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Eight ways your balanced scorecard should be helping you in an uncertain environment (Part 2)

This article provides four more ways that a good balanced scorecard should be helping you. It also includes a check list 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 to manage in an uncertain environment:

In this article we cover:

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

5) Providing advanced warning of internal problems and change

AWACS provides early warning

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 more advice and resources on our website, and when you need to make progress quickly, simply give me a call.