The Balanced Scorecard Part 3: Achieving Goals
By Bill Willbrand, Jr., CPA ,Member, Brown Smith Wallace LLC
As you have learned in the previous two columns on this topic, The Balanced Scorecard is a proven method that aligns business strategies with everyday performance. The first column described how to identify and overcome common barriers to success. Column two took the method further by introducing you to metrics that can be used to achieve improved performance.
Now you are ready for implementation. To implement the Balanced Scorecard, you need to execute three comprehensive phases. These phases are broken down into eight separate steps.
Phase 1: The Strategic Foundation
The first step is strategic alignment. A clear strategy is essential to formulating the Balanced Scorecard. For a strategy to be clear, it must have both specific objectives and a well-structured set of targets. An example of a strategic objective expressed in relation to action would be the following: Hand tool loss will be reduced by 50 percent in the next six months through the implementation of a radio frequency identification system for single items valued at more than $100.
The second step is communicating your plan. Once you have clear objectives, you must be able to communicate them to your stakeholders. Every individual in your organization needs to know the objectives and understand how his or her daily job performance supports the achievement of these goals. To best convey your plan, you may need to alter your communication style for each segment of your audience.
Step three is to establish strategic areas. Setting priorities when identifying even general areas for improvement is essential to staying on target. The Balanced Scorecard allows for a focus of five or fewer strategic areas. Key strategic areas you might want to include in your scorecard are:
- Customer Service
- Depth/Breadth of Service Lines
- Safety Innovation
- Improved Profitability
Every goal you set must drive a strategic result. For example, the strategic objective of reducing hand tool loss described above would drive toward the more general strategic area of financial performance.
Now that you have established your strategic objectives and strategic areas, you are ready for step 4: building a strategic grid. A strategic grid is a visual tool to outline the specifics of your strategy in relation to employee learning and growth, internal processes, customer satisfaction and financial performance.
Phase 2: Three Critical Components
At step five in the process, you will add metrics to your strategic grids. As discussed in last month’s column, these metrics must be: • Linked to the strategic objective • Repeatable, allowing for comparisons over time • An indicator of future targets and performance • Accountable, reliable, verifiable and accurate • Available when needed
Some examples of measurements that are leading indicators of performance are customer referrals, new contracts and service response time. Whichever metrics you choose, be sure to focus on those which are most relevant to your strategic objectives.
Step six is to establish targets for your metrics. In order for a metric to be useful, you must have a target goal and a timeline in which you expect to meet that goal. In the hand tool example, the timeframe of reducing loss by 50 percent in the next six months serves as the target of the measurement.
One of the most gratifying components of implementing the Balanced Scorecard is putting programs into place to achieve your strategic objective. A viable program must:
- Require some level of resource commitment
- Have designated leadership
- Be supported and sponsored by executive leadership
- Benefit one or more strategic objectives
An example would be to establish a program to promote company-wide safety (the strategic objective), which would include designated awards (resource commitment) and have the support of company leaders as demonstrated through internal communications and company events. The program should also be led by one manager or team.
Phase 3: Deployment
The eighth and final step in the process is launching your first Balanced Scorecard within your organization. When aligning the developed scorecard with other parts of your business, you can make certain there are no conflicts or competing agendas. As you launch your plan and the programs to support it, you will have the opportunity to gain buy-in from stakeholders throughout the company. A successful implementation will ensure all your employees know and are focused on the measurement and accomplishment of these plans in their day-to-day activities.