An enhanced balanced scorecard performance measurement system is provided through the Integrated Enterprise Excellence (IEE) business management system. This balanced scorecard performance measurement system provides predictive scorecard methodology that offers additional management insight for improvements.
Balanced Scorecard Performance Measurement System Enhancements
The balanced scorecard is a strategic planning and management system that aligns business activities to the vision and strategy of the organization and monitors organization performance against strategic goals. The balanced scorecard approach today transforms an organization’s strategic plan from a passive document into organizational daily-basis marching orders. The Balanced Scorecard enables executives to truly execute their strategies; however, is there a better approach for business management? An enhanced methodology will later be suggested.
Enhanced Balanced Scorecard Performance Measurement System: Benefiting from Incorporation of Integration Enterprise Excellence with Traditional Approach
The balanced scorecard, as presented by Dr. Robert Kaplan and Dr. David Norton in a 1992 Harvard Business Review article, tracks the business in the areas of financial, customer, internal processes, learning, and growth. In this model, each area addresses one of the following questions:
- Financial: To succeed financially, how should we appear to our shareholders?
- Customer: To achieve our vision, how should we appear to our customers?
- Internal business process: To satisfy our shareholders and customers, what business processes must we excel at?
- Learning and growth: To achieve our vision, how will we sustain our ability to change and improve?
Figure 1 illustrates how these metrics are to align with the business vision and strategy. Each category is to have objectives, measures, targets, and initiatives.
The Balanced Scorecard
Scorecard balance is important because, if you don’t have balance, you could be giving one metric more focus than another, which can lead to problems. For example, when focus is given to only on-time delivery, product quality could suffer dramatically to meet shipping dates. However, care needs to be given in how this balance is achieved. A natural balance is much more powerful than forcing balance through the organizational chart using a scorecard structure of financial, customer, internal business process, learning, and growth that may not be directly appropriate to all business areas. In addition, a scorecard structure that is closely tied to the organization chart has an additional disadvantage in that it will need to be changed whenever significant reorganizations occur.
Balanced Scorecard Performance Measurement System Enhancements
In the Integrated Enterprise Excellence (IEE) system, natural scorecard balance is achieved throughout the business via the enterprise value chain, noting that overall learning and growth would typically be assigned to HR but, when appropriate, can also be assigned to other functional performance. Metrics are assigned an owner who is accountable for the metric’s performance. These metrics can be cascaded downward to lower organization functions, where these metrics also are assigned owners who have performance accountability. With this IEE system, whenever there is an organizational change, the basic value chain metrics will not change, but only the ownership.
When creating these metrics it is not only important to determine what to measure, but it is also very important to focus also on the how to report so that this metric performance tracking leads to the most appropriate action, which may be to do nothing. To address this issue, the IEE system provides a 30,000-foot-level metric. Balanced Organizational Scorecard methodology
Alignment of Organizational Metrics to Strategy?
Jim Collins describes in Good to Great a level-five leader as someone who is great while leading an organization and whose effect remains after the person is no longer affiliated with the organization. I describe the level-five-leader-created legacy as being a Level Five System.
In workshops, one might ask, Do you think that your organization’s strategy would change if there were different leadership? A vast majority would give a positive response to this question. Because of this, it seems to me that it would be very difficult for an organization to create a Level Five System when the primary guiding light for the organization is its strategy, which can change with new leadership.
Another point is that strategies are often worded at such a high level, as illustrated in Figure 2 (a corporate strategy noted on the Internet) that it is difficult to cascade these high-level objectives throughout an organization. In addition, often strategic statements such as these are based upon intuition, rather than data, which can lead to very unhealthy, if not destructive behaviors.
Company’s objective is to maintain its position as one of the leading manufacturers of connectors, PC enclosures, and other precision components, and to successfully develop products and market its products for use in network communication and consumer electronic products. A number of strategies have been developed to attain this objective:
Develop strategic relationship with industry leaders – By working closely with top-tier PC and IC companies, Company is able to predict market trends accurately and introduce new products ahead of its competitors.
Focus on the development of global logistic capabilities – This enables Company to respond quickly and efficiently to the customer’s requirements around the world.
Expansion of production capacity – Company currently has production facilities in Asia, Europe, and the United States. Expanding its existing production capacity increases economics of scale.
Achieve further vertical integration – Further integration of the production process allows Company to exercise better control over the quality of its products.
Maintain technologically advanced and flexible production capabilities – This increases Company’s competitiveness relative to its peers and allows it to stay one step ahead of the opposition.
New products – Company will leverage off its manufacturing expertise and continue to move tirelessly into new areas of related business.
This does not mean to imply that organizational strategies are bad, but strategy creation without structurally evaluating the overall organizational value chain and its metrics can lead to unhealthy behavior.
Much benefit can be gained through a system that provides a structured approach for integrating predictive scorecards that have a natural balance with analytically/innovatively determined targeted strategies that lead to operational metric goals, which result in improvement projects that benefit the enterprise as a whole.
Balanced Scorecard Performance Measurement System through Integrated Enterprise Excellence (IEE)
Integrated Enterprise Excellence is a means to achieve this objective. To address this issue, the IEE system provides a system where targeted strategy is created in step 5 of a 9-step business management system, as described in Balanced Organizational Scorecard methodology.
The above Balanced Scorecard description was excerpted from Integrated Enterprise Excellence, Volume II – Business Deployment: A Leaders’ Guide for Going Beyond Lean Six Sigma and the Balanced Scorecard.
The IEE Balanced Scorecard Performance Measurement System addresses the traditional scorecard reporting and process improvement issues that are described in a 1-minute video:
Additional Information about Balanced Scorecard Enhancements Implementation
- Balanced Scorecard Enhancements with IEE Documentation: Articles, Videos, Books
- Addressing Executive challenges with resolution through balanced scorecard integration with IEE
- Transitioning traditional balanced scorecard historical metrics to predictive reporting (10 examples are shown)
- Incorporating in balanced scorecard enhancements implementation predictive metric reporting in IEE business management system
- Integrating business process management with balanced scorecard enhancement implementation