Improve the Odds of Successfully Managing Strategic Performance

The Balanced Scorecard Model


What is the best strategic model that will help you to link everyday organizational performance with core values thereby, driving your organization towards fulfillment in a long-term?

The answer is 'Balanced Scorecard'.

The balanced scorecard framework will assist you to connect the dots, in turn, creating the common ground between strategic and operational performance management.

The framework solves the issues such as lack of alignment, misallocation of resources, short-term focus, and a failure to perceive risk, among other things.

Organizations typically manage their long-term strategic performance independently from their short-term operational performance. A frequent, unintentional, result of this approach is that strategic objectives are not achieved, and operational objectives are.

This occurs because:

  • Operational objectives are not aligned with the strategic objectives
  • Resource allocation priorities are given to short-term needs
  • Most of management’s time is focused on the urgency of achieving quarterly results
  • Short-term success masks the risk of achieving the strategy

 

Gears

With the advent of the balanced scorecard, the common ground between strategic and operational performance management is created but the struggle persists i.e., to articulate exactly what that common ground is and how it works. For example, organizations working on implementing the Balanced Scorecard strive to operationalize the strategy so that employees can see how their day-to-day work activities contribute to achieving the strategy.

The Performance Management Framework

The performance management framework (“balanced scorecard framework”) provides that common ground for discussing and answering these questions and lays down a foundation upon which a successful performance management program can be established.

Performance management is comprised of four major sets of activities:

bsc-objectives

Defining objectives and standards
bsc-allocating-resources

Allocating resources and taking actions to achieve the objectives
bsc-reports.png

Analyzing and reporting on results
bsc-review

Taking necessary corrective actions to mitigate risk and ensure success

 

The framework below shows how alignment is done with the Deming improvement cycle of Plan-Do-Check-Act. The framework also aligns with the four sets of performance management activities. These sets of performance management activities are called phases in the framework. Shortcomings in implementing various aspects of these phases lead to the strategy achievement failures.

Guide to Balancedscorecard

Each of the four phases of the framework has strategic and operational components. These components have the same name in each of their respective phases. The components are called Objectives in the Plan phase, Projects in the Do phase, Reports in the Check phase and Reviews in the Act phase.

Planning Phase

Planning is the phase where performance objectives and standards are defined, articulated and communicated to the rest of the organization.

  • Strategic Planning & Outcome: Strategic planning is the process of establishing an organization’s long-term (typically three to five year) goals and an approach for achieving them. The outcome of the process is a set of strategic objectives and performance standards for evaluating achievement progress
  • Operational Planning & Outcome: Operations planning is the process of establishing an organization’s short-term (less than three years) goals and an approach for achieving them. The outcome of the process is a set of objectives and performance standards which describe how the organization’s resources will be allocated and utilized in support of the long-term strategy

The Interface

The description of the four phases above sounds a lot like any other management methodology. The difference with the performance management framework is that it considers the management of performance to be a system with two major components: strategic and operational.

Just like any system, the interface between the strategic and operational components of each phase of the performance management framework is where success or failure is determined. The framework identifies the practices and methods used to manage the strategic-operational interface within each phase of the Framework.

Maps

In the Plan phase, Maps are used to define the relationship between strategic and operational objectives. While there may be local operational objectives that do not necessarily have a relationship to the strategy, the bulk of the operational objectives should be short-term, local versions of the long-term strategic objectives. Maps, strategic and operational, provide a proven and easy-to-use mechanism for articulating and managing the objectives and their interrelationships and alignment.

Maintaining the Balance Determines the Success or Failure

  • Performance success means that an organization’s short and long-term goals are achieved and its daily operations function smoothly
  • Effective performance management must address both the strategic and operational aspects of performance
  • The framework provides a foundation for successful performance management by utilizing a proven improvement management construct (Plan-Do-Check-Act) and establishing a well-defined interface between the strategic and operational components

Click here to read about Balanced Scorecard Software.

 

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