Thinking of how to put your company’s strategic initiatives to better use? Take a look at this powerful business tool.
Business leaders generally strive to bring together best of the brains in the organization to come up with the winning strategy in the world. Everyone also takes pride to place the strategic directions / Strategy statements on the cabin wall.
However, all of this may become inconsequential and fruitless if the strategy is not defined by integrating the holistic perspective required for sustained and profitable growth. Strategy can’t be effective if it is built primarily on past performance parameters (last year’s revenue, last year’s market share or profitability figures).
It also becomes ineffectively if it solely hinges on financial targets/revenue numbers without providing an answer as to how to get those numbers.
The strategy needs to be futuristic and properly balanced on the key perspectives that ensure the long-term and holistic growth of the business. This is where a Balanced Scorecard gains prominence – created by Dr. Robert S Kaplan of Harvard University and Dr. David P Norton of the University of Florida.
How does a Balanced Scorecard work?
The process of building the Scorecard is as important as the Scoreboard itself. It helps you to be on track with your company’s strategy, mission, and goals. The Balanced Score Card Tool does this by defining strategic priorities and then designing indicators and measures that holistically cover the four most important the business performance perspectives. These are –
- Financial Perspectives: What revenue and profit do we want to achieve and what costs do we want to cut?
- Customer Perspectives: How do our customers see us and what we must do so that we become the First Choice of our customers?
- Business Process Perspectives: In what business and organizational processes we must excel to become the First Choice of our customers?
- Learning and Growth Perspectives: What people competencies, infrastructure and organizational learning we need to enhance to excel in first 3 perspectives?
A few pointers that will make the Balanced Scorecard work for you:
- To the Point: Retrain from adopting generic metrics that are easily available. Rather, focus on developing performance metrics that can give you a competitive edge. It especially helps to create indicators and measures for goals that may not give immediate results but are critical from long-term success perspectives.
- Make a simple Performance index: Like organizational performance expert Cy Charney, it would be wise to implement an easy, understandable framework so that employees can be engaged at all levels.
- Update all hierarchy levels on strategy: Strategy sounds so important that it is generally relegated to the upper echelons of the company hierarchy, which shouldn’t be the case. Promote the Balanced Scorecard system and try percolating the strategy to all levels of the company and let them know that results will be driven by their execution.
- Think and implement long-term: Approach the Balanced Scorecard as a long-term, ongoing process and not a short-term initiative. Create a successful performance culture by going long-term.
- Look at strategy as a step in a continuum: Include the front line as well as the back office. The entire process begins with a mission to find out why you exist, what you believe in or your core values, the vision or what you want the company to be, your strategy or game plan, the strategic initiatives of the company, and the personal objectives or your personal role. This entire process culminates with strategic outcomes like financially healthy organization, competent, highly engaged workforce and above all delighted stakeholders/customers.
- Be inspired: Among the many plus points of implementing the Balanced Scorecard, one is that it makes life a lot more hassle-free for the top management – making it easier for the strategy to percolate right down to the bottom of the corporate ladder – bringing everyone on the same page regarding the critical business goals. Balanced Scorecard brings out the thought alignment across the organization and this alignment in thoughts is the holy grail of good leadership.
Implementing Balanced Scorecard ensures easy articulation and smooth execution of the company’s strategic goals by everyone in the hierarchy, so that you as a business leader can focus on new horizons of growth for your company. We have implemented balanced scorecard in diverse organizations such as Manufacturing, Engineering, Auto Components, Startups, Information Technology, Healthcare and even in Non-Profit Organizations. Call us to reach the most experienced consulting firms for Balanced Scorecard in Mumbai and Pune.