How to improve the design and execution of strategy
Creating organisational balance
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diseases
Likely symptoms of problems
Management by financial measures. By the time the financial systems
provide the results, its too late. Profits warnings are looming.
The organisational change has been tried but the effects have
not materialised.
You are driving change through the organisation but are relying
on the project's completion to deliver the results. A gap exists:
What is missing is the effect of the project on the organisation.
Some try to solve this balance by grouping their measures into
groups. If they are not financial and there are groups of measures
then it must be a "Balanced Scorecard". In doing so
they are missing a fundamental principle of the Balanced Scorecard.
Preliminary diagnosis
Too little attention paid to the dimensions of the business that
lead to financial performance. Too much attention is paid to the
results.
In fact the organisation is changing, either deliberately, or
because of outside influences. In a steady state situation the
financial indicators are useful because they provide a run rate.
However when change is occurring, it is the underlying aspects
of the business that are changing first. Externally, the environment
and the competitors may be acting differently. Internally the
change in direction is most certainly underpinned by a change
in the capability of the organisation, that is in what it knows,
its skills, its values, its systems, its culture and values. These
take a while to filter through to how the organisation delivers.
In turn, this takes a while to affect the customer.
The financial consequences (be they changes to the cost base
or a change to the revenue) take much longer to come through.
Merely watching the financial results will not tell you whether
the change is being effective and the results will come through.
Case study
A major retailer's strategy included a theme that created future
sources of growth. This theme planned to add some 30% to the value
of the business over the next 3-4 years.
Everything looked Rosey. There were a stream of projects
and trials coming through. The first signs were very positive.
The project pipeline was full with forthcoming options and developments
being evaluated for value and attractiveness. Things looked positive.
However we had identified the critical, underlying, drivers of
performance. These included the extent of investment in the trials
and the collaboration and sharing of experience to create and
develop the ideas through to products. it was clear that these
were not being supported as well as they should. Critical was
the investment issue. To drive the value there was a ned for more
investment, but this had been held back in a board meeting some
6 months previously.
We coached the head of future sources of growth to present the
whole story to the executive team using the cause and effect model
of that theme of the balanced scorecard. The effect was electric.
As the realisation dawned that they were actively supporting the
work and relying on it, yet actions that had been side effects
some 6 months ago, were going to undermine its eventual success.
Had they relied on the financial results, or their existing management
processes, they would not have noticed the problem until it was
too late. Using the Balanced Scorecard framework brought
the issue right to the front of their attention, meaning they
could apply corrective action and make sure that the stream of
projects would come through successfully.
Underlying solutions
The balanced scorecard relies on a deep understanding
of the cause and effect model that drives performance and change
in an organisation. If this is not understood then you merely
have more measures that just happen to be in groups. There is
no relationship between them and they are unlikely to tell you
whether you are changing or not.
These groups often represent aspects of the business. These are
really themes of the strategy. The cause and effect performance
model should apply equally to all such themes.
When working with clients we rarely change the core structure
of perspectives of the Balanced Scorecard. The main exception
is for not-for-profit and public sector organisations, where the
response of customers does not include paying for the company's
products.
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