I read a good article on balanced scorecard in The Economic Times, with some statements from David Norton about the applications of BSC nowadays. The article, written by Dibeyendu Ganguly, tells when David Norton and Robert Kaplan introduced the Balanced Scorecard (BSC) as a strategy execution tool some 20 years ago, four American companies adopted the idea and implemented it very successfully, and had something else in common at that point — they were all led by CEOs with military backgrounds. David Norton said that it's not coincidence,the BSC fits the military. In a military operation, an officer who goes into the field may not return. But the operation has to go on. So people down the line need to know the strategy being deployed.
In the corporate world, the BSC is meant to turn vision into action and provide daily marching orders to the corporate soldier, and it helps create organisation-wide alignment around strategy. "We were moving from the product economy to the knowledge economy and the BSC proved to be a very effective tool for the new age," says Norton.
"I'd say only 30% of those who use the BSC actually use it as we described," says Norton."Some companies see it purely at a measurement tool, a way to create KPIs (key performance indicators). It gets used by engineers and middle managers, not the CEO. On the other hand, it is now being used by governments in Brazil, Philippines, Abu Dhabi, to execute developmental strategies. The BSC is about strategy execution, about results."
"Strategy is about change, and that's never easy," says Norton, "The leadership has to have a strategy and see to it that it is executed. But CEOs really have a hard time influencing change in their organisations." Strategy is formulated by the Board, executive leadership and senior management, with inputs from shareholders and analysts, but it has to executed by the line management and front line staff. Good organisations also share their strategy with customers, suppliers, regulators and society.
This communication, says Norton, can be viewed as an advertising exercise. You begin by selecting the target audience you want to reach and then let loose a stream of messages through various communication channels, ranging from brochures to videos to mouse pads with strategy maps. It works at a subliminal level." says Norton. "You have to tell them seven times in seven different ways: try my new strategy, you'll like it. Sometimes, front line employees are disengaged and simply not interested in learning about company strategy. Some employees may be totally focused on their jobs and indifferent to the larger picture. It is still in the company's interest to reach out to all employees since alignment amplifies the power of strategy. One way to get employees interested in strategy is to link their incentives to execution . The BSC can have anything from six to 20 target measures on which organisational units are evaluated and individual bonuses can be linked to these targets .
The BSC is a powerful tool, but needs a well-defined execution strategy in order to obtain the expected success. All the employees need to understand the organization's strategy and understand what they can do to contribute to the success of the strategy. Without this, you can define a great strategy, but you will hardly be able to implement it successfully.
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