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Most popular ideas in the domain of organizational management have a limited shelf-life. Those that gain widespread attention usually do so on the strength of a published work. My bookshelves are filled with titles that in their time, were purported to be the next ‘big idea’ in management, but have since faded into relative obscurity. This pattern is as much a function of the audience for the ideas as the ideas themselves; executives and managers crave the easy answers and magical insights that are promised by these works. So when an idea remains relevant and applicable for more than a few years, it stands out.
Of course, balanced scorecard has been an exceptionally durable concept. The idea of a scorecard (a collection of measures) as a tool for management has been around for decades, and is thought to have originated at General Electric during the 1950s. Kaplan and Norton elaborated the idea of a scorecard as a tool for strategic management beginning with their first Harvard Business Review articles on the topic in 1992 and 1993, and their book The Balanced Scorecard in 1996. The BSC articles and original book were extremely popular, and remain so today.But I never recommend Kaplan and Norton’s first BSC book to anyone embarking on a journey of strategic management.
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As elegant and appealing as the BSC idea was, the early literature focused far more on what the BSC is than how organizations should actually use it. Combined with the initial popularity of the BSC, this gap in the literature led to many failed BSC implementations among early adopters in the late 1990s. There simply wasn’t enough documented experience to understand how to successfully implement the BSC, and trial and error is an especially inefficient way to learn.
Reports of widespread failure of BSC implementations led Kaplan and Norton to write their second book on BSC in 2000, The Strategy-Focused Organization. This is a far better place to start than the first book.
The SFO concept (as it came to be known in the BSC practitioner community) was based on observations of the many organizations failing with the BSC implementations, and the far smaller number that were successful. It identifies five key behaviors in those organizations that were successful. Failing to model any of these is a powerful predictor of failure; adopting all five improves the likelihood but does not guarantee success. The SFO behaviors have influenced the work of every serious BSC practitioner I’ve ever met.
- Mobilize and engage executive leaders with the necessity for organizational change and the strategic management process. It is not sufficient to get the senior executive to agree to implement BSC. He or she, along with all members of the organization’s leadership team must commit to no less than changing the way they manage the organization, and must understand that the implementation process happens of the course of years, not weeks or months. A senior executive looking to BSC as a quick fix is a certain predictor of a failed effort.
- Translate the strategy into language that everyone can understand, a strategy map. Remarkably, many organizations implement their BSCs without developing a strategy map; this outcome is the result of a lack of centrality of the strategy map in Kaplan and Norton’s early writing. Bluntly, if you don’t have a strategy map as the basis for your measures, you don’t have a balanced scorecard.
- Align the parts of the organization with the overall strategy. Except in the very smallest of organizations, it is necessary to interpret the enterprise strategy for each part of the organization; business units and support organizations, such as information technology and human capital. This usually means subordinate strategy maps and BSCs that are cascaded from the overall strategy map.
- Ensure that each member of the organization understands his or her role in executing strategy. The natural inclination for executives to play their strategy close to the vest inhibits this vital behavior. Broadly communicating the content of the strategy and an unvarnished accounting of the organization’s actual performance are table stakes; embedding the language of the strategy in each employee’s performance management process is the first realization of this behavior.
- Embed the process of strategic management in business processes. Because BSC-enabled strategic management is unfamiliar and can make leaders a bit uncomfortable, the reflexive tendency is to quarantine the BSC from everyday management process. Successful organizations recognize that strategic management is an ongoing process, not simply a once-a-year event.
Needless to say, there is much more to say on the five SFO behaviors. Remember that skipping any of these will almost certainly mean your change program will fail.
How is your organization doing at each of these?