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

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

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

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

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

This article covers four more ways:

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

Let us cover these four in sequence:

5) Providing advanced warning of internal problems and change

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

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

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

6) Provide advance warning of external change

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

7) Communicating priorities so they are clear

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

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

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

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

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

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

So what now?

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

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

2) What are the gaps?

3) What do we need to change?

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

5) What help do we need?

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

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

Balanced 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

The difference between strategic and operational balanced scorecards?

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

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


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

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

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

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

The distinction I am making is between operational and strategic.

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

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

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

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

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

I hope this helps.

Phil

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 Scorecards Part 6

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

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

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

I suspect you know the answer.

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

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

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

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

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

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

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

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

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

More soon

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

Principles of Effective Balanced Scorecards Part 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

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