BSC and the systems of management (Part 1)
Intro
Companies that implemented BSC concept sometimes face the situation when the system is broken and does not work the way it was planned. It seems strange: the strategy is created and accepted , the indicators are built to show the performance of all the strategic goals and the strategy map is created – so why management still does not receive up to date information about every operational activity? The problem is also related to the staff – they cannot understand why the system was implemented and what the benefit of its practical usage is (both for the company and especially, personally for them). Let’s try to find out why it could happen and, certainly, how to prevent such situation.
According to the analysis of reports given by companies, the main reason for this is the independence of the BSC within the company. Often the implemented system plays some role separated from all other managerial tools and subsystems. The examples of such tools could be budgeting and accounting management systems, systems of strategic development and operational administration. Balanced Scorecard concept needs the overall development direction of the whole company. According to the concept, every department and even every employee needs to be oriented on the strategy. Certainly it is not possible if the new system is not linked with and adopted into the subsystems that currently exist in the company.
The following conditions are needed to be satisfied in order the whole company to develop according to its strategy:
- Every managerial subsystem introduces the investment in strategy realization;
- Every managerial subsystem is an information source for the tree of Balanced Scorecard project;
- BCS, in turn, promotes a successful functioning of all the subsystems presented in the company.
The pyramid of management systems
The image presents the structure of the management systems of a common company. The system of Balanced Scorecard needs to cooperate with all of those levels, to be integrated into them and to perform the control of them. The dashboard logic (read more in the article ”Advantages of BSC concept”) cannot be executed without cooperation of BSC and all other managerial subsystems.
The pyramid of management systems
Certainly every element of this structure has its own specific features. The following part of this article will describe the process of linking BSC system with some elements of this pyramid one by one. Those descriptions will be based on both theoretical and practical issues of BSC implementation process. It does not aim to be the only truth (every company is unique and the system needs to be adapted to its specific features) but it aims to show the logic, BSC implementation process needs to be based on.
The map of the article
- Part 1: This part is the intro, the first part of the whole article. It also contains the pyramid of management systems;
- Part 2: BSC and the Strategic Management system;
- Part 3: BSC and the Budgeting system;
- Part 4: BSC and the motivation system;
- Part 5: Balanced Scorecard and the subsystem of Organization Design. This part also contains the conclusion and summary for the whole article.
