Strategic Management Insights

"Instant" Balanced Scorecard

Wouldn't it be nice if you could whip up a Balanced Scorecard like a bowl of instant oatmeal? That way you could settle down to a delicious strategy implementation only moments after pouring in the ingredients. Well the word "instant" may be too strong, but for companies with an existing strategy and a good management team there is a speedy way to develop an initial Balanced Scorecard that creates real results.

As you may know, the Balanced Scorecard is a widely adopted methodology or tool to make strategy happen. Experience has shown that a strategy focused organization using the Balanced Scorecard is much more effective and successful than one that is operationally or financially focused or, worse yet, in constant reaction mode. It works because it translates the strategy into a framework of actionable objectives, measures and targets that are clearly communicated across the entire organization and aligned with relevant initiatives and budgets.

Ideal versus real
We tend to think of most companies as having a clearly defined strategy developed through the collective wisdom and efforts of a strong cross functional planning team. In this ideal organization everyone knows what the strategy is and believes in it, managers create and sustain programs that align with it, and measures are in place to monitor strategy-driven actions and expected results.

Unfortunately, reality is usually far removed from the ideal. In reality most people are so busy just working away that they don't take the time to figure out if their combined activity is taking them along the best route to a predefined optimal outcome. In this case an "optimal outcome" is a combination of customer satisfaction and financial targets that the company sets in advance. The "best route" is a well developed, clearly articulated and trackable action strategy.

To the rescue
The Balanced Scorecard solves this problem. Yet as valuable as the Scorecard is there may not be enough time or buy in at the executive level to commit to the days of interviews, research and multiple executive sessions that are required to create the best strategy and translate it precisely to the Scorecard. In those cases, assuming that some kind of reasonable strategy is already in place, it is possible and extremely worthwhile to build a quick Scorecard in under two days using a short cut method. This accomplishes 2 things:

1. It results in a good first Balanced Scorecard that has immediate impact on the company's focus, activities and budgets.

2. It helps the executive team appreciate the value of the Scorecard and of being a strategy focused organization which then paves the way for continual improvements of the Scorecard over time.

The Balanced Scorecard SWOT
The "instant" Balanced Scorecard is achieved by combining two familiar and well accepted methodologies into one. Most companies are familiar with what is referred to as a SWOT analysis. This is where the planning team grids the company's strengths, weaknesses, opportunities and threats to reveal or clarify a strategy that considers all factors inside and outside the company, both short term and long term. When the SWOT format is modified to incorporate the four Balanced Scorecard perspectives it creates a bridge that eases the eventual transfer of SWOT findings to the Balanced Scorecard strategy map - the heart of the Balanced Scorecard itself. This new SWOT format, developed by Brown, Bush and Norberg in 2001, is called a Balanced Scorecard SWOT (BSC SWOT).

Here's how it works. The team is brought together for a one to two day session. The session starts with a review of the traditional SWOT process and an overview of the Balanced Scorecard methodology and how it's used to create a more powerful strategy focused organization. The team is then led through the modified BSC SWOT analysis by questions that incorporate the four Balanced Scorecard perspectives: Shareholder-Financial, Customer, Internal Process, and Learning-Innovation. One way to orchestrate this activity is to use a wall-sized white board or wall charts and give everyone a pad of Post-Its. As the facilitator asks probing questions and channels the discussion, the participants write their responses on the Post-Its and place them in the appropriate SWOT categories under the headings for the BSC perspectives that they relate to. The Post-Its are then combined and summarized under concept headlines. The result is a SWOT analysis organized by BSC perspectives.


The Strategy Map
In the next step, the team selects the top 4 themes in each BSC SWOT perspective and writes the corresponding headlines in the appropriate boxes on a strategy map. When filled in, the boxes represent what you might think of as critical success factors and outcomes: i.e. the key things we need to learn (or innovate) and the key things we need to do internally in order to create the highest levels of satisfaction in the key areas that are most important to our key customers all of which will move us towards our revenue and profit goals. The map is then studied to identify causal linkages and check for proper balance.

The Balanced Scorecard
The final step is to select measures for all 16 objectives and arrive at stretch targets for each. Traditional revenue and profit measures are chosen for the 4 Shareholder-Financial objectives and non financial measures are developed for the 12 Customer, Internal Process, and Learning-Innovation objectives. I always break the targets down by month to make them more immediately relevant. Of course sometimes an activity or result occurs periodically, not monthly, in which case the target is simply placed in the appropriate month(s).

When the process is complete the team has identified and agreed on the best strategy based on the information available at the time. It has described the strategy in Balanced Scorecard terms that can be used to explain it to others, and it has established measures and targets to keep the organization focused on critical activities and anticipated results that represent the successful execution of the strategy.

Quick Enough
From a timing standpoint, the BSC SWOT can usually be completed in under a day and the strategy map and Balanced Scorecard with measures and targets can be completed in another day or two for a combined total of two to three days. That's not exactly "instant" but when you consider how long the Balanced Scorecard will benefit the company, two to three days is probably quick enough.

- Brian Kinahan

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