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 Â£70,000 businesses to Â£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.