In recent years, within the administrative and management area, the concept of the Balanced Scorecard (CMI), developed by Kaplan and Norton, whose business impact in the United States is beyond doubt, has emerged strongly. Of this material there are quite a few bibliographic resources in this regard, of which I intend to expose the relevant aspects of it.
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Originally the concept of Balanced Scorecard (CMI) essentially constituted a measurement tool (1992), later it evolved into a comprehensive Strategic Implementation tool (1996) in a System management system that aligns and focuses the organization's efforts and resources using management indicators to drive strategies and to create long-term value that is currently useful in the so-called Comprehensive Strategic Management in organizations.
2.0 Strategic Planning. "PE"
2.1 Basic concepts.
Concept of Strategy: Refers fundamentally to the basic formulation of a Mission, a Vision, purposes and objectives, the policies and programs to carry them out and the methods to ensure that the implementation meets the proposed purposes.
Strategic Planning Concept: Process by which the organization determines and maintains the relations of the organization itself with its environment, through the determination of objectives and the systematic effort to generate a desirable relationship for the future, allocating the resources that take us to that end.
Concept of Strategic Administration: It deals with the aspects within the administrative process that are involved with ensuring organizational viability and that the entity's resources are adapted to the environment in such a way that the efficient realization of its corporate objectives is allowed, using courses of action with an acceptable risk.
PE is a plan describing an organization and its environment at a specific point in time in the future. This PE describes the environment and the forces that will impact the organization from the outside in and from the inside out. Outline what the organization chooses to do and eat seriously if it achieves these goals.
PE consists of two elements; the Strategic Plan that describes the desired conditions for the future and the tactical plan necessary to achieve the desired future state in the present.
PE is the way to consider the risk, options and the impact of environmental forces to increase the probability of success. In PE, one must work in relation to technological, social and political aspects before considering economic ones. In PE there is always the challenge and the risks of decision-making, where competent managers have the ability to understand those risks and think creatively, with imagination and initiative in the face of new challenges.
3.0 Creating the organization focused on strategic focus management.
Financial measurements cannot measure the activities that create value in the organization's intangible assets: the skills, competencies, motivation of employees; information technology and databases; efficient and responsive operating processes; product and service innovation; customer loyalty; regulatory and societal approval. To excel and compete based on knowledge, the ability of organizations to develop, nurture and mobilize intangible assets is critical.
Statistics show that a good strategy is not enough: even the best formulated strategy fails if the organization cannot implement it. Since the early 1980s, an investigation by Management consultants reported that less than ten percent of strategies formulated effectively were successfully implemented. In most cases - we estimate that seventy percent - the real problem is not… Bad execution…
PE as a tool to measure the performance of companies through the Balanced Scorecard has offered a framework to analyze the strategy used, beyond financial indicators, and create value from four different perspectives:
- The financial one: the growth, profitability and risk strategy seen from the shareholder's perspective. The client's: the strategy to create value and differentiation from the client's perspective. The internal process: the strategic priorities of the different business processes that create satisfaction for the client and the shareholders. That of learning and growth: the priorities to create a climate that supports change, innovation and organizational growth.
3.1 The Criteria for Evaluating Management.
- The Efficiency with which Strategy is carried out The Credibility of the Administration The Quality of the Strategies The Competition to generate new products and / or services People
3.2 Management control system.
The Balanced Scorecard allowed executives to assess how their business units created value for current and future clients, without diverting interest from financial performance. It transcended its original conception as a "management control system" to become a new strategic management process. See figure 1.
Figure 1. Management control system
This management system served as a mechanism to mobilize and guide the process of change. The companies that successfully implemented it learned to place strategy at the center of their management processes. How? From five basic principles of Strategic Approach Management:
Principle No. 1: Translate the strategy into operational terms. The strategy cannot be executed if it cannot be understood, and it cannot be understood if it cannot be described. Starting from the question What is my strategy ?, build your strategic map, a logical and complete structure that describes it in detail. The strategic map describes the process of transforming intangible assets into customers and tangible financial results. It is the cornerstone of a new strategic management system. See Figure 2a and 2b Strategic Map.
Figure 2a. Strategic map.
Figure 2b. Strategic map.
Principle No. 2: Align the organization with the strategy. Synergy is fundamental in the design of organizations, traditionally designed around functions with their own body of knowledge, language and culture. Often "functional silos" become a barrier preventing joint work and direct communication for the implementation of the strategy. Strategy-focused organizations use the Balanced Scorecard to break it: they replace formal reporting structures with strategic themes and priorities (what really matters). See Figure 3. Align the Organization to your Strategies.
Figure 3. Align the Organization to its Strategies.
Principle No. 3: Convert the strategy into the daily work of each employee. Strategy-focused organizations require that all employees have:
- A clear understanding of the Objectives and the methods to carry them out. The determination of the new capacities required to succeed. A horizontal alignment of traditional functions. The clear definition of the sections of authority, responsibility and transparency. The explicit determination of a Future Vision. A clear balance of Intangible Assets. Personal development, from a particular area of Performance. The Need to Manage Performance.
Furthermore, they are aligned with the strategy and can execute it in their daily tasks. In this sense, the «Balanced Scorecard» focuses on communication and training, the development of personal and team objectives, and on incentive and reward systems that link the performance of the organization and that of individuals.
Performance Based Management Consists of a systematic approach to improve performance. It is carried out through a constantly running process, which must allow the establishment of strategic performance objectives; in such a way that they allow the measurements of the own performance; the collection, analysis, evaluation and use of data, to drive improvements in Management Performance. See figure 4. System for evaluating performance.
Figure 4. System for evaluating performance.
Principle No. 4: Convert strategy into a continuous process. To manage the strategy, the successful Balanced Scorecard uses the "double or double loop process", which integrates tactical management (financial budgets and monthly reviews) and strategy management into a uniform and continuous process. Link the strategy with the budget; closes the loop through effective feedback systems and management meetings; and, finally, tests the strategic hypotheses with the information obtained from the feedback system, learns from the results and adapts the strategy accordingly. See figure 5. The strategy in a continuous process.
Figure 5. The strategy in a continuous process.
Principle No. 5: Mobilize change through executive leadership. The most important condition for success is the ability of the executive team to own and actively participate in the strategy. If those in the highest echelons of the organization are not energetic leaders in the process, there will be no change, the strategy will not be implemented, and the opportunity for revolutionary performance will be lost.
In this "change project", the focus is on mobilization, on the drive to start the process. See figure 6. Motivate: To make the formulation of strategies a task for everyone.
Figure 6. Motivate: To make the formulation of strategies a task for everyone.
It must be clear that the organization needs that change. Once the organization is mobilized, the focus shifts to governance. This process defines, demonstrates and reinforces the new cultural value to the organization. Finally, with the passage of time, the new management system emerges, a true strategic management system.
In this "change project", the focus is on mobilization, on the drive to start the process. It must be clear that the organization needs this change to "unfreeze". Once the organization is mobilized, the focus shifts to governance. This process defines, demonstrates and reinforces the new cultural value to the organization. Finally, with the passage of time, the new management system emerges, a true strategic management system.
- Create a willingness to change. Change equals strategy. Anticipate relevant trends for our sector. Promote change initiatives. Create a leading team in formulating strategies. The Power of Vision.
We have defined the elements that make up a CMI, and all this does not guarantee a successful implementation. The leadership exercised by senior management, good communication and participation, and the adequate constitution and effort of the work teams are, among others, essential factors in the implementation. Some implementations fail with a good design for not taking into account certain key aspects of the implementation, such as its relationship with people, its responsibilities and barriers to change.
Given the integrative and global approach of the WCC, implementing it in an organization is not easy and it is necessary to work with the following aspects:
A simple model: The main objective of the model is not to add bureaucracy or complications, but on the contrary, to simplify management by focusing on what is important.
Common language: The name given to the model, perspectives, and the different elements that make it up is the least of it. The important thing is that the people who have to use them, agree on it.
Understanding the model: No two companies are the same, and no two implementations are identical. Companies adapt the model to their own needs.
Leadership: The implementation must be led at the highest level in the organization as it is an integrating project that requires time and effort from the people in the organization.
Communication: For the model to be accepted and used, it must be understood and accepted by the people who work in the organization.
Participation: The participation of certain people who can add value, which also enrich the design of the different elements that compose it, also helps in the internalization of the model.
Project team: It is vital to assign a work team or facilitators to manage the implementation.
The CMI must be an instrument that simplifies and improves planning and management by clarifying the business model, prioritizing what really matters.
5.0 Bibliography.
- The strategy focused organization. Harvard Business School Press, Boston 1999. Kaplan and Norton.The Balanced Score Card. Harvard Business School Press, Boston 1996. Kaplan and Norton. The WCC. "Helping to implement the strategy" Alberto Fernández. IESE. Management Control Notes. MBA Jorge Ramos. UABC - Master in General Business Administration.
THE STRATEGIC APPROACH IN ORGANIZATIONS
Contributed by: Edmundo Robinson Castellanos - [email protected]
- Peter F. Drucker. Managing in a time of great change 1995 Note: Long-term planning may not be strategic planning but extended tactics. MBA Jorge Ramos. 1999 Walter Kiechel, "Corporate Strategist under Fire" - Fortune, December 27, 1982, 38. R. Charan and G. Colvin, "Way CEO's Fail" - Fortune, June 21, 1999.
