PREVIOUS NEWSLETTERJune, 2010
Content of Making Scorecards Actionable Newsletter # 45 (2010) » Have a nice summer » The board’s responsibility for the strategy » What did you think about this newsletter? HAVE A NICE SUMMER Greetings from the land of the midnight sun. This far, the Swedish summer has definitely been worth a detour. We hope that the rest of the summer will continue down the same path. We would also like to wish you a happy summer, filled with the kind of activities you enjoy. But we are already looking forward to get in touch with you again after the summer again. As always, please drop us a note if you have any comments or opinions about the way scorecards and strategy maps can be used to make sure that the business strategies are executed – not only talked about in the internal policy documents. All the best from us, to all of You. /Nils-Göran, Jan, Sofie och Carl-Johan THE BOARD’S RESPONSIBILITY FOR THE STRATEGY In our books we typically focus on the management team’s utilization of scorecards and strategy maps. We also believe that, that is the most elaborated theme on how to use scorecards in the literature. The reasoning goes something like this: Establish the scorecard on the corporate (or company) level and then cascade them down through out the organization. Recently, we have read two new Swedish books on corporate governance, written by the same author – or former colleague of ours at Linköping University. Robert Sevenius’ two books tries to answer the question “what is corporate governance” (in the first one) and “how should corporate governance be implemented” (in the second). The books are written in Swedish, but they are so good that we hope they will find a translation soon. The books apply the principal-agent theory as a perspective on how to understand the relationship between shareholders, the board and the management team. Robert not only describes the theoretical context, he also makes an extensive effort to understand the international context and how different laws, rules, recommendations and standards have emerged in different parts of the world (separately from each other, influenced by others or in formal multilateral cooperation between countries). In Roberts’ books the main focus is on the allocation of power and authority between different actors in the “nexus” of relationships that we call a company, and how the board should make sure (as principals) that the management team (their agents) are behaving in the owners’ best interests. To make this happen, different procedures can be implemented to make sure that the board gets a “true and fair view” of the financial activities and effects of the business. But Robert also points out the fundamental responsibility of the board – stated as well in Swedish as international laws and standards – that the board is responsible to set the goals for the company and define its strategy. Few company boards, however, seem to engage in the more detailed discussions on how the company should operate to reach its goals (i.e. discuss the company’s strategy). Rather they focus on the outcome of the company, in financial terms. Often this deliberate focus on the financial outcome is rationalized by arguing that the board should not intervene in too tactical and operational matters. These decisions should instead be left to the management team to decide upon and the board should only focus on whether the management team’s efforts have led to satisfying financial results or not. We do not believe in this passive attitude to business strategies among many company boards. Instead, we think that the board should engage in the strategic “how-questions”. This will not necessary lead to board engagement in too narrow and operational issues. The board should form its own opinion about how the company should behave and then articulate this in a foundation for the company’s business strategy. Then, the management team should take on and operationalize these intentions into the company’s business strategy. This business strategy should both be used to control the company’s actions (cascading the intentions downwards in the organization) and be used to show the board how the management team has interpreted its responsibility. The business strategy should be described both in a visual strategy map and a written Strategy Story. The strategy should also be translated into indicators that can be used to evaluate whether the management is executing the strategy or not. Indicators that, preferably, should be structured according to the four perspectives in a balanced scorecard. For more information about Robert Sevenius’ books on Corporate Governance, see respective publisher’s website: - www.bonnierutbildning.se/bolagsstyrning - www.studentlitteratur.se/o.o.i.s?id=2474&artnr=32518-01&csid=66&mp=4918 WHAT DID YOU THINK ABOUT THIS NEWSLETTER? Please, help us improve this Newsletter. Follow the link below and give us some quick feedback (only three questions) on the Newsletter: http://www.surveymonkey.com/s/PG6DNL8 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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