Cascading Balanced Scorecards – The Basics
In the next series of three articles, we will look at cascading balanced scorecards – and the typical challenges that organisations face when doing so.
From strategy onwards
The Balanced Scorecard process lays out nine key steps for success. Starting with a full and rigorous assessment of the organisation, it then moves on to strategic planning and then objectives setting. This is perhaps the section of the process that leaders are most comfortable with and tend to focus their energies upon.
Intrafocus has created a seven-step strategic planning process based on the Balanced Scorecards process. This has been in place for nearly ten years and is regarded by many companies as a standard commercial approach to implementing a Balanced Scorecard. The main difference between the Seven-Step approach and the BSC Methodology is it provides a lightweight framework into which existing strategic processes can be added.
Most successful businesses will find that their executive team can create a coherent and logical business strategy that stretches and inspires the organisation’s people, answers the needs of the business and defines its intended direction, engages customers, and ultimately delivers the underlying objective of the organisation, whether it is profit-led or non-profit. So far, so good.
But when the executive team emerges from their intensive planning sessions, excited with the results of their finest collaborative work, what actually happens with the outputs? How do they go about cascading the strategy and scorecards?
The rollout process
This is where the subsequent stages of the Balanced Scorecard come in, and they can be the trickiest of all, namely: taking the executive scorecard, cascading it throughout the business to ensure that logical, connected and accurate departmental strategy maps are created to form a single enterprise-wide strategy map, and then ensuring that each individual understands the strategy and their role in delivering it.
So what’s the problem? Typically, once the top-line strategy has been created, the task of cascading it throughout the organisation tends to fall flat and never fully happens. Think about it. For anyone who has worked in an organisation – especially a larger one – is it true to say that every employee has understood the strategic business plan, their supporting departmental plan and their individual role and objectives towards achieving both? The answer is usually no.
The barriers to cascading balanced scorecards
There are a number of common barriers to ensuring a successful strategy cascade:
The first tends to be time. Businesses often fail to appreciate just how much time is needed to carry out a comprehensive and planned organisation-wide cascade. For even a small company the process can take three to four months if it is to be done correctly. For a medium to large company, it can take over a year to establish the process. This is particularly the case when the Balanced Scorecard framework is providing process rigour and structure for the first time. The additional learning curve required to roll out the strategy in the right way must be factored in if the business wants to see real results and to effect the necessary change.
The second issue is knowledge. If the executive team are not sufficiently clear about the process of the Balanced Scorecard and their role in setting expectations for the strategic rollout, then it will fail. The executive team must take a strong position to ensure that operational leads take the necessary action to create their own departmental-level objectives and that those objectives are genuinely in line with the intentions of the broader strategy. The key question is: In what way can our department impact on each strategic objective in the enterprise-wide plan?. The leadership team must be ready to shape those conversations and to provide the necessary focus and direction so that the operational scorecards are owned and accountable, aligned, designed to link with the corporate vision, produced with the necessary performance measures, and results focused.
Communication and process
The third common blocker tends to be communication and process. The Balanced Scorecard process relies on excellent, clear and regular communication that is expertly planned and delivered by the right people. At the same time, the process needs to be carefully managed and the right time needs to be given to operational leads so that they prioritise their scorecard planning, and deliver their role in the business strategy cascade. The executive team must commit to having face-to-face Q&As and communication sessions with different layers of the organisation and different teams. They must provide clear communication channels and feedback loops as employees seek to become familiar with the new process and the strategy itself. The business must become familiar with talking about the strategy, bringing it to life and having these conversations, reviews and updates on a regular basis. This communication often requires expert Internal Communication ownership, so that a variety of different channels and methods are used to engage with employees according to their preferred styles. This is particularly vital when employees work off-site or remotely, to ensure that they are engaged. It is essential at this stage to look at a balanced scorecard software tool.
The theory may make sense, but how can the practical challenges be overcome to ensure success? In the next article, we will look at the cascade to departments, and consider how organisations can better manage this process for the results that they want.