ley hill solutions - June newsletter

We are often asked by the senior managers of companies we are working with "what does the balanced scorecard do?".... Usually followed by a statement like "It's about measuring how we're doing isn't it?" The short answer to that is "Yes of course". In fact a good part of installing good scorecards is developing a way of measuring how you're doing.... But unless you have determined what you want to achieve and how you go about achieving it then any measurement system is next to useless.
In our view setting up scorecards (or as some of you know them - dashboards) is a little like giving a two year old a retractable measuring tape, you know the ones that you can buy in your local DIY store; The child, so fascinated by the tape, sets about measuring everything in sight just for the pleasure of measuring things and with no real purpose, certainly not to change or build anything! So it's a myth to think that all a balanced scorecard does is to provide a performance measurement system, balanced or otherwise.

So we usually go on to explain that the true purpose of the balanced scorecard is to develop and deploy a set of balanced objectives and strategies whose performance can then be measured in order to be able to adjust those very same strategies to achieve organisational goals. The balanced scorecard as described by Kaplan and Norton is a well tried and tested methodology that is gaining ground in private and public sectors across the world. Put simply it's a strategic plan-do-check-act loop that deploys strategies devised in the board room to the organisations grass roots. But it doesn't stop there as it then uses measurement to determine performance with a view to changing those strategies that are not performing well or just don't work.

Once we've tried to explain that the balanced scorecard methodology is about developing a balanced strategy to achieve your goals, the next question that presents itself is usually "what do you mean by balanced?" and "what are we supposed to be scoring?". Well again the simple answers are that organisations need to achieve a balance between those things that will present a sustained future for the organisation that satisfies the needs of a stakeholders, customers and staff alike. But it's not enough to voice a balance between these things, to be effective organisations need to understand the success of their strategies and it is this that needs to be "Scored".

Toward the end of our conversation the senior manager usually asks that question that most senior people do at some stage "how much will this cost?" and "how much time will we need to invest?" This of course depends on the size and scope of the organisation but think about the cost of NOT implementing a system, - some statistics identified by research done in the USA shows that:

�         85% of management teams spend less than 1 hour per month discussing strategy.
�         67% of high performing organisations have employees who have a good understanding of the overall goals.
�         78% of organisations don't change their budgets during the year

Interesting statistics when you consider the events of the last 12 months... Floods, "The credit crunch" and the dramatic rise in the price of oil, perhaps performance and strategy should be looked at more carefully?

Finally , its worth remembering that balanced scorecards work well if senior managers are involved with and actively support the strategies they develop, that the performance of those strategies are consistently measured and assessed and where strategies aren't working action is taken to adjust them or discard them.

If you want to learn more about the implementation of balanced scorecards take a look at our website or ask "Our Expert" - Dick Tyson