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October, 2004

Making Scorecards Actionable Newsletter # 11/2004

NEW DANISH BOOK ON SCORECARDS

Balanced scorecard as a strategy tool – Danish experiences is the subtitle of a new book. Some years ago, two of the authors published Balanced scorecard in Danish, the major Danish book on scorecard use. As far as we know, both books exist only in Danish, and in the same way as our Performance drivers and Making scorecards actionable they reflect how, over time, BSC has come to be regarded as a method for strategic control, rather than just a structure for monitoring performance.

Two of the authors come from the University of Aarhus while the third has his background in consulting. They have, however, subcontracted about two thirds of the book to practitioners in seven Danish organisations pursuing scorecard projects: three in the public sector, and four companies.

The Danish title of the book translates as Strategy maps, and the case descriptions focus strategic control without, however, being limited to how the organisations have mapped their strategies. Instead, we get rather full descriptions of their scorecard projects, strategy planning, and the link between these. The authors also give an introduction to current thinking about BSC which should be readable also for new-comers.

We find it interesting that the final chapter, where the authors summarize their experiences, so closely agrees with our own views. They stress that BSC can be used for different purposes, and at different organisational levels, and that this makes it necessary to determine in advance how the specific organisation intends to use the tool. Therefore,

“the success of the management models to a large extent will be determined by how employees regard them, how management inform about them, how reward systems are linked to them, and how employees are involved in their implementation. It can be frustrating for the individual employee that the firm introduces more numerous and detailed measurements, but it is of vital importance for the models mentioned that measurements are treated seriously –that concrete numbers reflect the success factors for all individual efforts. This makes it essential to communicate the overall strategic themes throughout the organisation, so that employees become participating and committed to both develop and implement the strategies.”

The quote talks about management models. This is because the authors see their case companies’ projects as a meeting-ground between three current models:
“The BSC concept builds on Porter’s view of strategy, which starts from a firm’s external environment and competitive situation, while Knowledge [Intagibles; Intellectual capital] accounting rather builds on a competence-based view of strategy, focusing internal assets developed over the history of the firm. The Business excellence model, on the other hand, is a product of the quality tradition or TQM, and should mainly be understood as a self-evaluation model, which however, different from the other two, uses a very fixed framework that at the same time makes it into a tool for bench-marking across industries and nations.”

The authors find that the aims of the three models are distinct, but yet can be combined:
“In spite of several theoretical differences, which in principle should make coexistence between the models impossible, practice including our cases proves that some organisations are successful in using more than one model and integrating them.”

As we also often get questions about BSC and TQM, and also tend to take an eclectic view of their relation, we find this discussion interesting and hope that its authors will pursue it further in other publications.

Per Nikolaj Bukh, Heine K. Bang and Mikael W. Hegaard, Strategikort. BALANCED SCORECARD SOM STRATEGIVÆRKTØY – DANSKE ERFARINGER. Copenhagen: Børsens Forlag 2004

A HOLISTIC VIEW OF STRATEGY AND CONTROL

At Linköping University, the group Economic Information Systems’ ongoing research on the relation between strategy and control has been summarized in a new book published internationally. It shows how corporations can integrate their corporate strategy, business strategies, and functional strategies (in particular manufacturing strategy) by using management control.

The book is aimed mainly at researchers and students, but interested practitioners may find it useful not least for its summary of the development of strategic thinking in recent decades. The perspective taken is highly rational and pro-planning, which should appeal to managers in search of advice on their use of tools like BSC. The authors even provide a sort of to do-list for executives who want to create competitive advantage through appropriate controls:

1. Define the firm’s core business
2. Define the firm’s overall control model
3. Co-ordinate strategies and control systems
4. Choose IT support
5. Establish a culture based on the benefits of continuous improvements.

The book’s main contribution, however, is the careful and theory-based discussion on the relation between strategy and control, creating a contingency model for how controls should be adapted to the combination of corporate, business, and functional strategies aimed for in a specific group of companies. The authors are now following this up with case studies in Swedish corporations.

Fredrik Nilsson and Birger Rapp, UNDERSTANDING COMPETITIVE ADVANTAGE – THE IMPORTANCE OF STRATEGIC CONGRUENCE AND INTEGRATED CONTROL. Berlin: Springer Verlag 2004




MAKING SCORECARDS ACTIONABLE NEWSLETTER is a bi-monthly update on our experiences and opinions on how scorecards and strategy maps can be made actionable – to help organizations realize their intended business strategies. The newsletter is compiled and distributed for free by the authors of the book “Making Scorecards Actionable – Balancing Strategy and Control”. Also make sure to check out www.makingscorecardsactionable.com to get up to date information about our seminars, to evaluate your organization’s BSC skills according to our computerized BSC Analyser and to download presentations from the document archive.
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