BSC implementation
What is BSC implementation
Basically implementation of BSC concept means lots of changes and sometimes even up to full reconstruction of strategy executing process. In the following article we will try to figure out the basic steps of Balanced Scorecard concept implementation. Features of both theoretical and practical issues referring to implementation will be noticed as well.
First of all it needs to be noticed that BSC concept usage does not mean the process of building strategy but means the process of its realization. Certainly, realization of strategy process stands for precise logical strategy that should already be created and confirmed.
The second important thing is that Balanced Scorecard is not just measurement system but is an overall business management concept. That is why managers should not even try to systemize somehow both material and non-material measurement indicators. Kaplan and Norton noticed in interviews that a successful BSC usage in business starts with a recognition of that fact that it is not just another “measures and scales” concept but the project related to measurements.
The four steps of implementation
According to R. Kaplan the process of Balanced Scorecard concept implementation stand for the four basic steps:
Step 1. Building a scorecard: translating company’s plans and strategy into operational goals and activities. After the tree of scorecards is ready it should be integrated into management process.
Step 2. Cascading process: linking all the management and specialists’ hierarchy levels between each other (starting with the highest levels (CEO, top management) and finishing with the lowest staff members). It is important that linking should be based on building goals and indicators for every hierarchy level as a part of the whole company’s strategy. Also the step of setting up cascading includes building of strategic communications as well as encouragement for initiative decisions.
Step 3. Planning: defining precise instructions of the ways of how the operational goal might be reached and when it has to happen. This step also contains distribution of resources and responsibilities among staff according to the plan and designing the strategic actions. In traditional management concepts this step was often mixed up with strategy setting which caused misunderstanding even among managers and sure among lower hierarchy level staff. BSC concept accurately separates the process of operational goals planning from the process of strategy building.
Step 4. Feedback and education: an endless process of testing the performance of the previous step and updating the plans according to the practical results. Also it means monitoring the effectiveness of the strategy according to the latest theoretical issues and case studies of practical examples.
Implementation plan
The first launch of BSC in company should be prepared for a long time and needs a lot of resources. It needs a group of specialists of different departments. As for implementation specialists it could be outsourcers, or company might hire a specialist as a constant employee, or top managers might play a role of such specialist if they are sure their knowledge of Balanced Scorecard concept is enough for it. This group should make a sophisticated project with a logical structure. Certainly the plan of implementation should be individual for every company; it should take into consideration all the special features of the business. But we will list some common stages the implementation plan might include:
- Creating the preconditions for system introduction (the level of enterprise);
- Establishing the basic architecture (the level of enterprise);
- Achievement of consent of strategic goals statement among group’s members (pilot level);
- Defining the key performance indicators and the measure units for each of them (pilot level);
- Defining the plan of actions in time (pilot level);
- Assigning responsibilities to monitor the activities (pilot level).
Practical issues analysis – common mistakes of BSC implementation
It had been a long time since Kaplan and Norton released their first article referring to Balanced Scorecard concept. Thousands of companies all over the world had tried to implement the concept and surely not all of them easily succeed. There are several common mistakes knowing which implementers might avoid huge problems. Here is the list of them:
As for implementation process directly:
- One of the common mistake is impose the responsibilities of implementation’s realization on middle managers but not top managers. Certainly middle managers are not able to rebuild the whole company’s activity and usually they are not even responsible for the strategy. Sure it is possible for some person among middle managers to help or even lead the process of implementation but this way he or she needs to get full authority and rights as well as support of top management. Anyway implementation plan needs a group of specialists to make all the decisions as objective as possible. Remember that Balanced Scorecard is not just another business concept but it helps to understand and optimize all the company;
- A delay of time: sometimes a project group tries to create a perfect plan and notice everything. That is why the time when project is preparing might last forever. Remember that there is no ideal and it is impossible to foresee everything. Sometimes a mark of “B” is enough and it should not be “A” by all means and time delays;
- Delay of launching projects because of indicators shortage. Practically the list of key performance indicators (KPIs) is updating while new activity is adding or some existing one is cancelled. We notice one more time – there is no ideal and human is not able to predict everything;
- And others…
As for theory and philosophy:
- Often the monitoring activities much higher priority than communication ones do;
- While BSC concept is starting to work for the company managers sometimes consider themselves to be responsible for every operational task and the ways it is executed so they deprive lover hierarchy level employees the right to choose the way on how to operate with the goal. That is why employees’ improvisation skills and opportunity to be noticed could easily be killed by such total control and the absence of any freedom;
- The project of implementation and BSC working could be considered as an instruction but not as a goal that all the staff should rich together.
