PREVIOUS NEWSLETTERApril, 2006
Making Scorecards Actionable Newsletter # 20 (2006) Content of Making Scorecards Actionable Newsletter # 20 (2006) » Who should run a balanced scorecard project? » Lasting interest in our study on BSC utilization in Swedish engineering companies » Up-coming public seminars WHO SHOULD RUN A BALANCED SCORECARD PROJECT? There are several roles in a balanced scorecard project. It seems, however, that most projects depend heavily on some enthusiast. When we interview organisations with active scorecard implementations, people often refer to some moving (“fiery”) spirit who is perceived to have imported the idea into the company and kept the flame alive. The fact, that so many projects depend so heavily on some individual may obviously be for good or bad. To have a true believer who takes a personal interest, promotes the project, can explain its benefits, and guide the learning process can be of immeasurable value. Together with clear contents of the project, it may be the greatest success factor of all. But projects that depend so much on some individual also become vulnerable. Will this person remain in the organisation, and retain his enthusiasm? Is there a danger that others abdicate from their duties in the project, trusting that the enthusiast will take care of everything? Given such risks, we believe that organisations should take the opportunity to provide good conditions for people who step forward, and are willing to become the main leader of a BSC project – at least during the initial years of the project. This person may come from several backgrounds. The most common choice seems to be a controller. This makes sense in organisations that live up to management literature’s recommendations that controllers should not restrict their work to the use of accounting numbers, but become a strong force in translating strategy into action. Some of us have argued for several decades now that a controller’s task is to make sure that everyone in the organisation whose actions will influence costs and revenues has access to, and takes an interest in relevant information. This will rarely come only from the accounting system, but will also include projections of future financials, non-financial numbers, data on customers and competitors, macroeconomic conditions, etc. For instance, a salesperson should understand the future value to his company of customer contacts. If people in an organisation associate controllers with this broad work description, they will find scorecards and strategy maps a natural extension of the controllers’ toolbox – an excellent pedagogical format for strategic dialogues where controllers are expected to contribute. But if controllers primarily deal with budgets and accounting reports, there is a risk that scorecards will be seen as an extension of these, which may not be good for the BSC project. In most organisations, budgets and accounting reports are not perceived as invitations to discuss and monitor the strategic logic of one’s actions, and controllers for whom they are the main focus will be tempted to emphasize financial scorecard measures. This does of course not rule out the possibility that a controller’s department can reform itself at the same time as it introduces scorecards. The “fiery spirit” who leads such a project then faces the double task of running the BSC project throughout the organisation, and changing the controller group’s way of working and its image to become providers of strategic guidance, rather than of accounting number-crunchers. In our experience, most organisations assign scorecard projects to controllers. The second-most popular choice seems to be to give the task to a planning or organisational development unit. If it exists, this department will have the future orientation needed, and it will be free from the negative associations of detailed monitoring through numbers that may make controllers less effective as project leaders. A third choice is that the managing director her- or himself leads the project. This will usually have to be a temporary solution, but it will of course signal the importance attached to the project. In this case, there will usually be a need to complement the MD with a “project secretary” who can take care of many practical tasks. In organisations where the workforce is the major resource (and cost), it can make sense to locate the BSC project in the HR department, which anyway should be heavily involved in preparing for the future through its work on developing skills, organisation and work practices. In this case, there will however be a need to make sure that strategy maps and scorecards also give sufficient attention to market developments, IT etc., and are not only workforce scorecards. Yet another background for a scorecard leader is the quality department. TQM-projects may sometimes turn into measurement rituals, but some organisations have been able to avoid this and turn their quality work into a strategy-based quest for excellence. Where this is the case, strategy maps and scorecards will often be perceived as an improved format for discussions which already take place, maybe adding more external focus. It may then be natural to base BSC projects in this department. Conversely, if TQM work focuses inspection, it may be harmful for the strategic ambitions to do this. When allocating the responsibility for a scorecard project, we have no universal recommendation. This leads us back to our initial discussion of the enthusiastic BSC missionary. Maybe the choice should be based largely on the availability of some person with an interest in modern management control and track record of successful project management, regardless of her or his home base? Of course, the person should have a view of BSC which fits with the ambitions of the organisation. For instance, a TQM practitioner who sees BSC as a tool for inspection should not be given the assignment in an organisation that wants to introduce it to improve strategic dialogues, even if the person proclaims enthusiasm for the task. But TQM knowledge may be an excellent base for BSC work, if the person wants now to add new aspects to his former experience – and can convince people in the organisation that this is not just a continuation of his previous work. Especially if her or his enthusiasm can be expected to last for the next several years. LASTING INTEREST IN OUR STUDY ON BSC UTILIZATION IN SWEDISH ENGINEERING COMPANIES Our survey on BSC utilization in Swedish engineering companies continues to attract attention. In the latest edition of “Teknikföretagen Direkt”, The Association of Swedish Engineering Industries’ monthly magazine, we are interviewed on our findings. Our research design has also been picked-up by two master students, Jonas Noresten and Jakob Sandberg, at Gothenburg University. The students have replicated our study in the retail- and service industry and come to similar conclusions as we did. The diffusion of BSC utilization in the engineering industry was around 38%. In the service industry it was also 38%, and in the retailing industry it reached 30%. A typical Scandinavian approach to scorecards is to include an employee perspective. 65% of the companies in the engineering industry use an employee perspective, whereas 75 % of the service companies use it and 43 % of the retail companies have an employee perspective. On the other hand, dedicated BSC IT software is rare in all three industries. Roughly 10-15 % of the companies in the three industries use specialized BSC software, between 7% and 22% of the industries (engineering industry 7%, service industry 22% and retail 13%) use a BSC module in their regular ERP solution, and finally between 60% and 80% use simple Office software (such as Excel and PowerPoint) to operate their scorecards. More information (in Swedish) about the students’ thesis can be found on http://www.handels.gu.se/epc/archive/00004727/ UP-COMING PUBLIC SEMINARS During the coming months we will run a host of different seminars. On May 4 Carl-Johan will give a seminar at Linköping University on how the management control systems influence utilization of shared information systems. May 12, Nils-Göran Olve and Carl-Johan Petri will deliver a full day seminar on the controller’s four different roles in an organisation and what implications this may have on scorecard utilization. Nils-Göran will then chair a public conference on control in the public sector, May 17. The following day, May 18, Carl-Johan Petri will visit Gothenburg University and run a seminar on “Functional scorecards” and the differences between scorecards that are used the manage the supplying functions (e.g. the IT department) and scorecards that are used in the business to make sure that the make use of the supporting services (e.g. utilizing IT in an efficient way). More information about our public appearances can be found under the heading Seminars on www.makingscorecardsactionable,com 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 organisations realise 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 organisation’s BSC skills according to our computerised BSC Analyser and to download presentations from the document archive. |
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