The Balanced Scorecard Takes the Pain out of Mergers

The Balanced Scorecard Takes the Pain out of Mergers

The now iconic 1970s sitcom The Brady Bunch showed that merging two formerly separate groups of people into one big happy family not only leads to love, contentment and years of happy endings but also plenty of high jinks and the occasional dose of mayhem along the way. Unfortunately, when it comes to business mergers, there tends to be more mayhem than contentment and happy endings. Divergent cultures, conflicting sales channels and mismatched strategies are just a few of the nails helping slam the door of success on most corporate unions.

But it doesn’t have to be that way, and as the following story illustrates, with the guiding hand of a passionate CEO and a powerful alignment tool, such as the Balanced Scorecard, companies formed by the merger of two or more individual entities can thrive in the new economy.

Imagine the challenge faced by Jay Forbes, CEO of Aliant, a Canadian information and communications technology company. In 2002, he found himself at the helm of an organization formed as the merger of four telecommunications companies, each with more than a hundred years of operating experience. Each company had developed its own distinct view of the world, with cultures to match. The combined entity led by Forbes employed more than 6,000 people and is the third largest incumbent full-service telecommunications company in Canada.

A New Day

The first order of business for Forbes was creating a new strategy, one designed to leverage the strengths of all four companies and recognize the changing dynamics of the early 21st century telecom industry. Employees had seen strategies enthusiastically introduced in the past, only to morph into a set of exclusively financial performance indicators shedding little light on how they could play a part in executing the strategy day in and day out. As one manager described previous strategy introductions, “We’d have a huge slide deck and then just a couple of financial indicators.

Forbes and his executive team seized the opportunity of introducing the Balanced Scorecard as representing the dawn of a new day at Aliant. They explained that the Scorecard would supplement traditional financial measures with the drivers of future success and give every employee the opportunity to contribute to the company’s triumphs.

Aliant leadership set out to ensure that all employees understood the Scorecard, linking it to all processes and workgroups. They recognized it would take commitment and perseverance to fully integrate the Scorecard and overcome suspicion and skepticism by some frontline employees.

Recognizing that many employees had been stung by previous attempts at strategy implementation, Aliant focused heavily on both communication efforts and comprehensive training. The leadership aimed communications equally at executives, managers, supervisors and frontline employees, utilizing a multi-pronged approach to launch Aliant’s Scorecard “brand.” In addition to contests, newsletters and presentations, the company created a comprehensive web site, which became the place to go for Balanced Scorecard information and current events. With enthusiasm growing every day, the leadership introduced the objectives and measures that would gauge the company’s strategic progress.

Select Few

Unlike many organizations that attempt to cram every possible wish list item that comes to an executive’s mind into their Strategy Map and Balanced Scorecard of performance metrics, Aliant recognized that a focus on just a small number of objectives and measures was a critical ingredient of success. Subscribing to the notion of “less is more,” the executive team constructed a Strategy Map comprising just nine objectives, including:

  • Growing Aliant profitably (financial perspective)
  • Serving customers on their terms with passion and integrity (customer perspective)
  • Continuously improving and simplifying the customer experience (internal process perspective)
  • Building an environment where people feel valued and maximize their potential (employee learning and growth perspective).

For reasons of confidentiality, I cannot share Aliant’s performance measures. However, I can talk about how they were created. To ensure the measures selected for inclusion in the Balanced Scorecard were in fact “measurable,” Aliant took the unorthodox step of creating a measure support team. The group’s mandate included formally documenting the measures, using a data dictionary, testing their reliability, proposing processes for data collection and suggesting targets.

The executive team supplied the measure support team with guidelines stipulating they should aim for “best-in-class” performance within three years and “world class” performance in five. They defined “best-in-class” as being among the top 10 percent of the Canadian communications industry and “world class” as tantamount to that of the top 10 percent of all industries on that metric.

The results have been both rapid and significant at Aliant, with Balanced Scorecard indicators resident in all four perspectives demonstrating success. Financially, during 2003, the company’s first year using the Scorecard, net income was up 28 percent; earnings per share increased 32 percent and Aliant’s share price rose 27 percent (according to the company’s 2003 annual report).

It would be unrealistic to attribute the entirety of these enviable occurrences to the company’s foray into the Balanced Scorecard; however, the positive ramifications of the investment are undeniable and are evident throughout the company’s operations. Customer indicators such as reputation and perceived value both rose within percentage points of world-class performance, while internal metrics, including operational efficiency, actually met world-class performance.

Perhaps the strongest sign of the Scorecard’s positive impact comes from an indicator within the Employee Learning and Growth perspective: employee knowledge of vision and strategy. The indicator rose about 6 percentage points in one year, when a 3-point increase would have been considered a significant improvement. That’s strong evidence that the Balanced Scorecard message is being heard loud and clear through the many channels offered at Aliant.

Beyond the numbers, Aliant executives and managers point to a subtle, yet unquestionable, shift in the culture of the organization. They suggest that the company is transitioning to a “culture of performance,” characterized by accountability, collaboration, information sharing and a focus on strategy. Rather than approaching strategy and its execution from their individual and isolated cultural lenses, employees have a wide-angle view of the company’s operations.

Now that’s a happy ending, right up there with the time Marcia Brady met Davey Jones.

Strategic Innovation Whitepaper

Blending Innovation and Strategy for Better Business Outcomes.

Download Now

The content of this page are Copyright © 2024 Corporater.
For more information see our privacy policy.