Develop Your Personal Scorecard

One positive outcome of the recession was several organizations gained inner strength by learning to be better at what they are. Growth without inner strength is dangerous. In my case, two things happened last year that made a huge impact. One was attending an NLP based program ‘Born-to-Win’ that helped me to blast off some of my mind-blocks. Another one was developing a Personal Scorecard for me.

Until last year, I had only new-year resolutions. That had some limited success. In 2009 beginning, I set the goals in a particular format. The format has been evolving for several months. Now it is a one page tabular format and I am calling it as my personal scorecard. It has the following headings:

Vision: What I want to be in the long-term? What I want to be known for?

Mission: What is my core purpose?

Objectives: What are my key objectives in the next few years?

Goals: What are my goals for this year?

Strategies (Key Activities): How am I going to achieve my goals?

Measures: Some simple measures of progress towards my goals that can be tracked monthly.

Both strategies and measures are classified under six categories:

1. Business
2. Finance
3. Health
4. Family
5. Self-development
6. Spiritual/Social

Then I have a list of key activities for the month and also a weekly plan for day-to-day tracking (outside the scorecard).

I have found immense value from this personal scorecard. Even though I am not able to complete all the tasks planned, I can see the definite progress that I am making against each of the goals. What matters is almost always getting done. Also I am not neglecting any area of my life and so it is balanced.

You can see a lot of similarities between the Personal Scorecard and the Balanced Scorecard. Instead of the four perspectives in Balanced Scorecard, I am using six perspectives. This approach of ‘six perspectives’ is pretty standard in personal goal setting, if you refer any self-development book.

Initially my personal scorecard was running to a few pages, now it is just one page, and it is really helping me to focus. My personal scorecard used to be an input to my daily affirmations/ meditation. Now-a-days it is an input once in a week. After a few months of its usage, I could find every activity I pick up is influenced by the scorecard. Every month-end I spend about half-an hour reviewing my scorecard which includes updating the monthly metrics and planning for the coming month. It is pretty exciting to watch the progress. Sometimes it creates pain when I don’t achieve the monthly targets, but it serves as an excellent energy booster. The scorecard has become a rich database of monthly info such as active & passive income, number of blog-articles published, books I read, new skills developed, and so on.

You could try developing your personal scorecard if you want to achieve your goals with certainty. There is so much material available in the internet on how to set ‘SMART’ goals. Please let me know if you find any difficulty in developing your personal scorecard.

The ‘secret’ behind the power of the Balanced Scorecard

Sometimes we wonder how large organizations with several lakhs/thousands of employees, manage their business and hold its employees together, when small organizations find it difficult to keep even a hundred employees together. After being associated with large organizations such as TCS and Flextronics for several years, and working closely with several mid-size organizations, I find the secret lies in ‘alignment’. There could be chaos at local level, but there is alignment at the overall level; alignment to the values, vision, key objectives, strategy, goals and so on.

How do they bring this alignment? They have established processes for their core business functions and there is a mechanism to measure business performance using proven framework such as Balanced Scorecard.

So many management concepts and fads came and gone in the last few decades, but Balanced Scorecard remains very relevant today and organizations are finding new ways of leveraging it and extending its capability. What makes Balanced Scorecard powerful and relevant even today? (Some aspects of this we have seen in the previous article.)

According to Paul Niven (Management Consultant and author), the tool’s longevity can be traced to its ability to solve several fundamental business issues facing all organizations today. In his article, he highlights the following issues organizations face today while measuring performance.

The Limitations of Financial Measures: Traditional focus on financial measures alone is not suitable for today’s environment. The chief criticism levied at financial measures is that they’re tantamount to driving a car by using only the rear-view mirror. You get a great view of where you’ve been, but little guidance towards where you’re headed. Balanced Scorecard gives a system that balances the historical accuracy and integrity of financial measures with the drivers of future financial success.

The Rise of Intangible Assets: In vast majority of modern organizations, what’s driving your success is not tangible assets, but intangible assets such as employee knowledge, databases full of rich information and culture of innovation that really drive value. Some recent estimates peg the value of intangibles as high as 75 percent of an organization’s true worth. Balanced Scorecard is a performance measurement system that sheds light on the value of intangibles and allows us to predict and drive future economic success.

The Challenge of Executing Strategy: Competition in any industry had significantly increased in the last few years. Hence it is vital to execute your strategy quickly. From an often quoted Fortune magazine study from 1999 found that 70 percent of CEO failures came not as a result of poor strategy, but the inability to execute. In this context, Balanced Scorecard has emerged as powerful strategy execution tool.

Balanced scorecard is centred on organization’s vision and strategy. Unlike traditional performance measurement systems that have financial controls at their core, the Balanced Scorecard begins with an organization’s vision and strategy. Then the vision and strategy are translated into performance measures that can be tracked and used to gauge the success in the successful implementation of vision and strategy.

In the same article, Paul Niven gives an example on how companies use Balanced Scorecard for resource allocation and for controlling expenditure in alignment with the business strategy.

To appreciate the beauty of the Balanced Scorecard, one should look at ‘The Building Blocks of the Balanced Scorecard’ and understand how it supports the core elements of business management - strategy, planning, measurement and reporting.

One notable feature of the Balanced Scorecard is ‘Cascading’, which is very effective in bringing in organizational alignment. Cascading refers to a process of developing Balanced Scorecards at lower levels of your business. It is about translating the corporate-wide scorecard down to first business units, support units or departments and then teams or individuals. These scorecards must align with the organization’s highest level Scorecard. This eliminates issues such as 1) employee actually running counter to the organization’s goals because they have a different understanding of what you are trying to accomplish 2) various departments in your organization focus on activities within their own silo more than on how they support the organization’s mission and vision.

Thus the differentiating features such as focus on strategy and employee alignment around a few key goals make the Balanced Scorecard a very effective performance management tool for modern organizations to achieve breakthrough financial results.

How to leverage scorecard in business?

To effectively use scorecards in our business, we could look at how it works in other areas of our life.

As you know, scorecard is a simple tool for measuring performance and giving feedback. For example, a school progress report shows performance against maximum marks; it also shows trends. It provides student, teacher and parent an overall idea about the performance and it prompts them to take any corrective action.

Take the case of scorecard for a game. It excites and energizes the players as well as the audience.

Let us explore some of the attributes of a scorecard that can bring certain powers to you.

The Power of Focus: As you know, focus gives intensity. A 40W bulb is just sufficient to illuminate a small room, but when the beam is focused, it can illuminate objects several hundred meters away. If you have taken a ride in ECR road from Chennai in night, you would have experienced this: you can see the road illuminated kilometers in front of you, reflecting the beam of your car headlamp.

Something similar happens with scorecard when we measure performance against the goal that is important to us. We may do hundreds of activities, but scorecard brings focus to a few critical measures and keeps our mind focused on the targets and the critical things to do.

We are aware of the 80/20 rule or the Pareto principle. By this rule you will find that 20% of your activities will account for 80% of your results. By having key action items (or strategic initiatives) against your goals, the scorecard can help you to get focused on those ‘vital few’ activities that will account for most of your results.

The Power of Leverage: When you leverage, you give a small input and generate a large force or output; for example with the fulcrum of a lever, you can magnify the force. Or with a small signal input at the base of a transistor, you can control a large power flow. You would have found that when you give feedback to your team with a measure or scorecard as a basis, your influence is far more than otherwise.

The Power of Alignment: Several interesting phenomenon we can observe, when things are aligned. When ions are aligned, we get superconductivity and it can produce extraordinarily strong magnetic field. When light waves are ‘aligned’, we get Laser. Think of the magnificent opera, where several artists play their role in alignment; or a symphony orchestra, where thousands of musicians play their instruments in harmony. Another example is the Olympic opening/closing ceremonies where the participants perform in unison.

A popular event in Kerala is ‘Snake Boat Race’. It is amazing to watch the rhythm, the coordinated hand movements of about hundred oarsmen and the synchronized chanting of singers. Great excitement is generated when people align to a common goal (video of a boat race).

“He whose ranks are united in purpose will be victorious.” – Sun Tzu, ancient military strategist.

Scorecard when reviewed by all stakeholders has a huge influence on team/business alignment.

The Power of a Written Goal: There is something magical about writing things down. It has been found that people commit themselves to their goals when it is recorded. Scorecard is a place where you have your goals in writing.

The Power of Feedback: Our perceptions can sometimes be biased by recent events and decisions based on perceptions can go wrong. Scorecard showing trends eliminates this bias and can give new insights that can lead to better decisions.

The Power of Dashboards: We know what a dashboard means to a car or a cockpit to a plane. I am sure you will not embark on a long journey in a car that is not having a dashboard.

Once you automate your business scorecard and incorporate the features of dashboards such as status, alerts, drill downs, you get a powerful environment to manage your business.

The Power of Filtering: One problem that happened with business process automation or ERP implementation is that there are hundreds of reports available to track. We are bombarded with mountains of information every day, thanks to the advancement in technology and communication. However, our natural capacity to process info remains more or less the same. So we need effective filtering mechanisms for the information deluge. Scorecard/dashboard can act as a great tool that can filter info and alert you for taking action.

By understanding the attributes of a scorecard we will be able to leverage it better in our business. Scorecard is a simple and powerful tool that you can use to provide feedback, to focus, to align, to leverage, to communicate, to motivate, to inspire, to manage, to improve, to engage and to ensure certainty of success in business.

Building Blocks of the Balanced Scorecard

The Balanced Scorecard (BSC) concept was created by Doctors Robert Kaplan and David Norton in 1992, and has been implemented by thousands of corporations, non-profit organizations, and government agencies worldwide. The Balanced Scorecard is a framework that describes and measures the strategy of an organization across four perspectives: financial, customer, internal processes and learning and growth. It has grown from a measurement system (that reports on past operating performance and the drivers of future performance) to powerful communication tool and to transformative strategic management system.

The Building Blocks of the Balanced Scorecard are:

Vision: A concise statement that defines the mid- to long-term (three to ten year) goals of the organization. The vision should be external and market-oriented and should express how the organization wants to be perceived by the world.

Mission: A concise internally focussed statement of the reason for the organization’s existence, the basic purpose toward which its activities are directed, and the values that guide employee’s activities. The mission should also describe how the organization expects to compete and deliver value to the customers.

Strategy: Strategy is about selecting the set of activities in which organization will excel to create a sustainable difference in the market place. The sustainable difference can be to deliver greater value to the customers than competitors, or to provide comparable value but at lower cost than competitors.

Perspectives: The basic premise behind the Balanced Scorecard is that Financial measures are important, but they must be supplemented with other indicators that predict future financial success. The Balanced Scorecard suggests that we view the organization from four perspectives, and develop metrics, collect data and analyze it relative to each of these perspectives. The four perspectives are: financial, customer, internal processes and learning and growth. The key questions asked in each of these perspectives are:

• Financial: To succeed financially, how should we appear to our shareholders?
• Customer: To achieve our vision, how should we appear to our customers?
• Internal Business Process: To satisfy our shareholders and customers, what business processes must we excel at?
• Learning and Growth: To achieve our vision, how will we sustain our ability to change and improve?

Key Objectives: At the center of the Balanced Scorecard framework is “vision” and “strategy.” The articulated vision and strategy are translated in to performance objectives and measures that can be tracked and used for the successful implementation of vision and strategy. We will arrive at strategic objectives under each of the perspectives by asking several questions and brain-storming. For example, under Customer perspective, we may ask questions such as “Who are our target customers?”, “What is our value proposition in serving them?”.

Measures: Key Performance Indicators (KPIs) are identified for each strategic objective. KPI is a measure of performance and measures progress toward organizational long-term goals. A Balanced Scorecard will contain a mix of KPIs and its associated lead indicators (also called performance drivers). These measures are not isolated; every measure selected should be an element in a chain of cause-and-effect relationships that communicates the strategy to the organization.

Targets: Targets for the measures identified. These are normally stretch targets that will allow breakthrough performance.

Initiatives: These are strategic initiatives identified to close the gap between the targets set and the current performance.

Strategy Map: A one-page graphical representation of what you must do well to execute your strategy. It is done in a plain and simple manner that is easily understood by every employee from top to bottom. It is a powerful communication tool to convey to all stakeholders what the organization is attempting to accomplish in a simple, coherent package (sample).

Scorecard/Dashboard: Scorecard gives performance measurement against targets and the measures are developed using a methodology such as Balanced Scorecard. Dashboard is normally an IT application that displays process measures and is rich in visual displays. A general dashboard need not display measures always against a target. It can have drill downs to analytical reports. There are several applications such as the one from Corporater that can be used to implement Balanced Scorecard System (a sample dashboard screen-shot from Corporater).

What makes the Balanced Scorecard so powerful? Let us explore this next week.

For more info on the Balanced Scorecard, refer Resources in CXO Dashboards. For regular updates on business performance measurement, please subscribe CXO Insights.

Implementation of a Business Scorecard for an SMB

This is a case study of developing a Business Scorecard for a small organization and is a continuation of the previous blog on Balanced Scorecard for SMBs.

I met the CEO of the organization and his core team and gave an orientation about the Balanced Scorecard. I had circulated a questionnaire a few days before the meeting. We had about two hours of discussion about the vision, mission, challenges, strategy, and the goals etc., about the company. We brainstormed about a few initiatives that would help to achieve his goals and objectives. After the meeting, I spent a day or two reflecting on his requirements and designed a Strategy Map and a Scorecard according to the Balanced Scorecard principles. I had one more discussion with my client to refine the Scorecard. We identified the metrics that need to be tracked monthly; it has metrics related to the four perspectives: Financial, Customer, Internal Processes, and Learning & Growth (Capabilities). We also identified and prioritized the initiatives. The key challenge in this project was identifying the critical few measures that must be tracked, especially the non-financial measures.

Now the organization has a one-page document that gives crystal clear clarity on the vision, mission, objectives, goals, strategies, measures and initiatives and also a tracking sheet for tracking the measures monthly. It is true that because of this initiative, the CEO has to spend about half-an-hour weekly tracking his Scorecard (anyway this is a key activity based on the 80/20 rule, where 20% of activities create 80% of the output). Some initiatives have to be completed and a few processes have to be set right before the organization see tangible business benefits from the Scorecard implementation.

What is interesting to note is that it took only a few hours of the CEO’s time and less than a week to create the Business Scorecard. Now he has a one-page scorecard to track what’s all important for him (not just the financial measures). This gives a tool for intensely focussing on his strategies and executing as per his strategy. This eliminates the need to track various Excel files and filters out some measures that need to be tracked only at the next level. This empowers the next level team to act on operational issues with ownership, because they also know the numbers they are accountable for, in the overall business context.

Balanced Scorecard has been used by large organizations for transforming their business. They used to spend millions of dollars and several months/years for implementing Balanced Scorecard. In this context, it comes as a relief that even small organizations can benefit from this methodology with an investment of a few hours and can see results coming out in weeks.

To know how to create a Business Scorecard for your Business or Function, please visit http://www.cxodashboards.com/.

Balanced Scorecard for SMBs

My friend couldn’t come for a meeting because he was attending a fire! He is running a small firm; some implementation at a customer site didn’t go well as expected. He and his team had to work round the clock to bring this fire under control. Many small firms occasionally face these fires and customer wrath. Can Balanced Scorecard help them to reduce these fires?

The Balanced Scorecard has been embraced by thousands of organizations around the globe as an effective way to execute their strategy and for transforming their business. It is not surprising that Balanced Scorecard takes several months to implement in large organizations.

Is Balanced Scorecard appropriate for only large firms and not for SMBs? First I convinced myself before advising my friend. In some organizations, issues are complex not because the processes are complex, but because of the wrong organization structure and lack of alignment. In a small organization, organization structure and the processes are simple. Business Scorecard originated as a measurement system and I looked at the analogy: a bike has only a few dials, a car has more, a old jumbo jet may have a hundred dials in a dashboard and a modern aircraft may have a dashboard with only a few dials! (Alert will pop up only if there is an issue). So a scorecard for a small firm makes sense and should be easier to develop than for a big firm.

I remembered the quote by the reputed Management Consultant Paul Niven “Whether you have one, one thousand, or one million employees the roots of success remain the same”. After all, even a small organization will have their vision/mission, a strategy, a need to measure performance other than financial outcomes, and a need to accomplish goals with limited resources. Since Balanced Scorecard aims to bring alignment of employees with the organization strategy and goals, it is very much applicable for small organizations too.

Can Balanced Scorecard eliminate the business fires? If you have a sound strategy and a tool to execute it, why can’t? I offered to help my friend by developing a business scorecard. How did we go about and what lessons we learnt: that I will share with you in the next blog.

Read more on Business Scorecards at CXOdashboards.com.