Benefiting from the Balanced Scorecard

by BNET Editorial

Harvard professors Robert Kaplan and David Norton developed the balanced scorecard to help translate vision and strategy into action. This technique can make strategic planning a core part of any business. They showed that financial analysis, which is largely a look backward over past performance, isn’t enough to guide long-term investment decisions. That information alone doesn’t demonstrate how an organization can create future value. The balanced scorecard uses a more holistic approach to analyzing how information is gathered and used to deal with investment decisions and other issues. In addition, it acknowledges the importance of input from customers, suppliers, and staff; as well as data concerning processes, technology, and innovation, to help organizations create a desired future.

The balanced scorecard builds on other management ideas, such as total quality management (TQM), process, and business process re-engineering to provide a valuable strategic tool. The key difference between the balanced scorecard and the other approaches, however, is the extensive use of feedback loops—from both internal business process outputs and the outcomes of business strategies—to identify and understand organizational problems.

Most likely, people who use this technique will have to change their mindsets. Collecting and sharing extensive information about the company, in an organizational culture that considers information as power, will require a major change in behavior. Additionally, being responsible for outputs will require employees to explore and learn from each other and each situation. Some people will find adopting this openness very difficult.

What You Need to Know

Does the balanced scorecard really add value?

Guided by the principle that “what gets measured gets done,” organizations often find it easier to focus on business priorities by using processes like the balanced scorecard. In fact, research has shown that companies that measure their performance out-perform those that do not. Organizations need to prioritize effort and initiatives; this technique, which is also a philosophy of how to manage and involve people in decision making, helps them do so.

How do I motivate my team to embrace the balanced scorecard?

Use existing systems and processes to support this initiative. Once the feedback loops are in place, you will be able to reflect upon, and learn from, core business processes that will demonstrate the usefulness of the balanced scorecard technique. First, do the following:

• establish a current benchmark for all systems and outputs;
• communicate the direction/vision/strategy;
• stimulate action toward new performance levels and output;
• facilitate learning from each other and existing processes;
• help employees improve their behavior.

Establish agreed upon standards for correct behavior and monitor your team’s progress. Recognize improvement toward those standards, and reward positive changes in performance. New standards may include being open and exploratory with peers regarding current individual and team behavior, meaning that everyone will need to become comfortable sharing information and ideas (if they’re not already). Discourage behaviors that may be unproductive, such as negative commentary, unilateral management, and the withholding of information.

Work with your team to make the new behaviors routine and recognize what is being achieved when new performance standards and goals are met. Delivering results based on key priorities for the business produce a greater sense of accomplishment and, therefore, motivation.

What to Do

Set Goals

The underlying behaviors required of the balanced scorecard are the key to its success. Working together to achieve goals, with well-defined measurable areas of accountability and responsibility, helps you reach those goals and drives performance improvement. It’s also essential to set clear goals to generate and maintain motivation for achievement. There are several key requirements for making the balanced scorecard succeed, each outlined below.

Encourage Collective Understanding

Organizations that implement the balance scorecard concept successfully create a performance culture. As part of that process, everyone involved needs to know exactly what is needed and who they will be expected to work together to achieve the desired goals. Both staff and the management team will benefit from training so that they understand the importance of being cooperative, open and able to explore new areas, and being willing to commit to higher standards of performance and organizational achievement.

Emphasize Teamwork

So that what may be seen as a “fuzzy” concept becomes more easily accessible, hold workshops with employees and management to translate the strategy and vision into key performance indicators. Examine the various teams’ objectives and how success will be measured from every angle—financial, effectiveness, customer satisfaction, etc. Work with groups to design and develop the framework for measuring operational performance after setting overall objectives, identifying specific output targets, and performance indicators. Remember to consider all options before settling on a few conventional measures.

Apply Your Agreements

Once the system has been put in place, keep track of it and report back to management at agreed periods. Gather feedback from everyone impacted throughout the process so that you have a full picture of which elements are working and which need more attention. There are bound to be a few hiccups the first time the system is rolled out, so be prepared to set aside time to make necessary changes.

Measure Performance

Be sure performance factors include the four critical areas: financial, customer, internal business processes, and learning and growth. Organizations frequently have a bias towards one or two areas; remember balance is essential. You may need to manage others’ expectations, so emphasize the point of the balanced scorecard is balance.

Allocate Time for Feedback and Revision

Set aside plenty of time to review the process. For many people, this is the most difficult part because it often feels unproductive, but learning and continuous improvement are essential elements of the balanced scorecard approach. Once you get accustomed to the process, the benefits of program review will become clear. As learning and growth opportunities are identified, people we agree that the time is well spent.

Keep Everyone Informed

Put in place strong communication systems to keep employees and management well informed of progress: your company’s intranet is ideal for this purpose. Where action is needed to shore up problem areas, act quickly and alert both individuals and the team. Remember: inform, initiate change, improve performance. Also celebrate and reward success: it’s a great way of boosting motivation during a time of change.

Empower Employees

Empowering your staff to share and use information is a central tenet of the balanced scorecard approach, but managers who are used to (or prefer to!) control agendas may find this freedom threatening. Some training will be useful here, and will help them ultimately to facilitate employee empowerment and establish new boundaries across various systems and tasks.

Focus on Quality

Quality is important to the success of the balanced scorecard approach, but it’s a complex concept and means different things to different people. When you’re working with customers (both internal and external) on a project, make sure you take some time early on to work out exactly what you both understand it to mean in your context, and what you both expect the outcome to be. Invite feedback and be sure to act on it so that quality and output expectations are understood and met.

Demonstrate Supportive Leadership

If you’re a manager leading the charge on the balance scorecard, cultivate the following positive practices:

• When working as a team, help it become self-managed and one that shares responsibility among its members;
• Recognize that in a participative environment, it is not important for you to always have (or need to have) the answer to every issue;
• Keep the team focused on results;
• Help the team learn collectively;
• Help the team see its results and understand how they were achieved;
• Role model sharing information and being self-disclosing (both about what you know and your responsibilities);
• Think strategically and share your knowledge of the past when it is in service to the future;
• Be decisive;
• Set unambiguous lines of ownership and responsibility for resolving issues;
• Keep a can-do attitude and an open mind.

What to Avoid

You Don’t Understand the Process

Unless there is real understanding and commitment from the senior management team, it will be difficult to drive the balanced scorecard initiative through to a successful implementation: serious issues will arise as motivation flags and commitment falters. By the same token, without the buy-in of all employees, the process will never get off the ground. Make sure you convince participants of the wisdom and benefits of using the new technique and be ready for some resistance at first.

You Try To Do It All in One Go

Implementing a balanced scorecard throughout the organization is a big job, and you stand a better chance of succeeding if you do it in stages. It may also be useful to try out your planned implementation process on a supportive, small test group whose feedback you can act on before the program goes organization-wide.

You Don’t Communicate Effectively

For the balanced scorecard to succeed, it’s essential that everyone is kept in the loop. Remember, at the outset, it is better to communicate too much than too little. Make sure your goals have been explained clearly, that everyone is aware of their role in the process, and that
you gather feedback as the project is rolled out.

Where to Learn More

Books:

Niven, Paul. Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results. 2nd ed. Wiley, 2006.

Smith, Ralph F. Business Process Management and the Balanced Scorecard: Focusing Processes on Strategic Drivers. Wiley, 2006.

Web Sites:

Balanced Scorecard Collaborative: www.bscol.com

Balanced Scorecard Institute: www.balancedscorecard.org

Don’t Believe in Rejection!

Rejection can put even an experienced sales pro into a downward cycle of failure. Art Mortell, author of the bestseller The Courage to Fail, points out that the experience of selling is a five-step cycle, where beliefs create attitudes, which create emotions, which determine sales performance, which determine results, which in turn reinforce the beliefs, thus completing the cycle:

If you’re experiencing bad results (like “rejection”) it reinforces whatever beliefs and attitudes that might be creating the emotion (like fear) that is adversely affecting your performance. That’s the downward cycle. The easiest way to get out of a downward cycle and back into an upward cycle is to change your beliefs about rejection. If those beliefs are powerful enough, they’ll change your attitude and emotions, thereby improving your performance and results

In other words, rather than clinging onto some lame belief like “rejection means I’m lousy” you need to incorporate a more powerful belief about what rejection means. In my previous post on rejection, we played a bit with your beliefs about rejection by pointing out that you’re being paid to be rejected. That’s a start. Now let’s find some beliefs that can profoundly improve your sales performance. Here, according to Art Mortell, are some beliefs about rejection that he’s discovered among top sales pros:

• Rejection renews my humility, sharpens my objectivity and makes me more resilient.
• I take the challenge of selling seriously, but I do not take myself too seriously.
• The more I fail, the more I succeed.
• Rejection is only failure when I don’t use it as an opportunity to try new ideas.
• I learn more from failure than success.
• Negative feedback is information that helps me make corrections in my course of direction so that I stay on target.
• If the rejection is invalid then I simply cannot take it personally.
• My self-esteem is not based on the reactions of others buy my own sense of virtue.
• The unkindness of others reminds me that I need to be kind to myself.
• If I’m going to get a rejection, it might as well be from someone important.
• If you don’t take things personally, you can actually enjoy rejection.
• Nobody ever got ahead without taking risks.

Now, I want you to consider — really think about — the following question:

How much more successful would you be if you REALLY BELIEVED the same beliefs about rejection that motivate and energize the top sales pros in the world?

Seriously, take a minute and really think about it! How much more money would you make? How much more success would you have? How much easier would it be to win that bonus? How much quickly would you exceed your quota? How much more would you enjoy going to work each day?

If that sounds good to you, click the “thumbs up” button at the top of this post.

In tomorrow’s post, I’ll explain exactly how you can change a belief at the gut level — so that the old, lame belief no longer intrudes, and the new belief becomes an integral part of your emotional life and thought processes.

By Geoffrey James

Leadership Checklist

This came from Robert Heller

I think it will be a good check list for self reflexion .Not only for managers to reflect on leadetship but also for individual to review how one handle daily issues.

The checklist I promised helps you to do just that. Here it is. DO YOU...

1. IMPROVE basic, measured efficiencies continuously?
2. THINK simply and directly about what you are doing and why?
3. BEHAVE towards others as you wish them to behave towards you?
4. EVALUATE each business and business opportunity with total, fact-based objectivity?
5. CONCENTRATE on what you do well?
6. ASK questions ceaselessly about performance, markets and objectives?
7. MAKE MONEY- knowing that, if you don't, you can't make anything else?
8. ECONOMISE always seeking Limo (Least Input for Most Output)?
9. FLATTEN the organisation to spread authority and responsibility?
10. ADMIT to your own failings and shortcomings and correct them?
11. SHARE the benefits of success with all those who helped to achieve it?
12. TIGHTEN up the organisation wherever and whenever you can because familiarity breeds slackness?
13. ENABLE everybody to optimise their individual and group contribution?
14. SERVE your customers with all their requirements to standards of perceived excellence in quality?
15. TRANSFORM performance by innovating creatively in products and processes including the processes of management?

If you've scored 15 out of 15, who are you kidding? There are always areas of weakness. At 10 YES answers, you're doing well, but with plenty to strive for. At 5 or less, your standards will let you down and let down your colleagues. These questions penetrate to the heart of successful management. They have passed, and will pass, the test of time.

How Leadership Styles Affect Productivity

By E. Brown

There are 4 primary leadership styles, many of which you can find within most businesses or organizations around the world. These styles are: Dictatorial, Authoritative, Consultative, and Participative.

Each of the leadership styles have impact on reforming and/or creating company culture. There are short and long-term affects of each style. For instance, the authoritative style may produce great results in a short amount of time. However, excessive use of authority will decrease productivity in the long-term. People either get fed up and leave or fall into a malaise of hum-drum repetitive tasks without creativity and innovation.

All the while, a participative style will be unproductive in the short-term. But, the longer this style of leading, the more productive a company can become.

Many leaders never make it to a point of high productivity. They give up before the participative style kicks in and the company starts to escalate. They see the initial drop in production and cannot wait long enough for the true results.

Do not give up.

Though many leaders and managers get discouraged seeing a drop in productivity when transitioning to a participative approach — productivity will come over time. People will see they have opportunities to create and innovate and their production becomes greater than before.

Three Keys
There are three keys that determine your leadership style.

1. How you view and use authority
2. How you view and use human resources
3. How you view and relate to people

The more you keep control the more authoritative your style the more you share control, the more participative your style of leadership.

Questions For Reflection
Ask your self these questions to see if you (or those around you) are moving toward a more authoritative or a more participative leadership style.

- Are employees involved in the planning process?

- What percentage of total employees know the vision and goals for the company?

- Do employees feel ownership?

- Do employees feel trusted?

- Is information readily exchanged between departments?

- Is information received from others truly accurate?

- Is problem solving delegated?

- Is there regular duplication of effort?

- Is there an inordinate amount of time spent correcting mistakes?

- Are relationships between leaders and subordinates good most all the time?

- Are departmental relations good most all the time?

- How rare is conflict?

- What is the company attitude toward authority?

- Are conflicts ignored?

- Do people fear failure?

- How do employees feel toward the organization?

The Worst Deals of All Time?

From Businessweek.com in Newyork

The greatest business successes are often engineered by bold visionaries who altered industries: Think Microsoft (MSFT), Berkshire Hathaway (BRKB), and Southwest Airlines (LUV). Unfortunately, when that type of grand thinking is applied to the mergers-and-acquisitions arena, disaster often ensues. Multibillion-dollar deals are based on personal relationships and egos, grandiose plans for so-called transformational changes to an industry, and a sense that the new sum will be far greater than all the previous parts. And, of course, the path for much of the wheeling and dealing is well lubricated by fee-hunting bankers and lawyers.

The wreckage of deals gone bad litters the business landscape these days. On Oct. 4, shareholders of German automaker DaimlerChrysler (DAI) are expected to approve renaming the company Daimler, jettisoning the last vestiges of the disastrous 1998 acquisition of Chrysler, for which it paid some $40 billion. While retaining a 19.9% stake in the Michigan company, Daimler's shareholders will be more than happy to forget the whole episode, which saw litigation over the deal, a dearth of hit models, cultural and operational snags between U.S. and German managers, and heavy financial losses. In May, Daimler agreed to sell the bulk of the company (BusinessWeek.com, 5/14/07) to private equity firm Cerberus Capital Management for a mere $6 billion.

On Oct. 1, online auction house eBay (EBAY) conceded that it had overpaid in its $2.6 billion acquisition of Internet telephone service Skype Technologies in 2005. EBay took a writedown of $1.4 billion, and Skype founders Niklas Zennström and Janus Friis departed (BusinessWeek.com, 10/1/07) from their former suitor.

And years after the catastrophic merger of Time Warner and AOL, Time Warner (TWX) is still trying to make the deal work. Time Warner's latest move: Focus AOL on the advertising market and move AOL headquarters from Virginia to Manhattan. "AOL is for keeps," Time Warner Chief Executive Richard Parsons has said, arguing that it wouldn't make sense to part with the Internet property just as advertising dollars are shifting online.

"Game-Changing" ROI and Disasters

How is it that such deals come together in the first place? In each case, managers were clearly swinging for the fences, pouring huge sums into the bet like a Vegas gambler desperate to score a big win as he sees his chips dwindle. And bad deals often are born of fear or desperation. A rival—or potential rival—is forging a new market or making inroads into the existing one and the incumbents must respond. Sometimes there's a surfeit of confidence about what the future will hold and management's ability to stitch the various pieces together nicely. In other cases, the deal may make strategic sense but at a price that is wildly off the mark.

No doubt, some large deals yield rich rewards. One of the richest was the 1965 deal that merged Pepsi-Cola and Frito-Lay to form PepsiCo. (PEP). In the decades since, the Purchase (N.Y.) company has become a global juggernaut, with more than 15 brands that each tout annual sales of over $100 million. And in July, 2005, many people questioned the wisdom when Rupert Murdoch's News Corp. (NWS) paid $580 million for the social networking site MySpace. Analysts now figure the popular property could be worth $10 billion, just as rival site Facebook is reportedly mulling selling a 5% stake (BusinessWeek.com, 9/25/07) that would also value it at around $10 billion. Two years on, Murdoch appears to have gotten an extraordinary bargain.

In many cases, the deals that end in disaster often come with descriptions like "game-changing" and "transformational," and hype attains currency. In every major disaster, the acquirer was a major player run by professional management and overseen by a board of directors. The target companies were scrutinized by analysts, vetted by advisers, and ultimately approved by shareholders, including sophisticated institutional investors. Yet those safeguards weren't adequate to prevent disaster at Time Warner, eBay, or Daimler. So why do they still happen so regularly?

Bad Decisions Lead to Understanding

M&A tends to go awry when well-run orderly deal machines are thrown off kilter by volatility or emotion. The tech and telecom sectors are rife with bad deals because revolutionary technological and regulatory change provoked fear and uncertainty, leading executives into bad decisions. That helped produce debacles such as AOL Time Warner. Arrogance, envy, and untamed ambition often lead to poor decisions as well. "Psychology is a big part of M&A. It's not all of it, but it's a big part," says veteran banker Hal Ritch, co-chief executive of M&A adviser Sagent Advisors and a former co-head of M&A at Citigroup (C), Credit Suisse in the U.S., and Donaldson Lufkin & Jenrette, which was acquired by Credit Suisse (CS).

To put such failures in perspective, it's helpful to understand what makes a good deal work. Companies with solid track records in M&A, such as Internet-equipment maker Cisco Systems (CSCO), tend to buy on a regular basis. They have methodical processes for selecting targets and integrating businesses postdeal. And they don't buy companies to prop up earnings or to enter dramatically new lines of business.

"We don't favor large, transformational deals," says Ned Hooper, senior vice-president of corporate business development at Cisco (BusinessWeek.com, 4/9/07). "We think M&A works best when it is part of a regular and stable business process. The best deals tend to bolster existing lines of business, or open new lines of business in adjacent markets. And we don't do deals to boost near-term earnings. We do deals to acquire promising new technology and to capture market transitions to open up new areas of growth." It may not hurt that buyers such as Cisco tend to work on their own, without much outside influence from investment bankers. Hooper runs Cisco's M&A group as part of its overall business development unit, vetting ideas for acquisitions with his team.

M&A: Not a Cure-All

Many of the worst deals have come about because management tried to use M&A to fix a fundamental business problem, such as a market that faces a terminal regulatory or technological threat. Companies such as AT&T (T) and the former drugstore chain Revco sought acquisitions to steer their businesses out of troubled markets and move into new opportunities.

In AT&T's case, it tried to move from the traditional landline phone business—which was dying—into the newer and more promising broadband Internet and cable businesses. M&A proved to be a poor route for that transition. Years later, Verizon had more success (BusinessWeek.com, 10/1/07) by expanding from telecom into cable and broadband via large capital investments and relying on organic growth. Revco tried to move out of the pharmacy business with its 1983 acquisition of discounter Odd Lots, sealing the company's demise the next decade.

Just like AT&T, toymaker Mattel (MAT) nearly went bankrupt using M&A as a way to keep pace with technology. The company spent billions to buy software and game publisher the Learning Co. That, and a string of disappointing profit results, led to the ouster of former Chief Executive Jill Barad.

Market and Cultural Landscapes

Managers tend to make the biggest M&A blunders when they convince themselves that times have changed and that basic business rules no longer apply. "The best acquirers make a habit of constantly scouring the landscape for acquisition opportunities that make fundamental sense, and don't depend solely on whether the market is up or down at the moment," Ritch says. If that sounds like the description of a certain legendary billionaire businessman from Omaha, it's hardly a coincidence. That doesn't necessarily mean that all M&A targets must be profitable. Cisco often buys startups that have never turned a profit, as long as they possess a solid business plan.

Good acquirers also pay close attention to a potential deal's cultural fit and the odds that the two organizations can be integrated successfully. To this day, huge cultural divides remain between the staffs at the AOL and Time Warner units, making it difficult to construct a successful operation, industry insiders say.

As a general rule, the larger and more ambitious the deal, the more "landscape-shifting" it appears, the higher the risk. Time after time, deals heralded as transformational have merely transformed a troubled business into a terminal case headed for bankruptcy.

Check out the BusinessWeek.com slide show for a roundup of the worst deals in recent memory.