10 questions about Balanced Scorecard to Henry Killackey
10 questions to Balanced Scorecard Expert Henry Killackey, Jr., Managing Partner and Educational Services Manager at Global Institute for Management
1. Please, summarize in few words what is your expertise and background with Balanced Scorecard.
I have instructed large and small companies on how to construct strategy maps and Balanced Scorecards. I have created e-learning courses covering the fundamentals of strategic planning and establishing performance measures. I have authored several articles describing the role of the Balanced Scorecard in improving business process management and risk management. Also, I served as a conference producer for the Palladium Group / Balanced Scorecard Collaborative.
2. It is known that Balanced Scorecard is used by more than 50% of Fortune companies. Do you think this concept is for big companies only?
Absolutely not. CEOs of large companies and small companies are unified by their common need to execute strategy. It has been reported that nine out of ten companies fail to execute their strategy. Much of this problem has been due to the fact that companies typically do a poor job communicating and translating the strategy to managers and frontline employees. The Balanced Scorecard is a tool that facilitates strategic execution through serving the organization as a management system, a means of communicating business results and a process of change.
3. While BSC concept is popular now, what other business performance measurement concepts can you recommend for companies to consider?
For performance measurement, companies can always turn to dashboards. However, what must be understood about dashboards is that they report tactical (not strategic) business information. In other words, dashboards measure the performance of business processes and typically do not have a clear link to the organizational strategy. The Balanced Scorecard, in contrast, is tied directly to strategy. The strategy is articulated through a strategy map which shows the direct linkages between strategic objectives within the four perspectives (financial, customer, internal process, learning/growth) of the Balanced Scorecard. Performance measures, targets, and initiatives emerge out of each of the strategic objectives of the strategy map.
4. Please, share your opinion about key ideas that should be kept in mind for successful implementation of BSC?
First, upper management has to fully support and sponsor the BSC. If their support for this system is lukewarm, then its implementation will fail. Second, management needs to take the time to articulate and translate the organizational strategy. Patience is required with building and establishing consensus around the strategy map. There is often a temptation to shop around for a reporting tool right away but the problem with rushing to the process of building measures is that hastily built measures do not have a firm strategic foundation to stand on. A properly constructed strategy map is a solid foundation on which to build meaningful performance measures and initiatives that effectively assess the organization’s progress in executing its strategy.
5. The BSC is a business performance measurement concept, but should only top managers and CEO use it? Or should it be used company-wide? Should BSC be implemented in all departments or for instance only in HR?
For the BSC to be effective in facilitating the execution of strategy, it needs to be cascaded throughout the organization. Cascading requires the participation of managers at all levels of the organization to translate the strategy and articulate the relevance of strategic objectives to each department, team and individual. Cascading can and should result in the alignment (or connectivity) of the corporate, departmental, and individual levels of the organization. It is important to remember that strategy is communicated from top to bottom (executives to frontline employees) and that execution begins with the individual.
6. While there are certain benefits of BSC, do you see there any limitations or possible problems? Some areas where BSC does not work properly or is inefficient.
Over the last three years, the topic of initiative management has gained importance. The BSC has been brought into many organizations where other management systems such as lean, Six Sigma and TQM are used. When multiple management systems come together, there can be a problem with information overload amongst employees. This clash of management systems, in many instances, can result in a growing list of initiatives for driving business performance. Each of these management systems can drive action, but they do not always integrate to ensure organizational alignment. Integration can cause confusion at times because operations and process managers who work with Six Sigma have to get used to monitoring the Balanced Scorecard. Senior managers who use the Balanced Scorecard for assessing strategy execution have to understand Six Sigma as a means of achieving strategic objectives. While the BSC does lead the organization to generate strategy-focused initiatives, it does not provide a consistent method for prioritizing initiatives. Executives and managers have to take responsibility in organizing and prioritizing initiatives which is something the BSC cannot do on its own.
7. The BSC concept is discussed widely. What do you think, if most companies understand the importance of BSC development? Are they willing to invest in BSC? Is it hard to get decisions makers to conclusion that it is necessary to use BSC?
The process of buy-in takes time. Without buy-in, there can be no successful implementation or usage of the BSC. From an organization’s executives and managers, there has to be a realization that there is a need to execute strategy.
Leaders have to ask themselves why they are truly considering the BSC. Has the organization lost its competitiveness through following an outdated strategy? Has strategy become too complicated for the organization to understand? Or does the organization simply need to better understand the performance of its business processes to diagnose problems? If an organization truly understands its strategic needs, then buy-in for the BSC has a higher likelihood. But if the organization is looking to fix its business processes and is not sure of its strategic needs, then buy-in for the BSC does not have a favorable likelihood. There is no purpose in selling the BSC to a company that really needs a dashboard for gauging process performance. An organization truly has to understand its own needs.
8. The practical implementation is always as important as theory itself. There are a lot of ways to implement BSC from simple Excel files to software, web-based services and full integration with company business system. What do you think is the best implementation strategy in terms of quality/price? What type of tools would you use to do implementation?
The type of tool that is used should be determined by the size and budget of the company that is having its BSC implemented. A small company, for instance, with 100 employees and a very limited budget can use Excel or it can purchase one of the many affordable web-based services that have emerged in the last two to three years. Many of the web-based services have monthly “pay-as-you-go” subscription plans that spare the client from the obligation of a contract. What I’ve noticed about some of the web-based services is that they have a high level of user friendliness (data can be easy to find and objectives can be easily built) which is ideal for a small company that may have limited experience with business performance management solutions. A Fortune 500 company, on the other hand, has more options at its disposal. This type of company is going to be concerned with such issues as cascading scorecards and having access to real-time performance information to name a few. The name brand software solutions are going to offer more choices in terms of scorecard adaptability, integration, and performance reporting.
9. There are companies that already use BSC, we read about them in business magazines, we read their case-studies and success stories. What advice would you give companies that just start considering the implementation of Balanced Scorecard concept?
My advice to companies that are just starting out with a BSC implementation is to not just perceive the BSC as a reporting tool. Your BSC will do more for the organization than just show business results. It is a management system that gets managers and stakeholders focused on action through initiatives. It is a process of collaboration that requires feedback from managers, business units, and individual employees for the formulation of strategic actions and initiatives. The BSC is also a facilitator of change. A company cannot move toward achieving objectives unless it is willing to adapt and evolve. If you can think of the BSC as something more than a reporting tool, you will realize that the BSC is worth the effort required with implementation.
10. Thank you very much for your answers. I think our readers would like to know more about your company and service you provide. If possible share also your detailed experience with Balanced Scorecard here.
The Global Institute for Management (GIM) is the leading provider of educational services that enable organizations to overcome the challenges that prevent the achievement of optimal performance. Our core competencies include strategy management, risk management and organizational leadership. We provide educational products that come in a variety of formats which include e-learning, live workshops and in-house training.
Here are a few samples of our thought leadership:
The Balanced Approach to Managing Risk (featured in Information Management)
Seeing Red: Integrating Balanced Scorecard and Six Sigma (featured in iSixSigma)
Bringing the Balanced Scorecard Back to Life (featured in iSixSigma)
We are able to help you build your BSC. Visit us at www.gimanagement.com
