Management Web Conference

(1)

2GC Limited Albany House Market Street Maidenhead Berkshire SL6 8BE UK

Better Management Web Conference

3rd Generation Balanced Scorecard: Practical Improvements

to Facilitate Implementation and Maximize Success

(2)

Post-Seminar Discussion

Gavin Lawrie answers the questions asked by

participants in the web-seminar

More information on 3

rd

Generation

Balanced Scorecard?

Rafael Rodriguez



The presentation lacked clarity on 3rd

generation. The slides were not that clear.

Rafael Rodriguez



Probably needs another session fully devoted

to the details of 3rd generation.

Milena Komitska



Would you be so kind to send me more

information about the 3rd generation Balanced

Scorecard? Thanks.

Gavin Lawrie writes:

The 3

rd

Generation Balanced Scorecard concept

is described in more detail in various papers and

slide packs that can be downloaded from the

2GC web site. Top picks from the wide range

available there are:



Presentation: Performance Management & the

3rd Generation Balanced Scorecard

−

http://www.2gc.co.uk/resources-presentations.asp



Document: The Development of Balanced

Scorecard as a Strategic Management Tool

− http://www.2gc.co.uk/resources-papers.asp



Ask 2GC a question – simply email us at

[email protected]

and we’ll send you a reply

as soon as we can!

We hope to offer additional web-seminars on

aspects of 3

rd

Generation Balanced Scorecard

design soon. 2GC also makes presentations at

conferences, and you can attend 2GC Training

Events.



For details of forthcoming events, visit our

events page:

http://www.2gc.co.uk/events.asp



For regular updates on 2GC events, sign up for

our email update service:

(3)

Post-Seminar Discussion

participants in the web-seminar

On Destination Statements

Rafael Rodriguez



How different a destination statement is

from Vision?



All companies I know of, do have a clear

destination. Managers know what they

want to do, where they want to go, etc.

How different is this from the destination

statement?

Zelia Carvalhais



Could you explain again what is the novelty

of the destination statement. I didn't get it

Bette Francis



I'm not clear how the destination statement

supports the 4 (possibly more)

perspectives of the balanced scorecard

The leaders of most organisations declare that they have some long term goals for how the organisation will be at some point in the future - typically this ‘vision’ is of an organisation that is different to the way it is today. Elements of such ‘visions’ include views about strategic success, financial performance and organisational form, and are commonly used to provide stakeholders in the organisation (I.e. investors, customers, staff etc.) with some orientation concerning the nature of the organisation’s goals.

But typically ‘visions’ are timeless (I.e. they don’t include specific statements about when they will be achieved), and say little that is definitive about how the vision will be achieved. For example, a firm can have a vision to be ‘market leader’ without being clear about how ‘market leader’ is defined, when this achievement might be realised, or what it will need to do to achieve this aim. It turns out that the implications of a vision are often poorly understood even by those who wrote it: but such clarity is needed if you are going to decide how to monitor an organisation’s progress towards it.

A ‘Destination Statement’ by contrast is a ‘snapshot’ of what an organisation is expected to be like at a specific point in time: as the organisation works towards achieving the elements of its ‘vision’. Typically it is chosen for a date about 3-5 years into the future, but this does vary by industry and

circumstance. The statement is very tangible and concrete, and describes to the best of the ability of the management team responsible for its

achievement, what they are hoping to have achieved by then. Some elements of the Destination Statement are hard numerical targets - such as projected revenue / cost figures. Others are numerical, but deduced from the hard numbers (e.g. production capacity required to achieve forecast sales), and some elements are descriptive (of what the organisational culture will be like, perhaps).

Typically only one Destination Statement is created, but in theory there could be many (for, say, several different years in the future). But what is common is that a Destination Statement is a much better starting point for Balanced Scorecard design - for many reasons.

Destination Statements often are sub-divided into sections, each relating to a particular aspect of the future organisation - for example Financial Details, Work processes, Relationships with stakeholders etc. These headings are chosen to suit the context of the organisation designing the Destination Statement, but have strong parallels with the four ‘perspectives’ found in 1st and 2nd Generation Balanced Scorecard designs, and serve a similar purpose (to help managers focus on the issues that need to be reflected in the Balanced Scorecard design).

(4)

Post-Seminar Discussion

On Balanced Scorecard Use

Mohamed Cassim



What percentage of businesses do you see

where the concept of the 3rd Gen

Balanced Scorecard has been

implemented? Are you able to determine

this by industry?

Mirjana Mladic



Are there any comparison available on

improved implementation of strategy using

3rd Generation BSC?

Guy Messer



Can you give some telecom Balanced

Scorecard examples ?

Surveys of organisations’ use of Balanced Scorecard (and other Performance Management frameworks) are carried out periodically, but typically are not much use. The problem is not in carrying out the survey, it is in ensuring that the answers given are comparable. Some surveys have suggested that upwards of 60% of organisations in the US have implemented Balanced Scorecard - but it is not known reliably what this actually means: either in terms of what the Balanced Scorecard looks like, of how much of the

organisation is using the Balanced Scorecard, or if it still is being used.

Anecdotal evidence suggests that the very large majority of Balanced Scorecards are 1st Generation designs, but most new designs have some 2nd Generation features - 9 years after 2nd Generation designs first emerged. 3rd Generation design ideas are beginning to take hold, but it is likely that it will be a few years before 3rd Generation designs become the norm.

2GC is currently writing two research papers that look at 3rd Generation Balanced Scorecard implementation experience, to add to the case study already available from the 2GC Web Site (at http://www.2gc.co.uk/resources-papers.asp). One of these will look explicitly at the replacement of a 2nd

Generation Balanced Scorecard with a 3rd Generation design. To be kept informed on this paper’s publication status, subscribe to the 2GC Email Update service at http://www.2gc.co.uk/guestbook.asp.

2GC does not have any telecom case studies to share, but there are several available on the Internet.

(5)

Post-Seminar Discussion

Questions on Balanced Scorecard Design

Poonam Makkar



When you have a large organization with

multiple business units, should you create

measures and objectives at the top level and

cascade it down or should you involve

managers at the various levels and in each

Business unit to create their own BSC?

J Mullen



How long should the design process take?

David MacGill



What is the typical time in educating and

implementing the balanced scorecard?

Rachell Peterson



What is your recommendation as to the best

way to get management to understand that a

scorecard takes time to implement. What if a

scorecard has already been implemented but is

not working? What are your recommendations?

For various reasons, it is much easier and better to design Balanced Scorecards in complex organisations from the top down. Other levels of management typically develop their own Balanced Scorecards taking a starting point in the top-level Balanced

Scorecard. Cascading of Balanced Scorecards will feature in a future Bettermanagement.com web seminar, but you can also read about it in the 2GC Paper “Performance management system design in a devolved organisation” that can be downloaded from the 2GC Web site (http://www.2gc.co.uk/resources-papers.asp). To find out about future 2GC web-seminars, sign up for the 2GC Email Update service, at http://www.2gc.co.uk/guestbook.asp

As noted in the presentation, Balanced Scorecard design takes about three months. See page 32 of this presentation for more details.

The lead up to the design of a Balanced Scorecard can take up to six months (in our experience). The time is partly due to the time needed to educate top managers about the Balanced Scorecard process they will need to follow to get good results, and partly due to having to wait for the ‘best’ time (e.g. don’t try and do a Balanced Scorecard design during financial year-end…). Our experience suggests that the best way to get managers engaged is to be open and candid about the issues that Balanced Scorecard can help address, and about the full extent of their participation that will be needed to realise these benefits. The involvement of external specialists in these discussions (such as 2GC) can help greatly - but such involvement needs to be complemented by committed people within the organisation who have an interest in seeing best practice performance management being introduced.

If an existing Balanced Scorecard is failing, the best approach is to get someone to do an Audit of the tool, diagnose the problems, and come up with a plan to fix them. 2GC (naturally) offers such a service. In general it is much better to try and fix an failing Balanced Scorecard incrementally than to discard it and ‘start again’ - as few existing Balanced Scorecards have no valuable features at all…

(6)

Post-Seminar Discussion

Questions on Balanced Scorecard Design

Snezha Atanassova

 If a newly initiated into the knowledge of the BSc

company would like to implement it, which is the right approach for the implementation process - to start from the 1st generation and to do it step by step or could possibly implement 3rd generation BSc from the very beginning.

Ric Davies

 Does Balanced Scorecard planning need to be

detailed process or iterative process?

Aidan Clarke

 Kaplan & Norton gave primacy to the financial

perspective. I came across a multinational giving primacy to the customer perspective in a local subsidiary. I had hoped this seminar would resolve if the customer experience should get primacy, and what is the role of financial measures in these circumstances.

Gavin Lawrie writes:

If you don’t have a Balanced Scorecard currently, you should implement 3rd Generation designs in your organisation. 3rd Generation designs are simply better than those that went before: if you are going to go to the trouble of building a Balanced Scorecard, you would be wise to give it the best possible chance of success by implementing a ‘best practice’ solution

Balanced Scorecard design needs to be carefully planned to ensure that the process is tailored to deliver the outcome that best satisfies the reasons why the programme was initiated in the first place. Once designed, use of the Balanced Scorecard has to be carefully planned and integrated with existing planning and control tools. Regular review meetings for monitoring progress in achieving objectives and discussing required management intervention have to be integrated with the existing management team meeting schedule. Reviews of the Balanced Scorecard design also has to be scheduled and integrated with existing planning processes.

To decide which perspective to put on top of the hierarchy; Financial or Customers, try asking yourself who are the masters that ultimately you serve; shareholders or

customers? The Financial perspective is on top because it reflects the interests of the shareholders or owners. In commercial organisations they are usually the ones you need to satisfy in order for them to keep funding the organisation. Many government organisations put customers on top or next to the Financial perspective (Governance or Outcome perspective as many prefer to call it). This is not

recommended because public sector organisations also have to satisfy first of all an authorising environment

providing them with the funds to operate, be it a Department, a Minister or the Government as such. The best example of why it has to like that is the Tax Department, imagine if they

(7)

Preparing for implementation

How 2GC can help

If you are exploring Balanced Scorecard for the 1st time –we can help:

Build a case for change - Give basic training - Provide management briefings

If you are starting a Balanced Scorecard project – we can help:

Supply advanced training - Design the Balanced Scorecard project/programme

Give presentations and briefings - Provide facilitation / project support

If you already have a Balanced Scorecard – we can help:

Give briefings on Balanced Scorecard trends - Audit existing Balanced Scorecards

Redesign / reset existing Balanced Scorecards - Providing coaching support

(8)

3rd Generation Balanced Scorecard

To find out more

Meet 2GC (www.2gc.co.uk/events.asp)

Conferences / Presentations



March

−

SAS Forum – Warsaw, Poland

−

Balanced Scorecard Forum – Stavanger, Norway



May

−

IPSM Conference – United Kingdom

Training Events



March – Lebanon



April – Malaysia, Singapore



May – United Kingdom, Malaysia

2GC Performance Management Resources (www.2gc.co.uk/resources.asp)

Presentations, FAQs, Case Studies, White Papers, Internet Links, Software Vendor

database – all free to access

Contact 2GC

Let us know if you have a question you can’t answer, we’ll do what we can to help…

email to

[email protected]

or call on