Performance Management Solutions

The Balanced Scorecard Approach

The Balanced Scorecard approach to strategic planning takes into account the key fundamentals for successful strategy implementation and provides answers to every senior manager's most challenging questions in measuring the performance of their organisation.

For example:

• How do we know the organisation is performing to its optimum levels for reaching our strategic aims, in all areas ?
• Do our key performance indicators (KPIs) align to the factors critical to business success ?
• How do we openly communicate to all the individuals in our organisation and provide them with a clear line of sight to our strategic aims ?
• How do we engage the organisation to deliver our strategic vision ?

Senior executives start to ask themselves questions about what is critical to the success of achieving the strategy.

The Balanced Scorecard approach takes executives and their teams through the journey to understand and value these critical success factors (CSFs) and develop a balanced set of KPIs to manage their delivery - no simple challenge in an increasingly dynamic economic and global arena.

Performance indicators are a mixture of soft and hard measures developed to align the CSFs with the resources needed for successful operations. This draws a direct cause and effect relationship between the inputs of the business and its financial outcomes.

The Balanced Scorecard Perspectives

At the core of Balanced Scorecard principles are four key perspectives, but these can be changed to suit the number most appropriate to that best balancing the view for an individual organisation.

• Financial perspective - these are the financial ratios every organisation is familiar with,. These indicators in Balanced Scorecard measurement terms are 'lagging indicators'. Hard measures, they are traditionally the outcomes of successful business processes, good competitive market strategy or high quality skill base and technology. They are also the enablers for reinvestment and continued growth.
• Learning and Growth - through this perspective, the Balanced Scorecard approach recognises the importance of having the right people with the right skills, the right tools and the right technology as inputs to successful operational process optimisation.
• Process - Key Performance Indicators (KPIs) against processes are not only on the critical path for understanding the targets for best performance but also the outputs being delivered to customers and therefore acknowledgement of the relationship and influence of the external world.
• Customer - this perspective, to provide true balance, is wider than just the customer - it also considers markets and competition. At this point, if customers are not buying, the impact is immediate in financial terms.

These four perspectives complete the Balanced Business Scorecard. Understanding the way they inter-react is an integral part of implementing the Balanced Business Scorecard successfully.

Communicating Strategy

For tangible benefits to flow from a Balanced Scorecard the measures used must be both actionable and actioned by managers.

It is therefore essential in any scorecard solution that the actions flowing from a Balanced Scorecard are both visible and readily reported. A well-designed Balanced Scorecard creates a clear "line of sight" for employees between their own activities and decisions and the strategic objectives of the organisation.

In this way it becomes more than just a measurement tool as also acts as a means of effectively deploying the strategy of the organisation. This ensures the Balanced Scorecard will be taken seriously and therefore have a real impact on the organisation.