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Alasdair Macnab, FCMA, CGMA, director of corporate services for the Royal Botanic Garden Edinburgh, has adapted the Balanced Scorecard to create a new way of measuring the HR and financial costs of meeting strategic objectives. In this article he shares how his innovative approach, coupled with the Executive Strategy Manager, enable strategic objective budgeting. The system he has built offers insight into the input costs for each objective on the scorecard which can then be juxtaposed with the achievement of the objectives, realized through the associated measure performance.
Read the article at: http://www.cgma.org/Magazine/Features/Pages/Strategic-Objective-Costing.aspx
Balanced Scorecard,
BSC Hall of Fame,
Business Leadership,
Client Success,
Competitive Advantage,
Decision Making,
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Posted
2/8/12
@ 2:51 PM
by ESM Team ESM Team
Drs. Kaplan and Norton recently shared with us the future of the most powerful management concept of the past 75 years (according to Harvard Business School). As published in the CGMA inaugural issue a few days ago, the gurus lay out five key guidelines for this framework in the future:
1. Collaborate with external constituents, such as key suppliers, customers and alliance partners, to develop a strategy map that describes and communicates the strategic relationship; once developed, the map and scorecard are used to govern and guide the relationship.
2. Realize that cities and provinces, and even nations, around the world are using our framework for describing and communicating strategies for competitive advantage, and then successfully implementing their visions with our strategy execution system.
3. Use the strategy map as a jumping-off point for risk management, especially the identification and management of strategic risks.
4. Use the strategy map as a central change management tool.
5. Expand the role for analytics in the strategy execution system.
Read more at:
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Balanced Scorecard,
BSC Hall of Fame,
Business Leadership,
Client Success,
Competitive Advantage,
Decision Making,
ESM General Information,
Initiative Management,
Innovation,
Operational Reporting,
Reporting,
Risk Management,
Strategy Maps,
Sustainability
|
Posted
2/8/12
@ 2:48 PM
by ESM Team ESM Team
The development team is putting the finishing touches on by far the largest iteration of the ESM6 build, measures. Pure agile gurus would have encouraged us to break this iteration up into 8 separate iterations given its size but because of our skilled developers, we were able to still pull off a long but very successful build! Unlimited data series, Excel based tables, in line data field calculations with compatible Excel fields, automatic target schedule setting, multiple measure charts per data set, data sourcing, and excel input/output for easy data management in ESM6 make this our biggest achievement yet.
Historically, ESM required final calculated numbers such as a target, actual, variance, and forecast. With ESM 6, if desired, those raw data calculations can be done right in ESM or easily sourced in from excel by the end user. We will also enable period groups for month to date, quarter to date and year to date summary series. This means you can track your total performance for a period in time without manual computations. Our measure charting enhancements should remove any restrictions users have felt in the past with complex measure calculations, roll up, and visual charting. We are very excited to get this out into beta testing later in 2012. Get ready!
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Imagine your strategic elements (themes, objectives, measures, driver measures, initiatives, initiative KPIs, and milestones) as an alignment “web” or “family tree” through which there are causal relationships. While some of these relationships are close, say 50-75% of their performance feed into the next element’s performance, others are distant, and perhaps say only have a 3-5% impact on another element from the same scorecard or from a cascaded scorecard. If there were only a way to represent that impact that would be wicked cool.
Now there is. The team has completed the build out of the ESM6 automatic performance status indicator setting iteration. If you want to in ESM6, you can activate this capability to have milestones and initiative KPI performance feed into the overall initiative performance. Initiative performance can then feed up into objective level performance. Similarly, driver measure and cascaded measure performance can feed up into strategic measures from both a performance status indicator level and at the raw data level. Strategic measures, cascaded objectives, and initiative performance indicators can then feed up into objectives and finally, objectives into themes. The ESM team is getting ready to automate your performance status indicators. Are you? We look forward to sharing this new capability with you soon.
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Now that the Execution Premium book by Drs. Kaplan and Norton has been out in the market for a number of years, let's take a look at the benefits that can be realized through the XPP implementation in your organizaiton. Let's take it a couple stages at a time. Stage 1 and 2 looked at Develop the Strategy and Translate the Strategy. Now let's look at stages 3 and 4: Align the Organization With the Strategy and 5: Plan Operations. In these stages, the strategy has been clarified with scorecards and strategy maps at the enterprise level so now they need to be cascaded down into the business and support areas to ensure vertical alignment. Individuals might employ personal Balanced Scorecards and development plans to link the performance review process with the strategy. A communication program around the strategy is also paramount. The organization can begin to link strategy to key processes, driver models, and dashboards. Rolling forecasts and dynamic resource allocation are often found around the operational planning step.
STAGE 3: ALIGN THE ORGANIZATION WITH THE STRATEGY
- Defines the corporate role so that organizational units receive strategic guidance & direction
- Cascades strategy maps and scorecards to ensure organizational alignment to the strategy
- Leverages synergies between corporate, SBU, shared services, and other units to ensure alignment
- Communicates the strategy so that everyone understands his/her role in executing it
- Aligns team and individual goals and incentives to ensure the behavioral changes required for success
STAGE 4: PLAN OPERATIONS
- Identifies critical processes required to execute the strategy
- Establishes cross-functional business teams to drive performance across organizational boundaries
- Develops rolling forecasts and dynamic resource allocation to link strategy and operations
- Implements driver based planning to identify the critical levers of performance
- Creates operational dashboards that identify the key performance indicators that drive performance
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Balanced Scorecard,
BSC Hall of Fame,
Business Leadership,
Client Success,
Competitive Advantage,
Decision Making,
ESM Development Team,
ESM Features,
ESM General Information,
ESM Tips and Tricks,
Initiative Management,
Innovation,
Operational Reporting,
Personal Balanced Scorecard,
Reporting,
Risk Management,
Software as a Service,
Strategy Maps,
Sustainability
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Posted
9/7/11
@ 2:25 PM
by ESM Team ESM Team
Now that the Execution Premium book by Drs. Kaplan and Norton has been out in the market for a number of years, let's take a look at the benefits that can be realized through the XPP implementation in your organizaiton. Let's take it a couple stages at a time. Stage 1 and 2 of 6: Develop the Strategy and Translate the Strategy. These stages are where the organization performs S.W.O.T. analysis, Gap and shift statements, identifies key overarching strategies, clarifies the mission and vision and key risks. Then the strategy is developed into Balanced Scorecards and strategy maps. Typically an Office of Strategy Management (OSM) or other like group/individual is tapped to manage the strategy implementation and execution.
STAGE 1: DEVELOP THE STRATEGY
- Defines how shareholder value will be created to achieve new levels of performance
- Identifies required changes from current to future state so the organization understands it
- Quantifies vision, values, mission, objectives, and risks so they are measurable
- Analyzes strengths, weaknesses, opportunities, and threats to determine course of action
- Formulates strategy so that the entire organization can execute it
STAGE 2: TRANSLATE THE STRATEGY
- Clarifies strategy with a strategy map to produce a one-page action plan that works
- Develops a Balanced Scorecard to specify objectives, targets, measures, and initiatives
- Identifies key risk indicators that must be managed to avoid failure to execute
- Focuses on initiatives with the greatest impact to accelerate time to results
- Allocates resources dynamically to produce the most effective outcomes
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Balanced Scorecard,
BSC Hall of Fame,
Business Leadership,
Client Success,
Competitive Advantage,
ESM Features,
Initiative Management,
Innovation,
Operational Reporting,
Personal Balanced Scorecard,
Reporting,
Strategy Maps,
Sustainability
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Posted
8/31/11
@ 3:19 PM
by ESM Team ESM Team
For those of us who have participated in the scorecard creation process know that measures creation is both an art and science. Arriving at the right measure(s) for an objective is not an easy process once you get out of the financial perspective and beyond the classic customer satisfaction measure in the customer perspective. My colleagues and I have been discussing some good books on the topic so I'd like to share that reading list with you.
- “Hard Facts, Dangerous Half-Truths & Total Nonsense: Profiting from Evidence-Based Management” by Pfeffer and Sutton
- "Bullseye" by Schiemann and Lingle
- "Super Crunchers" by Ayres
- "Winning", "Keeping Score", and "Beyond the Balanced Scorecard" by Mark Graham Brown
- "Performance Dashboards" by Eckerson
- "Key Performance Indicators" by Parmenter
- "How to Measure Anything" by Hubbard
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The ESM team is hard at work innovating, designing and building ESM 6. This effort began in February 2010 and will continue through to Beta launch in early 2012. Through our recent surveys, direct client requests, and guidance from Drs. Kaplan and Norton and Palladium’s strategy consulting experts, we’ve compiled over 200 potential enhancements to include in this release.
As our developers share these new enhancements with the larger ESM team, we get more and more excited about where the ESM community is pushing the application. After all, it is you, the client, who’s advancing our application as you use it in your organization and provide us with feedback.
Some of the latest features to be built include automatic status indicator roll up across the scorecard. For example, milestone performance status indicator can impact the overall initiative status indicator, which in turn impacts objective performance status indicator. Objective status indicators can also automatically set based off of cascaded objectives and underlying measures. Measure can be automatically set by either data roll up or status color roll up. Objectives then roll up into perspectives and themes and then ultimately into an overall scorecard performance. It will be up to you if you activate this feature and just how far you want automatic status color setting to go in your organization.
We’ve also seen a new measure charting interface, allowing for unlimited data series, data calculations between columns, and multiple charts that can be displayed against the same measure data set. We will enable much more complex data roll up since different underlying measure series can feed into various higher level measures. For example, historically ESM required final calculated numbers such as a target, actual, variance, and forecast. With ESM 6, if desired, those raw data calculations can be done right in ESM or sourced in from data sources or data bases. We will also enable period groups for month to date, quarter to date and year to date summary series. Our measure charting enhancements should remove any restrictions users have felt in the past with complex measure calculations, roll up, and visual charting.
As we continue our development efforts we look forward to sharing our development efforts with you.
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Palladium’s research also involved surveying 101 organizations representing a wide range of industries in order to explore the relationship between their management practices and the performance results they have achieved. Among our most important findings:
IT, if aligned well with strategy, plays a very significant role in determining the ultimate chance of execution success. Integrated, end-to-end software solutions, together with operations governed by robust strategy management systems, constitute a proven method by which organizations and their entire business networks can achieve the Execution Premium. This Palladium white paper reviews the methodology used to align strategy to operations, drills into the three components of operational excellence and walks through how the 6 stage Execution Premium model can help organizations achieve healthy operational alignment. View this and other white papers at Palladium’s white paper site.
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I just came across an excellent account of the Balanced Scorecard effort undergone at the Royal Botanic Garden Edinburgh. In this paper, BSC champion and strategy director, Alasdair Macnab, along with Chris Carr and Falconer Michell from University of Edinburgh tell the implementation story. They focus their research on how the Balanced Scorecard approach can be successfully adopted for nonprofit businesses. The team also reviews why the Executive Strategy Manager was selected as the preferred solution and how it streamlined the data reporting and presentation while providing leadership and employees froma cross the organization critical line of sight into the strategy.
Key findings cited from the paper include:
Just as strategies are specific to an organisation, the balanced scorecard (BSC)/strategy map can and should be adapted to suit an individual organisation to leverage the full power of the BSC system.
• The effort and commitment required from senior management involved in transforming strategy management processes should not be underestimated as individuals/departments will become more accountable for their actions, particularly in the public sector, and resistance to change may be experienced as a consequence.
• If an effective costing system is developed, such as the one described in this report, management will see how their staff are directing their efforts, particularly important in knowledge based organisations.
• With their intimate knowledge of the organisation, the management accountant is well placed to become very involved or direct the transformation process to manage strategy execution leading to improved effectiveness/profitability of the organisation. In this way the management accountant becomes more of a strategic partner to the business.
• The research relates primarily to the practitioner who should find it helpful as the work is based on research subject to academic rigour but is translated into a pragmatic approach via the case study; thereby demonstrating its usefulness to a real organisation.
See:” Implementation of the balanced scorecard and an alternative costing system at the Royal Botanic Garden Edinburgh,” available at the following link:
Access the full report here
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Balanced Scorecard,
BSC Hall of Fame,
Business Leadership,
Client Success,
Competitive Advantage,
Decision Making,
ESM Development Team,
ESM Features,
ESM General Information,
ESM Tips and Tricks,
Initiative Management,
Operational Reporting,
Reporting,
Risk Management,
Software as a Service,
Strategy Maps,
Sustainability
|
Posted
7/22/10
@ 11:43 AM
by ESM Team ESM Team
Industry giant Microsoft's Word application has created headaches for software developers seeking integration since its creation. The code used to write the immensely popular Word has a very complex base, and since other applications need to communicate with this code it comes with many complications. The ESM struggles to interact with Word as users who paste from Word to the ESM end up with text corrupted from the attached Word code. To combat this, the ESM has two text editors which translate and clean this code, called SoEditor and FckEditor.
As some ESM users have experienced, MS Word code can give the ESM fits when using the common task of copying and pasting from Word to the ESM. This is particularly true when the text contains lots of formatting, uncommon characters, or multiple languages. The ESM uses the aforementioned text editors in an effort to elminate text corruption. These editors help to scrub any existing code attached to text from other applications. The resulting clean text then fits seamlessly in the ESM without corruption.
The ESM joins other software vendors in their constant battle to maximize compatibility with the complexities of Microsoft Word code. You can read about struggles in the blogosphere with Word integration at the below link. As an end-user driven application, the ESM seeks to create an intuitive user experience. However, this task is ever complicated by the hassles of integrating with Microsoft Word. The ESM will seek further optimization with Word later this summer, when the integration of the popular TinyMCE Editor into the ESM will give users added artillery against text corruption.
Learn more about the struggles of other applications here.
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Bob Kaplan recently posted a noteworthy Blog on Harvard Business School Publishing's web site around measuring your company's strategic risk. His premise is that many of the recently failed institutions had a focus on short term results and not long term sustainable results.
While you and I could blame the SEC for a lack of oversight, ultimately, it is the responsibility of these organizations to shareholders and the constituents they serve to operate in fiscally responsible manners. The BSC, if constructed and managed well , should provide organizations with the forward looking insight into their strategy so that they avoid many of the pitfalls failed organizations have fallen into today.
Dr. Kaplan suggests organizations might consider including risk oriented objectives on their scorecard. He says they often present a challenge though: "The high-level objective in BSC's financial perspective is growing and sustaining shareholder value. Traditionally, we have advocated two methods to drive shareholder value: revenue growth and productivity improvements. The third method for sustaining shareholder value, missing in many companies' strategies, should be risk management. We've asked many companies why this method is missing in their plans, and consistently we hear back that their challenge is to find valid metrics of risk management, a key driver of sustainable value creation." As Palladium consultants often tell our clients, you should not select objectives based off of their ease to measure. Select the right objectives first and then worry about the measures later. Key risk indicators are often new to organizations and will take time to flush out so that they effectively measure risk in your organization. Regardless though, getting some risk oriented objectives on your scorecard is a big first step. Talking about them, regardless of if the appropriate measures are in place, is a second big step. Remember, just having the dialogue and focusing the discussion in a strategy review meeting is half the battle.
View the full blog post at: http://discussionleader.hbsp.com/kaplan-norton/2008/12/how-to-measure-your-companys-r.html
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Strategic Risk Management (SRM) is the key to an integrated risk management approach which Professor Mark Frigo discusses in his most recent article, "Strategic Risk Management: The New Core Competency." Professor Frigo sees the lagging development of SRM in a sea of new risks as the driving force behind the recent meltdown of financial markets. While companies focused on the upside of new business developments such as globalization and supply chain innovation, they made the fatal error of disregarding the associated risks. This evidence strengthens the need for a holistic approach to risk management in today's economy, an approach echoed by Frigo's emphasis on Strategic Risk Management within the Balanced Scorecard Concept.
One downfall found often in risk management approaches is a strictly siloed approach, where finance accounts for financial risks while HR manages their own risks. Though many companies strive for SRM, this movement has been hampered because "holistic performance management is still evolving, and many companies lack a culture or mechanism for managing cross-enterprise issue." This common mistake is where the Balanced Scorecard Concept (BSC) plays a pivotal role in successful SRM.
Frigo stresses the link between Strategic Risk Management and the BSC by concluding "[s]trategic frameworks like... the BSC provide a mechanism for managing strategic risk in an integrated and holistic way, across the enterprise." The Executive Strategy Manager(ESM) is a web-based software application that takes you step by step through both the construction of, and reporting on, Balanced Scorecards and strategy maps. The only application built and managed by the creators of the Balanced Scorecard, Drs. Kaplan and Norton, the ESM will help you create strategic alignment at the corporate, division, and individual level. The ESM provides the perfect resource for the company struggling to align it's Strategic Risk Management.
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Companies have become overly reliant on Business Intelligence to focus decision making on results. While the reporting, query, and analytical tools are important to the success of a business, an accumulation can bog down the decision making process. Many companies are turning away from such BI-centric methodology and refocusing resources on Performance Management.
Performance Management provides decision makers only data which is relevant to the strategy of the company. This approach allows executives to focus on making timely evaluations with pertinent information. Dr. David Norton of the Palladium Group describes the delicate balance of combining strategy and operations as such: "If you don't link strategy and operations, then you're stuck in either a bottom-up world, where you're focusing on operations and you don't really have control of whether it's impacting the strategy, or you come top down and focus only on strategy, but you can't make things happen." Using Performance Management software like Palladium's Executive Strategy Manager (ESM) facilitates the active linking of strategy and operations. Businesses can use reports and analysis gathered by operations to drive successful strategic execution with the ESM.
Click here to read more about Performance Management in Doug Henschen's article "Decision Time."
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To follow up on Kent's recent post, I'd like to remove my "Strategic Hat" for a few moments, and dive into the more uncharted territory (for me) of operational management. Historically, most organizations managed their strategic and business requirements as distinct silos. However, today's management processes need to maintain a firm footing in both areas.
Throughout the blog, we've done our best to share thoughts on best practices in managing strategy: How to use the ESM to maximum advantage, best practices in Balanced Scorecard Reporting, insights on initiative management and guidelines for employee performance measurement. What we haven't done however, is focus on operational reporting. Now it's becoming more and more clear that the conversation is not complete if you're only speaking about the strategic sphere or operational sphere, so I want to begin a dialogue around operational business intelligence (BI) and reporting.
Historically, organizations used business intelligence primarily to support strategic decision making. This is where the ESM has its sweet spot, allowing executives and managers make a smaller number of, broad-based strategic decisions, such as whether to make a corporate acquisition, introduce a new product or change product pricing, or expand the sales force. Tactical/operational BI enables managers and staff to make more frequent decisions, such as how to create a new marketing campaign, or how to analyze the impact of a new business initiative. As you get even more operational, report data helps a wide range of users, from all levels in the organization make thousands of operational decisions each day, such as how to deal with a delay, satisfy an upset customer, replace a defective part, deal with a shortage. As opposed to strategic decisions, operational decisions need to be made rapidly so that a problem doesn't escalate or an opportunity isn't lost.
This means that operational reports (and the BI systems that support them) must deliver real time information to users the instant that an event occurs. In other words, operational BI should provides the right information to the right people at the right time so they can make the right decisions to positively affect desired outcomes.
What we're trying to streamline now, is the optimal way to bridge strategy and operations. When reviewing operational info, how much does the strategic context matter. On the flip side, when reviewing strategic information, how deep into operational data should you dive, and how should the drilldown be structured. For those of our out there who are already tying together these discrete, yet interrelated processes, please let us know what conclusions you've come to.
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