Ensuring Holistic, Sustained and Profitable Growth – The Balanced Score Card Way!
Business Leaders often need help in planning future business growth based merely on traditionally used past financial performance indicators. There are several reasons why leaders find it challenging to define growth objectives :
- Past performance indicators may not always define future growth potential
- Financial indicators and targets heavily focused on numbers are good to measure but they do not provide the direction required for performance.
- Financial performance of the organization is based on many other enabling factors such as (customer satisfaction, operational efficiency, process excellence, brand image, infrastructure/technology readiness, people competence and motivation to name a few). Unfortunately, these enabling factors are often left out or given cursory attention during the planning process.
- Strategy is defined after rigorous analysis and rounds of debates however its communication across levels remains a key challenge.
- Even when organizational goals are well defined, there is a lack of a robust practical framework that can help to articulate, align and monitor the performance of various functions on their goals.
As the HR and OD Consultants in Pune, we always believe that Balanced Scorecard (BSC) approach provides the most effective solution for the challenges involved in critical elements of Strategic Planning –
- Strategy Formulation
- Strategy Articulation and
- Strategy Execution.
Balanced Scorecard translates a company’s vision and strategy into a coherent set of performance goals and measures that can be communicated across the organization. The balanced scorecard tool created by Dr Robert Caplan and Dr. David Norton, in 1991 is selected by Harvard Business School as the most important management idea in the last 75 years. BSC is considered to be the globally recognised and time-tasted performance planning and measurement tool that is currently used in thousands of organisations around the world.
Conceptual Model of Balanced Scorecard Tool
Is your organization using Balanced Scorecard Tool for strategy planning and execution?
Balanced Scorecard is a balancing tool that helps you articulate your business strategy and set your organizational goals by integrating answers to all the above questions about Finance, Customer, Internal Processes and Learning & Growth.
The Best HR OD Consultants in Pune also consider BSC as an important tool for organizational transformation. If you are the business leader of an organization which needs to stay agile, drive change, transform its ways of doing business, increase competitiveness and achieve sustained profitable growth, BSC is for you!
It is the No 1 strategy execution tool as it allows organisations to define and communicate their strategic plan in an extremely simple and precise manner. Additionally BSC provides an effective mechanism to align and periodically review the performance of key functions and employees working across various levels.
In What Way Does The Balanced Scorecard Contributes To Organizational Goal Setting?
- Clarifying strategy by articulating and communicating business priorities and objectives
- Focusing and investing in the key aspects that are critical for sustained and profitable growth
- Defining and managing action plans – ensure activities and initiatives are in place to deliver the priorities and strategic objectives.
- Aligning, monitoring and evaluating strategy execution to the grass root level of the organization.
- Keeping the long-term strategic goals visible throughout the execution period
- Improving organizational performance by measuring what matters and leads to results.
- Increasing focus on strategy, results and behaviours that can bring sustained results.
- Improving communication of the organization’s Vision and Strategy across levels
- Prioritizing Projects / Initiatives from a business priority and budget standpoint.
To achieve maximum benefits from this strategic tool, organisations however need to stay away from some common mistakes and pitfalls.
Here are some of the key pitfalls in Balanced Scorecard Implementation
- Not having an understanding of the BSC tool and lack of buy-in from key stakeholders within the organization.
- Most general managers are busy working on targets, numbers, operational priorities and firefighting issues. They need to be oriented towards taking a pause and reflecting upon what is strategically important. From this perspective, they also need to understand how the balanced scorecard process works and how it will help them become successful in achieving their short-term as well as long-term goals. Jumping into BSC implementation without this crucial step creates hurdles in future.
- Starting the BSC development with metrics and KPIs instead of the strategy.
- Measures become too operational or irrelevant if they are not carefully aligned with the strategic objectives. The Strategy Map is the first and most important component of any BSC, KPIs follow once the strategy is clear.
- Using the generic strategy map as a template or simply copying and populating the strategy map template downloaded from the internet.
- A strategy map has to be a unique representation of your company’s strategic objectives, business opportunities as well as unique organizational challenges. It has to be developed with the wholehearted involvement of the senior executive team after carefully facilitated debates, brainstorming sessions and a consensus process.
- Not revising and refreshing the Strategy Map, KPIs or Action Plans from time to time.
- We all know that your company’s priorities shift over time and therefore the Strategy Map, KPIs and Action Plans have to reflect that.
- Using only oversimplified and Operational KPIs to track progress.
- It is essential that the KPIs help to track your strategic objectives but instead of developing the most relevant KPIs companies often chose the ones that are most easy to measure or the ones everyone else seems to be tracking. More effort has to go into developing truly relevant and meaningful KPIs that can bring long-term and sustainable growth.
- Not having an Action Plan linked to the BSC.
- A strategy without a plan to deliver it will always remain a trip to fairyland! Balanced scorecard objectives need to be securely tied up to projects, and initiatives that need to be implemented to achieve the relevant objective. Defining detailed action plans also helps in planning and optimizing resources for cost-efficient strategy execution.
- Lack of Business Review Mechanism
- Lack of organizational discipline to design, develop and meticulously implemented the Business Review Mechanism is another most commonly noticed error. Ensuring timely business reviews not only improves the visibility of strategy execution but also enhances a sense of accountability in a team towards the final business results.
In the fast-paced, volatile, uncertain, complex and ambiguous business world, organizations need to stay agile. Agility is the function of knowing where we stand today and what needs to be done to move forward to achieve our vision despite the chaotic world around us. Using a balanced scorecard will offer your organization the much-required clarity and precision in strategy execution. Feel free to connect with the Best HR OD Consultants in Pune for Balanced Scorecard services.
Let’s stay connected to discuss many such interesting and insightful topics!
Dr. Soniya Yadwadkar