Balanced Scorecard

What’s this all about?

For medium to large businesses this is an essential focus to achieve sustainable and profitable growth.

As Michael Porter said: “the essence of strategy is choosing what not to do”

I use the Balanced Scorecard approach with all my clients to ensure there is strategic focus and to help ensure that the business does not operate solely in a reactive or tactical way.

It ensures a proactive methodology is being applied to ensure business profitable growth where the business creates a culture focussed on Goals/Strategy and actions-with all three being inter connected. The creation and implementation of a balanced scorecard is your route to sustainable, profitable growth. The balanced scorecard is a tool to translate strategy into action…….it needs commitment from the whole business….top down.

I apply it to the business owner and their key “leadership team members”.

It’s a structured way to clarify key strategic areas to ensure that the business moves forward.

I find that many businesses are not balanced. Their focus may be strong in one or two areas but often there is not the strategic focus across all the areas. The business is therefore not being optimised. Opportunities are missed and so therefore are profit opportunities.

Businesses morph into reactive mode, focussed on transactions……do the work, get paid, do the work get paid etc. etc. basically a treadmill of survival.  There is little focus on creating sustainable long term growth. The focus is often primarily “IN the business stuff” and a minimal amount of “ON the business”.

The profit improvement for your business will come from a well thought out strategy that is put into action.

So why use a balanced scorecard?

Well, building a strategy map and balanced scorecard for an organisation follows much the same process as taking a trip to a specific location.

• Select a destination
  • State in one page what your organisation wants to be at the end of your strategic horizon.
  • It’s key that you consider
  • Mission- what do we do
    • Why do we exist
  • Vision
    • Where do we see ourselves in x years? Note it’s not about doing, it’s about being the future
  • Values
    • What do we believe in, how do we act……..what is our culture
  • Agree on the type of trip
    • What themes are on your journey? Customer engagement/operational excellence/speed or low cost. Be clear here.
  • Agree on the route
    • Leaders, management team are all aligned to be going in the same direction
  • Plan time and resources
    • Create your strategy map
    • Identify the measures/metrics and who is accountable
  • Travel
    • Execute the strategy
  • Stay on course
    • Monitor and test and measure your plan

This latter one, “staying on course” is key. Too often businesses become “distracted” and the business owners become embroiled with “operational detail” which is best left to the team to manage. Maintaining a focussed direction can be as difficult as walking a child through a toy shop in a straight line……..distractions are everywhere!

So what are the key elements of strategic focus you need to consider?

Goal setting and Strategy selection for these main areas is at the heart of achieving and maintaining a balanced scorecard for your business:

• Business plan
  • One that is “joined up” and is totallly supported by corroborative data
• Finance
  • P and L
  • Cash Flow
    • Operational
    • Investment
    • Financing
  • Balance sheet
• Sales
  • Pipeline
  • Conversion
• Marketing
  • Lead Generation
  • Creation of a Life time marketing machine
• Operations
  • Delivery optimisation
  • Logistics
  • Systems
• HR
  • Organisation optimisation
  • Balanced teams
  • Recruitment and Induction systems
  • Training and Personal improvement
• Testing and Measuring progress
  • The principle here is “What gets measured gets managed and improves”!
  • Creation of Operational dashboards—-the key dials to track your business progress.

So how balanced is your business scorecard? Achieving it will turn your business into a genuine asset. That means a business that can work without you needing to be there and one that is something you can sell at an optimum price……..

But a word of caution……..a balanced scorecard does not guarantee success!

Organisations can still fail by having the wrong strategies; or by having a poorly built strategy map; by failing to diligently use the balanced scorecard once it is implemented or by failing to modify the balanced scorecard if their hypothesis of what works is wrong.

Interestingly a balanced scorecard only works where the organisation is committed to change.

Studies show that Medium sized businesses often benefit more from adopting a balanced scorecard approach. These businesses have limited resources and really need to focus their energy and resources.

One thing I can guarantee……..you will arrive somewhere in the future………better to reach the destination you want.

Register for one of my many workshops running in Guildford this year. Find out more at http://www.actioncoach.com/briandoubleday/events/