SWOT Analysis Guide

The SWOT Analysis Guide will introduce you to SWOT – widely used strategic planning method. It enable business executives and strategists to evaluate options, plan for the strategic goals and implement the changes necessary to achieve those goals.

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• Inside: 29 pages SWOT guide (Adobe PDF file), 21 PowerPoint Templates (PowerPoint .pptx file; check examples below)
  
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We will discuss the advantages and disadvantages of competitive methods and will evaluate each one against the other. This will give you some insight to what methods work better in particular situation, and what is the course of action one would take to maximize the advantages each method has to offer.

Full version includes:

The full version of SWOT Analysis Guide that includes:

• 21 PowerPoint templates for SWOT presentation
• 28 pages SWOT Analysis Guide that includes

Furthermore, we will discuss several business cases where SWOT has been used and will provide you with a detailed information how it have been helpful in the decision making process.

Finally, we will provide you with a detailed checklist and FAQ sections. By reviewing the information, professionals looking for the material on business analysis methods can get educated on the key aspects of SWOT.

What is inside?

21 PowerPoint templates for SWOT presentation:

SWOT Analysis Guide includes 21 PowerPoint templates for SWOT presentation

28 pages SWOT Analysis Guide:

• “SWOT Analysis” part addresses the definition of the SWOT analysis, and talks about the problems and situations that the method can be useful for. It is a short, but all inclusive summary of the method and its uses. It provides reader with focused information on the advantages and disadvantages of the method, informs on the key stakeholders of the SWOT analysis, and provides information on who uses the method the most.
• “SWOT and balanced Scorecard” is a summary part that discusses the balanced scorecard as a tool for the business professionals, and provides a view of how SWOT and balanced scorecard can work together in order to achieve the strategic goals. It concentrates on the role SWOT plays in the balanced scorecard. It answers a question of how SWOT can assist in designing the BSC (balanced scorecard) and what are some of the measures and evaluations necessary in order to achieve the best results. It compares the scope and coverage of each method and presents them as a complementary to one another.
• Part “Alternative Methods to SWOT analysis” discusses some of the alternatives available today when it comes to the strategic planning tools and methods. It is a summary part that goes in to certain detail about three alternative methods: PEST, Porters Five Forces for Competitive Position, and SCORE. These are all methods that have been very popular through years and have earned positive evaluations from many prominent business professionals. As with all other methods, they have advantages and disadvantages that we will try to present as fairly as possible. Furthermore, we will discuss them in contrast with SWOT and try to give you an objective point of view on which is the best solution and in what case do they provide the best results.
• Part “Steps in Solving Problems Using Porter’s Five Forces” touches on one of the alternative methods to SWOT, and provides a step by step guide to what it means to solve the problem using Porter’s Five Forces. It is an all-inclusive and detailed part on the method, its applications and the advantages and disadvantages it offers in the decision making process. It goes in detail on every force described by the author and provides some examples and scenarios where the method might be useful.
• Part “Solving Problems Using the SWOT Analysis” talks about the method and its pattern of implementation in the business world. It provides 5 alternative scenarios where the method has been successfully used and has delivered the desired results. It is a sort of practical illustration of a theoretical concept. In this part we will try to show you how the real companies have used the method and what are the steps, factors and details that one needs to pay attention to when using SWOT. After reading this part, reader will have an idea about the method, the theory behind it, and how it can be helpful for the strategic planning purposes.
• Part “SWOT Analysis Conclusions” discusses and summarizes some of the key points made in the previous parts about the method. It offers more analytical rather than discussion tone, and provides readers with some prospective on the method, its advantages and disadvantages, and the opportunities other methods might offer. It mostly discusses the best scenarios when the SWOT delivers the highest results.
• Part “SWOT FAQ” talks about the method and the questions that some might have when first encountering it. Questions like, why use SWOT? Who are the key stakeholders, and what are the cases when the method is most effective? Also, one might be interested in who is the main user of the method is. All of these questions and more are addressed in the part.
• Part “SWOT Checklist” discusses some of the key aspects that one would need to use, in order to analyze the situation using the method. It give a user an idea about the factors that affect the method, about the key measures that need to be addressed and it touches on the results and their interpretation by the business professionals. It also addresses the topic of the key findings and most probable outcomes. In other words, it is a complete overview of the method and the factors that affect its results.

After reading these guide, you should have an extensive idea about the strategic planning tools and the methods of their application.

To be short, use of Balanced Scorecard will let you use:

To manage your business as a unit (which includes almost unknown for most of managers “noneconomic” factors). Think about how often you was saying “manage” and in the matter of fact kept in mind some unimaginable blend of “going there not knowing where” and “ do what others tell you”. Managing as a unit means the whole organization (every single employee) works in order to achieve a strategic goal.

To improve the level of visibility of business the managers up to the top level of hierarchy. With BSC you will get a measure with the help of which you can impartially to estimate your business and to predict probable scenarios of its development before the market will do it instead.

Really to control your managers without need to immersion in those parts of administration, that they are responsible for it. If before BSC implementation you were thinking that no one of your managers will not risk to cheat you, so now they simple will not be able to do it in large-scale.

Conclusion

The volume and format of our article does not let us to describe BSC in more detail. If you want Balanced Scorecard to work for you at the full capacity, it is necessary to know and to be able to use a lot of quite difficult details of this methology correctly.

The map of the article

Part 1. Discovering the new horizons of management: Introduction;
Part 2. Discovering the new horizons of management: Measuring non-material;
Part 3. Discovering the new horizons of management: How exactly to measure?;
Part 4. Discovering the new horizons of management: The benefits.

Conception BSC is properly the most general answer for all of the 3 challenges at the same time. On the one hand it allows to put into digital form any type of assets and any aspect of business thank to the use of non financial criteria and on the other hand to manage seamlessly “digitalized” business in the form, which is ideologically very close to that one, which was used in traditional material economy.

Let’s look through any business from official point of view. Its compulsory aim is the reception of positive financial results, practically without any dependency on historical prerequisites which the business is carried out in. Manipulation of material and non material assets is the implement for influence on the external community in relation to business and the financial result is an estimation and summation of this influence.
[image 1]

On the image there is a description of the scheme of conversion process of assets in conditions of nonmaterial economics. The classical reorganization “Tangible assets > Money” was altered by reorganization “Tangible assets + intangible assets > Money + Intangible assets stroke.” By the way exactly the increase in the course of this “distillation” of intangible assets (consider that they are presented at the right part of reorganization as well because they are not only to be expended but also to be increased by right business conduct) explains a faster growth of non-material economies comparing with the material. As part of present article scheme will make us interested just in the context of question about the management job.

In spite of apparent obviousness of the scheme not so obvious deduction succeeds out of it as follows: any managing influence must explicitly consider all echelons of this cause-effect chain (in other words all movements of all assets in strong interrelation no matter on which level they would be provoking these movements of business processes). Disregarding of lower link (by of top management) leads to financial indexations and indexations that characterize position of company in the market “hang down” in the air and become inapproachable.

Administrative staff does not understand how they should turn into the reality the words the personable aims, which headquarters “appose” for them. Disregarding of higher links (by the managers of the middle link) results to that point of activities that activity itself becomes the reason of that activity, that doesn’t lead to consummation specific financial and trading multiple (further under “criterion” will be comprehend financial and nonfinancial criterions). In other words there’s the same “slant” aside managing of only some assets of a company about which we have mentioned above.

That is why when it is spoken about a seamless business managing we have in minds, or to be more correct, BSC supposes the next series of steps:

On the basis of viewing business expressed or not expressed of this way or another in form of mission (better expressed adequate enough) and with due consideration of the realities of the market property owner must represent to the top manager list of clear aims that are stated through resulting criteria, which should be reached. Results can be financial criteria; criteria that characterize position of the company in the market and consumer attributes of manufactured goods; criteria of staff competence and so forth depending on viewing and inside units of property owner. The only condition is that criteria must be quantitative. Later the practice will show whether the chosen criterion expresses some non material asset adequately or not. The criteria is simple: if the change of meaning of this criteria some way or another influences value of financial criteria then it is expressed and if it does not then the only one that is expressed is unfortunately the only restless soul of property owner. If the performance measurement of criterion is not obvious, for example, consumer attributes of material items or criterion of staff competence then the direct responsibility of supervised “problem” direction of top manager to offer some alternative estimation procedures at option for property owner. (By the way it will be not so bad to test about adequacy for the job or compatibility of top manager and property owner what is generally the same.) This stage in BSC is called the approach.

After recording the resulting criteria, that is the result of the previous step top manager must represent the array of aims, which must be done for the track records of intended resulting criteria (in other words those criteria that attest to intend or not intended strategic aims). In arriving at aims probably it will be emerged that some resulting criteria depend on other missing nevertheless at the list of resulting criteria. These accessorial indicators we will name forming (clearly that forming indicators are criteria that attest to reaching or not reaching tactical threats). Clearly that level of “inclusion” – depends on forming indicator that can be whichever and measure only by the complication of business.

Consequently all that top manager must do at the present stage is to record the full list of the criteria (resulting, that are definite at the stage of strategy determination + forming, that are definite as at the stage of strategy determination and at this stage too) with assignment of formulas that connect the criteria between each other and list of aims realization of which must lead to reaching recorded criteria. In other words aims are those concrete actions, which must be done by dominated of top manager’s structures for reaching strategic aims and the list of criteria is a way to control the task activity. Clearly that each criterion in that way if doesn’t show independent of company reality (for example, the volume of new for company market or macroeconomic activities), must be connected with facing concrete manager a concrete task either directly or indirectly through the forming indicators. All the time it must be absolutely clear who exactly is in charge of reaching any criterion and what way he must influence by the meaning of this criterion.

[image 2]

Tasks that are not connected with of the confirming criteria existed in list are to be rejected. (Occam would tell like this: “Do not augment performances over necessity”.) This stage in BSC is named like “strategies”. Of course we are talking about list of users we mean that those meanings of criteria, which must be reached to the definite time moment. In this particular case this means that about tabular compositions that describes the time history changers of measures through time.

The next stage is very simple as everything already is specified at previous two stages. It’s time to apply and conduct monitoring of reached planned values indicators. Here everything depends on discipline of activity, movement exactly by target goals. This stage in BSC is named like operational administration. Diagrammatically the whole process is introduced at image number 2.

The results of stages of strategy determination and tactic are possible to record, for example, in form of diagram Excel. Obviously it is necessary to “register” those administrations that are relevant to the concrete company. This can be the management of education and the staff development (for example, for financial companies or consulting), and managing of process reception marketing advantages by marketable and mis targeted methods (for example, for producers of juice) and re engineering process of the production. The principal meaning in the context of BSC does not have it. On principle it is important if any of this districts relevant for your business will be overlay either in district of inside or exogenous processes and finances, or at their interception and always will be described as methodologically only the way in the context of BSC.

By analogy with “traditional” budgeting that are generally recognized as a management tool of material assets, “expanded” may be budget of solution and fact, so it can be such effective means of the management as “traditional” as well as the nonmaterial assets already.
That is why there are all reasons to confirm that BSC is really the management procedure of the business in all together! At least till humanity will invent the third type of the assets to add to material and non material assets.

Let’s look at the following example. Let proprietor of some enterprise to decide about possibility and desirability expansion of the enterprise’s activity at the expense of the departure on the regional markets, for instance wholesale. The best of all is if this decision will be formulated in the form of purposeful instruction, for example: “Our Company after period X must enter to Y of the major companies that are operational at such-and-such markets” and as appropriate informed to staff of the company. Then there must be conducted the next arrangements:

1. Marketing department must explain the opportunity of reaching these strategic indicators in terms of evaluation of these markets, calculate the revolution that is necessary for implementing a goal and depending on volume of the market and formulate a plan of performance. In particular in order for informing the information about company and about its products to local concessionaire, it is necessary to work out with concrete materials (for example, informational letters and commercial proposals) and put into practice arrangements about their delivery to consignees (for example, the direct mail). Then the concrete criterions that characterize the activity of marketing department will be the amount of consignees of potential concessionaires along which it is necessary to put into practice the distribution of commercial proposals. At the same time the quantitative meanings of this criterion must be measured from the anticipation of what part of those who received the suggestions will conclude contracts. The predicted percentage ratio and assumed amount of contracts (in turn it calculated on the basis of share of market that is planned to be taken possession) allows calculating the amount of consignees in the address basis of distribution.

2. Sales department must plan the performance in such a way that it can be assured the reaching of the demanded percent who signed a deal among those who will receive the commercial proposal.

3. Both of departments must present plans of their activities in BSC and finalize it with financial, manufacturing career and HR Department.
Upon approval BSC all careers must monitor approved plans according to the predesigned intermittent. Obviously that the on-line monitoring independence of expanded budget plans (in other words meanings of non financial indicators “the amount of potential concessionaires” which received the commercial propose”, “percent from the signed deal” and so forth) will give the opportunity for early detection of appeared problems (we are coming back to the image number 1). At the same time the low meaning of percent of those who signed a deal can be the result of bad work of the sales department or unsuccessfully composed commercial propose (inappropriateness of its conditions) or mismatched address basis. Monitoring of financial indicators (reverse by contracts) can give the information about approximation of promoted products to the regional market.

So, the strategy expressed in form of system of interfacing criteria of course transfers in tactic and guarantees ability of adequate control of reaching intended purposes at least because in case of rising problems it allows to define clearly their source and represent method of their eliminations. (Of course the method of eliminations of problems also must be predesigned through suitably matched quantitative indicators). The interest of using BSC is doubtless even in that case when the reason of rising problem was voting initial error of approach. Then the property owner can understand that the route was chosen erroneously until that time when the business sheep will get a hull breach.

Therefore to the tag of traditional budgeting managing in BSC conforms the scheme that is described on the image number 3.

It’s clear that BSC is necessary not only for managing by sales and it serves not only for producing (in the example based on first sales could be adjusted requirements as to output products and represented plans of its localization for concrete market) but also for training of personnel (low operational efficiency of selling assistants could be the result of lacking qualified personnel where under could be formulated plans of the reeducation for reaching necessary percent of taking place deals). We will take the responsibility to approve that BSC serves for managing of any business aspect including such a specific area like managing of the nonmarket processes.

Although this will raise a storm of indignation of consultants of the approach, but BSC says that the strategy is not so important on its own. The system of the objectivities approach, mechanism of its transformation in the performance and back, control of activity on the accordance of approach are much more important. It’s not accidentally that in original edition of founders BSC there was subtitle “Translating the approach on the language of activity”. This result is also approved by the newest exhaustive investigation of the famous American companies for the last 15 years.

The deduction №3: If the material assets are a “body” of the enterprise and the non material assets are its “soul” then BSC is the integrated system of the transducers and augmenters that are managing business as a life form. The extended period of the history of civilization during which business was considered as some “Frankenstein imaginative” and “was paying” for this by the shocking inoperativeness is declared close. Full point.

The map of the article

Part 1. Discovering the new horizons of management: Introduction;
Part 2. Discovering the new horizons of management: Measuring non-material;
Part 3. Discovering the new horizons of management: How exactly to measure?;
Part 4. Discovering the new horizons of management: The benefits.

In the context of the article we will be interested in two aspects of intangible assets, more specifically:

Methods, technologies and standards, which are used for optimization of business processes, in other words all that improve effectiveness of business at the expense of reduction of time needed for production, reduction of expenditures and the improvement of products’ quality in comparison with the competitors’ ;

Methods, technologies and standards, which are used for managing loyalty of groups of people, which act as: demanders of the products (regulatory authorities; associations; vendors and others) – all that increase efficiency of business at the expense of increase in a turn-over and the enterprise capital.

The first deduction is: traditional financial model (accounting records and budget management) in no condition with the proper effectiveness to solve the problems, which are opposing managers about necessity of managing the nonmaterial assets. For the successful business administration it requires deployment of nonfinancial criterions (alongside, of course, with financial).

Challenge №2. What exactly should we manage?

The last example is “Customer Relationship” conception that recently became very fashionable. Most of the local structures, which the company had to work with, thought absolutely sincerely, that it was enough simply to operate automatically reception and processing of customers’ calls (imitation of methodology) to enroot the conception. But it was not the main problem – quite the reverse, it could be easily solved. The problem was about incomprehension that this conception initially focused on managing exactly contacts with clients. This led marketing departments to weaken essentially the managing of “potential” (potential not in traditional financial meaning in other words who did not pay money yet, but in nonfinancial meaning in other words by those who did not contact with company still in one or another way) clients by making the emphasis exactly on “adaptation CRM”. The most important source of income, the one which makes costumers to do the first call/resort to the company and to land up in the ambit of control of CRM, was left without any control. And if there are instances when CRM has been understood right and had not been used instead of managing of marketing, then it is too difficult to remember occurrence when all business subsystems (“Customer Relationship” and Brand Management, Quality Management, Budgeting) took concerted actions.

The second deduction: the management of business is more than managing of all business processes/assets; it is managing of all business processes/assets as a whole thing. Taking into account that such a methodology exists for material assets and that material assets as well as nonmaterial ones are still assets anyway, it’s possible to suppose that methodology of managing of both seamlessly should be close to budgeting which has already approved itself in practice. You can be convinced about that by reading further.

The map of the article

Part 1. Discovering the new horizons of management: Introduction;
Part 2. Discovering the new horizons of management: Measuring non-material;
Part 3. Discovering the new horizons of management: How exactly to measure?;
Part 4. Discovering the new horizons of management: The benefits.

The article is aimed to very considerate and obviously of current interest economical subject matter, however it is hardly positioned as scientific research but rather as an opinion-based journalism.

We would really appreciate the anticipation of what we are not going even though to subject at the article of generally sufficient challenging, and to excruciate with unnecessary and boring technological and scientific details. As a matter of fact not so necessarily to know all inside out how the plain is engineered in order for reaching by plain to the point of destination. And the flight by itself will become the best practical confirmation that the plain engineered right by the way of argument like substantiation “Ipso facto”.

Admittedly you are suggested to pass a micro test subsequent to the results of which you will determine if you really need to spend your time for reading represented information below. Now please answer only “yes” or “no”:

1. Are you sure that you live in one of the best worlds?
2. Are you surrounded by nice, talented like-minded persons apiece of whom you can repose trust at your work?
3. Do you think that you do not need to worry about your future? And this is because besides you with a vengeance nice people from the previous question and the whole machinery of government are trying to approximate it; and all together know what to do.

If your answer is “yes” to all of the questions then it is certain, that it is absolutely no need for you to read further.
If your answer is “no” to at least one of the questions then it is recommended to read this article to the end.

The primary objective of activity business consultants worldwide seems to be a development of such recommendations, which operating managers could apply practically here and now. In what connection the basic requirements are correspondence of these recommendations to economical fundamentals, progressive economical theory and most crucially to common sense. This article is an attempt to show, that reliable methodological basis for this can be and should be the Balanced Scorecard (BSC) – one of several economical conceptions, which seamlessly consider “particular qualities of business management” and which mean that it is really usable. If to be more exactly then offered for your attention remodel of the methodology of BSC (The Balanced Scorecard) featured by Robert Kaplan and David Norton, but it saved the main ideas of this wonderful conception. During the article we will specify all differences of our lead-up from the original conception and will describe the reasons that determined us to alter it.

But at first it is necessary to describe those challenges, if the answer to these questions completely adequate will be the Balanced Scorecard.

The map of the article

Part 1. Discovering the new horizons of management: Introduction;
Part 2. Discovering the new horizons of management: Measuring non-material;
Part 3. Discovering the new horizons of management: How exactly to measure?;
Part 4. Discovering the new horizons of management: The benefits.

Balanced Scorecard is a strategic tool that helps a company to control performance of its parts. Balanced Scorecard system is of great use in targeting and controlling of company’s strategic goals. Such kind of methods as BSC has many advantages in business management: efficient business planning, timely generation revenue, sales increase and promotion, creation of businesses identity, etc.
A Balanced Scorecard appeared in 1992. Since then it has been modified and corrected. By the middle of the 1990s a new design of a Balanced Scorecard appeared that demonstrated a better level of goal achievement.

Balanced Scorecard testing is effective in watching and controlling the achievement of the goals that were previously set by the company. It helps a company to use proper performance measuring tools and all company activities to be crowned with success. This system of testing is useful and efficient both in monitoring present activities of the company and watching its activities in perspective. The reason of the BSC usage is quite clear. It improves business organization, promotes the achievement of company’s goals, creates a common understanding of the overall goals and helps in tariff rate increase. Though one can make these systems by oneself, but to save some time people usually use the results of somebody’s work. Companies and organizations often consult with an expert in this area even while using the Balanced Scorecard concept.

It is important to mention here that the very Balanced Scorecard cannot be efficient or useful without fitting to proper measures or goals. Though it is not so easy as it seems. To simplify this process an old design of the scorecard was improved and a new one was developed. To find out whether BSC system is effective or not, some researches were made in this field. This study showed the following results. In 66% people noticed profits increase by using Balanced Scorecard, in 88% there were improvements in operating of a company. Balanced Scorecard method has infinite advantages, so everyone has an opportunity to derive benefit with the help of this system. If you want to learn more information about balanced scorecard testing, you can find it online, in special books or videos. Do you want to see improvements in your business planning and management? Then do not waste your time and act immediately! Only in this case you will be able to reach the desired results.

1.    Please, summarize in few words what is your expertise and background with Balanced Scorecard.

I have been associated with Balanced Scorecard since 2000 and was and am actively involved to roll it out from SBU level to functions and individual KRAs and goals.

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?

No, even small companies can as well utilize it for systematic planning and growth.

3.    While BSC concept is popular now, what other business performance measurement concepts can you recommend for companies to consider?

Benchmarking and utilization of National Quality Award models like MBNQA, EFQM and Deming Prize are advantageous.

4.    Please, share your opinion about key ideas that should be kept in mind for successful implementation of BSC?

• Cross-checking “Cause and effect” linkages for initiatives across all four perspectives,
• SMART measures rolled down to functional and individual level,
• Few measures and goals to each individual to keep focus,
• An appropriate feedback and monitoring mechanism, which would review the whole process, take mid-corrections where necessary and guide whole organization towards achieving the goals and targets set, appreciate functional and individual achievement and efforts,
• Bring out periodic status reports for all concerned to know where they are and what remains to be done.

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?

BSC is a companywide approach to be implemented by all departments.
HR has a vital role in it, as Learning and Growth perspective in bottom-up starting point, influences Internal Business Processes, which in turn influences Customer perspective and finally Financial perspective.

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.

Ill defined or too much ambitious strategy as well too many functional and personal goals causes implementation problems.

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?

Malady is, most companies use short and long term planning, but only a few companies fully understand importance of strategic planning and BSC. Once they embrace it, there is no looking back to old approach.

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?

Simple Excel files are good enough. Since BSC percolates down to functional and individual KRAs, they are lot easier to deal, plot and track. For Chairman and CEO level, its aggregation may be arrived at by due software.

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?

I would request companies to elevate from mere planning to strategic planning level and take help of professionals to guide them, for a few initial years, to implement BSC and see the level of improvement and achievement. This will make them ardent followers.

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.

Excellence unLimited helps organizations to embrace all proven management tools and techniques, including BSC, for their performance improvement, growth and sustainability.
For companies that are new to strategic planning, we help them to take systematic route to identify their SWOT, assess external environment, formulate their Vision, Mission and Values, identify Strategic objectives, formulate strategic plan and roll it out through BSC and hand-hold them for a few cycles till their internal team gains expertise and confidence.

Business management issues are most important in any business.  In the early stages of business development it was enough to organize simple bookkeeping system which made it possible for business owners and shareholders to adequately evaluate business value, perform efficiency analysis, identify revenue, organize necessary managerial actions etc.  But as competition was becoming tougher and with development of technologies there appeared new important business factors – growing volumes of intangible assets that had a great impact on business efficiency and value.  Thus, if 20 years ago nonmaterial assets constituted only 38% from total assets volume, now this figure is approaching 85.  Moreover, even those assess that cannot be directly evaluated are considered to be primary assets.  For example, the fighting spirit of the company is referred to intangible assets.  Although they cannot be directly evaluated making bring quite real revenue and losses for the company.  Business evolution and progress required implementation of more effective management systems.

During the last several decades business owners started to ask themselves whether the reach their goals and how they do that.  Emergence of such questions is accounted for the following reasons:

• The scope of business ventures have incredibly grown as the business turned international;
• There is very little time for decision making (if 50 years ago the company had six years to construct a new automobile, now car producers have only two years in order to stand tough competition in the market);
• Decision-making is based not on the prime data but expected future results.

In such a way, modern business requires effective system to manage strategy implementation and communicate strategy, tactics and operational management.

BSC model

Balanced scorecard as a compass for modern business

Modern company requires a compass that would show the right direction in the changeable and sometimes violent business world.  Balanced scorecard system created by Norton and Kaplan is such a compass.  The idea of BSC is based on two statements:

• The right implementation of strategies is more important than the strategy quality;
• Use of financial indicators only in company management will not make it possible to fully reach the goal of increasing company value.

Balanced scorecard is implemented in companies with the aim of putting strategy into action.  The key mission of balanced scorecard is strengthening of business strategy, formalization of strategy, explanation of strategy to every company employee, establishment of monitoring and feedback systems. BSC is a management tool aimed at implementation of a long-term strategy.  It transfers strategic goals developed by top managers into a set of interrelated and balanced indicators which are capable of representing critical success factors of current and future state of the company.  Balanced scorecard can show implementation degree of a strategy through evaluation of financial and nonfinancial indicators.

Classical model by Norton and Kaplan of includes four groups (categories) of key performance indicators connected with cause and effect ties:

• Financial;
• Customer;
• Internal business processes;
• Learning and growth.

These four categories are applied in most organizations.  At the same time, it is always recommended to take into account specific character of every individual company, and amend this model with indicators and perspectives relevant to a certain company.

Balanced scorecard modal developed by Norton and Kaplan makes it possible for top managers to focus on those areas which are really important for strategy implementation, as well as use most important information having the greatest influence on company efficiency.  Moreover, BSC represents the idea of the so-called “responsible organization”, i.e. organization in which everyone knows his roles and responsibilities.  Of one of the greatest advantages of balanced scorecard is that it is based on both past, present and future events, thus becoming a “three dimension” model.

A few words about BSC advantages

Balanced scorecard is quite universal and can be applied to manage every business aspect, including nonmarket processes.  This is not another mathematic-economic model, but an entirely new approach to business management, superior level of business thinking, advanced logic of strategic decision making.  Balanced scorecard can be called an accounting system.  It is an inseparable part and sometimes even the nuclear of organization management system.  BSC can measure things that cannot be evaluated in terms of accounting.  Of course, financial indicators in balance scorecard are key elements, but at the same time they cannot give a complete characteristic of the entire business.

In the age of information and IT technologies implementation efficiency is playing the most important role, as all key managerial decisions will be made based on the obtained data. Will lack or distortion of information have a negative impact on BC implementation?  Without any doubt, the answer is YES!  That means that BC model should include indicators representing the quality and efficiency of IT system implementation.  In general, it should be noted that a set of key performance indicators in balance scorecard, their structure and priority is defined according to company strategy.  Sometimes, financial indicators may not have a supreme priority.

Balanced scorecard in combination with other management systems

Balanced scorecard can be successfully used with other management systems and methodology is implemented in various organizations.  First and foremost, these are budgeting system, quality management system (QMS) and reengineering.

There is a misbelief that budgeting can fully substitute balanced scorecard.  But budgeting system is the technology for operational management, and really focuses on results and strategic goals, while balanced scorecard makes it possible for an organization to communicate strategic planning with budgeting.  The maximum effect from combination of budgeting and balanced scorecard in strategic and operational management is obtained through automation of these processes based on a shared IT platform.  At that, it is necessary to include started values of balanced scorecard financial indicators in the annual budget.

Requirements to implementation of quality management system are partially relevant to implementation of balanced scorecard.  Above all, this is necessity to integrate top management in the process of quality management.  In such a way this requirement directly refers to strategic management area.  Scorecard with support of quality management system implementation must perform functions which are supported by BSC as well:

• Understanding of quality strategy at all levels of an organization;
• Ties between different projects of a company;
• Communication of selected quality strategy outside the company.

As a result, we can see interrelation of these systems which makes it possible for the company to improve quality management system and implement balanced scorecard at the same time.

Interrelation of balanced scorecard and reengineering is especially interesting.  Usually strategic goals set by business owners or shareholders seem unachievable or non realistic to linear managers.  That’s why implementation of balanced scorecard without reengineering methods is almost impossible.  Thus, top managers of very far from every day operations in the company, and their views on company management are based on financial indicators which represent past events.  Reengineering makes it possible for top managers to understand business processes and factors in depth which helps them reach strategic goals.

Reengineering of business processes changes almost everything in the company because personnel, intellectual capital, management and values are interrelated.  We call them for elements of business system diamond.  The key element is company business processes or the ways in which job is done, the second one is intellectual capital in organization structure, the third is management evaluation system, and the last is organization culture – values and personnel attitude.  Relations between these elements play a key role.

Reengineering in BSC implementation enables company management to effectively review existing business processes and integrate them in full.  At the same time, using a range in Erie methods, balance scorecard helps business shift from “Brownian motion” to “ordered motion”, intensify synergy effect etc.

As a result of this process, balanced scorecard becomes an effective tool to stimulate and motivate employees who would aim at implementation of specified goals.  It can force an employee to use a previously identified path.  Statistics show that 88% of companies using balanced scorecard to motivate employees consider this system extremely effective.

What is necessary to implement balanced scorecard?

It is impossible to implement balanced scorecard without proper preparation.  This looks exactly like the house built without foundation.  Such a house will not last for long and will collapse every next second.  The foundation of balanced scorecard is:

• Readiness of top management to develop a strategy and objectives (competent and professional personnel should be in charge of BSC implementation);
• Introduction of managerial accounting, budgeting and controlling system;
• Effective system to collect information, prompt analysis of financial and nonfinancial operations;
• Education of personnel, formation of appropriate corporate culture;
• Successful functioning of qualities management system (as already said above, BSC and QMS supplement each other).

Does immature business need BSC?

Not all companies need balanced scorecard.  In other words, balanced scorecard implementation would not be reasonable for any company.   In order to implement balanced scorecard the company should mature or reach a certain level.  This is the highest degree of business culture, a new stage of development.

BSC and reengineering

There a special systems and standards identifying maturity of the company, like People-CMM model (People Capability Maturity Model) which can be easily used in balanced scorecard.  This model is based on identification of key processes and related practice elements, successful implementation of which signals about relevant maturity level of the company.  At that, processes and practice elements of the same level become the basis for implementation of processes and practice elements of the higher level. People-CMM scale is composed of evolution stages which the company undergoes as it becomes mature:

• Initial;
• Managed;
• Defined;
• Predictable;
• Optimizing;

An organization will be considered immature in case all processes depend on certain performers and managers, and decisions are made spontaneously.  In a mature company management procedures are clearly defined.  As a rule, it is recommended for the companies at the fourth level of maturity to implement balanced scorecard.

Benefits of balanced scorecard implementation

If all preparations for BSC implementation are made and the company has reached required maturity level, such a company will enjoy the benefits of balanced scorecard implementation.  If properly implemented and maintained balanced scorecard will make it possible to:

• Managed business as one single whole;
• Fully communicate company strategy with operational management;
• Make business transparent;
• Optimize balance of interests for customers, shareholders and personnel;
• Communicate balanced scorecard with management methods aimed at increase of company value;
• Increase growth potential for short and long-term success;
• Timely locate problematic areas;
• Integrate balanced scorecard with controlling system;
• Executive effective control over linear managers;
• Decrease volumes of corporate reports;
• Help ordinary employees better realize development prospects and company value system.

Implementation of balanced scorecard is recommended for huge companies with a complex organization structure.  BSC implementation is additional positive indicator for investors.  It means that the business is under control.  BSC is also viewed as intangible asset which increases company value in the market.

If the wrong strategy was chosen, business owner can timely locate mistake and introduce necessary corrections long before such a mistake will cause massive losses.

But sometimes happens that BSE signals on successful strategy implementation, but in fact there are no positive results.  Well, perhaps the wrong implementation model was chosen.  In such a case it is recommended to perform an expertise of BSC model by competent specialists.  In addition, it is necessary to remember that balanced scorecard system is a mechanism for strategy implementation, and it does not substitute strategy.

As already said, in today’s business the ability to implement strategy matters more than the strategy itself.  IT technologies can do that, but one should not forget that these are just tools.  People interested in company success stand behind all managerial decisions.

Implementation of balanced scorecard in the company signals about business success.  As improvement of the strategy and indicators in the system is a continuous process, it is recommended to review its model and introduce amendments according to changes in external and internal environment.

I do appreciate to find at last this product on the market that helps me to design in a easy and rapid manner some BSC for client. The balanced scorecard tree and the strategy map are designed very quickly, The product is able to merge several indicators under categories and to developp a multi-level BSC.

Targets, weights and stop lights are flexible and the predefined representations are very expressive for my clients. At the end, the reports are automated and the import/export functions give me a lot of way to proceed.

I do particularly like the export to html that gives me the opportunity to publish reports on intranet sites. BSC designer is a simple and powerful tool that responds exactly to my demand.

BSC Designer helps me to design some prototypes for client even if i have developed my own system for BSC and reports over Excel

The impirical studies of management quality are few and most take business as a basic unit, whereas there is extensive evidence that a small business unit (under 150 people) tends to be a much more important indicator of the quality of management team. Perhaps more importantly, only on such a granular level, the variation due to special cercumstances can be properly accounted for and analysed.

It is clear that if we can build a better management team, we can outperform competition, provide a better investment opportunity and achieve more, so how do we get there?

We have already talked about the individual traits of awareness, imagination, empathy and logic that are necessary for management success. We have also talked about the team variable of cohesiveness. We even talked about the past business performance as being a lagging indicator of management quality and having some predictive function if the management is stagnating ( there is no turnover and nobody is learning anything). There are a number of other factors, such as learning and growth, emotional well being, strength of the convictions, prior experiences, personal priorities that certainly impact the team performance.

Finally, there are techniques and tricks, approaches that can be used to leverage the management skill set. Practitioners of Theory of Inventive Problem Solving (TRIZ) often use example of a modern day eight grader who is transported to 15th century. Even though today he may be an average kid, in that time period he would appear shear genius because of what he knows and could easily do. Thus good technique raises everyone, no matter how mediocre to a level that is a lot higher than what was available without it.  It is so with management: Balanced Scorecard, Theory of Inventive Problem Solving, Lean, Six Sigma, Primal Leadership and many other techniques can raise the quality of leadership substantially.

But we run in to the fundamental problem: if we don’t know what it means to be a quality leader, how will we know if the quality of management is increasing and what is the ROI on that investment? Thus we are back to the measurement challenge.

In a sense, even a crude measurement will give us a substantial improvement over the current state of uncertainty since we have established that we cannot accurately tell a good manager from a bad one, often substituting popularity, or personal charisma for  some indicator of management ability or falling back to relying on the past track record. So, over the next few weeks we will explore alternative ways of approximating the measure of management ability.

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Oleg Tumarkin, Juris Doctor, Master of Business Administration, Certified Six Sigma Black Belt is an Adjunct Professor of Business at Lakeland College and Concordia University of Wisconsin. His firm, FutureWorks, in partnership with Bucket Brigade and AKS-Labs provides business coaching and Balanced Scorecard implementations.  His life’s passion is the development of a universal business measurement and management system that would cause management in to the realm of a repeatable, replicable, yet humane and flexible science.