Why Is a Balanced Scorecard Good?

This is the continuation of the transcript of an in-person customer seminar hosted by InetSoft on the topic of "How Performance Management Consultants Work." The speaker is Christopher Wren, Principal Consultant at TFI Consulting.

Why is a balanced scorecard good though? Well I like it because it really allows you to translate strategy into objectives, and it really is a great tool to drive behaviors, to change behaviors and with that also drive performance.

Of course, you know the four different categories, and I have said it here within the corporate values, vision and mission, which I think is the framework around it. I love the scorecard for two reasons. It develops a consensus within the organization if the process that’s associated with the development of the scorecard is actually exercised well.

Best value of it all is it allows you to communicate to the organization what needs to be done. It's not a control tool and it shouldn’t be used that way. A balanced scorecard also allows you to align business units. And this is just from a metric standpoint, right. You have got your corporate values here. You can then list your business units. You can see what is the measure at the corporate level.

There has to be corresponding measures at the business unit levels. You have support units. They may have similar values that align with that so you have for example, reliability. Support units would provide redundancy, and you also have external partners. It’s a great little exercise. You can align everyone. You have got the right measures in place. The measures support your corporate goals and you move on.

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Align Processes and People

But that’s not all the work that needs to be done. There is still the issue of okay, you have people. You have processes and procedures and policies. How do they align with this? So that’s the third dimension on top of the page. So each business unit prepares a short and long range plan. Each of the support units prepare a short, medium and long range plan, and then of course last, your external partners, their plans need to align with your objectives also.

So what is the value of the balanced scorecard? I alluded to that. The fact that I value the scorecard is because it provides a focus to the organization. It provides alignment within the organization, and it provides flexibility to adapt to the ever-changing business environment. Now I am going to bring something else in which is a buzzword, Six Sigma.

This is essentially the classic DMAIC process, Define Measure Analyze Improve and Control, okay. I don’t know why we call that Six Sigma because that’s what you do with just about anything in your life. You have a problem. You are going to define what the issue is. You are going to measure the extent of it. You are going to analyze a potential solution to it or what you are going to do. You are going to improve unless there is no way that you can change the outcome and of course, you are going to try and control that. You can call it Six Sigma, or again common sense.

Now one thing that I like to place this into is what I call a continuous improvement culture. There are some organizations that excel because they have a focus on continuous improvement. It is the primary focus of the executives. In those organizations, changes are implemented very well.

Changes are analyzed prior to the implementation. Change management plans, implementation plans and communication plans are developed before these changes are implemented. Organizations that don’t do so well, an e-mail comes from the executive. It moves down the line, and people try to figure out what does this mean, that’s not sound change management.

So putting it together what we do and what we have learned, what works over the years in an organization is really to go in there and to get the one to two people, to get them to commit to wanting to see changes. What are some of the things that we do? There is a phase one which is really to work with the leadership as well as all the people in the organization to conduct interviews, to review processes, to review procedures, to essentially do like a corporate pulse-taking.

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Interviewing People for Scorecard Input

What are you doing? Okay. The interviews, of course, are extremely important because there is nobody that knows these organizations better than the people that work there. And in many cases, I have got to tell you, again, it's not rocket science. I just write down what people tell me and put it in a right framework and then work on what would the impact be if you could resolve that.

So that’s the first part here. Usually what comes out of that is some kind of a self-assessment. Self assessment is very important. Rather than me going in there and telling them, you stink at this, I am going to go in and say look, I have worked with companies that are very good in this particular area, there is this little area, and here are the things that they do that make them better, or the things that they do that make them excel in that area.

And then I ask these people, which of these things do you do, and then I ask them to score themselves on a scale of 0 to 10. And so these scores come in from that organization to develop a high level organizational assessment, and the whole point of eliminating the barrier via the self-assessment is very valid because obviously those people ranked themselves. It is not me ranking them.

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