IMPLEMENTING YOUR STRATEGY: WILL A MODERN BALANCED SCORECARD HELP?

This question gets to the heart of what a Modern Balanced Scorecard is about: helping you communicate, implement, and get results from, your strategy.

You can run this diagnostic tool in about 15-20 minutes to help you answer this question for your strategy clan. It is just one of the set of techniques I use when helping Executives decide how, and where, a Modern, Third or Fourth Generation Balanced Scorecard might help them. This simple test will give you insights into your strategy, and help you to avoid some of the many pitfalls of poor strategy design, management and implementation.

A SIMPLE, SHORT, EXERCISE

Let’s get down to basics. You want to be sure your strategy is going to work and make a difference Deep-Drawn Parts. A balanced scorecard is a just a tool to help you implement your strategy, to see that it is working and demonstrate that it is making a difference: We can talk about the theory and techniques (and we can do so later, if you like), but frankly it is about usefulness and action.

That is why I created this simple exercise: an exercise I do with all my clients at the start of an engagement. It is quick and simple to do, requires minimal effort, and yet is extremely revealing. It gets to the heart of how a modern balanced scorecard can help you implement your strategy better. You only need is a basic knowledge of balanced scorecards, (explained below), to do this exercise yourself. You do need four differently coloured highlighters (ordinary pens will do), some common sense, and a copy of your business plan cheap Rear Loader. That is it.

ALL YOU NEED TO KNOW ABOUT THE BALANCED SCORECARD, FOR THIS EXERCISE

At its heart, the Balanced Scorecard has a simple principle that describes how strategy works: Cause and effect. At its most basic level the cause and effect model works across four perspectives, to tell the story of an organisation’s strategy. It runs as follows:

• The Financial perspective: To improve your financials you will have to improve revenues, invest, reduce costs, or improve cash flow. It won’t happen by magic. So what are your most important financial objectives and what improvements do you want?

• The Customer perspective: To improve revenues you have to satisfy your customers. So you need to be clear what your customers want, how it benefits them and how you serve them.

• The Process perspective: Your customers won’t get more of what they want, unless you do things better or differently. So what are the few things that you need to do better, from amongst your many processes, that will make the biggest difference?

• The Learning and Growth perspective: Underpinning all this is your capability as an organisation to learn and grow. What skills, knowledge, culture, s, values, technology, capability or capacity do you have to grow, or learn, as an organisation, to make a sustainable difference? What drives your strategy?

All you need to remember for this exercise is:

a)There are four perspectives: Financial, Customer, Process, and Learning and Growth .

)There is a cause and effect relationship that tells the story of your strategy. It says, it you “Learn and grow” skills, knowledge, culture, technology, s, capabilities, to improve what you do, “your processes”, then your “customers” will get more of what they want and, so, they will give you money. But you have to do all this economically (financial).

If you would like an in depth explanation of modern balanced scorecards and their development up to their latest incarnation of the fourth generation of balanced scorecards, then that and more free information can be found at:

http://www.excitant.co Data Replication.uk/pages/bsc_four_generations.htm

However, for this exercise.

Just remember: 1) Money, 2) Customers, 3) What you do, and 4) What you have to Learn and Grow. It is that simple. Now, get your business plan, four coloured pens, and you are ready to do the exercise.

THE EXERCISE

We intend to develop 20% of our revenues (£4m) (Financial) from export activity the next year, up from £1m (Financial). We believe that customers in both the EU and US will find our products price competitive (Customer) since the changes in exchange rates. But in the longer term, the unique features of our Zygon-x model will help our customers lower their operational and servicing costs by 10% (Customer) over our main competitors.

In order to open up these markets (Process) by targeting potential customers more effectively (Process) we need to improve up our ability to partner with new distributors (Learning & growth) in Europe and get better market research data on potential users of our products across Europe (Learning & growth). This will mean an investment of £50,000 in market research (Financial) and recruiting a new overseas distribution manager at a cost of £70,000 (Financial)

We will need to set up and manage new servicing arrangements (Process) to support local servicing in France, Germany and in Philadelphia in the US. To make this happen we need to develop standard service training arrangements (Learning & growth) and increase the number of service staff trainers (Learning & growth). This is expected to cost £150,000 over the next year (Financial)

It is as simple as that. So, go through your strategy, section by section, marking references to each perspective as you progress. Work quickly through aiming to cover the document fairly quickly, so you get an overview of the whole document. If you want to spend longer than 15 minutes, do so. It’s up to you. So, pick up the pens and start to work through your strategy document.

ANALYZING WHAT YOU HAVE FOUND

There are a number of tests we use once you have done this exercise. Here are three of them.

BALANCE:

The simplest test is to look at the balance of colours or comments you have. You should have a fairly balanced percentage of comments that reflect financial improvements, improvements for customers, improvements for your activities, and improvements to your capability as an organisation.

Roughly what percentage of comments are there for each perspective (expect 25% in each)

• Financial…

• Customer…

• Process…

• Learning and growth…

Are there any business units, departments, or strategic themes where there is an obvious, or severe, imbalance?

CLEAR CAUSE AND EFFECT – THE STORY OF THE STRATEGY:

The exercise really highlights the cause and effect relationship and tests the story of your strategy. For any section it should be clear how the capabilities of the organisation will improve your activities and processes, thereby improving the experience for your customers and alter the financials. Unfortunately, this may not be as clear as it should be. If we want to reduce costs by 10%, what effect will it have on customers, where will the costs savings come from and what will be different this time?

Is there a clear story? Were there sections of the strategy or plan that did not tell a clear story for you?

GAPS IN THE STRATEGY:

Having quickly reviewed your own strategy and plans, are there any major gaps?

• Sometimes there can be a major objective in the strategy, but little describes how it will be achieved….

• Sometimes there might be a major aspect of the strategy, which may not be mentioned in the plans… naturum.

• Sometimes, there is a fundamental change necessary, that is not in the strategy document (perhaps how you as a management team work together)…

What gaps have you noticed?