{"id":319,"date":"2013-04-16T01:38:18","date_gmt":"2013-04-16T06:38:18","guid":{"rendered":"http:\/\/flevy.com\/blog\/?p=319"},"modified":"2020-12-11T17:13:04","modified_gmt":"2020-12-11T22:13:04","slug":"perform-strategic-management-right-with-a-balanced-scorecard","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/perform-strategic-management-right-with-a-balanced-scorecard\/","title":{"rendered":"Perform Strategic Management Right with a Balanced Scorecard"},"content":{"rendered":"<p>It&#8217;s (relatively) easy to come up with a corporate vision, with a mission statement, with a set of strategies. \u00a0But, when it comes to the execution of that vision and strategy, things become much more challenging. \u00a0This difficulty increases \u00a0as the size of the organization increases. \u00a0For proper strategic performance management, a number of methodologies and tools exist. \u00a0The best strategic management framework is still the <a href=\"https:\/\/flevy.com\/business-toolkit\/balanced-scorecard-bsc\">Balanced Scorecard (BSC)<\/a>.<\/p>\n<p>First, let&#8217;s define strategic management. \u00a0Wikipedia states\u00a0strategic management analyzes the major initiatives taken by a company&#8217;s top management on behalf of owners, involving resources and performance in external environments. It entails specifying the organization&#8217;s mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs. \u00a0It is a level of management activities below setting goals and above tactics.<\/p>\n<p>The goal of every business is to make a profit. \u00a0As such, corporate goals, initiatives, and investments all typically are tied to financial metrics. \u00a0How will it impact sales? \u00a0What is the ROI? \u00a0How long is the payback? \u00a0Resultantly, most strategic management systems focus on <strong>Financial Measures<\/strong>. \u00a0The Balanced Scorecard differs in that it takes a &#8220;balanced&#8221; approach by supplementing traditional financial measures with three important non-financial categories:<\/p>\n<ul>\n<li><strong><span style=\"line-height: 13px;\">Customer Relationships<\/span><\/strong><\/li>\n<\/ul>\n<ul>\n<li><strong>Internal Business Processes<\/strong><\/li>\n<\/ul>\n<ul>\n<li><strong>Learning and Growth<\/strong><\/li>\n<\/ul>\n<p>This balanced approach allows organizations to track financial results, while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they need for continued, sustainable growth.<\/p>\n<p><a href=\"https:\/\/flevy.com\/browse\/balanced-scorecard-bsc\/balanced-scorecard-134\"><img decoding=\"async\" class=\"alignnone size-full wp-image-7703\" src=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2013\/04\/bsc.png\" alt=\"\" width=\"1162\" height=\"872\" srcset=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2013\/04\/bsc.png 1162w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2013\/04\/bsc-300x225.png 300w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2013\/04\/bsc-768x576.png 768w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2013\/04\/bsc-1024x768.png 1024w\" sizes=\"(max-width: 1162px) 100vw, 1162px\" \/><\/a><\/p>\n<p>The foundation of the strategic management approach should be based on BSC. \u00a0With the scorecard and metrics in place, the organization should adopt a continuous, iterative approach to managing its strategy and BSC. \u00a0Though this process, companies can achieve the following:<\/p>\n<ol>\n<li>Clarify and update the overall corporate strategy;<\/li>\n<li>Communicate the strategy throughout the organization;<\/li>\n<li>Align departmental and individual goals with the strategy;<\/li>\n<li>Link strategic objectives to long-term targets and annual budgets;<\/li>\n<li>Identify and align strategies initiatives; and<\/li>\n<li>Conduct periodic performance reviews to learn about and improve strategy.<\/li>\n<\/ol>\n<div class=\"aside\">Note that the Balanced Scorecard approach can also be implemented independently at a lower level, e.g. at a departmental or project initiative level. \u00a0For reasons started above, it is the preferred scorecarding methodology for many organizations and consulting firms. \u00a0You can learn more about the <a href=\"https:\/\/flevy.com\/browse\/business-document\/Balanced-Scorecard-134\">Balanced Scorecard here<\/a>.<\/div>\n<p>Properly implementing BSC requires an iterative set of four processes.<\/p>\n<p><strong>Process 1. Translating the Vision<\/strong><\/p>\n<p>The first process is to translate the vision. \u00a0This involves converting the vision statement into operational terms. \u00a0The process also ensures that, at the management level, we gain consensus and its true essence. \u00a0Whereas gaining consensus may seem an easy and self-evident task, it often is not. \u00a0Vision statements are often vague and easily interpreted differently by different people. \u00a0In other words, even though everyone may agree to a vision statement, each person may have formed a different interpretation of what that statement actually refers to in operational terms.<\/p>\n<p><strong>Process 2. Communication and Linking<\/strong><\/p>\n<p>The second involves communicating the translated vision down through the organization and educating people on what it means. \u00a0It also involves setting objectives and linking rewards to performance metrics.<\/p>\n<p><strong>Process 3. Business Planning<\/strong><\/p>\n<p>Business planning must then be performed in accordance to the work done in the previous two processes. \u00a0Business planning activities include setting targets, aligning strategic initiatives, and allocation resources. \u00a0In most companies, strategic planning and budgeting are two separate processes. \u00a0BSC forces your organization to integrate the two processes.<\/p>\n<p><strong>Process 4. Feedback and Learning<\/strong><\/p>\n<p>This fourth process\u00a0provides a mechanism for strategic feedback and review. \u00a0It allows for continuous strategic refinements. Info that can be tracked with the scorecard for this include feedback on products, new learnings about internal processes, and technological discoveries.<\/p>\n<p><a href=\"https:\/\/flevy.com\/browse\/balanced-scorecard-bsc\/balanced-scorecard-134\"><img decoding=\"async\" class=\"alignnone size-full wp-image-7704\" src=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2013\/04\/bsc2.png\" alt=\"\" width=\"1162\" height=\"872\" srcset=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2013\/04\/bsc2.png 1162w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2013\/04\/bsc2-300x225.png 300w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2013\/04\/bsc2-768x576.png 768w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2013\/04\/bsc2-1024x768.png 1024w\" sizes=\"(max-width: 1162px) 100vw, 1162px\" \/><\/a><\/p>\n<p>As the diagram above illustrates, Feedback and Learning feeds back into Translating the Vision.<\/p>\n<p>Of course, the approach to strategic management can be driven by the size of the organization. \u00a0\u00a0A global organization may employ a more structured strategic management model. This is due to its size, scope of operations, and need to encompass stakeholder views and requirements.<\/p>\n<p>A small or mid-sized business may adopt an entrepreneurial approach. This is due to its comparatively smaller size and scope of operations, as well as possessing fewer resources. In such cases, the CEO may simply outline a mission, and pursue all activities under that mission.<\/p>\n<p>The Balanced Scorecard approach becomes more useful and necessary as the size of the organization increases.<\/p>\n<p>For a deeper discussion, check out these resources:<\/p>\n<ul>\n<li><a href=\"https:\/\/flevy.com\/business-toolkit\/balanced-scorecard-bsc\">Balanced Scorecard Toolkit<\/a> &#8211; collection of 10+ frameworks directly about or related to BSC<\/li>\n<li><a href=\"https:\/\/flevy.com\/business-toolkit\/performance-management-perf\">Performance Management Toolkit<\/a> &#8211; collection of 20+ frameworks on Performance Management<\/li>\n<li><a href=\"https:\/\/flevy.com\/browse\/stream\/performance-management\">Performance Management Stream<\/a> &#8211; Flevy&#8217;s most comprehensive offering on Performance Management, a bundle of 25+ frameworks (e.g. BSC, OKR, KPIs, Value Mapping, Benchmarking, etc.).<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>It&#8217;s (relatively) easy to come up with a corporate vision, with a mission statement, with a set of strategies. \u00a0But, when it comes to the execution of that vision and strategy, things become much more challenging. \u00a0This difficulty increases \u00a0as the size of the organization increases. \u00a0For proper strategic performance management, a number of methodologies&hellip;&nbsp;<a href=\"https:\/\/flevy.com\/blog\/perform-strategic-management-right-with-a-balanced-scorecard\/\" rel=\"bookmark\"><span class=\"screen-reader-text\">Perform Strategic Management Right with a Balanced Scorecard<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[82,85,81],"tags":[126,127,130,129,128,28,125],"class_list":["post-319","post","type-post","status-publish","format-standard","hentry","category-operations","category-organization","category-strategy","tag-balanced-scorecard","tag-business-planning","tag-kpi","tag-metrics","tag-scorecard","tag-strategic-management","tag-strategic-performance-management"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/319","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=319"}],"version-history":[{"count":16,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/319\/revisions"}],"predecessor-version":[{"id":7706,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/319\/revisions\/7706"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=319"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=319"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=319"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}