Performance Management & Strategy Execution Blog: The Glue

The Unvarnished Truth: Why Balanced Scorecards & Performance Management Efforts Fail

I’ve seen statistics thrown around that between 50 and 78 percent of “Balanced Scorecard” efforts “fail.”^* Gartner’s latest research reports the number at about 50%, but when you look at the survey targets and numbers, it would be hard to put a lot of faith in that number. 

I do know -- from seeing hundreds of implementations over the last decade and coming in to “clean up” problems -- that it's true that many do fail. And I know why.

But before we go there, I want to point out why I have the terms “Balanced Scorecard” and “fail” in quotes. First, I’ve seen lots of performance management efforts termed “Balanced Scorecard” that bore only passing resemblance to the principles laid out by Kaplan & Norton^✝. I’ve also seen lots of efforts that employ the nuts and bolts of the “Balanced Scorecard” but neglect other elements needed for successful strategy execution. So when you see reports on Balanced Scorecards, just understand whether or not what they're assessing is the real deal.

Then there is the word “fail.”  What does “fail” mean?  Failed to live up to the expectations of the executive team? Failed to save the job of the CEO? Failed to get updated with new data and used to drive business reviews? There are plenty of interpretations for this term, too.

So without strong numbers on how many of these efforts fail or what failure even means, I’ll go out on a limb and say the primary reason that virtually all such efforts fail is: timid, unfocused, or unengaged executives. Usually you can even trace it to a single executive who -- if things were different -- could not only prevent scorecard failure, but could actually use the scorecard to drive true breakthrough improvement. Usually, that executive is at the top of the organization in question. I will call this person the Breakthrough Roadblock (BR).

I’ve seen lots of BR’s. In the next post, I’ll list the things I think are needed from an executive to assure the success of a strategy execution effort. Later, I’ll try to categorize BR personality types based on what I've seen in the field over the past ten years or so. I don’t claim to be exhaustive or authoritative on this topic. I’d really like to hear from you.

✝By the way, while researching this blog, I found lots of interesting fodder on the question “Who created the Balanced Scorecard?” Surely a topic for a future post.

*Based on our client retention rate at ActiveStrategy, our clients have experienced a much better success rate than the world at large.

Gartner's Predictions for Scorecard & Strategy Management Software

Gartner recently published a report on software solutions for Scorecards and Strategy Management. While the vendor coverage was pretty thin (though positive on ActiveStrategy, incidentally), I was interested in some of the broader survey results.

According to this report, about 30% of respondent companies are using an automated solution for strategy management and another more than 45% are planning on implementing a system in the next 12-24 months.  Those are huge numbers and would indicate a coming increase in demand for performance management experts (both internal and external) to help create all of those strategy maps and scorecards, train people in methodology, help with culture change, and implement sound business review practices.

If you are someone involved in deploying Scorecards and Performance Management (which is probably fair to assume if you're reading this blog), and these numbers are right, you are probably going to be in much greater demand in the near future...especially given the statistic in the same report that 50% of Balanced Scorecard/Performance Management efforts fail. More on that next time.

Successfully Executing an Enterprise Strategy in a Multi-Cultural or Multi-National Organization

There are five key elements that must be in place at any organization hoping to successfully execute strategy using Balanced Scorecards:

1. Strong, involved leadership to establish the focus and drive accountability
2. A clear 3-5 year strategic focus on the top strategy map and scorecard, plus a “focus within that focus” for a few key enterprise improvement areas
3. Alignment of that focus to all functional and cross-functional departments/entities
4. Orchestrated improvement of the key “focus within a focus” areas throughout the organization
5. Accountability at all levels to manage and improve in a way that is consistent with the strategy

And, based on my experience from working with many multi-cultural and multi-national organizations, there are five additional areas that need to be addressed carefully to ensure success within these types of more complex organizations:

1. Communication of the strategy must be multi-faceted and tailored to the various cultures.
2. Training on what you want executed, why, and the resulting benefits to each person must be handled as a priority.
3. Leadership must be sensitive to the various cultural mores in the ways that they communicate the benefits of the strategy execution framework, communicate the strategy itself, set individual and departmental expectations, and hold people accountable.
4. The focus on under-performing areas must be crystal clear, but sensitivity to culture must be taken into account.
5. Different cultures react differently to individual recognition, so you may need different ways to recognize success within different cultures.

Here are a few more details on each item:

1. Communication:
Communication of a high-level strategy is, of course, important in any culture. But it is even more important when various parts of the staff see the world differently, speak different languages, and come with different expectations of management. A multi-pronged approach works best. Consider:

• using multiple forms of media to accommodate different styles of learning and to provide helpful repetition of the key messages
• providing tangible examples of exactly how the strategy might be translated to lower levels
• allowing ample time (more than you think you need) for questions
• scheduling follow-ups to test and confirm understanding

2. Training:

Training on why the new framework is important, what the strategy means, how it applies to each person and their scorecard, and what’s in this new framework that benefits them is always important. With people from different cultures, more one-on-one follow ups are needed to ensure that you have broken through the language barrier and/or cultural paradigms. Individual coaching and mentoring is almost always required, as many people will not communicate that they don’t understand if they fear that they will “lose face” or be viewed as not very intelligent or knowledgeable on the subject matter.

3. Leadership:

Without a senior leader communicating why the new strategy, scorecard, and business review framework is important, setting expectations around accountability for goal achievement and improvement, and then holding people accountable for execution, no systematic approach will ever work effectively. In all cases, but especially in multi-cultural and multi-national environments, translation of those measurable goals and improvement initiatives to the various levels is critical. Also, periodic performance reviews must occur in a way that absolutely ensures “win-win” for all individuals through proper training, mentoring, preparation, and through the tenor of the review itself (read the next section for more on this).

4. Focus on Under-performing Areas:

In scorecard vernacular, under-performing areas are usually portrayed by red stoplights. The reason scorecards have reds is to draw attention to issues that require action so that the appropriate owner(s) can improve performance. In some cultures, however, I have experienced the color red to be a huge barrier to scorecard adoption because any red stoplight is seen as a major embarrassment. 

What you care about, of course, is not having red on scorecards, but driving the focus on under-performing measures and late milestones. If using red is a problem, use a different stoplight convention. Some organizations I've worked with, for example, have had good luck using blue for excellent performance, green if performance is good, and yellow to indicate that action is needed.

5. Recognition:

In my many years of helping organizations around the world manage performance and execute strategy, I've seen that different cultures across Europe, Asia, and the Americas view personal recognition quite differently. In Italy and Japan, for example, recognition that most Americans would relish is not appreciated in the least. To be sure that the recognition you bestow on your teams is proper, talk to the employees and staff and pay particular attention to what is appropriate for individual cultures. The last thing you want to do when trying to praise an employee is embarrass him or her!

What cultural issues have you encountered when deploying scorecards and performance management at your organizations? I'd love to hear your thoughts, insights, and questions that you have.

The Fastest Deployment of an Automated Balanced Scorecard Framework I’ve Ever Seen

I very recently helped a client fully deploy an automated balanced scorecard framework from start to finish within just two months. The client has their scorecards built, data loaded, they’re holding effective business reviews across the organization using the framework, and they are self-sufficient moving forward. 

You're probably thinking: "But this is impossible! Many organizations implementing scorecards/ performance management don’t get that far in a year." Really? Just ask Seven Hills Foundation.

So what’s their secret?  They weren’t small (they have 3,000 employees), they weren’t simple (they provide services to 28,000 individuals with disabilities and life challenges through programming at 150 locations), they didn’t have any more extra free time than any other client (Seven Hills was right in the middle of budgeting season).  But Seven Hills did have what I'll call all 5 keys to a rapid, successful deployment:

1. Availability – just scheduling time with project participants (from executive users, to decision makers on strategic content, to data experts) can often take weeks.  But in Seven Hills’ case, they were ready to meet the day the contract was signed and management had made it clear that participants should prioritize time over other items.

2. Skills and Authority – those learning about the software had the skill set to absorb the information, those learning about the methodology had the skill set to appreciate the concepts, and those making decisions on content and direction were given the authority to make those decisions.

3. Scope that Mattered – the client chose to build the first scorecards for affiliates (businesses) that had a burning need immediately.  As an example, one affiliate team needed the automated scorecard solution to score highly on their 3 year CARF accreditation coming up in a matter of months (CARF is an accreditor of health and human services providers).  Though the drill down in some measures was very deep (i.e. thousands of measures), the total number of scorecard-level measures was low -- they focused on what was pressing.
   
4. Content Ready to Go - this client had already picked the measures they wanted to see.  More than that, they had understood what the measures meant, where the data was coming from, and had approval from management to set targets and ownership.
   
5. Reviews – with the scope focused on what was pressing and scorecard teams that had a reason for using the scorecards immediately, we worked quickly to create views and variance reporting that would immediately suit their workflow and live use needs.  The day the scorecard was complete, the affiliate teams were using their scorecards in business reviews and locking in the software skills they had learned.

The result? Seven Hills was reaping benefits from their automated scorecards starting on day 1. Watch for updates on their impressive story soon.

5 Helpful Responses to “But that’s not measurable!”

"But that's not measurable!"...it's almost inevitable that this phrase will come up at some point when we're helping one of our clients build scorecards and cascade performance measures.

It happens while we're discussing how a particular area supports an organizational goal. Typically, everyone involved will decide that a new objective should be on that area's scorecard. But when it comes to selecting the best way to measure progress toward said goal, the "not measurable" objection comes out.

If you're involved in building scorecards or helping your organization select performance metrics or KPIs, you've probably run into this issue as well.

Of course the objection tends to arise when something new is being brought to the scorecard. If it's never been measured before, it might be because it seems too "big" or a little too "fluffy" to measure.

So how do you get past this objection and come up with a measure that will make sense to all involved (and will help you track progress toward achieving your strategic goal)?

Ask yourself and/or your team these questions:

   1. What are you specifically trying to impact or change?
   2. Let’s pretend you’ve already reached that goal -- what would be different?
   3. How will not reaching this goal impact other departments?
   4. How will you know when you you’ve reached this goal?
   5. How would you convince your boss that you’ve reached this goal?

By talking through these questions, we almost always come up with a measure and/or improvement initiative that makes sense, drives the right behavior, and can be effectively tracked on the scorecard.

So the next time you’re working hard with your team, and someone says, “we have to do this initiative, but there’s no good way to measure it,” try using these five questions. It should help your team be more specific in their word choices and help identify good measures for some of those more challenging objectives or projects.

And don't just put these away once your scorecards and metrics are cascaded. These same questions can be used effectively during scorecard-based Business Review sessions as well, as teams are formulating initiatives for under-performing measures. 

8 Key Roles Leaders Must Play to Make Balanced Scorecards Successful

Senior leadership support is absolutely essential when it comes to implementing performance management frameworks like Balanced Scorecards.

But what does "support" really mean? Listed below are eight specific things executives or senior leaders should do to support their organizations as they implement a Balanced Scorecard framework.

These eight key roles were originally identified by Dr. Joseph M. Juran, considered by many to be the father of quality management. In my opinion, Dr. Juran -- especially as compared to Dr. W. Edwards Deming -- placed more emphasis on a holistic approach to effectively managing an organization. I also think he had a better understanding of management's perspective on running the organization.

I believe Juran hit the nail on the head when it comes to defining these roles, which apply perfectly to organizations that are implementing Balanced Scorecards to drive organizational improvement and ongoing performance. I've included my own commentary to help relate the roles more specifically to scorecards:

1. Serve on the governance vehicle that is established to guide the entire performance excellence journey.

• While implementing a Balanced Scorecard framework to more effectively and efficiently operate an organization, some new approaches will certainly be deployed. Therefore, governance is an important part of the new framework, as there will be different rules, processes, and guidelines introduced that will need further definition and approval. Senior leaders must play an active role in these discussions to ensure that changes of this magnitude are actually implemented and sustained.

    2.   Establish the high level organizational strategic goals.

• Establishing the high level goals of the organization is the obvious starting point for a Balanced Scorecard framework, because those high level goals (including objectives, metrics, targets, and strategic initiatives) make up the enterprise scorecard. The goals (and the top level scorecard) should be established using a strategic planning process that the senior leaders should always lead.

    3.   Provide the necessary training to expedite the changed behaviors.

• As mentioned above, new approaches will be introduced to the organization, which will require changes to the culture and ways of doing business. Training and coaching are key steps in successfully introducing and locking in change. Too many scorecard frameworks fail because they fail to be explained and adopted below the executive team.

    4.   Stimulate focused and systematic performance improvement.

• Improved results occur because of both focused and systematic performance improvement. Any results that occur from luck or chance are not sustainable. Improvement efforts must be carefully targeted and designed -- usually during strategic planning -- and then systematic processes like Lean or Six Sigma can be used to permanently change and improve the current business processes to drive improved results. Senior leaders must create and support a culture that includes systematic approaches to improvement.

    5.   Regularly review progress.

• “What gets reviewed, gets improved” is a commonly heard truism. The reviews should be analytical in nature, usually monthly in frequency, and focused on both the progress of aligned initiatives and on the performance of key metrics. This role is one of the most important ones for a Senior Leader to initiate and role model. Too often, senior-level reviews are only superficial or are conducted too infrequently to drive the focus and attention needed to ensure improvement.

    6.   Give recognition.

• As Frederick Hertzberg, who authored many books on motivation, wrote one of the best long term motivators of employees is recognition of their work and achievements. So, if your goal is to lock in change, one of the best ways to do that is to formally and publicly recognize the positive results of the new (or newly revived) Balanced Scorecard framework.

    7.   Revise the reward system.

• Aligning rewards, whether monetary or not, to the new desired behaviors that you are seeking in the changed system is a sound practice to achieve and sustain the behaviors long term.

    8.   Provide the needed resources.

• Although Philip Crosby, another Quality Guru, wrote that “Quality is Free,” the reality is that it does require some upfront and ongoing investment to change and improve an organization. The payback from that investment can be 5 to 10 times the investment, but the investment in people, skills, time, etc. still must be made.               

        

            

Are You In the Game Or Just Riding the Pine?

Well, football season is over – hats off to the Saints for a great year and a strong, determined effort from start to finish. Now we can focus on college basketball. If you're a basketball fan, or just love March Madness, this time of year is great.

One of my favorite leaders of all time is legendary coach, John Wooden. His 10 NCAA National Championships in a 12-year period while at UCLA are unmatched by any other college basketball coach. What's more remarkable to me is the focus and diligence Coach Wooden put into leadership and the management of his teams. Even if you're not a sports fan, his lessons about leadership and successfully managing teams are quite valuable. If you have a few moments, take a look at his website, www.coachwooden.com.

Coach Wooden has published several books – within them, he often refers to his “Pyramid of Success,” which correlates just as well to leading business teams as it does to coaching college athletes.

The base of this pyramid contains key components you must exemplify and ingrain within your team to begin building momentum and establishing open lines of communication: things like loyalty, cooperation, and enthusiasm. If your team members (and your peers) don’t sense your urgency or the importance of your goals, they may not participate at the level you need, so these things form a critical foundation.

The next row on the pyramid focuses on action and control. Not control in the sense of being a control freak, but controlling yourself (displaying disciplined emotions), staying focused, and helping others stay focused.

On this blog, we talk about the many benefits of scorecards and the role they can play in improving overall organizational performance. One of the chief benefits is actually the dialogue that occurs when organizations begin to really use scorecards. They provide a fantastic framework that puts intense focus on solving the the most important issues. Coach Wooden would describe this as having "alertness,"  "initiative," and "intentness." Keeping your eye on the ball, having the attitude that you can and should make positive change, and being firmly focused on your goals. Do your scorecards and your approach help instill an attitude and approach like this?

The next row of blocks on the pyramid speaks to your mental and physical character. Many successful leaders will point out that they take care of themselves (exercise, diet, sleep) in order to continuously lead at a high level. Coach Wooden also points out the importance of life-long learning and “team spirit.” Successful strategy execution is a journey, and many times it's a hard journey. Imagine how much better you and your teams can approach that journey if they have focus on the Wooden pyramid blocks of “condition, skill, and team spirit.”

Near the top of the pyramid, Coach Wooden places “poise” and “confidence,” attributes that are critical to any successful team member or leader. I'm sure Coach was an expert at recognizing false confidence, arrogance, and players who didn't fit in with his program, just as good business leaders must be able to do. As you look to deliver on your strategy, ask yourself if you have the right players on your team. Do your tools and your approach bring out a higher level of accountability, rewarding those who successfully carry out your chosen strategic goals? Or do initiatives and the great ideas from your planning sessions always seem to fall through the cracks because teams don't deliver and aren't being held responsible when they fail?

For Coach Wooden, each block in the pyramid supported the ultimate goal of achieving “competitive greatness.” His quote within the uppermost block of his pyramid says “Perform at your best when your best is required. Your best is required each day." 10 NCAA National Championships in 12 years. It goes to show that when you expect the best and build the right  foundation for achievement, amazing things can happen.

Should Scorecards be Strategic or Tactical?

In one word, “yes.” Balanced Scorecards are both strategic and tactical, depending upon where they exist in an organization.

Before I explain, let's take a step back and define terms. What do we consider to be strategic? The practical definition is that it is what emanates from a strategic planning process, usually in the form of multi-year strategic improvement goals or objectives (such as "Grow Global Revenues") or as strategic imperatives or initiatives that support these goals and are time-bound by design (e.g., "Develop two new products to fuel global revenue growth"). Tactical can be defined as those activities that are designed or carried out with only a short-term end in mind.

So strategic issues are longer term and improvement-focused and therefore appeal to -- and must be managed primarily by -- the senior leaders of an organization. So since they own these issues, senior-level scorecards should clearly be dominated by strategic -- not tactical -- goals and issues. And to be really forward-looking and strategic, senior management-level scorecards should have multi-year targets for goal measures and multi-year improvement initiatives, as well. Some of these initiatives might have milestones that start later in the current fiscal year or even in future years.

Webinar This Thursday: Balanced Scorecard Fundamentals

If you (or your colleagues) are new to the Balanced Scorecard management framework, this week's free webinar is ideal. We'll be covering these topics:

-Balanced Scorecard terminology review

-Steps to translate a strategic plan into a top-level Balanced Scorecard

-Overview of how to "cascade" Balanced Scorecards to lower levels

-Best practices to think about & pitfalls to avoid

-Live Q&A

Balanced Scorecard Fundamentals

Thursday, September 17th

2:00-3:00 pm Eastern Daylight Time (which is 11:00 am Pacific Daylight Time)

Register here for this free webinar. We'll also record the session, so if you can't make the live event, register anyway and we'll send you a link after the event.

Feel free to forward this to any colleagues or friends who you think might be interested in this topic.

Also check out our list of archived webinars, including more advanced topics on Balanced Scorecards, selecting measures, ActiveStrategy Enterprise performance management software, and client case study webinars.

What’s Cool About Scorecards?

Today I was reminded what the coolest thing is about Balanced Scorecards: THE CONVERSATION

 

The point of a scorecard is to force "the conversation" about the most important “red” measures (those not hitting targets). Sure there are other benefits of scorecards, like communication of strategy and transparency, but for me I’m most excited to see my client have an honest conversation about what they can do to turn “reds” to “greens.” The real reason to develop a scorecard, after all, is that it's not just a report. Reports don’t relieve stress in the organization. The conversation that occurs during a Scorecard Business Review does.

As many of you can appreciate, there are no guarantees that you’ll get to the conversation.

But after the strategic planning, the scorecard cascading, the cultural resistance to “more work,” the gathering of the data, the setting of targets…today we made it!

 

I felt truly happy to listen to a cross-functional conversation about a “red” measure in the purchasing area. At the beginning you could feel the tension in the room.  This measure symbolized the stress behind the process.  But the conversation forced the participants to truly understand the current process and to brainstorm how they could improve it.  Once that happened, the scorecard participants could see the light at the end of the tunnel.  This will be a "green" measure soon.  Their lives will be so much less hectic next year. They finally saw the value that the CEO promised would be there.

 

That's cool.