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

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

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

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 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.

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

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

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

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

KPI Strategy workshop:
What is important for your organisation to measure, and How to construct meaningful KPIs

This is an advert more than a blog, but at least you will get to hear about it and talk to me directly

Are you concerned that your organisation is not measuring the right things to determine Performance and Alignment?

I am running a FREE KPI Strategy Workshop, with some colleagues about:

Providing Insight into

what is important for your organisation to measure

and how to construct meaningful KPIs

Over 90% of medium and large organisations have measurement systems in place to inform senior management of performance and to reassure the executive team that the organisation is aligning its activities to support corporate strategy. However, our research has shown that usually there is a disconnect between the information that senior managers receive and that seen by the executive team. The corporate strategy is probably on paper, was last looked at months ago, was never communicated past the senior management team, and is not a `living' document.

Your corporate strategy will likely have Quadrants, Themes or Major Objectives. If you were to place all of the activities that you measure into these boxes would you have some Themes without KPIs and some KPIs left over that don't underpin a Major Objective?

If so, you have a lot in common with most other companies. Measuring what people do is fine, but the fact that they know you are measuring them may change their behaviour in ways that may not be desirable.

If you are only measuring what you have the ability to measure, rather than what you want to manage, that may be fundamentally flawed and provide no insight to performance at all. What needs to be determined is what measures are important and how will you measure them? We don't know all of the answers, but we can explain how you can figure this out.

This free workshop on 24th July will help you understand some of these issues, and others, and help you get a clear picture of what you should do to determine what is important for your organisation to measure.

We will help you answer these issues:

• How to determine what is important for your organisation to measure?
• How to roll up KPIs in support of the overall corporate strategy?
• How to achieve balance and create forward looking KPIs?
• How to communicate the corporate strategy to everyone and change behaviour?
• What type of measurement framework is right for your organisation?

During the briefing, we won't necessarily answer all of your questions, but we can help you to better understand the underlying issues and provide insights into how you can answer these for yourself.

If you would prefer a one- on -one meeting, we would be delighted to arrange to come to your offices.

Who should attend?....

• Anyone who is part of the management or executive team who thinks this is important.
• Anyone who is part of the measurement process who wants to get this right or wants more insights into their management performance.
• Anyone who wants to hear from a specialist who has tackled these issues.

How much will this cost? Just 3 Hours of Your Time.

How to Book:
Via email info@rosetta-stone.co.uk
By phone: 01932 724492
By fax: 01932 770808

The event will be run at Egham near Staines

BOOKING HOTLINE01932 724492

Looking forward to seeing you there.

Phil

PS if you are interested in a version of this presentation, drop me an email.

Welcome to the Excitant Blog

Here I get to write about things to do with strategy , management, business models, performance, management thinking, strategy planning processes, strategic thinking and other stuff that comes to mind.

Phil