinking that it suggested an association with capital and investment. How wrong they were. Let's look at some of the employment themes over the past 5-10 years:

Disenfranchisement of employees

Go back 10 - 15 years and there was a much stronger association between people and who they worked for. People expected to have a job in an organisaton for their career. They associated their identity with the company: "I'm a Mars person" or "I belong to Shell". Whilst I am sure that this is still true for some larger organisations, and some employees, many people have had this contract broken.

Pensions debacle

One good reason to stay with a company was the pension rights. By staying in a company with a final pensionable salary scheme you built up a strong pension, guaranteed to provide after you have retired. However the increasing life expectancies have driven a cart and horse through the actuarial calculations and Gordon Brown's stealthy raiding of the pensions dividends for tax purposes, have together undermined these attractive schemes.

People treated as capital

Remember that capital is a commodity. It is traded and swaped in markets. You don't invest in cash, you use cash to make some thing else (which will turn into cash). You borrow it and put it back. It is a commodity. We are seeing the same with the investment in people.

Partly due to the breaking of the contract of employment and the disenfranchisement of employees and partly due to capital constraints, training was dropped back. The expectation that people will not stay as long as they would means you either find a cheaper way to train then, don't train at all or rely on people who have been trained by others. The result, created a merry go around of employment, where the only ones winning are the recruitment companies and monster.com.

Permanent contracts?

Let us take another example. A few years ago a well qualified colleague of mine was offered a job in an IT development company. Typical terms, 6 months probation period, 3 months notice after that. Despite doing an excellent job, he was made redundant at 5 months and 3 weeks (when the notice period was still a week). Within 2 months he was in another job and six months later he was in the same situation again, being made redundant after 5 months and 3 weeks. This time it was because he had done such a good job, he had put himself out of a role in their minds. In neither case was he made redundant for adverse reasons.

You can imagine that now, whilst he is in a "proper job" with a full time contract, he is constantly thinking he has 6 months' employment left and that he is only as good as his last 6 months of deliveries.

In a final case, a friend of mine was offered a contract in a large company to replace a maternity leave. When I asked about the day rate and we did the calculations, we worked it out that he was being paid the same effecive salary as the full time employee he was replacing. Moreover, the company was not factoring in the costs of employment sich as NI and taxes. He received no offer of holiday time and no other benefits such as insurances. He would be taxed out of this. They thought this reasonable.

I recall arriving in an established company during the late 90s having moved from a redundancy to another job and then to this one. My first reaction was, "Gosh, these people have no fear in their eyes!". They were walking around as if the waves of redundancies on the outside world had not been happening. I was asked, by a lovely chap who had been in the company for 25 years whether I was a full time employee or a contractor.

I explained, I had a full time "permanent" contract, that was on 3 months' notice, whereas the full time "contractors" I was working with had contracts that provided for 6 months' notice.

He looked at me as if I had come from another planet. Two years later a large proportion of those people were made redundant and within 5 years, the place was down to around a quarter of its original size.

Anti-big corporate

One other piece in the jig-saw is the invideous trend towards regarding large organisations as nasty, selfish, money- grabbing, don't care about the environment, unethical monothiths that need to be brought down.

The BBC do it when they talk about profits without a reference to the investment return. Enron and Parmalat stand as blotches in a landscape that includes philanthropists who put their hard earned money back into society (yet people ignore). Television soaps put out the image of the rich as unworthy cheaters. Directors responsible for the running or large corporation at risk of losing their property, are seen as money grabbers. The green lobby is on the same wagon playing ethical and moral cards, where economic ones could be played.

No matter that the prosperity, increases in life expectancy and health, televisions that peddle this trash, and the ability to communicate together like we do, comes about largely due to these people working in these corporations.

The brand "me" generation and portfolio careers

When I first joined IT it was apparent that people in IT thought of themselves as part of the IT industry rather than a part of the company that employed them. The exception were those employed by the large IT firms.

Now we have the logical extension of that. People regard a career as a series of jobs seen in retrospect. We protect ourselves from unemployment by creating multiple sources of income through internet companies run in the evening, trading on ebay, property investments and other side (or main) businesses.

In "The brand you" Tom Peters makes it clear that you run your career now. You develop multiple sources of income. You develop your credibility beyond your cv through the internet, to others around you whom you connect with.

At the same time our communities have become on-line communities, and multiple ones as well.

Is it recoverable

So the interesting questions for organisations are:

"Can we as an organisation win back the loyalty, commitment and affiliation of our people?"

"What do we as organisations have to do to make it worthwhile investing in our people?"

"How do we regain their trust?"

"How to we develop a sustainable trust that will make a difference to us as an organisation?"

I welcome your comments and will put more later...

Phil

www.excitant.co.uk

"Work-Life balance": A dangerous way to think about the issue

You hear it all over the place nowadays. "I need a better work-life balance". "People have their work-life balance wrong"."You need to improve your work-life balance".

What this all suggests is that work and life are at the opposite ends of a scale. Like a children's see-saw in a playground, as one child rises ,the other falls; apart from those moments when both have their feet dangling uncomfortably off the ground. It suggests there is an old style pair of scales and, one one side there is the time you spend at work, on the other side the time you spend at life; and they work against each other unless they are in that precarious equilibrium of perfect balance.

I believe this expression, and the underlying thinking is is dangerous. Why? Because it suggests that work and life are different. Let's be clear now, they are NOT.

To suggest that work is not a part of life is to suggest that we all take off our heads before we go to work in the morning. It suggests that somehow we can enjoy life, but we can't enjoy work. It suggests that, in our lives, the time we spend at work is not a part of our "life".

The mere act of starting with the suggestion that life and work are separate, starts in the wrong place. It causes all sorts of wrong thinking as a result.

What are the implications behind this thinking. It suggests you can't enjoy work. It suggests that work is not a social activity. It suggests that at work you are somehow controlled and not yourself. It suggests that you have your life outside work and any part of work that exists, takes away from your life. It reminds me of the old factory mentality of the 50s, 60s and 70s where you went to work, did a mundane activity and then were released from this servitude when the factory hooter went off.

It also carries a deeper suggestion: that work does not contribute to your life;that they are separate. When I describe this face to face I usually have one hand to represent life and another to represent work, and they are held apart with a void between them.

Now bring those hands together.

What we have now is more about the balance of work in your life. It is also about how work contributes to the rest of your life.

Of course, I run my own business and enjoy what I do. It interests me. It challenges me. I learn things from it. I want to be better at it. To me there is no distinction between life and work. I can't imagine not being interested in what I do.

However, I recognise that there are people out there who have a different approach. They see work as a way of earning money to do other things in their lives. Of course that makes sense. Many people go to work simply to get money to "live" and enjoy things. But that never makes work a different thing to life. It simply has a different aspect and importance.

I was chatting to a colleague yesterday. She runs a business where there are a lot of part- time people running a business in their spare time to earn money, but they are self employed and geographically spread out. She can't "supervise" them, as they are working independently. They have to be self- motivated and self- managing.

Ironically, the answer in this environment is one which works in most environments: help people to understand what they have to achieve.;give them the tools to help them achieve it; provide the motivation and direction that they need, and trust them to get on with it.

In most cases people like to be trusted and make decisions for themselves. It is empowering (sorry - awful buzz word). It says "I trust you, you are an intelligent person, these are the guidelines and these are what you can achieve. Now use your initiative and judgment to deliver it". In those circumstances, people will deliver. The rest of management is making sure they are delivering and helping them to do it.

As another colleague said to me. "If you can communicate the vision and convince people of it, and ,at the same time, if you can communicate the values, then you have management cracked. The rest is simply checking that they are doing it.

In both these circumstances these people are using their life experiences, characters, skills knowledge and personalities to deliver and enjoy work.

Of course the work-life balance is used in the sense of overworking and not having a balance of other time in one's life. The other expression we hear about now is "Quality of life" and "Quality time".

So, my suggestion is that we ban the phrase "work-life balance". It is a dangerous and misleading phrase. The effect on employee -thinking is dangerous: I switch off when I come to work. The effect on management thinking can be similarly dangerous.

I suggest we use phrases like, "a balance of work in our lives", or "having a balance of work as a part of our lives". Both these expressions are far more inclusive. They recognise that work is a social activity; that chatting next to the coffee machine is a vital part of it; that enjoying what we do, learning things, and seeing a difference matters to people; that organisations are social networks; that the people in companies and their customers, partners and suppliers are also people.

Moreover, that work is a part of life. If we deny that we lead to a robotic model of management; one which no-one I know really wants, whether as a manager, or as those who are managed.

There are more dangerous expressions out there we need to be careful of. I'll cover more soon.

Phil

Excitant Ltd: Stimulating your Strategy, People, Performance and Results....
phil@excitant.co.uk
Mobile: 07 711 711123
Office: 0870 420 7978

Valuing companies - starting from first principles.

Several times recently I have been in discussions about company valuation and, in each case, the topic has moved to earnings multiples. If I have this sort of company, then it is worth/values on 1x, 3x, 10x whatever earnings, revenue, ebit etc. You know the conversations

Everytime I hear this discussion I feel uncomfortable. It feels like the wrong end of the question.
Let me explain. On a discussion forum recently, someone asked, about valuing a niche logistics company for the drinks industry. This will do as an example. This is what I offered as my thoughts:

"I take the view that multiples of earnings is merely a surrogate "rule of thumb" for what the business is really worth to that buyer or a post justification of valuation when there has been a series of acquisitions in a market (well they paid 11 times earnings, so that is what it is worth).

The real driver of value to you is what is it worth to you.

For instance:

Is there a revenue stream (that is recurring and is tied to reasonably long term contracts) that provides an income greater than its costs? If there is then any buyer of the business can expect a revenue stream that provides income above the investment.

The next question is about pension (and other) liabilities, as there are plenty of organisations around whose valuation is negative until they sorts out their pensions (and other) issues. The next question is, what would it cost you to set up this logistics capability over the geographic area you are looking at?

This provides a maximum valuation for you ,as why buy someone elses (possible mess) when you can start your own possible mess? - I joke but there is a serious comment in there.

Obviously, time might be an issue here as might be access to the skills. Are you buying because you believe you can access the market quicker than building the capability? If so, what will you do between now and the acquisition being completed? Is there a quicker way?

Secondly, ask what would it cost merely to contract these services. Again this provides a basis for the cost of the business as you can ask, why would I buy this business at a cost of (say) £1m and interest payments of £50,000, when I can access the service for less and not worry about the management of the service and having my capital tied up in a risk?

These two (what would it cost to build and what would it cost to just have it serviced?) provide a bracket around which you can value the company and think about the extra value you are trying to aqcuire through the acqusition, which we shall go on to...

It was described as a niche logistics company and I assume it refers to the niche of drinks distribution. You didn't mention geographic area, so if you want to cover the whole of the country you may find a single company or need to buy up a range of companies that cover the whole range (and then dispose of overlapping, or surlplus bits or area and infrastructure (like spare systems), vans, drivers, offices or routes).

How effective are their logistics skills. It's a specialist area, so if there is someone (or a few) with a specific logistics planning and management that is really excellent (rather than just average) then that might be worth something as long as you can keep them. If you need to put a new management i