Proper execution of strategy seems to be an elusive goal. As Fortune Magazine noted in 1982, "Less than 10% of strategies effectively formulated are effectively executed." After two decades of the application of modern business principles, the problem remained. Fortune again noted in 1999, "In the majority of cases we estimate 70% the real problem isn't bad strategy ... it's bad execution."
In the 1990s, Drs. Robert Kaplan and David Norton led a study based on the hypothesis that reliance on strictly financial measures affected a company's ability to create long-term value. This research led to the introduction of the balanced scorecard, which functions as a measurement system, strategic management system and a communication tool. It is estimated that today more than 50 percent of the Fortune 1000 companies have adopted the balanced scorecard methodology, and the momentum continues to grow substantially. The balanced scorecard has been heralded as the most important business management tool of the 20th century because it provides a new framework for organizations to translate and communicate strategy through carefully selected and aligned objectives and measures. The ultimate goal of the balanced scorecard is to create a learning organization that focuses on strategic execution and differentiation that will lead to long-term value.
The goal of creating a "shared vision that galvanizes an organization" (Fifth Discipline, P. Senge) can ultimately only be accomplished through a team effort, thereby exposing the weakness of the "Lone Ranger" myth in today's complex and competitive business environment. Teams have been working together for centuries to solve complex problems, to strengthen the capabilities of individuals and to overcome management challenges. The power of a team effort must extend to the formation and development of the balanced scorecard. The long-term value of the scorecard will only be sustained by a complete team effort. No single individual within an organization possesses all of the knowledge of organizational strategy, internal processes, business competencies, markets, mission, vision, time, etc. to produce an articulate and enduring balanced scorecard.
In their book, The Wisdom of Teams, Katzenbach and Smith provide the following definition: "A team is a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable." In the context of a balanced scorecard, it is impossible to generalize regarding the optimal participants on the team; however, the team should not be so large that efficiency and progress are hindered nor so small that certain business units or key thought-leaders have no representation in this shared organizational tool. For successful implementers of the balanced scorecard, this team is comprised of between 10 to 20 people. There does, however, appear to be more consensus around the composition of the various roles and responsibilities of a balanced scorecard team. We will first explore the roles and responsibilities of the executive sponsor and the core team members and then those of the balanced scorecard manager.
The balanced scorecard is a change-management process for any organization and, therefore, mandates the full support and participation of senior management. As noted by Professor R. Moss Kanter, "The most important things a leader can bring to a changing organization are passion, conviction, and confidence in others."1 As with any change agent within an organization, it can take longer than expected for an organization to fully comprehend the concept, ideas and the impact on the daily tasks of all the knowledge-workers. Therefore, during this time, it is vital for the entire work force to see that senior management unconditionally supports the key tenets of the balanced scorecard. Organizations that fail to garner this support and participation will tend to fail at some stage of implementation when adversity is encountered. Resources from both a human and financial capital perspective are necessary in order for the scorecard team to be successful. In today's economic environment, this can be challenging; however, if sufficient resources are not dedicated to this strategically critical management system, the initiative will have limited long-term success, or none at all.
The executive team ultimately owns the balanced scorecard. Therefore, even today, as senior management's time is compressed by an overabundance of prioritized issues, they must be fully engaged in regular team meetings, reviewing results and making the scorecard the cornerstone of management review meetings in order to be viewed as committed and credible sponsors. As noted by P. Niven, author of Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results, "Nothing can take the place of an energetic and knowledgeable executive willing to work tirelessly toward the cause of advancing the balanced scorecard."
Using an analogy, if the executive sponsor were to be the head, the core team would be the body of the balanced scorecard team. Their role is ultimately transforming the raw materials of high-level vision, mission and objectives into a flexible and actionable scorecard for their organization. This selected group of business unit experts provides not only deep functional knowledge of their teams, but also a broad knowledge of measures and processes that weave a thread across the various business units. Their sphere of influence must include the executives they represent to ensure that they continue to embrace the scorecard within their own business unit; and they must also be able to influence their own team members as to the value of the balanced scorecard.
The core team members act as "goodwill ambassadors" by including as many people as possible in discussions on how high-level objectives and measures will affect daily workflow activities and how everyone can contribute to the overall goal of strategic awareness and execution. By initiating these business unit discussions, individual team members frequently see internal processes from a new vantage point, which can lead to continual process improvements. The core team's tasks would include balancing the individual and sometimes conflicting interests of their business unit with the overall mission and objectives of the organizational scorecard. While individual business unit progress is important, it should not be achieved by sub-optimizing the processes and progress of other business units or even that of the overall organization. While executive sponsorship is critical to advancing the concept of the balanced scorecard, the core team members will be the ones that guarantee that the introduction and implementation are moved from the boardroom to the lowest level of the organization. Strategic success is only achieved when everyone is aligned with the strategy, and the core team members help ensure this cascading process.
Completing the analogy of the various members of the team, the manager of the balanced scorecard is like the skeletal and muscular structures, the parts of the body that tie everything together. All of the pieces are critical to the success of such an endeavor; however, without someone to oversee all of the integrated components, this strategic management tool would greatly suffer. In analyzing the facets of this position, we will focus on the roles and responsibilities and key skills, and then on some of the challenges.
Before any new technology is introduced and becomes productive, the infrastructure to support it must be in place. This is as true today as it was when immigrant workers were laying railroad tracks to enable the locomotive to travel from coast to coast. In many aspects, this same groundwork is the responsibility of the balanced scorecard manager. This groundwork provides the context, explains the business reasons for the scorecard and lays out the anticipated or expected results for this management system. This groundwork includes both a logistical and philosophical component.
Logistically, the manager must be adept at providing a project plan that begins with initial strategy sessions with senior management and flows through to coordinating sufficient team meetings so that the entire organization is adequately trained on how to evaluate their contributions to the organizational strategy. This encompasses a continuous cycle of planning executive and business unit meetings, and providing a system of tracking and reporting strategic progress to all audiences.
One of the critical roles in providing timely reporting is the evaluation of reporting options. As Drs. Kaplan and Norton stated, "To move the scorecard from the boardroom to the backroom, companies need more advanced technology" (Kaplan & Norton, HPS, 2001). In reviewing software options in today's competitive business performance management arena, the following questions must be considered: From a functionality standpoint, does the software allow multiple strategy maps and the ability to link maps? Will the users be able to have collaboration capabilities and discussion forum functionality so that information regarding performance is quickly available to everyone? Will the organization be able to develop corporate-level, team-level and personal-level scorecards? Is the product fully Web-based? Finally, does the software allow for ad hoc analysis through drill-down reporting? In addition to considering software functionality, the manager must assess the software provider's position in the market place. Facts for consideration would include: Balanced Scorecard Collaborative certification, structured and proven implementation experience across multiple industries, commitment after point of sale, technical support, maturity of the product and the provider's long-term commitment to the business performance management market.
However, it is also important to keep in mind that technology is an enabler and not the focus of the balanced scorecard. The focus must be on the philosophy of the strategic management value of the balanced scorecard. Therefore, in considering the philosophical component of the manager's role, the manager must be responsible for educating the organization on the history and past and current successes of the scorecard, and communicating the business reasons for senior management's adoption of the balanced scorecard to assist with strategic management and communication. The value is in changing a culture that is transactional and operationally focused to one that is long-term and strategically focused: What must we do today to not only meet but also overcome the challenges of tomorrow? The focus on the philosophy of the balanced scorecard must be defined and communicated first and foremost; otherwise all of the logistical work will eventually collapse. People will no longer comprehend or acknowledge the strategic value of the scorecard, but instead view it as simply another mandated senior management project.
An effective manager of the balanced scorecard must exercise certain skills to ensure success. First, it is clearly important that the manager is the subject-matter expert. As new information becomes available, it is his or her responsibility to see that this information is disseminated to the core team and throughout the organization. It is most effective to share this information through multiple mediums. Effective balanced scorecard managers must also have the ability to form and develop teams through coaching and support. They are the team builders. As motivators, they must consistently and coherently articulate the philosophy and benefits of the scorecard to a variety of audiences and be able motivate an organization to want to undertake such a change effort. They must also truly be the champions of the projects. If they are not firm believers in this new management system, it will simply not succeed. Only through absolute belief in what they are doing will they be able to pass this knowledge and excitement to others; without this, they will quickly lose their audience. Finally, they must possess the ability to work with all levels within the organization. This will require working with the executives to develop the top-down view and also working with the employee base to sync the bottom-up expertise that knowledge-workers today understand. Finally, according to C. Hamilton, effective balanced scorecard managers must, "Face all challenges objectively and dispassionately." Communication and time stand out as two major challenges. Communication is critical to the success of a balanced scorecard initiative. The establishment of a core team (one or two key members from each business unit) can assist with communicating direction to their respective teams. As mentioned previously, core team members act as goodwill ambassadors for the scorecard. The use of a monthly internal newsletter can help keep everyone apprised of developments; define where teams are in the development, implementation and maturation process; and also educate new members on the value of the balanced scorecard.
Time can also be a challenge. Everyone has daily responsibilities within their business units; therefore, it is vital to respect their time with meaningful meetings and information. Once people view this project as a burden with no value added, it will lose momentum and eventually become shelfware. Maintaining momentum will also be a challenge. There must be a comprehensive plan that is adhered to throughout the development; otherwise, people will lose interest and momentum will be lost. However, by far the biggest challenge is obtaining buy-in throughout the organization. In working with a complex and diverse business organization, it is easy to see and understand the influence of the late adopters. A large group of these people can easily influence others to doubt the project and hinder progress. To overcome this critical challenge, it is important to identify early adopters who will work diligently to develop a well considered balanced scorecard solution. These early successes can then be used to show others what can be accomplished using the scorecard.
It is important to note that the balanced scorecard's development as a strategic tool is never complete. According to the Oxford University Templeton College study (1998), "The process of change here covered a period of four to six years." This should not be surprising when we remember that the usefulness of the balanced scorecard as a strategic measurement system must be kept alive through the constant testing of strategic choices as leading organizations are always adapting to changes inside of the business and in the turbulent business environment outside of the organization.
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