After several years of diversification, Anglian Water decided to revert back to its core regulated business and needed a transformation project to achieve it. In this interview Steve Lunn describes how he used strategy maps and the balanced scorecard, amongst other techniques, as part of a successful two year transformation programme: A programme that took Anglian Water from sixth place in the table of Water Company performance, to first place.
This video describes the approach and how the Balanced Scorecard and strategy maps played an important role in the whole transformation project.
Over two years, as a transformation programme, they:
- Obtained the permission of the senior executives
- Put together the best team they could get. A group with a good mix of skills.
- Built and gained credibility as they progressed, setting objectives, identifying measures and gathering information, putting in the performance reporting
- Established the big wins required for the business as well as looking for shorter term tactical wins. Balancing big change alongside small wins.
- Installed the performance management process and ensured that it ran and built confidence.
- Establishing a new business planning process and establishing the programme of change. Alongside that putting in place the new programme governance processes and change processes.
- Overall showing that they were making progress against the big corporate objectives.
- Changed the incentives and reward systems with the executives and managed as well as through the whole organisation. (See part three)
Follow this link for more about the interview on our case studies page
Steve explains how he used the approach to engage his team and help the Directorate meets its financial and non-financial targets, replacing EFQM that had been used previously. Steve highlights the need to find out what in important to people and what “needs fixing” in order to create buy-in and interest.
Most implementations of strategy, and therefore the balanced scorecard, involve a top down cascade from the corporate strategy map and balanced scorecard, through to strategy maps for the directorates. Unusually, in this case, the Directorates were invited to use the approach based upon being given only a few overall corporate objectives and some principles to work with (such as target cost savings). Each Directorate was asked to develop their approach to delivering their part of the strategy. These were later brought together, checked for consistency, synergy and overlaps, to create the whole picture across the organisation.
As this was applied, one major change was to establish substantially new objectives for the Directorate, rather than simply move incrementally from one year to the other. Another was to get the team thinking about customer outcomes, instead of merely thinking about the regulatory business and targets. “Have we really thought about measures beyond those required by the regulator, OFWAT?” Instead they used the balanced scorecard customer perspective to think through the real needs of their various customer groups.
Steve talks about how this then change the way customer services thought about their processes within the directorate, and beyond the directorate to the interfaces with the other directorates and how they worked. How do we contribute and influence another directorate’s performance and how do they influence our performance.
Part 2: Using the balanced scorecard as part of a system of management for organisational transformation
After several years of diversification, Anglian Water decided to revert back to its core regulated business. In this interview Steve Lunn describes how he used strategy maps and the balanced scorecard, amongst other techniques, as part of a successful two year transformation programme: A programme that took Anglian Water from sixth place in the table of Water Company performance, to first place.
Having being diverted by the non-regulatory business, Anglian Water realised it needed to improve its performance and ring-fence its core business. In the water industry, the funding you get from the regulator for capital programmes and price increases is determined, in part, by your financial and customer service performance. Anglian Water’s performance with the acquisitions had not been good, so it needed to improve its position substantially before the next “determination” by the regulator.
Steve’s proposal of a transformation project was accepted by the Board and Executive team, highlighting the issues and the underlying reason for the performance. This allowed his to create a transformation team that could address the whole organisation with the whole life cycle or transformation from organisational vision through transformation projects and operational measures.
Part of this included engaging the wider stakeholders as the transformation involved a new funding arrangement with new stakeholders including debt from banks and new non-executives. Steve used strategy maps and the balanced scorecard to map this collection of stakeholders, enriching the customer perspective, to describe the overall demands on the organisation. This was part of an overall strategic management approach.
Steve used a strategic management process that included strategy maps and the balanced scorecard to identify the underlying drivers of change and cascade the change. He used the strategy map and scorecard to construct the objectives for the organisation and the, through his team, cascaded these to the various directorates ensuring these all fitted together consistently.
Steve gently reintroduced the balanced scorecard with the executive by using it every week with his executive programme board. He persistently used this in every meeting “boring the executive with it” until one day he played a game and did not produce it, when they asked, “Where is it?” By persistently using it he highlighted its usefulness. He also used the strategy map and scorecard to introduce and describe the objectives at the corporate level and ensure they were bought into the overall programme.
The other important role of the balanced scorecard was to develop a performance improvement culture. The balanced scorecard was used to train the organisation to think beyond the regulatory view and to start to measure some of those things that were important, but had previously not been measured. Mapping the objectives and processes, and making sure that the measurement of the processes were on the radar screen. An important role of this was to identify where objectives in one directorate depended upon another directorate.
Performance books were introduced as the regular reporting mechanisms so that each team with a role in the organisation could see how they were able to manage and influence performance.
In Anglian Water at the time, they split the responsibilities into three parts, the so called three ball arrangement, of owner, manager and provider. The balanced scorecard based performance books provided the reports to each role building their confidence.
One important aspect of this was to improve decision making by providing evidence based reporting, as opposed to relying on anecdotes and individual views. This helps to ensure that each role concentrated on what they needed to make decisions about.
This clearly illustrates the importance of implementing a discipline of performance. Having factual reports on a regular basis that provides information for decision making and action instils the basic discipline needed for managing performance: The discipline of information and the discipline of action. Embedding this provides the base for challenging people and moving forward.
The systematic approach using Balanced scorecards as port of an overall strategic management approach ensured there were no hiding places. It provided the basis for meaningful objectives, choosing the right measures and for setting the right targets, both where they are chosen and at what level. It also helps with the timing of change and the projects and overall programme of work. Whilst this was a two year programme, this mean that they were able to see the green shoots of early improvement after about six months, and evidence that improvement.
