3-The Balanced Scorecard and Change Management

8/12/2019 3-The Balanced Scorecard and Change Management

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The Balanced Scorecard and Change Management Martin McCannInn-vision

Summary What is the balanced scorecard? Why should we use one? Failure to definitively answer basicquestions like these is negatively impacting companies' success with scorecard implementations.Failure to grasp fundamentals at the outset, such as scope and organisational impact, are resulting inlack of appreciation for the scale of change, and a subsequent inadequate provision of resource todrive break through results. Organisational inertia means that behaviours and processes don'tchange easily. This leads us to ask the question is change the real challenge behind successfulscorecards?

Scorecard, the performance king Traditional management control techniques that have grown out of the financial managementdiscipline over a century, are essentially static (assume planning once a year approximates to static)and ingrained in successful business managers today. The advent of the scorecard – some 10 yearsago - represented a radically new way to implement business strategy. Utilising measures of externalfactors, such as broad economic indicators, market share and sales forecasts that impact the

business was a fundamentally new approach in mainstream planning and control for companies.

'If it's worth doing, it's worth doing well', goes the old adage; unfortunately not a trend that hasapplied to scorecard implementations. Such has been the frenzy around scorecards that experiencedbusiness managers have often abandoned basic logic in the rush to what they seem to believe is anassured route to breakthrough results. The reality is scorecards like organisational change requiresenior executive commitment and tenacity. While scorecards can and do deliver performanceimprovements in isolated middle tiers of an organisation, touted breakthrough performance happenswhen the scorecard is rolled out across the entire organisation, has the support of seniormanagement and changes the behaviour of a vast number of the workforce.

The scorecard was designed as a strategy planning and implementation tool, delivering morearticulate and precise definition of the components of strategy, which can be utilised to drive resource

mobilisation and align operational activity. The challenges come not from proper definition of theorganisations strategy but application of that strategy across all areas of the business – The processof driving change!

The challenge of change So the success of scorecards involves organisational change. Sadly the likelihood, and subsequentrate, of change in an organisation is not determined by what is best for the organisation. Rather acomplex cocktail of organisational influence determines if and how fast change occurs to supportstrategy implementation. Managing change along the following dimensions should be a fundamentalpart of any scorecard implementation:

Managing political bias,Driving transition in employee behaviour and working practices,

Motivating constructive behaviour.

The puzzling art of driving change and achieving breakthrough results with the scorecard does notend with an understanding of what organisational dimensions to manage. Traditionally someindustries have proven more emphatic to change needs than others. Also within industries individualcompanies react very differently to change challenges posed by external events, particularlycompetitive and regulatory challenges.

So why do some companies and indeed some industries have a higher capacity for change? Theanswer is as simple as needs must. Take British Telecom (BT) as an example. A decade after UKtelco deregulation, BT was still fighting local loop unbundling to thwart a flood of nimble competitors.They succeeded only in delaying the inevitable growth of fixed line voice services from new entrantssuch as The Car Phone Warehouse. However the company utilised this delay to better understand

its unique differentiators and develop a new long term growth strategy. Enter the recent andinevitable destruction of voice pricing models thanks to Voice over IP (VoIP). In the most currentanalysis of the winners and losers from the inevitable penetration of free telephony by the economist,



BT was classed as one of the global operators least at risk. Less at risk than mobile operators whomwe normally consider more innovative and ready for change! The bottom line here seems clear;deregulation forced BT to deal with competition and develop a capability for change management inresponse to external events. This new change capability has enabled it to monitor and react tosubsequent, more devastating external events better than traditionally more innovative competitors.

The change maturity benchmark How do you know what level of change your organisation can embrace? Working with clients overmany years has enabled inn-vision to develop the change maturity model™ to help companies tobetter grasp the prerequisites for change and hence successful scorecard implementation. Changecapability is a function of systems, processes and culture. As with most organisational issues, allthree are in fact related and a measure of one dimension is indicative of the overall situation. This isparticularly fortunate for practitioners as softer, human factors contributing to culture are elusivelydifficult to quantify.

Technology alignment with business performance is easier to understand. During the past twodecades a myriad of technology-led performance improvement initiatives have being embraced bydifferent degrees, across different industries. By focusing on the best-practice processes in a givenindustry, we can look to the degree of transaction automation, functional integration and capacity forcollaboration to provide a benchmark indicative of change capability. The simple truth is that drivinghigh rates of change or successfully improving performance with scorecards requires a prerequisitestate of process, system and cultural readiness.

Figure 1

The change maturity model can be considered as a generic starting point regardless of industry andutilised to develop a rough benchmark of change capability. Using the change maturity map, shownin Figure 1, scorecard practitioners should determine the maturity level of the organisational at theoutset and develop an approximation for change capability for the organisation.

This change capability should be considered when scoping and resourcing scorecard projects.Particular attention should be paid to the basic questions posed at the outset of this article, relating tothe overall objective of the initiative and the realistic achievable benefits. Using the principles of thechange maturity model™, inn-vision is often able to determine the level of success or failure of ascorecard initiative within the first six weeks of the project, by comparing the change required by thedefined success criteria with the organisations change capability.

Recommendation The components of any strategic management system, including scorecards, must integrate all of thefollowing organisational functions: strategy formulation, performance reporting, operational planningand review, human resource management and IT. Inn-vision recommends clients take a more holisticapproach to scorecard feasibility planning (the mobilisation phase), to asses the true rate of changeand integration required to achieve targeted or breakthrough results. Inn-vision has designed the

CPM maturity model™ to assist companies in determining rate of change and hence the stretchtargets achievable by the company. Based on this systematic assessment, companies mustrealistically judge if they have the competencies to drive through the required change, set success



criteria, resource and commission the scorecard initiative accordingly.

Failed scorecard projects often reduce an organisations appetite for change by underminingorganisational confidence; inn-vision recommends that organisations focus more resource on pre-project mobilising activities to avoid such catastrophic failures. Mobilization should enable the projectsponsor to match the level of change sought to achieve scorecard success with organisational

change capability. The mobilisation phase should also be used as an opportunity for the project teamto grasp the impact of, and integrate into its project activities, the change dimensions that need to bemanaged, namely:

Managing political bias,Driving transition in employee behaviour and working practices,Motivating constructive behaviour.

Additional Information: Martin McCann, CEO and Director of Research of research firm inn-vision, is a recognized authorityin Corporate Performance Management, having worked in the industry for many years both as aconsultant and as a software executive.

Inn-vision is a research, advisory and consultancy firm dedicated to the advancement of businessperformance through application of Corporate Performance Management (CPM). The companypromotes best practice CPM in industry through its research, and subsequent dissemination ofpractical information.

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3-The Balanced Scorecard and Change Management