The Balanced Score Card (BSC) is a tool for developing, aligning and implementing what you say you want to do (your business strategy) to your organization’s grassroots level actions. The need for BSC arose as historically businesses have been driven by financial measures alone like ROI/ROE/EBIT etc leading to long term competitive weaknesses due to lack of focus on ‘softer’ measures. BSC hence focuses on broader range of qualitative and quantitative measures across the holistic dimensions of customer focus, financial performance, internal processes and innovation / learning and growth.
BSC is not exactly a ‘new’ concept as it is more than a decade old but the balancing act has probably got another 50 years to go. It is now well established as a leading performance management tool with over 50% of the Fortune 1000 companies and 300 international banks using or experimenting with it.
My perspective of Balanced Score Card is in terms of ‘strategy’ in my performance model called CRS3 or the Five Pillars of Performance including Strategy, Systems, Skills, Consensus Building and Relationships.
Performance’ primary pillar is ‘Strategy’ the closely guarded secret that is all but obvious to the people its hidden from i.e. the competitors, however, poles apart in perception of the team who make and implement it. What’s our vision, where are we going, who are our customers, what are their researched needs, and our competitive advantage in the e Bazaar? How do we fund and manage our financials are some of the key questions that need clear answers here not just for today, but for survival and growth in a changing market. While there are many tools available in this area, the ‘Balanced Business Score Card’ fully capitalizes at the level of creating and implementing business strategies.
Sorting the strategy out one needs to build ‘Consensus’ to ensure apples are apples to everyone (or they’d taste different!) – teamwork, character, values and motivation are the areas to study in this area.
Now the business must build or fine-tune its ‘Processes’ – the way things get down on paper, electronic or wireless gateways. The measurement processes to arrive at results, systems and procedures neither too complex to scare away customers nor too simple to let intruders in.
Moving forward we need to unlock the performance key of ‘Skills’ so the organization knows what it is supposed to know. The leaders know their job and everyone is clear on their competencies and where they stand on them. OD efforts are highlighted at building an organization of the future. Psychometric and client need based testing are some of the tools used to assess competencies.
Finally the most critical dimension of ‘Relationships’ be they internal with employees, or external with customers, or with partners and alliances needs to be evaluated with only aim – customer delight for everyone. Satisfaction surveys assist in gauging the level of client satisfaction.
How do you go about implementing BSC?
Majority of companies buy-in to the BSC philosophy but fail to properly implement it. Most companies simplistically assume that they can do it in house from the start leading to frustration as time goes on since implementing BSC is more than drawing 4 quadrants. David P Norton in his article ‘Managing the development of human capital’, BSR, Volume 3, Number 5 writes:
60% of organizations do not link strategy to budgeting
70% of organizations do not link middle management incentives to strategy
85% of executive teams spend less than one hour per month discussing strategy
95% of the typical workforce do not understand their organization’s strategy
90% of organizations fail to execute their strategies
BSC external consultants have the expertise and broad experience in implementation and certainly add value to the process as starting points and moderators of the process. Secondly an external consultant brings integrity into the process that may be hard to find internally as staffers often devise ‘camps’ to push their ‘philosophy’ leading to failure of entire team to buy the process and participate with heart and mind.
Some PITFALLS TO AVOID in implementing BSC are:
One size fits all solutions
Top management delegates or doesn’t take interest
Unclear business Strategy
Trying to measure the un measurable
Waiting for the ‘perfect’ time for implementing a BSC
In summary, the BSC is an excellent performance management tool that helps a company implement its strategy across the key dimensions of customer focus, financial performance, internal processes and innovation / learning and growth.
About the writer – Imran Owais Kazmi
Imran is an MBA and BBA (Hons) from the prestigious Institute of Business Administration. He used to head AGN MAK’s Consulting and Training division alongside Soobia Imran and has work exposure in firms such as BAT, Motorola, Knoll/BASF, Synergize and has client base in multinational and private sector Banks/FIs, Pharmaceuticals, Telecoms, FMCGs, Electronics/Consumer Durables Social, Government sectors – Imran’s clients find him an original and creative addition to their value chain… that delivers beyond expectations.