BSC

6 ways successful leaders reinvent their Balanced Scorecard

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YOUR BSC
Jeroen De Flander is a globally recognized strategy execution expert and a highly regarded keynote speaker. He lectures at several business schools including London Business School and is co-founder of the performance factory. His first book Strategy Execution Heroes reached the Amazon bestseller list in 5 countries and was nominated for Management Book of the Year 2012 in the Netherlands. His second book, The Execution Shortcut, reach the #3 spot in its category on Amazon.

His strategy articles 7 things every leader should know about strategy and 8 strategy questions every CEO should ask, created a solid strategy debate on LinkedIn, with close to 500 Likes and 75 Comments.

Now it’s time for the next step – cascading your strategy.

The most popular strategy cascade framework is the Balanced Scorecard. According to research by Bain in 2010, the Balanced Scorecard is the sixth most used management instrument in today’s organisations, with around 50 percent of all 11,000 survey participants making use of it.

Want to be in the top 1% of Balanced Scorecard users?

Keep improving what you have!

Here are 6 ways to reinvent your current Balanced Scorecard:

1. Re-think your starting point

A well-designed Balanced Scorecard reflects your company’s strategy − so make sure your strategy is clear at the start. If it isn’t, take the necessary time to clarify. The quality of the strategy cascade can only be as good as the quality of the strategy it starts from. Challenge your strategy for inconsistencies and loopholes. Use these 8 questions every CEO should ask to spark your thinking process.

2. Re-think your strategy map approach

‘We have a strategy map’ is not the same as ‘We have a strategy’ Just because you have a strategy map, doesn’t mean that you have a strategy.

It’s a lot of ‘map’ and very little ‘strategy’.

I believe each strategy map should include a written two or three-page Word document with all the hypotheses clearly explained. A document that captures the choices that you have made.

So if you don’t have those three pages that match your strategy map, why not try writing them?

3. Think made-to-measure

The Balanced Scorecard should be adapted to the size of the user group.

You don’t need a cannon to kill a fly.

Smaller units don’t have – or need – the resources to handle a complex Scorecard. If you use Scorecards for large and small units, you need two different approaches – a basic and a more detailed way of working. If you don’t, you will overshoot for the smaller units and create frustration. So adopt according to size – a bare version for the smaller units, a standard version for mid-sized teams and a full-size version for big units.

4. Re-think the finish line

The Balanced Scorecard is not the end station… so don’t stop!

Strategy Execution is a continuous process. The Scorecard is one technique for cascading strategy to the next level. But cascading strategy to the next level down is just the first step in the cascading process. If you stop there, your strategy will never end up in all the hands, hearts and heads of your employees. Make sure you continue to translate the Scorecard output to a solid project and program portfolio, small choices and individual objectives for all employees.

5. Re-think your budget process

What is the most important process in an organization?

Based on the amount of attention it receives, I would say the budgeting process. In many organisations, budget is king.

Many see the budgeting process as the trigger (because they are forced to do so) of a limited reflection process to identify (read justify) how much more money they will need the following year. They get into a battle with those at the top and after some struggle and cutbacks, return to business as usual. Many companies would make a big leap forwards if the strategy cascade process received the same attention as the budgeting process. Ideally, the cascading process should lead and the budget process follow.

A solid strategy cascading process with the BSC is a great counterbalance for an out of control budget approach – a situation prevalent in many organizations. Do you need to shift the ‘budget – strategy’ balance in your organization?

6. Re-think your KPI approach

Be careful with the slogan ‘What gets measured gets done.’ Many companies lose valuable time playing around with performance measures in their organization, debating the bells and whistles of their flashing traffic lights, measuring things because someone repeated the famous quote ‘What gets measured gets done’. I’m not against measuring, but it needs to become part of the overall execution framework and aimed at the strategy. It cannot be a stand-alone process.

Think about this, ‘What’s the value of measuring speed if you are driving in the wrong direction?’

Strategy Execution Ambassador I Best Selling Author I Key-note Speaker on Strategy & Strategy Execution

The challenge of executing the strategy in the day to day

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“The challenge of executing strategy requires both developing the right strategy execution tools and implementing the right strategy execution processes.

SMIT Amandla Marine developed more than one year ago a strategy map, creating a key framework to manage and monitor its strategy. In addition, a strategic Scorecard (known as Balanced Scorecard) has been implemented to monitor each strategic objective, and a set of strategic initiatives has been identified and prioritised, clarifying the strategic road-map going forward.
In order to ensure a strong alignment and commitment of first and second level management, the company created a specific Personal Scorecard Model that link the contribution of each one to the strategy execution and achievement.
This solid set of monitoring and management tools allowed SMIT Amandla to excel in the science of Strategy execution and Balanced Scorecard.
But in order to fully internalise the process and ensure the key executioners’ “buy-in, SMIT developed also the art of Strategy execution, through continuous and solid change management and strategy communication.
The result has been outstanding, and the organisation is now 100% focused on monitoring, managing and executing the strategy …”

Clare Gomes
Strategic Planning & Communications Manager at SMIT Amandla Marine

Strategic Risk: Linking Risk Management & Strategy Management processes

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Strategy is always linked to risk. We could say that risk is the other side of strategy coin. For each strategic objective exists a strategic risk. But even if many different methodologies and approaches are focusing on improving the risk management or on improving the strategy management, none of them clearly offer a solution for linking both management processes.

At ACSA (Airport Company of South Africa), we were using an ISO 13000 framework to manage our risks, and the balanced scorecard methodology to track and execute our strategy. But, again, both processes were not talking to each other. Therefore we have been working on linking both strategy management and risk management processes, and we came out with the following 3 steps approach:

The first phase consists on identifying, for each expected strategic outputs:

  • the strategic objectives: they are the strategic input that ACSA has to be achieve in order to obtain those expected strategic outputs. They answer the question “WHAT do we need to achieve?”
  • the strategic initiatives: they are the strategic projects that ACSA has to implement in order to reach the strategic objectives. They answer the question “HOW are we going to achieve those objectives?”

The second phase is about identifying the key risks for each one of those strategic objectives and strategic initiatives:

  • Risks related with strategic objectives: we ask ourself “What if we don’t achieve this objective?” “What could happen?”
  • Risks related with strategic initiatives: we ask ourself “What can go wrong in this initiative?” “What can be the consequence?”

The third and last step relates more with a classical risk management process: risk identification, description, control, rating, treatment, etc.

You will find in the slide-share below some details and illustration of this breakthrough link between strategy and risk management processes”

Wasfie Ismail, Group Manager – Strategic Planning at ACSA