Around 60% of strategy projects fail. After this impressive data it is obvious that a deep reflection is needed to ensure that the project of Strategy and Balanced Scorecard in our organization is a success.
Taking into account practical experiences in these projects, it can be concluded that leadership is one of the causes that most influence the success or failure of a Balanced Scorecard project.
For practical purposes, a perfect Balanced Scorecard methodology can be used, but in most cases the importance of leadership and in general of the entire human side of the process is underestimated, especially in two fundamental aspects:
In the definition of the strategy and of the Balanced Scorecard where the entire organization should participate, since any consensual decision will be much better accepted than that defined solely by Senior Management.
In the implementation of the Balanced Scorecard because in these stages, change management is key to success so that the organization has a passion for indicators and objectives.
In this sense, it must be taken into account that the results obtained are the implanted results, not the designed results. In other words, a perfect Balanced Scorecard design is useless if it cannot be implemented in the organization.
Beyond the problems associated with not considering leadership and change management in Balanced Scorecard projects, I think it is interesting to review what are the advantages that can be obtained with the correct development of a Balanced Scorecard project. Integral command.
Why are strategy and Balanced Scorecard indispensable in today's environment?
In our consulting work, we find sectors or companies that traditionally have large margins due to product / service / business model innovation or the lack of competitors and that currently tell us: “We have less and less margin. Competitors are more aggressive and we have to sacrifice margin often. " In this situation it is an important time to ask yourself some questions:
- Are we losing the advantages over our competitors and are we currently engaged in a price war? Does the market see us as one more, without any differentiation over our competitors? Is the impact of globalization being important in our sector? Are we losing operational efficiency? If we are in a productive sector, are we competitive with current costs? Is the business model in crisis?
The Balanced Scorecard was created to definitively relate the strategy and its execution using indicators and objectives based on four perspectives. The benefits of the implementation of the Balanced Scorecard can be integrated into four concepts:
- Relate the strategy with its execution defining objectives in the short, medium and long term Have a control tool that allows decision-making in an agile way Communicate the strategy at all levels of the organization, thus aligning people with the Strategy: Have a clear vision of the cause-effect relationships of the strategy.
To achieve these benefits, the Balanced Scorecard uses a model based on indicators and objectives that revolves around four perspectives: financial, clients, internal processes, and learning and growth.
Thus, a table of indicators is defined with objectives in each of the perspectives that serve to execute, communicate and control the strategy.
In addition, the strategic map is also used, which is a diagram of the cause-effect relationships of the strategy through the four perspectives and that serves to capture in a graphic way the deployment of the strategy to have a clearer vision for taking decisions. decisions.
Leaders and the Balanced Scorecard
When implementing a Strategy and Balanced Scorecard project, leaders are needed in the organization to manage the change necessary to ensure the success of the project. Some of the characteristics that these leaders must have are:
- Have a long-term strategic vision. Develop the necessary strategies to achieve it. Align the team with the strategy Be able to balance the strategic aspects with the day-to-day running of the organization
But, once the leader has a clear idea about what he wants to do (vision) and how to achieve it (strategies), he must make the rest of the organization or his team of collaborators share them, inspire enthusiasm and encourage commitment to achieve the objectives set. And this is where many of the leaders fail.
Potential Problems in the Balanced Scorecard
For practical purposes, in this process we find different potential weaknesses:
- We usually find big problems in the initial diagnoses. On many occasions, managers are too "optimistic" so there is a tendency towards continuity plans and "radical" action plans are not necessary. The leader, however, looks for risks and challenges the "status quo", seeks change, looks to the horizon, encourages people to change. That the strategy is defined at the senior management level and not communicated to all the organization. However, the leader focuses on people, uses person-to-person influence and encourages them to follow. That the strategy cannot be executed because there is no clearly a relationship between the strategic, tactical and operational level. However, with the Balanced Scorecard it is possible.The definition of objectives without taking into account the cause-effect relationships of the organization with which there are incoherent objectives between them. That the strategy is "static" and that it is not reviewed with the agility that a changing environment like the current one requires. However, the leader is interested in effectiveness, asks what and why, takes the initiative. The leader encourages change. Failure to correctly manage the necessary culture associated with a project of this style, since the indicators and objectives not only have to be defined but also must be "lived".take the initiative. The leader encourages change. Failure to correctly manage the necessary culture associated with a project of this style, since the indicators and objectives not only have to be defined but also must be "lived".take the initiative. The leader encourages change. Failure to correctly manage the necessary culture associated with a project of this style, since the indicators and objectives not only have to be defined but also must be "lived".
Each of these potential problems has a different solution line. In the first and last case, leadership and a culture in the organization open to constructive criticism and in which all people can contribute to the company's strategy, in addition to having their visions valued. In this sense, the leader has an essential role, since if he does this correctly, he will begin to align the organization and have allies of good will, who trust themselves to perform at their best.
To solve the rest of potential problems we have the Balanced Scorecard. A tool that every leader needs to communicate in the best possible way their vision and strategies to the organization, and so that the cause-effect relationships between the achievement of tactical and operational plans and the achievement of objectives are perfectly clear and specified. strategic.
In addition, the use of variable remuneration policies linked to the indicators and objectives of the Balanced Scorecard will be a key element for the success of the project.
In conclusion, at a time like the present it is a good time for a thorough review of the organization's strategy with a critical eye and to use a Balanced Scorecard to get it into operation, starting with a vision shared by all the organization, and fostered by its leaders
