Performance management and scorecards

Organisations and companies work at many different levels and disciplines: finance, logistics, customers, environment, management, internal processes and labour relations. Corporate Performance Management (CPM) and Balanced Scorecards are designed to give both management and staff a complete overview of how their part of the organisation is functioning allowing them, after the appropriate analysis, to take the actions that are necessary to solve problems.

By configuring a Balanced Scorecard we provide a platform for assessing performance in a more objective manner, not just looking at the financials, which give a restricted view of what has happened, as so many organisations still do today. This allows us to understand the actual working of the organisation better, allowing us more insight and control of the critical processes. 

A by-product of the scorecard is the higher level of involvement of both staff and management in the performance of the organisation, if you "trust' people and make information available to them in general they will become more involved. It shows that better financial results don't just happen but are the result of, for example, more effort, better marketing, more customer focus, improving the logistics or just training the staff better. Over the years the balanced scorecard has proved itself as one of the most effective ways of defining what the information requirements of an organisation really are. 

Additionally we take a good look at the mission, strategy and the goals of your organisation, since all the Key Performance Indicators (KPIs) are of necessity derived from them. This connection usually leads to a drastic improvement in the performance of the business resulting from the increased focus on the goals from all parts of the organisation.


Traditionally we use either Corporate Performance Management (CPM) or Business Performance Management (BPM) in combination with Balanced Scorecard systems to run our organisations based on goals and to manage the processes better. We do this by measuring our results on a (very) regular basis (based on the risks of the processes failing) and reporting the results and variances from target allowing us to react quickly to problems.

Given the increasing popularity of organisational models we see more and more organisations that choose to structure their processes this way. Often the model is implemented from the perspective of Planning and Control but other variations are also possible where Personnel and Organisation take the lead or in some cases Quality Control - often with surprising results!

The Organisational Perspective
Balanced Scorecard systems have proved to be effective when used for organisational (re)development. Not all of them, but in general the systems where there is a consistent linkage in the hierarchy of the scorecards work well. This creates an environment where each of the organisation's goals, at each level has an associated question "How are we going to achieve that?", where the answer to the question is always specified in quantifiable terms i.e. it can be measured, simply and accurately. Each of these quantified goals then becomes the responsibility of a specified group of people within the organisation - creating an organisational structure which fits the organisation's goals: "Who does what?" or better said "Who is responsible for what?" becomes clear. A by-product of this process is that it also becomes clear which activities have no added-value in achieving the organisation's goals, leading at the very least to internal discussions and possibly a reassessment of priorities.

 
The Human Resources Perspective
Balanced Scorecards also have a positive effect in the area of HR. The primary reason is that the very development of BSC promotes, of necessity, communication within the organisation. Not only does it means that all staff members, at all levels, become aware of the mission and goals of the organisation, it gives everybody a much better view of how realistic (or not) the goals actually are, giving the opportunity to remove non-achievable goals thus reducing much internal frustration. This results in an almost automatic formulation of, and agreement with, the criteria and conditions that are necessary to achieve the goals and the changes that this entails for (internal) processes. Typically at this stage we hear comments like..." to do that then I will need this from that department" and " we need at least 2 days between doing this and doing that". If these conditions turn out not to be possible then, within the constraints of a good implementation of BSC, you can guarantee that the achievability of the goals will, again, be brought into question, and discussions will ensue with the level of management who defined the goals.

Secondly, as a part of this process, the staff defines exactly what the organisations can (and can not) expect from them in terms of achieving the goals. This gives the organisation an insight into the achievability of what they are proposing, which may be either too easy or too difficult. At the very least there should be agreement between each individual and the person they report to, an agreement which becomes part of the "contract" between the member of staff and their boss stating clearly what the expectations and requirements are from both sides. In many organisations this also becomes the basis of some sort of bonus plan and affects the earnings of the member of staff.

Thirdly, these agreements when committed to paper, become the basis of the annual personal performance review, creating a more objective system than is customary.

Fourthly, together with the last point, reviews based on experience/activity/responsibility become less relevant as the level of success moves to achievement of the defined goals.

The Quality Perspective
There are a large number of quality management systems available, many of which are based on interpretations of international standards like ISO 9001 and are activity based with shelves full of handbooks giving procedures describing how activities should be carried out. Organisation-wide implementation of BSC basically removes the need for most of the handbooks; the results of a process become the central issue not the activity itself. In a well implemented BSC system, the correct measurements and reports, i.e. the measurements that fit the process being carried out, control the quality of the process making it just a small step to a full ISO 9001 management system without all the procedures.

Balanced Scorecard also brings a number of advantages to organisations that work with the INK model, the various areas where the results are analysed automatically get their performance indicators, quantified, from the scorecard. It is very effective to use the results of the processes as the tool to manage the areas of interest. 

In conclusion: A Balanced Scorecard can contribute more to the management process than we would expect. Not just the day to day management, but a whole range of related processes can be better directed and managed in this way. This makes the Balanced Scorecard basically a tool for Planning and Control, but because of its wide range of uses extremely useful for the whole organisation.