MeasureProductivity

Many companies are making a very serious mistake in implementation of balanced scorecard – they do not start an extensive discussion and research of strategy maps inside the company.  The fact is that balanced scorecard will never work if it will be just another top management project which is not understood to ordinary personnel and mid-level managers.  As a rule, company top management is recommended to create a working team that will assume responsibility for implementation of balanced scorecard and promotion of this strategic management tool inside the company.

But creation of a working group itself will not solve the problem.  The company should find the right people who will have desire, motivation and time to promote balanced scorecard and manage discussion of strategy maps.  Some of these people should be discussed and moderators.

Working group members must represent different managerial levels in the company

The common mistake is inclusion of external advisors and company top managers only to the working group.  Sure, these people are very competent in the fields of strategic management.  Of external advisors have prior experience and skills in implementation of balanced scorecard, while top management possesses valuable information on the company itself.  But without participation of ordinary personnel development and design of strategy maps will restrict itself to one time presentation of balanced scorecard and strategy maps to the company.  If ordinary personnel in the company does not understand why they should use this system and what their personal of interest is, there are very few chances to succeed in implementation of balanced scorecard.

How BSC strategy is discussed

BSC becomes philosophy for the company.  It should always cause changes and discussions inside the company.  Discussion on the top level will mean nothing to ordinary personnel who actually bring money and contact customers.  And ordinary sales manager may tell you a lively picture of who his customers are.  He will tell something that a top manager never new.  That’s why combination of professional knowledge in the field of strategic management and the dissipation of ordinary personnel will give the best results.

Working group members should lead discussion on all themes and topics which might be relevant to strategy development and use of balanced scorecard.  BSC must be promoted and working group members should rather act like preachers (of course in a good sense of this word).

It has been observed that companies that initially failed to use balanced scorecard in the right way them and get back to the system, while companies with the positive BSC experience will never part with it.

Balanced scorecard system has received a huge portion of criticism.  But who are Those critics?  Well, these are mostly top managers and business owners who have a negative experience of BSC implementation.  The problem is that balanced scorecard becomes the most effective strategic management tool only if a number of norms and conditions are observed.  It has turned out that balanced scorecard can be used in a variety of ways.  It would be wrong to say that some ways to use balanced scorecard are correct while others are not.  But at the same time, balanced scorecard is above all strategic management tool, but not just another system of accounting and managerial control.  Balanced scorecard helps to start a broad discussion in the company.  Balanced scorecard should become company philosophy.  There are two types of companies: those that have tried Balanced Scorecard and either gave it up or use it as system of managerial control, and those companies for which Balanced Scorecard became an inseparable part of everyday routine.  Such companies are unlikely to part with BSC.

Reward program life cycle

But there is one condition for successful use of balanced scorecard.  Company personnel must be involved in development of strategy maps and in everyday use of BSC.  The problem is that sometimes top management is far far away from company customers while ordinary front line employees know everything about those people who bring money for the company.  That’s why ordinary employees must understand their contribution to implementation of strategic goals.  In other words, they should know how their work affects company success.

Employees must be well motivated.  As known, financial motivation proves to be one of the most effective systems of rewarding employees.  But very often companies develop incomprehensive reward systems.  On the one hand, employees may be not satisfied with the compensation and bonus systems.  On the other hand, the company may simply be paying bonuses for completion of the wrong goals.

How reward system works?

For example, when measuring business productivity, company employees in sales department may be getting bonuses for number of contacts with customers or visits paid to customers.  This leading indicator is very important.  But at the same time it does not guarantee that all those potential customers will be buying from the company.  So, as sales manager is not interested in sales but he wants to make as many phone calls as possible.  Formerly, he will improve his performance, but in fact the company will not benefit from it.  Just to the contrary, it will pay such as sales manager bonus for a certain number of phone calls.