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Effective Performance Management with the Balanced Scorecard

Technical Report
Writers:
Liz Murby CIMA
Stathis Gould CIMA
CIMA gratefully acknowledges the contributions of
Gary Ashworth, Philip Barden, Peter Brewer, Gavin Lawrie, Bernard Marr,
Professor Bob Scapens, Dr Mostafa Jazayeri-Dezfuli, and Francesco Zingales.

Contact:
liz.murby@cimaglobal.com

Copyright © CIMA 2005


First published in 2005 by:
The Chartered Institute of Management Accountants
26 Chapter Street
London SW1P 4NP

Printed in Great Britain

The publishers of this document consider that it is a worthwhile contribution to


discussion, without necessarily sharing the views expressed.

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Effective Performance Management 1

Contents

1. Development of scorecard thinking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3


1.1 From performance measurement to strategic management . . . . . . . . . . . 3
1.2 Strategy mapping. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2.1 An introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2.2 Decision support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3 Effective scorecard design. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2. Implementation and practicalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8


2.1 Kaplan and Norton’s five guiding principles . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1.1 Translate strategy into operational terms . . . . . . . . . . . . . . . . . . . . . 8
2.1.2 Align the organisation to the strategy . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1.3 Make strategy everyone’s job . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1.4 Make strategy a continual process –
strategy management meetings and the learning process. . . . . . . 11
2.1.5 Mobilise change through executive leadership . . . . . . . . . . . . . . . . . 14

3. Beyond Kaplan and Norton – alternative complementary approaches . . 15


3.1 Strategy mapping. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1.1 The value creation map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1.2 The value dynamics framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2 Scorecard implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2.1 The business modelling approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

4. Dimensions of scorecard application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19


4.1 The balanced scorecard in the public sector
4.2 Embedding a sustainability focus with the balanced scorecard. . . . . . . . . . 19

5. Software in scorecard development and application . . . . . . . . . . . . . . . . . . . 21

6. The balanced scorecard – a resounding success? . . . . . . . . . . . . . . . . . . . . . . 23


6.1 Why balanced scorecards sometimes fail . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.2 Presentational/stylistic criticisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

7. Case studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Private sector: BAE Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Public sector: Health Action Zone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Appendices
1. The value dynamics framework at Dell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2. The Business Modelling Approach’s ‘if-then matrices’. . . . . . . . . . . . . . . . . 36
3. The Business Modelling Approach’s implementation questionnaire . . . . . 37

References and further information sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38


2 Effective Performance Management

Introduction

To manage and deploy organisational resources in such


a way as to deliver and fulfil organisational objectives is
a vital role of senior finance and management
professionals. Many tools, techniques and frameworks
have evolved to assist managers in this: value-based
management, total quality management, the
performance prism, and more.
This report focuses on one such The scorecard has been used To help organisations’ scorecard design,
framework: the balanced scorecard. successfully by organisations (public, the report includes:
Of the tools designed to improve private and not-for-profit) to realise
corporate performance, the balanced and integrate the strategic contribution ● Case-study based observations and
scorecard has probably been the most of all relevant organisational value practical advice from two
popular. Originally developed as a drivers for two key reasons: organisations that have implemented
performance measurement tool, the a balanced scorecard approach.
scorecard is now associated First, it helps to ensure consistency
increasingly with strategy and alignment between the ● Extensive references and signposts to
implementation. It acts as a non-financial and the financial further information and advice.
management framework with the measures, (this helps to facilitate the
potential to identify and exploit alignment of the measures and In addition to the balanced scorecard,
organisations’ key value drivers to their strategy). many organisations use a range of
best strategic advantage. tools and techniques to improve
Second, it helps to identify and performance. It is important to
This report considers the more recent measure the specific value drivers that integrate these with the scorecard
developments in scorecard thinking, in underpin performance. This allows approach and we recommend
particular the key role of strategy managers to test their hypotheses on therefore that this report be read in
mapping. It outlines how, through wide what is driving organisational conjunction with resources on other
application, and facing ever-changing outcomes. management accounting techniques
operating conditions, the scorecard has such as value-based management,
developed over the last ten years, to The report considers the use of the activity-based costing, quality
support different organisational balanced scorecard to link strategy to management and business process
‘missions’ – from profit maximisation, resources and then to performance re-engineering. Recommended reading
to service delivery or resource measures, and offers guidance on the can be found at
optimisation. For example, many strategy mapping process to ensure www.cimaglobal.com/sem
organisations are realising increasingly robust cause-and-effect linkage. New
that much of their strategic value lies approaches to bridging the gap
in their people, systems, processes and between strategy and the balanced
ability to innovate – this report scorecard such as value-creation
includes an explanation of how mapping and the value dynamics
organisations can integrate the framework are profiled.
potential of these intangibles in their
scorecard.
Effective Performance Management 3

1. Development of scorecard thinking

1.1 From performance measurement The opportunity to use such The underlying premise of the strategic
to strategic management information to satisfy the concerns of scorecard is straightforward: that all
The balanced scorecard is a not only internal management but also the actions determined by
management framework which, since external stakeholders was soon management decisions and
its inception by Kaplan and Norton in acknowledged, and companies such as implemented to promote strategy
the early 1990s, has been adopted, Sears, Citicorp, and AT&T, as well as realisation, have an impact. To
modified and applied by hundreds of numerous public sector organisations successfully contribute to achievement
organisations worldwide. If understood developed such ‘stakeholder of an organisation’s mission, the
thoroughly and implemented scorecards’. By first identifying the scorecard must effectively interpret
appropriately, its potential contribution interested parties whose objectives strategy into operational terms.
to organisational success – however they sought to satisfy, (shareholders, Strategy is thus ‘operationalised’
measured – is fundamental. customers, employees, suppliers etc), through the assumed relationships
the organisations then defined goals between actions and their impacts. By
The scorecard translates vision and for each and developed stakeholder measuring these impacts (via the
strategy into four notional quadrants. cards of appropriately balanced scorecard’s identified key performance
In the original offering from Kaplan stakeholder-related measures and indicators), management information –
and Norton, these quadrants reflected targets, in an attempt to meet the which informs decision-making – is
the following perspectives and needs of all. created.
implications of the strategy:
These second-generation scorecards Importantly, by introducing this
● Financial; allow individuals and teams to define concept of ‘causality’ into scorecard
● Customer; what they must do well to contribute design, more recent refinements to
● Internal business processes; and to higher-level goals. They are found balanced scorecard use have exploited
● Organisational learning and growth. most frequently in manufacturing and its potential value as a framework for
healthcare organisations, especially strategic management. Through the
(An overview of the balanced scorecard those that have been implementing use of ‘strategic objectives’, many
can be found at: www.cimaglobal.com) total quality management programmes organisations, both private and public,
(TQM, Malcolm Baldridge award have used the scorecard to place
The key to the popularity of the initiatives), which generate many strategy, rather than financial metrics
scorecard may lie in its flexibility and measures to monitor processes and (simple budgets, economic value
adaptability. Whether for commercial progress. Such stakeholder scorecards, added, shareholder return etc.) at the
organisations, governed by profits, were criticised by some, as being little heart of their management processes.
public sector operations governed by more than an extended list of key Strategic objectives, first represented
service delivery, or not-for-profit performance indicators (KPIs). as short sentences attached to each of
organisations driven by commitment the four perspectives, can be used to
to a particular cause, a scorecard that As organisations developed their own highlight the essence of the
improves performance (either through scorecards to measure performance, organisation’s strategy relevant to
performance measurement, or via each generated valuable information, each. Measures that reflect progress
strategy refinement), can be relating to many aspects of towards the achievement of these
developed. organisational activity. objectives are then selected.

When first developed, the scorecard Close analysis of this information, The identification of ‘causality’ –
was positioned as a holistic added to organisational knowledge of action and resultant impact – between
performance-measurement framework, operations and their impacts, made and within scorecard perspectives,
which could provide management with people aware of the potential of the marked a significant development in
useful information relating to financial framework from a performance scorecard understanding and
performance, internal processes, management perspective rather than application. Identifying assumed
customer perceptions and internal one of performance measurement. causality within the scorecard design
learning and growth. was the catalyst for the scorecard’s
leap of value, from a framework for
measuring organisational performance
(second-generation scorecards), to one
which may, if fully embedded in an
organisation, lead to strategy
refinement. This is being called the
‘third-generation balanced scorecard’.
4 Effective Performance Management Development of scorecard thinking

Inherent in these third-generation scorecards is the graphical representation of


organisational activity as a series of ‘linkages’.

Generation 1: Generation 2: Generation 3:


Using a balance of financial Using balanced scorecard design Testing the business model by
and non-financial performance to understand the business securing greater clarity
measures, long- and model through value between the assumed
short-term horizons, and propositions and the causal non-financial drivers of
external as well as internal relationships between performance and cash flow.
perspectives. objectives.

1.2 Strategy mapping: Strategy mapping provides an Building the strategy map
opportunity to articulate the key It is crucial that a balanced scorecard
1.2.1 An introduction strategies or initiatives that represents a chain of assumed cause
It is critical to note that the scorecard management intends to adopt to and effect links between and within
itself is NOT a tool for strategy achieve the strategic objectives. The each scorecard perspective. For each
formulation, rather it is a description mapping process can be effective in performance measure it must be clear
and interpretation of the strategy, closing the gap between the strategic what the key performance indicator is,
founded on assumed/hypothesised vision/direction and the operational and how each is achieved. Building the
causal links between actions and their activities of the organisation – strategy map involves the following
impacts. ensuring better execution of strategy. steps:

Kaplan and Norton noted the value of Thus, the balanced scorecard design 1. Clarifying the mission and
articulating and representing process is founded on the premise of strategic vision.
graphically such links between actions strategy as a set of hypotheses about 2. Specifying objectives in the
(‘drivers’ or ‘lead’ indicators) and cause and effect. These hypotheses scorecard areas necessary to realise
desired outcomes (‘lag’ indicators). form the strategy for moving the this vision.
They termed the representation organisation from its current position
process ‘strategy mapping’. The to where it wants to be. (Organisations The over-riding contribution of the
identification and effective can sometimes find it helpful to state third-generation scorecard rests in the
management of such causal this desired position by formulating a clarification and expression of the links
relationships is the anchor to the ‘destination statement’). between performance drivers and their
success of the ‘strategy scorecard’, and impact on progress towards strategic
shows how assets can be deployed, Importantly, having developed the success, conveyed through the
results measured and resources scorecard and by using the associated strategy-mapping process.
managed to achieve desired strategic performance metrics, the cause and
results. effect relationships between actions Simply, a strategy map charts the
and impacts are both explicit and impacts of activities. Once maps have
The strategy map is a general, logical testable. As such, it should be possible been constructed, linking actions and
and comprehensive architecture for for a third party to understand an their impacts, operations can be
describing the strategy framework. It is organisation’s strategy, and how this is managed to achieve desired outcomes.
only when this is achieved that to be achieved from an effective and
management can claim to understand well-constructed strategy map. From the example of a strategy map
the key drivers behind organisational opposite, it can be seen that the
performance and view the business organisation’s mission is to improve
model through a single lens. shareholder value, and that this is
achieved through the revenue growth
and productivity strategies – objectives
of the financial perspective.
Effective Performance Management Development of scorecard thinking 5

Strategy map example

Improve Shareholder Value

Shareholder Value
ROCE
Revenue Growth Strategy Productivity Strategy

Financial Perspective
Value from
Increase Customer Improve Cost Improve Asset
New Products and
Value Structure Utilisation
Customers

New Revenue Sources Customer Profitability Cost per Unit Asset Utilisation

Customer
Perspective: Product leadership
Customer value Customer Intimacy
proposition
Operational Excellence

Internal Perspective
‘Innovate’ ‘Increase ‘Achieve ‘Be a Good
Customer Value’ Operational Neighbour’
(Processes that
Excellence’
Create New (Customer (Regulatory &
Products and Management (Operations & Environmental
Services) Processes) Logistics Processes) Processes)

Learning & Growth


Perspective
Employee Technology Corporate
Competencies Culture

source: Adapted from Kaplan and Norton, (2000)


6 Effective Performance Management Development of scorecard thinking

The strategy map shows increased 1.2.2 Decision support 1.3 Effective scorecard design
customer value and the value delivered In a presentation to CIMA’s Strategic The process of understanding the
from new goods and services to be the Enterprise Management Round Table in business model and identifying both
key drivers of increased shareholder 2003, the Inland Revenue identified performance drivers and appropriate
value. the balanced scorecard as a good measures is complex. There is often
framework for a decision-support tool confusion, for instance, around
These are driven by achieving at board level. A process of strategy assumed logical, rather than actual,
operational excellence, customer mapping with executives and senior causal relationships between drivers of
intimacy and product leadership. These management was used to understand performance and hence performance
are customer-perspective related the existing business model and create measures. It may seem logical to
measures, and progress towards their an iterative process of change. This was assume causality between reported
achievement might be measured seen as the best way forward for customer-service satisfaction levels
through devices such as customer developing the organisation’s direction and financial results. However, the two
surveys/feedback, falls in numbers of in the light of a changing environment are not necessarily congruent:
complaints and dissatisfied where new management customer-service satisfaction levels
customers/returned goods. responsibilities and expectations were within the budget airline industry may
emerging. be significantly lower than those of
Operational excellence, customer full-service carriers, although the
intimacy and product leadership are all The Inland Revenue found that the comparative financial performance of
driven by initiatives identified in the process: the former is markedly better.
internal-processes perspective:
innovate, increase customer value, ● Ensured shared goals and objectives; Further advice concerning scorecard
achieve operational excellence and be ● Brought a strategy and its drivers to design and the selection of appropriate
a good neighbour. Thus it might be life; performance measures was offered by
expected that the organisation: ● Focused the organisation on Professor David Larcker in his
delivering value for customers and presentation, as CIMA’s visiting
● Invests in increased R&D expenditure other stakeholders; and professor (2004).
(supporting the innovation initiative); ● Enabled less, but more relevant, The presentation is available at:
● Enhances the performance information to reach the board to www.cimaglobal.com
dimensions of existing offerings (to facilitate strategic decision-making.
increase customer value); To be predictive, rather than simply
● Reassesses internal logistics of The result of this project has been a backward looking, the balanced
production and delivery; and better shared understanding by the scorecard approach should focus on
● Monitors the environmental impacts board and senior managers of how the those activities and processes that an
of activities (supporting the ‘good business works. Value trees have been organisation needs to get right to
neighbour initiative’). created that link systematically the ensure it fulfils its strategy. The
operating elements of the business to significance of this task cannot be
The above activities and changes are value creation. Ultimately, this underestimated. The lack of a cause
all achieved through appropriate facilitates a better dialogue with and effect relationship between drivers
deployment and effective utilisation of stakeholders, such as HM Treasury, on of performance and indicators, perhaps
the learning and growth perspective resource-allocation issues. from invalid assumptions of the
constituents – employee business model, will lead to adverse
competencies, technology and the organisational behaviour and
corporate culture. performance.
Effective Performance Management Development of scorecard thinking 7

In designing a scorecard, there is a Of all the firms participating in Olson If we accept that organisations create
need to challenge and discuss the and Slater’s study, irrespective of their value through their superior
generic four perspectives of the product/market response position, co-ordination and integration,
balanced scorecard that preoccupy ‘higher performers’ placed greater identifying what it is exactly that a
managers regularly. In the public sector emphasis on measures included in the balanced scorecard integrates seems
particularly, scorecard design can be financial perspective than did lower very useful. What matters most for the
refined with perspectives that are performers. Interestingly, for operators individual company, however, is on
more meaningful and as is illustrated classified as ‘low-cost defenders’ those which dimension of integration to
in chapter three, visualising value that performed better placed less concentrate. Manufacturers that
drivers does not need to be undertaken emphasis on customer-related compete on product quality might, for
within the context of these performance measures than did the example, emphasise the integration of
perspectives. lower performers. internal and external units. Their
balanced scorecards would need to
To summarise, the Kaplan and Norton Recent research suggests that the way highlight measures of co-operative
view is that strategy scorecards: forward for managers, is to focus product design, speed and reliability of
explicitly on how goals, strategies and deliveries and logistics efficiencies, for
● Provide a logical and comprehensive operations are connected, and to try to example.
way to describe strategy; understand the interdependencies
● Communicate clearly the across the value chain. By contrast, organisations in a strategic
organisation’s desired outcomes and turnaround situation might need to
its hypotheses about how these Chenhall categorised an index of emphasise the integration between the
outcomes can be achieved; and integration over a number of operations in local units with overall
● Enable all organisational units to dimensions including: corporate strategy. Performance
understand the strategy and identify measurement systems can support
how they can contribute by ● Operations/strategy: integrated such change programmes by
becoming aligned to the strategy. operational actions with highlighting the extent of integration
organisational strategies; between operations and strategy.
Getting the ‘balance’ right ● Different internal units: integrated
The correct ‘balance’ that a scorecard objectives of different business units The bottom line is that a good
encompasses should be driven by – within the organisation; scorecard will reveal an organisation’s
and reflect – the value proposition ● Internal/external: make transparent strategy and paint a picture that the
(product leadership, customer intimacy the interrelationships between the traditional focus on financial measures
or operational excellence) on which activities of different business units is unable to do.
the strategy is based. To be most and external suppliers and customers;
effective, scorecards of ‘customer ● Financial/non-financial: provide
intimates’ should emphasise measures information on financial,
in the customer perspective; product customer-related, business-process
leaders should emphasise those in the related, and long-term innovation
innovation and growth perspective; and related performance; and
those pursuing technical excellence ● Time: integrate current actions with
should focus more on the internal past and future consequences by
business-processes perspective. using leading and lag indicators.

Olson and Slater (2002) have tested


this approach. Their research findings
showed that ‘superior’ performance can
indeed be facilitated by manipulation
of performance emphasis, i.e. scorecard
design, irrespective of:

● The value proposition on which the


strategy is based; and
● The characteristics exhibited in
addressing the product/market
strategy decisions.
8 Effective Performance Management

2. Implementation and practicalities

2.1 Kaplan and Norton’s five guiding 2.1.2 Align the organisation to the From this corporate scorecard, the
principles strategy strategic contribution of the
In their original exposition of the Kaplan and Norton’s work shows that supporting business units/divisions is
‘strategy-focused’ scorecard Kaplan the common thread to the successful clarified, and scorecards which are
and Norton identified the five ‘key implementation of the balanced consistent with, and reinforce the
principles’ to successful development scorecard lies in companies’ ability to corporate level scorecard, can be
and implementation of a strategic realise consistent strategic alignment developed for each. The framework
scorecard, outlined below. and focus. An organisation might best allows the continued communication
achieve focus by developing and of strategy throughout the
2.1.1 Translate strategy into communicating a number of strategic organisation. Scorecards developed at
operational terms themes. Corporate or organisational corporate level can be deployed
The balanced scorecard is not a strategy generally encompasses two or throughout departments and divisions,
strategy-formulation tool. Strategy three complementary and mutually and may prompt such units clearly to
formulation may be viewed as an art, supportive strategic themes that allow define their contribution to overall
although the description of strategy, organisations to balance and focus strategy execution.
(through the balanced scorecard), is potentially conflicting long- and
not. For organisational performance to short-term priorities. Thus begins a communication process
be of a value exceeding that of the from division or department level to
sum of its parts (the composite The strategic themes: corporate head, facilitating refinement
business/organisational units and of strategy and strategy management
departments), the activities of each ● Reflect what must be done internally plans throughout the organisation. In
must be linked, and mutually to achieve identified strategic reality, this is often a process of
re-enforcing, via the organisational outcomes; and negotiation and discussion until
strategy. (Chapter three outlines ● Provide a way of segmenting the objectives and priorities are agreed.
variations on Kaplan and Norton’s strategy into several general
strategy-mapping theme used to categories, or projects. According to Kaplan and Norton’s
translate the strategy from a notional research, organisations such as Mobil
concept into a schedule of actions and Typically, strategic themes relate to Oil have used this approach in
key performance measures: an internal business processes, and each developing scorecards for the 18
organisational plan). acts as a ’pillar’ supporting the business units of its North America
over-arching corporate strategy. Each Marketing and Retailing division. It
Strategic themes and priorities must theme contains its own strategic should be noted, however, that the
be embedded within reporting hypothesis, its own set of cause-and- translation of values into desired
structures to enable a consistent effect relationships and occasionally its behaviours is not a straightforward
message and set of corporate strategic own scorecard. It is frequently the case process. It requires that all the drivers
priorities to permeate each part of the that organisations overload themselves of employees’ behaviour – including
organisation. with too many initiatives and projects. performance measurements and
This leads to a dilution of focus on the rewards, available technology,
In some cases, for example within the high-value-at-stake issues. In many structure, people skills, and
UK National Health Service, or the large organisations, the balanced organisational culture and processes –
financial services industry, where scorecard is developed first at are influenced.
reporting structures are required for corporate level to articulate a
regulatory requirement compliance, it company’s vision, and how it will be
may be necessary to add a delivered. Kaplan and Norton suggest
supplementary reporting structure. In that the corporate scorecard can clarify
other circumstances, a new reporting two elements of corporate-level
structure that addresses the balanced strategy:
scorecard themes and priorities may
simply replace the existing ● Corporate themes – the values, ideas
performance reporting structure. and beliefs shared throughout the
company; and
● Corporate roles – the actions that
create synergy and value at
business-unit level.
Effective Performance Management Implementation and practicalities 9

Where organisations are also realising Kaplan and Norton cite three To be of lasting impact, however, the
the value of partnership working – and processes as vital in aligning actual methods used must be
boundaries between organisations are employees to the strategy: consistent with the organisation’s
becoming increasingly fluid (as shown culture. While there may be some
by an increase in partnership ● Communication and education; value in ’handing out’ strategy from
arrangements, joint ventures and ● Developing personal and team corporate to departmental level and
outsourcing) – scorecards can be objectives; and expecting the required degree of
developed to define how value will be ● Incentives and reward systems linking compliance from employees, in
created within the external performance and reward. practice this approach may prove too
partnerships. In such circumstances, simplistic and detached to be effective.
contracts between organisations may Launching a strategy Ownership of strategy can be better
be based around joint, strategy-driven, To launch a strategy requires: fostered where appropriate managers
balanced scorecard metrics. and perhaps front-line staff are
● Education (strategy awareness); involved through workshops in
2.1.3 Make strategy everyone’s job ● Testing that employees understand identifying key performance drivers
For the balanced scorecard to be fully the strategy (strategy mind share); and the important activities and
effective as a strategic and ● Checking that employees believe the processes needed to support these.
communication tool, it is imperative strategy is being followed (strategy
that all employees understand the loyalty); and Some researchers and consultants have
strategy and conduct their business in ● Determining how many employees recommended that organisations
a way that contributes to its mission are teaching others about it might benefit from working with local
and objectives. (promoting the concept and groups of staff to decide how a
engagement of strategic customised and compatible scorecard,
Where higher-level scorecards are ’missionaries’). which takes account of local
’cascaded’ to lower-level departmental circumstances, might be developed and
– and even where individual scorecards Careful thought should be given to implemented. This approach can follow
are used – employees must ’buy in’ to how the scorecard is rolled out the communication of the identified
the organisational strategy for effective throughout the organisation. Kaplan and agreed key strategic goals that
implementation. In the majority of and Norton recommend the use of underpin the corporate scorecard (see
cases, where due diligence has been meetings, brochures, newsletters, the case study on Health Action
observed in cascading a corporate education programmes and the Zones).
scorecard to departmental or intranet, to promote the scorecard
project-team level, the value of the approach among employees.
scorecard as a tool for ensuring
strategy is executed is optimised. It
may be valuable to cascade the
scorecard down to individual level so
that each employee has a personalised
scorecard which could then be used as
the basis of their performance
appraisal. This way they can track their
own personal contribution to
departmental and divisional objectives,
and ultimately to the achievement of
corporate goals, strategy and mission.
10 Effective Performance Management Implementation and practicalities

Embedding strategic objectives ● Integration with existing planning Although by no means exclusive or
throughout the organisation and quality processes approach: prescriptive, some organisations have
Good timely communication with Integral to the introduction of quality found the following simple rules
employees is crucial to the success of management initiatives, for example helpful in developing personal balanced
any change process. Organisations can Total Quality Management, Malcolm scorecards:
use a diverse range of communication Baldridge award focused
activities to embed the strategic programmes, is the identification of ● Do not exceed 15 measures;
objectives of the corporate scorecard metrics which track progress in a ● Individual scorecards should support
into personal and team objectives. ’management by objectives’ supervisor or team scorecards;
Some alternative approaches environment. ● Include measures relating to a mix of
suggested by Kaplan and Norton lag and lead indicators;
include: For organisations already ● Supervisor/manager scorecards might
implementing such quality usefully include an objective and
● The ’super-bowl’ approach: management initiatives, the key measure relating to
A high-level team sets corporate performance targets developed for coaching/employee development;
targets drawn from different balanced scorecard implementation ● Scorecards must include an
scorecard perspectives, and explains should be consistent, at least in part, objective/measure that supports
to all employees their role in hitting with the quality-related measures. another part of the business; and
the targets; if the targets are met, ● Both supervisor and employee must
employees can be rewarded through In this way, regional, business unit agree to any change to the scorecard.
performance-related pay. and corporate scorecards that are
consistent with and reinforce existing Personal scorecards can be a useful
● Alignment with strategic initiatives quality initiatives can be installed. tool in the incentive and reward
approach: programme, by linking reward to the
Scorecard measures that link day jobs ● Integration with human resources attainment of an agreed performance
to programmes or projects are processes approach: target. This fulfils two functions:
developed; a work team takes Using strategic themes, companies
ownership for one or more specific can roll out a balanced scorecard ● It focuses employee attention on the
projects or programmes and a tool, approach by establishing links from activities and measures most critical
such as a one-page report for each financial objectives to objectives in to achieving organisational strategy;
project, is developed. the other three scorecard and
The report should outline: perspectives. Measures can be linked ● It provides extrinsic motivation by
– The balanced scorecard objectives to specific employee development rewarding employees when they, and
and measures that the project has and change programmes. the organisation succeed in reaching
an impact on; targets.
– The actions required to implement ● Personal balanced scorecard
the project; approach: It should be noted that the practice of
– Desired project outcomes; The corporate scorecard is cascaded relating employee appraisals, and even
– The responsible managers; down, first to business-unit level, reward, to personalised scorecards is
– The critical success factors; and where corporate goals are translated not without its limitations. Where a
– Project-specific performance into business-unit level goals, and dynamic scorecard is implemented,
measures. from there to personal performance risky strategic choices may become
objectives. This approach gives less attractive, and there may be
The report delineates clearly the employees the facility to develop internal resistance to granting
responsibilities of frontline workers their performance objectives based employees the required freedom to
and can enhance motivation of the on a clear understanding of corporate modify their performance targets and
frontline team by mapping their and business unit objectives. objectives.
day-to-day activities to higher-level
business unit and corporate In some circumstances however, where
objectives. However this does not the scorecard approach and culture is
necessarily promote innovation and well established, companies may have
may constrain cross-functional some success. At Shell, for example,
activities. the balanced scorecard approach (first
implemented in 1996) has evolved
into a robust framework that now
forms the basis of employee appraisals
(see box).
Effective Performance Management Implementation and practicalities 11

Shell: an example from practice 2.1.4 Make strategy a continual


process – strategy management
Recognition of the potential importance of its intangible performance drivers: meetings and the learning process
● Customer focused innovation;
● Technology, brand, reach, reputation; As operating conditions change
● Talented and diverse pool of employees; and continuously, so must the business
● Strong business principles and sustainable development strategy, and hence a process for
strategy management is required.
led Shell International to undertake a study aimed at providing a better Successful balanced scorecard
understanding of how these factors have an impact on future cash flows. companies implement a process for
strategy management, which
Shell implemented its scorecard in 1996. Since then, the framework has integrates the management of tactics,
evolved into a robust framework that forms the basis of employees’ appraisals and the management of strategy into
(up to 30 per cent of salary is available as a bonus, based on individual a seamless and continual process.
scorecard results, and the introduction of new factors to the scorecard is
taken very seriously). In these organisations, the role of the
budget may change. Budgets can be an
Agreement on the intangible value drivers and key success factors is vital. inflexible tool for managing operations,
Shell enlisted the help of Cranfield University to bring all performance data however few organisations have any
together so that apparent relationships between intangible assets and tool at all for managing strategic
high-level scorecard results could be tested empirically to provide a robust progress. For organisations using a
foundation for future analysis. balanced scorecard, this may be used
as the link between operations and
Much work was, and still is being invested in understanding discretionary strategy.
behaviour and people’s psychological contract with the organisation –
whether people were happy with their stakeholder relationships. Using an In managing and controlling
average of 38 different variables, Cranfield formulated an employee operations, the budget defines both
’happiness’ index, which, although just as much a feel-good factor as a resources allocated to business unit
scientific link, was central to understanding how employees and the public operations, and the associated
view the organisation. performance targets.

Implementing the index at Shell has had longer-term repercussions – Three themes emerge in the
leadership credibility was viewed as an important variable in the hierarchy of implementation of a learning process.
employees’ value drivers, leading to an investment in high-quality leadership First, strategy is linked to the
training for managers. This in turn contributed to Shell’s high standing in the budgeting process, and spending
employment market, helping to secure top-quality graduates and sustain the decisions are analysed for their
drive for improved performance. strategic impact. Such analysis has lead
some companies to operate two kinds
Reference: CIMA’s executive report, Improving decision making in your of budget:
organisation, available from www.cimaglobal.com/sem
● An operational budget which
functions as a management tool to
guide the day-to-day expenditure
necessary to run the business; and
● A strategic budget which protects
long-term strategic initiatives from
the pressures of short-term financial
performance.
12 Effective Performance Management Implementation and practicalities

The second behavioural change to Strategy management meetings Basic management tools, such as
accompany the strategic management The agendas of business management reports of actual performance against
process is the introduction of meetings are concerned, generally, with budgeted performance, and variance
management meetings to review the reporting and control of the analysis, are useful for the
strategy and facilitate wider organisation’s operational activity. management and control of strategy
involvement in scorecard issues. Some Although this is necessary, it is unlikely implementation, and may help
companies have taken this to be sufficient to secure the executives to determine a course of
information-sharing initiative as far as performance improvements often action that will help the organisation
open reporting, so that performance promised by implementation of the to get back on track. However,
results are available to everyone in the ’strategic’ balanced scorecard. traditionally, these tools use only
organisation. financial metrics, and, more
Strategy management meetings, importantly, do not challenge existing
Finally, in taking steps to make focusing directly on the impact and assumptions about the performance
strategy a continual learning process, effective implementation of the measure, target, and current strategy
the balanced scorecard is based on the strategy itself, should align with the for achieving the target.
cause and effect linkages between new ‘strategy focused’ culture that
individual/departmental/business units Kaplan and Norton espouse. They Even where a culture of teamwork and
actions. Once the scorecard is put into should focus on strategic issues, and problem solving is fostered, the value
action, and feedback processes report the value of teamwork and of a ‘single-loop’ control system, which
progress, the hypotheses on which organisational strategic learning, to operates only within the context of
such cause and effect linkages are improve the management of strategy, the existing strategy, is obviously
based can be tested, either statistically rather than operational tactics. limited. By using a balanced scorecard
or qualitatively. as the agenda for strategy
Where the practice of reporting by management meetings, and
The scorecard operates by monitoring exception is adopted, the balanced exceptional reporting, investigation and
and measuring actions and the impact scorecard can function as a useful remedying of anomalous performance
that they have, and by allowing agenda for strategic management results, the underlying causal links and
managers to manage assets used to meetings. Managers’ time is limited ultimately the validity of current
deliver value to identified stakeholders. and using the scorecard to focus strategy can be considered.
An effective scorecard design must attention on those activities where
therefore reflect the contribution of targets are not being met, is a Some commentators argue that a
these assets by generating appropriate time-efficient way of steering and strategic management system is a
performance indicators. managing strategy implementation. communication rather than control
(More information regarding good system. Its concerns are not with
If the strategy is inappropriate or performance reporting and reporting absolute accuracy of reams of financial
invalidated due to changing market by exception is available in data, but with clear, concise and
conditions, a balanced scorecard ‘Performance reporting for boards’, readily understood information about
approach, if implemented in the right available from CIMA’s website: progress towards the achievement of
way, should allow for organisational www.cimaglobal.com). strategy-related targets and strategic
learning. This means that the inherent projects and initiatives.
performance measurement system is To be fully effective, the meetings
providing appropriate information to require honest feedback, commitment,
help management to challenge its and a culture of supportive teamwork.
existing assumptions of the business The balanced scorecard’s role in
model. fostering a common view of the
business model should help this.
Organisations also need to ensure that
their strategies are still valid.
Continuous learning enables
management to scrutinise the
fundamental assumptions on which
strategy is to be founded. However,
this approach is not a tool that should
be used in isolation to facilitate
‘out-of-the box’ thinking. Other
approaches, such as scenario planning,
can be used effectively to identify the
possible drivers of change in the
industry and the wider macro
environment.
Effective Performance Management Implementation and practicalities 13

Different organisations have developed Computerised performance-reporting Dynamic simulation modelling is an


different ways of communicating the and management systems can be established methodology that can be
information necessary for effective developed and configured specifically applied to inform strategic thinking.
strategic performance reporting. Using to facilitate predictive analysis of Statistical analysis can be helpful in
a balanced scorecard, many have found performance against scorecard targets, testing the hypotheses supporting the
that the voluminous reports of and to alert organisations to causal links in the strategy maps. In
countless measures previously unexpected deviations from expected theory, and for those prepared to
circulated have become redundant, and performance outcomes. Further commit the necessary financial and
concentrate instead on using simple ‘at information regarding such systems is employee or IT resources, statistical
a glance’ indicators which quickly available in chapter five. (factor or cluster) analysis may be
convey pertinent information regarding used to test assumed relationships
the progress of existing initiatives. Sustaining the value of the scorecard between actions. For example,
Although organisations need to ensure investment – reviewing causal improvements in the workplace (a
that the appropriate data required for modelling over time learning and growth/internal processes
compliance reporting is being A frequent error in scorecard adoption, perspective action) and their impact
collected, using a balanced scorecard is to pursue an organisation-wide on financial measures (a financial
approach means that the entirety of exercise involving strong executive perspective impact), via improvements
the compliance-driven data is not leadership and wider involvement in the shopping experience (a
necessarily included in strategic through workshops to build a causal customer perspective impact).
reporting. model of the business, and then stop
the process. Once developed, adopted As for any performance management
A popular example is the traffic and fully integrated into the tools, a study of relevant collected
light/RAG system, where project organisation, the scorecard arguably statistics can be used to produce a
progress may be reported thus: facilitates improved performance at time-series analysis of collected
the front-line. Furthermore, regular balanced scorecard information. This
Red: the initiative is off-track, with review of performance levels and facilitates quantitative estimation of
no plan or no agreement. performance metrics is vital overtime. the magnitude and time-lags of
Amber: the initiative is off-track, but linkages between measures.
there is an agreed, resourced Evaluating results and testing the way
recovery plan in place. people think about the business should This has two benefits:
Green: the initiative is on track to be regular. Over time an organisation
deliver objective. will gain a deep understanding of its ● It helps to forecast the future value
value drivers. Consequently, both the creation impact trajectory of
This system can be further modified, value and nature of the selected strategic alternatives before
to communicate additional/other performance measures need to be committing resources to new
information, for example: reviewed frequently, at the very least investments and initiatives; and
through the planning and
Blue: progress information overdue. forecasting/budgeting process. ● It makes explicit the key operational
Black: progress information not yet drivers of value creation, and
due. Testing and adapting strategy facilitates an understanding of
There is little point in achieving interdependencies among strategic
In implementing its balanced performance targets that underpin a resources and the business unit’s
scorecard, Morrison Construction used faulty strategy. Appropriate actions strategic objectives.
a golfing analogy as a framework for that ensure the validity of the current
the 18 key measures that it identified strategy that underpins the scorecard,
as key to its success. can be implemented. These include:
analytic methods – hypothesis testing
Each measure (or hole) was given a and dynamic simulation.
‘par’ value, and the company scored
and communicated its performance
according to its score for each ‘hole’.
14 Effective Performance Management Implementation and practicalities

It is worth noting however, that while 2.1.5 Mobilise change through However, even where such
this may look like a good idea in executive leadership commitment is secured, and despite
theory, the statistical testing of causal A pre-requisite for the success of a expending considerable effort and
links may in practice prove scorecard programme, or indeed any resource, not all organisations have
uneconomic due to: other performance measurement been successful in developing and
framework, is the absolute and explicit deploying a balanced scorecard
● The required investment in IT and commitment of management at the approach.
staff resources; most senior level (see box, below).
● The lack of availability of, and time
lag between, required statistics
(particularly for ‘woolly’ strategic Mobilising change through executive leadership
measures of indicators such as
workplace improvement perceptions); A balanced scorecard programme is not just about metrics, it is about
and large-scale change. The most important condition for its successful
● The tenuous nature of any measure. implementation is demonstrated ownership and active involvement of senior
executives.
The key question is: ‘how much
scientific basis is required to know that The balanced scorecard is often most effective when used as part of a major
a particular performance driver is key organisational or culture-change process (see the case study on BAE
to generating shareholder or Systems). Although scorecard projects can be launched from different
stakeholder value and therefore one organisational units, the most important criterion for success is that the
which the organisation needs to get initiating unit has a senior executive whose leadership and management style
right?’ emphasises:

In answering this question, it is critical ● Communication;


to consider the scalability of lead ● Participation;
indicators. Although customer ● Employee initiative; and
satisfaction may drive sales and profits, ● Involvement.
a doubling of customer satisfaction
ratings may not lead to a doubling in The process to initiate a balanced scorecard, as with any other change
profits. An appropriate question to ask programme, begins with the leader creating a sense of urgency for change,
may be: ‘how much customer which may arise from the need to:
satisfaction should the organisation be
seeking to deliver?’ ● Reverse recent under-performance; and
● Respond to changes in the operating environment.
Other anticipated causal links with an
impact on strategy realisation may The commitment of senior management is needed in three distinct phases of
relate to intangible performance the change:
drivers and outcomes, such as the
trade-off between two intangible ● To launch the change process (mobilisation);
assets: e.g. product innovation and ● To establish team-based approaches to deal with transition to the new
customer satisfaction. performance model (governance); and
● To create and modify the strategic management system.
These are not questions with easy
answers and academic research has Adopting the new measurement and management system of the balanced
not proved that causality can be scorecard helps organisational leaders to:
numerically solved, particularly for
longer time scales. In the complexity ● Communicate the vision for change; and
of a large organisation, it can also be a ● Empower business units and individual employees to devise new ways of
challenge to split out cost drivers from doing their day-to-day jobs to help the organisation achieve strategic
revenue drivers and model the business objectives.
in a way that it is fully understood
when a ‘lever’ is pulled. It is therefore By focusing and aligning resources and activities on the strategy required for
important to consider the objective of achieving an organisation’s mission, the balanced scorecard helps
an initiative underlying a strategy and organisations to mobilise for change. Where employees can see the linkages,
to analyse both its impact on revenue integration and initiatives encompassed in the balanced scorecard, they are
and cost. For example, a price more willing to commit to stretch performance targets.
promotion will affect store traffic and
will therefore have an impact on both
cost and revenue.
Effective Performance Management 15

3. Beyond Kaplan and Norton –


alternative and complementary approaches

3.1 Strategy mapping Strategic importance of characterised by their unique resource


While there is wide agreement on the intangible assets base. This resource base consists
need to understand how tangible and Organisations realise that it is their increasingly of intangible assets. This
intangible assets interact to drive the intangible assets (together with means that the intangible assets of a
business model and performance, there tangibles) that create distinctive firm should be one of the central
are differences of opinion on how best organisational capabilities, which in considerations in formulating strategy
to achieve this. It is important to turn are the basis for a competitive and one of the primary constants upon
understand the basis and contribution advantage. It is no longer sufficient to which a firm can establish its identity
of alternative approaches so as not to just identify the competitive forces, and frame its strategy.
be confused by terminology. opportunities, and threats of the
industry. In addition, organisations In summary, it is the interaction
3.1.1 The Value Creation Map have to understand their corporate between resources (tangible or
(Bernard Marr et al., Cranfield School competence and resource composition intangible) that drive capability
of Management) in order to evaluate these differentials, which in turn drive
This approach builds on the strategy opportunities. Different firms develop competitive advantage. This is why
map as a tool to represent visually different distinctive competencies and organisations need to bring intangible
how intangibles drive tangible value. It the question they have to ask resources and core competencies into
was developed to address questions themselves is: do we have the right their strategic thinking.
such as: What are our most important competence to pursue certain
intangibles? How do they help us opportunities? Figure 1 shows the breakdown of
deliver better performance? organisational assets into physical,
Critically, there is the understanding Competence-based competition was monetary, and intangible assets.
that: first framed by Edith Penrose (1959) Intangible assets are then subdivided
and then later picked up and enhanced into human, relational, and structural
● It is not the stock (the simple by Birger Wernerfelt, Richard Rumelt, assets. Below, each of the intangible
possession) of organisational assets and Jay Barney, who viewed assets categories is described in further
that delivers value but the organisations as heterogeneous entities detail.
deployment and configuration of
such assets (tangible and intangible); Figure 1: Organisational assets
● Organisational assets are
interdependent and cannot create
value on their own – a strong brand
for example is worth less without the
supporting processes to produce
good quality products or services; the Physical Assets Monetary Assets
latest technology requires the
complementary knowledge to
operate it; and best production Organisational Assets
capabilities are worth little without a
good distribution network; and
● Not all assets are of equal
Intangible Assets
importance in the value-creation
process. Marr (2004) et al address the
issue of how best to understand and
visualise the causal dynamics
inherent in organisational value
creation. This can then guide
decision-making and resource
allocation. Human Assets Relational Assets Structural Assets
16 Effective Performance Management Beyond Kaplan and Norton – alternative complementary approaches

For the purpose of this report, The example below is based on the Step 2:
intangible assets are defined as those experiences of an on-line retailer. Arrange a workshop of senior
key value drivers that do not have a management to:
physical presence and are based on Step 1:
intelligence or emotions. They may be Identify key resource stock, by linking ● Identify the organisation’s key
analysed as: internal competencies with external resource stock, based on
opportunities; pre-prepared lists; and
● Human assets: skills, competence, ● Identify and rank the key resources in
commitment, motivation, loyalty of This can be done using either a order of importance, prepared by
employees, technical expertise, top-down approach (appropriate for each participant.
problem-solving capabilities, organisations with a clear strategic
creativity, education, attitude, intent, who should ask what key The workshop is used to consolidate
entrepreneurial spirit; resources are needed to deliver the different views into one document.
strategy), or a bottom-up approach The outcome of the workshop is a
● Relationship assets: relationships with (more appropriate for organisations map of the key resources and their
stakeholders, licensing agreements, that have a more diversified strategy, relative importance.
partnering agreements, contracts, who should consider what resources An example map of key resources,
distribution arrangements, customer they have and what the organisation based on the experiences of an online
loyalty, brand image; and does well). retailer, is given below (figure 2).

● Structural assets: all intangibles that


stay with the organisation – Figure 2: Organisational key resource map
corporate culture, routines and
practices, virtual networks, tacit rules,
intellectual property – patents, Physical resources Relational resources Monetary resources
copyrights, trademarks, brands,
registered designs, trade secrets and
processes whose ownership is Distribution Supplier
Budget
granted by law. network relationships
Lender
The dynamic nature of intangible IT Customer relationships
assets infrastructure relationships
It is not the stock of assets (tangible
or intangible) that deliver value, rather
it is the deployment, configuration and
interactions between these assets, and
the transformation process from inputs
into outputs/offerings that is key. Marketing know-how Processes

The process of identifying and


mapping value creation in firms is Distribution
relatively straightforward. In essence, Patents
know-how
the following questions must be
addressed:
Human resourses Organisational
● What are the most valuable
resources that enable the firm to
deliver value? source: Marr, B. (2004)
● How do these resources depend on
each other and interact dynamically
to deliver value?
Effective Performance Management Beyond Kaplan and Norton – alternative complementary approaches 17

Step 3: Figure 3: Map of the resource stock and flows


The map of the key resource stock is Organisational resources interactions
given to all workshop participants, plus
a matrix containing the same
resources in rows and columns.
Participants then each complete the Distribution
matrix, rating the influence of all know-how
resources on each other, until all Supplier
combinations are complete. relationships
Budget
Step 4:
From the completed matrices, the
facilitator compiles a map, termed a
Navigator (Guta and Roos, 2001, Neely
et al. 2003), or Value Creation Map IT Patents
(Marr et al, 2004) of resource stocks infrastructure
and flows. An example map of resource
stocks and flows is included (figure 3).

Marketing know-how

Processes

source: Marr, B. (2004)

Figure 4: An example value creation map

The Value Creation Map approach


offers the freedom to depart from the
four perspectives of the balanced
Brand scorecard framework and start from a
blank sheet of paper in order to reflect
Know-how
the idiosyncratic nature of each firm.
For instance, where improvement of
the conformity of the prototype with
the product design is a key value driver
Customer of new product development, there
Patents satisfaction will be a series of indirect
dependencies behind this occurring
Culture such as codifying procedures and
problem solving capacity. When these
have been identified, it is then possible
to identify priorities and management
actions.
Customer
relationships Figure 4 is the organisational Value
Creation Map based on the identified
direct and indirect performance drivers.

source: Marr et al, (2003)


18 Effective Performance Management Beyond Kaplan and Norton – alternative complementary approaches

The Value Creation Map was developed ● Create a list of assets used to Phase two:
to complement Kaplan and Norton’s execute strategy and differentiate ‘Map’ the specific customer value
original strategy map. Its developers organisation from competitors; propositions and product/service
suggest that the processes followed in ● Clarify relationships between VDF outputs that drive the attainment of
its configuration ensure consensus identified assets, explaining how they specified financial goals;
among managers that the interrelate to deliver customer value;
representation is correct and bias is ● Identify strengths, weaknesses, Phase three:
limited, and propose that further opportunities and threats underlying Select internal business process
useful steps would be to: the VDF; and measures.
● Define the critical success factors
● Integrate the map with the underlying the company strategy, The 13 steps:
performance measurement system; and identify particular combinations 1 define financial goals;
and of assets as being supportive of each 2 define customer;
● Test empirically the assumption using critical success factor. 3 define outputs;
performance indicators. 4 define processes;
It is argued that using the VDF and 5 define inputs
Unlike the traditional strategy map, this four-step process helps 6 define suppliers;
this approach identifies both the direct organisations to focus their balance 7-9 prepare ‘if – then’ matrices (the
and indirect dependencies of scorecard metric selection process on hypotheses that underlie the
performance as well as differences in the assets and critical success factors business model) for financial
importance. Understanding the relative most important to achieving strategic drivers, customer value drivers
importance of specific assets in the goals. and process drivers (see
creation of capabilities and value appendix two); and
enables better resource-allocation (A summary of the VDF adopted at 10-13 select balanced scorecard
decisions. Dell is included at appendix one). measures, for each scorecard
perspective.
3.1.2 The Value Dynamics 3.2 Scorecard implementation
Framework Kaplan and Norton’s five guiding The business modelling approach
(Peter Brewer, Associate Professor, principles together form a useful claims three strengths:
Department of Accountancy, construct supporting scorecard
Miami University, Oxford, Ohio) implementation. An interesting ● It offers a lock-step methodology to
alternative is offered in Peter Brewer’s guide the balanced scorecard
In an article that won the International Business Modelling Approach, outlined formulation process;
Federation of Accounting (IFAC)’s below. ● It adds rigour to the process of
Professional Accountants in Business linking organisational strategy to the
2003 Article of Merit award, and 3.2.1 The Business Modelling balanced scorecard since the first
published in Strategic Management Approach nine steps of the business modelling
Accounting, Peter Brewer introduced Causal links are again key to the approach must be completed before
the Value Dynamics Framework (VDF). scorecard development and any measures can be selected. This
This is as a tool that can help implementation process, but business means that the organisation must
companies to bridge the gap between modelling involves a 13-step crystallise its strategic vision into a
strategy statements and balanced programme with a three-phase process-oriented business model,
scorecard implementation. implementation programme: linked together through ‘if-then’
hypothesis statements; and
The VDF recognises five asset Phase one: ● By following the questionnaire
classifications (physical assets, Characterise the business model as a (shown in appendix three), coupled
customer assets, organisational assets, process, by identifying: with the ‘if-then’ matrices, it provides
financial assets and employee/supplier organisations with the tools needed
assets), and recognises inherently the ● The customer value proposition to ensure that all members of the
increasing importance of intangible offered; management team have an
assets. Thus the value creation ● Key (product/service) outputs that opportunity to provide input into the
capabilities of organisational, customer enable delivery of the value balanced scorecard formulation
and employee/supplier intangible proposition; process.
assets are brought into the scorecard ● The processes required to support
framework, through Brewer’s four-step provision of these outputs;
model: ● The critical inputs that allow the
processes to function optimally; and
● The suppliers that provide the inputs
that enable processes to function
optimally.
Effective Performance Management 19

4. Dimensions of scorecard application

Part of the value of the balanced Critically, however the scorecard is The research findings suggest that
scorecard as an effective tool for adapted, the cause and effect front-line staff have a detailed
strategic management lies in the relationships inherent in activities are knowledge and understanding of
versatility of the framework, which key. By deriving multiple and health care delivery that can make a
may be adapted according to inter-linked strategic ‘themes’, which key contribution in specifying the
organisational needs. Accordingly, a underscore the overall strategy, the optimal source and extent of
balanced scorecard approach can be process of defining lower level performance improvements.
adopted by organisations in the public operational objectives, measures,
and not-for-profit sectors. However, targets and initiatives relating to a The key contribution of senior
following a mechanistic scorecard particular theme (and thus management in this
template, without understanding the contributing to corporate strategy performance-improving partnership,
organisation’s key strategic/value realisation), is made easier. arises from their enabling and
drivers is unlikely to help realise empowering functions. By:
desired activities and behaviours. For public sector organisations, it may
be difficult to define who the ● Establishing the context;
4.1 The balanced scorecard ‘customers’ are. The ultimate customer ● Providing resource; and
in the public sector is generally not the same as the body ● Facilitating effective communication,
According to the original scorecard providing the funding. Public sector
architecture, the strategy map places organisations have multiple Senior management realise their most
the four perspectives in a hierarchy, stakeholders (government, service significant contribution to continued
with the financial perspective at the users, funding bodies, other agencies) and sustained performance
top. Where profit-maximisation is not and it may be appropriate to include management and improvement.
the main objective of an organisation, objectives for several different groups
the ‘perspective-derived’ architecture as part of the ‘customer’ perspective, 4.2 Embedding a sustainability focus
remains appropriate, although the before looking at, for example, the with the balanced scorecard
nature and focus of each constituent internal processes required to meet the In its original format, the scorecard is
perspective is likely to change, to objectives of each different group. concerned more with strategic success
reflect the non-commercial logic of the from the owner/shareholder
organisation. Where consideration has A case study based on a health service perspective. Some commentators have
been given to the focus of such drivers, delivery organisation that has followed noted that its apparent disregard for
the underlying cause and effect this approach is included in Chapter the wider impact of corporate activity
relationships can be explored, and an seven. on other stakeholders may ultimately
appropriate scorecard developed. weaken the value of the scorecard in
Research by Dr Philip Barden found the longer term. However, leading
The strategic objectives of that the success of front-line institutions like the French business
not-for-profit organisations are not performance improvement in the UK school INSEAD are considering the
measurable simply in financial terms, National Health Service (NHS) is value of the scorecard as a strategic
and this can be reflected in a scorecard linked inextricably to the development management framework to
with a structure and emphasis slightly of partnerships between policy makers, re-orientate strategic thinking and
different from the standard. For strategists and front-line staff. What is integrate sustainability issues in the
example, the ‘traditional’ perspectives crucial to the success of the balanced scorecard design. (see below).
(see chapter one) may be changed, so scorecard and other performance
that the customer/service-user improvement initiatives is not the 'The value of the balanced scorecard
perspective replaces the financial sophistication of such initiatives, but: as a tool for integrating
perspective at the top. Alternatively, sustainability concerns into
attention may be focused on achieving ● The extent to which they are jointly organisational strategy, and for
the overall objective or mission designed by senior management and embedding this throughout the
through all four perspectives, via the front-line staff; and organisation'
development of inter-related strategic ● The communication styles used in (Author, Francesco Zingales, Research
themes, and the establishment of discussing and evaluating Associate, INSEAD).
targets and theme-based objectives performance objectives.
dispersed throughout the organisation. Our research focused on three large
companies – LVHM, EDF and ACEA –
for whom sustainability concerns are
of strategic significance and impact for
identified stakeholder groups.
20 Effective Performance Management Dimensions of scorecard application

It was thought that the scorecard To address these perceived


approach might be an appropriate shortcomings we took the decision to:
integration tool for four main reasons:
● Include issues relating explicitly to
● Because of the scorecard’s (medium- environmental and social risk in each
to long-term) time horizon. This of the scorecard perspectives; and
reflects the time horizon through
which environmental and social ● Involve a broad array of people
management activities might be (including environmental/social
expected to create value; managers) in a number of steps of
the building and running of the
● Because the scorecard approach balanced scorecard construction and
requires top management to management process.
acknowledge implicitly the
limitations of relying solely on The two-and-a-half-year research
financial indicators; programme resulted in:

● Because the explicit ‘cause and ● The identification of strategic issues


effect’ analysis of which the to which environmental and social
scorecard is comprised, fosters the operations (and therefore managers)
level and breadth of discussion and might have a key contribution. This
exchange which are helpful for the was facilitated by the exercise of
full consideration of sustainability mapping strategies in terms of cause
issues, which occur along the and effect diagrams;
value-creation chain; and
● Greater collaboration between
● Because the scorecard is the focus of environmental/social managers and
a widespread strategy management marketing managers, financial
process which is conducive to controllers and operation managers
intelligent consideration of the at the business-unit level; and
strategic value of
environmental/social issues. ● A new set of strategic indicators with
an in-built link to
We were aware of what were environmental/social issues, making
considered to be deficiencies in the the value-creation potential of these
framework and processes of Kaplan activities easier to access in a later
and Norton’s balanced scorecard: stage of the management process.

● The framework appeared to lack an Information regarding INSEAD’s


appropriate mechanism to include research activities is available at:
risk that went beyond those relating www.insead.edu/facultyresearch/
to client needs; and research/index.htm

● The process was insufficiently


codified – it did not enumerate
principles that would help firms to
decide who should be involved in
discussions regarding scorecard
design, or when and in what form
sustainability considerations should
be included.
Effective Performance Management 21

5. Software in scorecard development and application

Developments in performance- Cranfield’s team identified ten points


measurement software have improved that each organisation should consider
the design of strategy maps. These when looking for the right software to
applications have helped to make use with a balanced scorecard:
them a key part of understanding,
communicating and reviewing ● Company and product – vendor
performance. They also allow the user background and expertise, licence
to ‘feed’ the maps with information fee, maintenance fees, training and
about relationships and underlying implementation costs;
measures. This enables automation of ● Scalability of the programming, how
‘traffic lighting’ of performance (green the database works;
for good performance, amber for ● Flexibility and customisation of
medium and red for bad). methodology and approaches;
● Features and functions – security and
As businesses, governments and access control, exception alerting,
not-for-profit organisations around the collaboration and reporting;
world realise the need to manage their ● Communication – web-based,
strategy more proactively, many are commenting, email integration;
implementing corporate ● Technical specifications – technical
performance-management systems. requirements, integration with
Multiple application providers offer a existing infrastructure and databases;
plethora of software solutions and an ● User interface/data presentation –
informed selection is vital, since the information display and strategy
software will be instrumental in maps;
collecting data, analysing performance ● Analysis functionality – analysis
and communicating performance capabilities, statistical functionality,
information. The wrong decision can forecasting;
result in a significant waste of time, ● Service – levels of service,
energy and money. It can also implementation support, technical
undermine the entire balanced support; and
scorecard development effort and the ● Future – developments and release
credibility of the performance frequency of the product, future
management system that is being compatibility.
implemented.
A recent Gartner/Cranfield report
To help guide companies through the evaluates all major performance
selection process, Bernard Marr of measurement software applications.
Cranfield University has led research More than 30 applications (see below),
involving more than 80 companies including products from SAP, Oracle,
over three years. Using theoretical Peoplesoft and Hyperion, as well as
sampling techniques, data from a more specialist vendors, are discussed
range of companies was gathered, with in detail.
the aim of developing a selection
framework applicable across
organisation types. Twenty-five senior
members of consulting firms,
(including Accenture, Cap Gemini,
Ernst & Young, KPMG and Gartner)
were interviewed. Each had experience
of scorecard implementation and
software selection. In addition, more
than 45 members of software
companies specialising in providing
balanced scorecard and performance
management software were
interviewed.
22 Effective Performance Management Software in scorecard development and application

Software vendors with solutions to support a balanced scorecard implementation:

Company name Product name Internet address


Active Strategy Active Strategy Enterprise www.activestrategy.com
Aspiren Ltd Aspireview www.aspiren.com
Business Objects Balanced Scorecard Analytic App. www.businessobjects.com
Cognos Metrics Manager www.cognos.com
Corporater Corporater Balanced Scorecard www.corporater.com
CorVu CorStrategy/CorManage www.corvu.com
EFM Software BV Bizzscore www.efmsoftware.com
Ergometrics Ergometrics www.ergometrics.com
Hyperion Hyperion Performance Scorecard www.hyperion.com
IC Community Dolphin Navigator System www.iccommunity.com
IFS IFS Scorecard www.ifsworld.com
Insightformation Balanced Scorecard Framework www.insightformation.com
Nexance NeXancePM www.nexance.com
Open Ratings SPImact Balanced Scorecard www.openratings.com
Oracle Oracle Balanced Scorecard www.oracle.com
Panorama Business Views PB Views www.pbviews.com
Peoplesoft Enterprise Scorecard www.peoplesoft.com
Pilot Software Pilot Balanced Scorecard www.pilotsoftware.com
Procos AG Strat&Go Balanced Scorecard www.procos.com
ProDacapo Prodacapo Balanced Scorecard www.prodacapo.com
QPR Software QPR ScoreCard www.qpr.com
SAP SEM Balanced Scorecard www.sap.com
SAS Institute Strategic Performance Management www.sas.com
Show Business Software Action Driven BSC www.showbusiness.com
Stratsys AB Runyourcompany www.runyourcompany.com
The Vision Web Scorecard.nl www.scorecard.nl
Vision Grupo Consultores Strategos www.visiongc.net
4GHI Solutions Cockpit Communicator www.4ghi.com

source: Marr, B. and Neely, A. (2003)


Effective Performance Management 23

6. The balanced scorecard – a resounding success?

Although the balanced scorecard has 6.1 Why balanced scorecards Strategy, success or value-creation
many advocates, support is by no sometimes fail mapping is a way of facilitating
means universal or unqualified. Undoubtedly some organisations have agreement between managers on
been less than successful in using a those non-financial performance
Some commentators have remarked balanced scorecard. The reasons why drivers that have the greatest impact
upon a perceived absence of rationality can be explained by the results of on the financial outcome. The research
and logic in the original presentation several surveys, which show that: by Ittner and Larcker (2003)
of the scorecard. Others have remarked highlighted the difficulties that most
upon specific issues that may result in ● 78 per cent of companies that have companies have in trying to achieve
the failure of the scorecard to live up implemented strategic performance- this, with fewer than 30 per cent of
to its perceived potential for measurement systems do not assess companies developing causal models.
implementation. rigorously the links between Moving to this stage requires a shift in
strategies and performance approach to planning and performance
Some critics refer specifically to: measures; and time to think and develop rigorous
causal models and performance
● The validity of the objectives/ targets ● 71 per cent have not developed a measures.
selected to track the observed cause formal causal model or value-driver
and effect relationships upon which map; Ittner and Larcker also found that
the scorecard relies; organisations adopting a causal
● 50 per cent do not use non-financial business model experience both high
● The scorecard’s reliance on control measures to drive financial levels of managerial satisfaction and
features (performance measures) performance; return on assets. With the potential for
which are not rooted in the economic benefits dependent on
organisation, but which are ● 79 per cent have not attempted to getting a balanced scorecard
formulated and distributed in a validate the linkages between their implementation right, it is perhaps
hierarchical, top-down manner, non-financial measures and future surprising that so few managers devote
reducing the likelihood of financial results; and time to this area.
organisational buy-in; and
● 77 per cent of organisations with a One approach that organisations may
● The model’s disregard for external balanced scorecard place little or no find helpful, is to formulate a
competition and/or technological reliance on business models and 45 ‘destination statement’, possibly even
advance, which may introduce per cent found the need to quantify before considering the scorecard
uncertainty in terms of risk, and results to be a major implementation objectives, which sets out a clear idea
which may threaten or invalidate the problem. of what the organisation is trying to
present strategy. achieve. From the destination
Research by professors Christopher statement, a menu of strategic options
Ittner and David Larcker at Wharton and the supporting ‘strategy map’
Business School found that many illustrating the cause and effect
companies mistake the balanced relationships that underpin the
scorecard (and other measurement strategy, can be derived. For many
frameworks such as the Performance organisations, it is advisable to
Prism) as an off-the-shelf checklist. A separate the strategy-mapping process
lack of understanding of the non- from the development of a scorecard.
financial areas of performance that
might advance strategy can allow Equally, some organisations, although
self-serving managers to choose and successful in tracking the causal
manipulate measures. relationships underpinning strategy and
drafting the balance scorecard strategy,
experience problems at the
implementation stage.

Some problems that organisations


have experienced in using the
framework and their underlying causes
are considered here.
24 Effective Performance Management The balanced scorecard – a resounding success?

Transitional issues Design failures Following this approach guides the


scorecard team to a consensus, and
1. Major organisational changes 1. Confusion regarding primary provides the logic behind the scorecard
(for example, a merger or acquisition); performance drivers which is invaluable in gaining
The balanced scorecard is not a Often, financial measures carry more credibility and obtaining buy-in
‘quick-fix’ approach to alleviate weight within an organisation than throughout the organisation.
financial problems. Where large-scale, non-financials, but to drive through a
structural organisational changes are holistic, long-term and sustainable 2. Poorly defined metrics;
driven by the need to remedy financial strategic re-alignment, the needs of Metrics may be classified as either:
difficulties, the longer-term non-owner stakeholders (service users,
commitment required for successful service delivery partners, etc) should ● Results metrics – measures seen by
balanced scorecard implementation also be considered. This is particularly the process customer. These are the
may be sacrificed for the short-term important where: most useful as a management tool,
hunger for apparent improvements in and are usually what appear on the
reported financial results. ● The business is adopting a value scorecard.
based management (VBM) approach;
A potential problem of such OR
short-termism is that unless ● Shareholder value maximisation is
organisational strategy has been the ultimate objective; and ● Process metrics – internal measures
considered carefully, and measures to that cause the results metrics.
secure and manage its implementation ● The needs of non-financial Process metrics are most useful to
have been developed and deployed in stakeholders are material to the improvement teams and focus
the ‘new’ organisation, the strategy is business. attention on the places where
unlikely to be sustainable. improvements will have the greatest
These requirements should be analysed impact.
2. Changes in key explicitly and translated into scorecard
personnel/management team; measures. Because of the causality Good metrics are:
Leadership and management between links within and between
commitment to the balanced scorecard scorecard perspectives, it is important ● A reliable proxy for outcomes and
and its underlying principles that the ultimate impact of the stakeholder satisfaction;
determines the way it is used and its metrics is understood clearly.
impact on performance. Existing ● Weakness or deficit-oriented (have
scorecard initiatives can falter if, To construct a scorecard that balances an ideal value of zero);
following a change in key personnel, all stakeholders’ requirements the
new management does not explicitly following methodology may be useful: ● Simple and easy to understand;
continue to support its use. It is
important to ensure that a change in ● Establish prioritised (numerically ● Well-documented, unambiguous, and
management does not lead to a weighted) stakeholder requirements, consistent, with sound operational
preoccupation with operational based on strategy-adjusted need for definitions;
matters, rather than a continued focus improvement;
on the strategic issues reflected in the ● Timely and accessible to those who
high-level scorecard. ● Quantitatively rank the internal can best use them;
processes in terms of their aggregate
impact on these requirements; and ● Linked to an underlying data system
that facilitates the identification of
● Create appropriate metrics for the root causes of gaps in scorecard
processes heading the list. results; and

● Have a formal process for their


continuous review and refinement.
Effective Performance Management The balanced scorecard – a resounding success? 25

Designing robust performance 3. Negotiated, rather than stakeholder 6. There is not, and cannot be a
measures can be aided by the use of a focused performance targets quantitative linkage between
structured approach using a framework Although performance targets should non-financial and expected financial
such as the one shown below: be set according to current knowledge results.
of the means used to achieve them, it It has been argued that efforts to
Title: a clear title that explains its is argued that such means are rarely undertake a meaningful quantitative
importance known at the time of target setting – analysis of both the impact of actions
a ‘chicken and egg’ situation. generating non-financial performance
Purpose: for example, measuring measures and the expected financial
rate of improvement 4. Lack of a delivery-level target results, are not only difficult, but may
deployment system also be pointless. Diverting resources to
Relates to: which business Financial systems are able to develop alternative strategies or
objective consolidate data generated at the strategic objectives may be similarly
transactional level (individual sales are misguided, for the same reasons,
Target: setting out the level of aggregated to product levels, then to notably:
improvement expected and in product line levels and are eventually
what time frame combined until a single corporate sales ● The impact of apparently
figure is generated), and all financial insignificant decisions;
Formula: specifying the way measures can be communicated using
performance is measured taking a single metric. ● The operation of the ‘chaos’ theory
into account peoples’ behaviour within businesses; and
The same cannot be true of
Frequency of measurement: non-financial performance measures, ● The potential existence of unknown
which may be difficult to or un-quantifiable time-lags between
Frequency of review: communicate in a consistent actions and impacts, even where
denomination. causality does exist.
The person who measures:
5. No state-of-the-art improvement 7. Being inward looking and examining
Source of data for the measure: system is used; the impact of external discontinuities
In theory, the strategic balanced One criticism levelled at the balanced
The person/team who should act scorecard has an in-built mechanism scorecard is that the framework
on the data: for verifying the validity of the encourages an internal focus, although
causalities from which it has been advocates argue that the scorecard
Their response if performance is developed. However, in practice, manages external forces in two ways.
acceptable or unacceptable. organisations seldom have the time or First, these are considered when
resource to develop and follow through managers performing a SWOT (and/or
The use of this approach could any required strategic realignment, similar approach) and competitor
help ensure that measurement particularly where considerable analysis to formulate strategy, and
stimulates improvement and resources are already deployed. secondly many scorecard measures are,
issues and challenges are (Computerised balanced scorecard by their nature, calibrated against
discussed. systems may address this perceived competitors (for example, incentive
short-coming). packages).
Neely A. Richards H. Mills J.
Platts K. and Bourne M., (1997), Where there are significant changes in
external conditions, management
should assess how these have an
impact on the scorecard and whether
it needs to modify the objectives,
measures and targets. (Examples of
such changes include those imposed
by competitor activity or government
legislation).
26 Effective Performance Management The balanced scorecard – a resounding success?

To ensure that external factors are Other criticisms include: This is particularly pertinent for targets
considered in strategy development, an in the learning and growth perspective
organisation should first undertake an ● A danger of using the scorecard to of the scorecard, which are likely to
assessment of its current position. replace a genuinely systematic set of have an impact on employees directly.
Management accountants need to take performance measures. Development The need to attract and retain the best
a central role in this assessment, by of such measures for each level of employees may lead organisations to
producing and analysing the right review in the organisation remains a ‘lose’ a percentage of the workforce
information that supports decision task to be completed, even if each year, based on poor performance.
making including: developing an executive-level Where such policies are pursued,
scorecard just happens to be the first careful consideration should be given
● A definition of the market, and step; to communication and implementation
market segments in which the of the scorecard, so as to avoid
organisation operates; ● The scorecard pays scant regard to resentment among employees.
● A qualitative and quantitative variations in performance. While this
analysis of these market segments; may be acceptable at the top level of Linking targets to individual pay may
● An understanding of the a global corporation which is be a reasonable approach in theory, at
organisation’s competitive position in interested in tracking the high-level least, within cultures where financial
each; implementation of a new corporate reward is prized above other sources of
● Identification of sources of strategy throughout the organisation, employee compensation. However,
competitive advantage; and it may be a dangerous oversight at such a policy may be irrelevant in
● Articulation of findings and definition front-line level; cultures where financial rewards are
of issues to be addressed. not valued as highly. This point is
● The value of the visual representation particularly important for corporations
The use of the CIMA Strategic and intelligent interpretation of data, that are considering balanced
Scorecard outlined in a report from key to making variations in data scorecard implementation on an
CIMA, Enterprise Governance: Getting visible, is largely ignored. Both issues international scale.
the Balance Right, will help may be central to how measures are
organisations develop a pragmatic used in practice, and as such, deserve Despite its perceived limitations, it is
approach to the oversight of a serious attention in their own right. unwise to write-off the value of the
company’s strategic process. Kaplan and Norton’s book, Strategy balanced scorecard approach.
The report is available at Maps: Converting Intangible Assets Experience has shown that, as
www.cimaglobal.com. into Tangible Outcomes, shows how organisations have bought into
strategy mapping can help to scorecard theory, it has evolved from a
6.2 Presentational/stylistic develop the power of visual simple performance-measurement
criticisms representation; and device, into a powerful framework,
Critics refer to clever (if consciously which may be used:
‘confused’) use of linguistic devices in ● The use of numeric targets as the
Kaplan and Norton’s original foundation of making fundamental ● As a communication device;
presentation of the scorecard’s improvements. It has been suggested ● As a driver and conduit for
potential – for example the use of that arbitrary numerical target organisational culture change; and
rhetoric, storytelling, metaphors and setting is more likely to provoke ● To implement, reinforce and
authority arguments in the place of grudging compliance and continually refine an agreed strategic
sound argument. They suggest that counter-productive behaviour than a focus and business model throughout
such devices combine with an existing thirst for fundamental and an organisation.
level of reverence and respect for, sustainable improvement.
between and within the academic, In practice, many organisations (public,
consulting and ‘management guru’ It is probable that staunch proponents private and not-for-profit) have
community to raise expectations of of the scorecard would refer to the implemented a balanced scorecard
what the scorecard can deliver. importance of education and of approach for these, and other reasons,
gaining genuine buy-in and ownership with differing degrees of success. Some
from employees to the potential of the may be counting the cost of an
scorecard. This would, arguably, result aborted project, where others enjoy a
in a real commitment to the re-alignment of strategic focus, and an
achievement of mutually agreed engaged, motivated and empowered
scorecard performance targets. workforce.

However, the implementation of


targets needs to be handled sensitively
with clear appreciation of their wider
impact.
Effective Performance Management 27

7. Case studies

7.1 Private sector: BAE Systems This case study focuses on the ● Lack of cost control at product
This case study is based on Customer Solutions and Support design stage;
information generated by a business unit, which is responsible for: ● Lack of marketing strategy for new
CIMA-funded research project, markets;
undertaken by Dr Mostafa Jazayeri- ● Service-based prime contracts, ● Poor response to changing
Dezfuli (Manchester Metropolitan programmes and equipment customers; and
University) and Professor Robert transitioned from the programmes ● Eroding market share and profit as a
Scapens (University of Manchester). organisation, and the avionics and result of over-productive European
operations business units; capacities and American competition.
BAE Systems – the balanced ● Generic support services; and
scorecard and the culture change ● The development of opportunities in Faced with changing markets and
programme. adjacent markets. increased competition, the company
The balanced scorecard approach was struggled to re-establish its dominance
implemented at BAE Systems partly as The unit plans to focus its growth and regain market share.
a consequence of an existing culture efforts on the following three areas:
change programme. It supported the The change programme at BAE
cultural change project by reinforcing ● Customer support; systems
its five fundamental values and ● Commercial aircraft; and Senior management decided to
encouraging behaviour that was ● Defence systems. implement a comprehensive change
consistent with the company’s goals programme, which involved:
and values. A historical perspective
The end of the Cold War led to a rapid ● Dismantling the conglomerate that
About BAE Systems: formation and contraction of British Aerospace’s had existed since 1979;
management structure major customer base. Although BAE ● Replacing this with interlocking
In 1979, British Aerospace was Systems made its first profit for three businesses that would enrich one
privatised. In 1999, it was Europe’s years in 1994, its performance was still another and generate competitive
largest defence company, and on lacklustre when compared to sector benefit for the entire enterprise; and
acquisition of Marconi Electronic peers and it was recognised that ● Reducing reliance on managerial
Systems later that year, it became, as supply far exceeded demand. authority, formal rules and
BAE Systems, the world’s second- procedures and narrow divisions of
largest defence contractor. Despite major changes to its control work.
systems (including investment in
With more than 100,000 employees in up-to-date facilities and machinery, At the heart of the culture change
nine ‘home’ markets (UK, USA, the adoption of modern manufacturing programme was BAE’s balanced
Sweden, Saudi Arabia, France, Italy, methods and implementation of scorecard. The change process was
Germany, Australia and Canada), the activity-based costing and systems and aided by the fact that the information
company enjoyed annual sales of over analysis programmes), competitive on which successful operation of the
£12 billion, an order book of performance did not improve as scorecard relied, was extractable from
£41 billion, and had customers in more expected, and it was time for serious BAE’s existing SAP R/3 (ERP) system.
than 80 countries. analysis of the company’s strengths: Thus the scorecard was central to the
organisation’s control system. (BAE
The Executive Council of BAE Systems ● Good reputation in aerospace; used ‘traffic light’ reporting to highlight
formulates corporate strategy, and the ● Advanced technology; deviations from expected
company is divided into business units. ● Very good outreach to export performance).
markets;
● Lots of skilled employees;
● Positive cash-flow;
● In-service training and support; and
● A good relationship with some
customers and weaknesses:
28 Effective Performance Management Case studies

To achieve the required change, the Step four: Step six:


following steps were followed. Communication of the vision Embed cultural change
To create a consensus around the ‘Value teams’ were established, each
Step one: vision, the 130 Group drafted a values led by the managing director of a
Review of competitive position statement that included five significant business unit, plus a coach,
The chief executive reviewed BAE fundamental areas: drawn from the 130 Group. Each
Systems’ competitive position, with participant in the 130 Group had a
regard to market position, ● People – our greatest strength; role in the value teams. (The
technological trends and financial ● Performance – our key to winning; importance of committed line
performance. ● Partnerships – our future; leadership in securing the sustained
● Customer – our highest priority; and effort needed to drive through the
Step two: ● Innovation and technology – our culture change should not be
Involvement of senior employees competitive edge. understated.)
Aware of the significance of wide
employee involvement to drive the These became the perspectives for the Step seven:
change programme, the five company company’s balanced scorecard. Articulate the linkages between the
directors joined the chief executive to cultural change project and
undertake a comprehensive SWOT The chief executive was key in organisational competitive success
analysis of the company. motivating members of the 130 Group To maintain commitment to its change
to search for and create opportunities programme, BAE Systems used the
After initiating a broad review of the to accomplish the overall vision of the objective measures derived from the
company’s operations and company. values scorecard, and linked each to its
performance, the chief executive impact on financial performance, and
assembled a broader group of Through the consensual creation of the ultimately to the increase in company
employees who would be heavily five fundamental values, the necessary stock price.
involved in driving the project forward balance between the following
(the 130 Group). This group included dynamics was attained: Performance reporting at
the five company directors and the BAE Systems
heads and direct management of BAE ● Value creation; BAE Systems used the following
Systems’ divisions and joint ventures. It ● Strategy making; and modified version of the traffic-light
was led by a key line manager who ● Human behaviour system to report the performance and
had sufficient power to lead the status of projects:
change effort. Step five:
Plan for and create short-term goals Green everything on target;
Step three: To avoid any loss of momentum, BAE Amber minor problems occurring;
Creation of a shared vision Systems converted long-term targets Red major problems exist,
The 130 Group developed a shared into a series of short-term requiring major action;
vision to clarify: performance goals. The short-term Blue project completed;
goals focused first on individuals’ Black no report exists; and
● How to organise the change effort; objectives and behaviours, the White no measure exists.
and aggregation of which resulted in the
● The direction in which the company achievement of business targets. Overcoming resistance to change
needed to move. The establishment and role of the 130
Operations at BAE Systems were Group in crafting and clarifying the
focused on 40 or 50 projects, each proposed value statements were key to
linked to a strategic objective. Thus the overcoming resistance to change.
key driver behind long-term business
growth was recognised to be the
project reports and accounts, rather
than the six-monthly company
accounts.
Effective Performance Management Case studies 29

The chief executive insisted that each Figure 1 BAE’s Value Scorecard
member of the130 Group write a full
and honest reaction to discussions at
its first meeting, and about anything Performance Partnership
that related to the culture change Our key to winning Our Future
project. Measure Measure
● Business unit 3yr cash flow ● Growth of supplier assessment
The impact of the balanced scorecard ● Business unit value – 10 yr rating
on management control ● Growth in order book ● Sales delivery through
BAE Systems used SAP to enable it to ● Change in overall EFQM* score partnership
report the monthly results of the ● Change in EFQM* score on ● Change in EFQM* score on
scorecard in a visually appealing way Business impact on society
online. Thus, the information was ● Reduction in supplier base
shared with all company employees, result score
and this was viewed as key to
management control.

Importantly, the reports contained Customer


layers of hierarchically linked data, Our highest priority
which allowed employees to view data Measure
from a top-down or bottom-up ● Change in EFQM*
perspective. (This means that ● Sales prospects conversion
employees can both drill down to versus planned
identify the factors contributing to ● Growth in customer
performance results, or drill up, to satisfaction
affirm how their own work contributes
to the performance of their business
unit and to the business as a whole).

When the scorecard was launched in


1997, it included only eight Innovation & technology People
performance measures. The number of Our competitive edge Our greatest strength
measures was deliberately limited, to Measure Measure
allow the measurement system to ● Increase in nominees for ● Personal Development Plan
evolve over time, and indeed the Chairman’s award deployment
scorecard now includes more than 70 ● R&D % of turnover ● Change in EFQM* and people
measures, which are organised into the ● Number of best practice satisfaction score
five ‘values’ to facilitate goal setting case studies ● Opinion survey feedback
across different departments and ● Value of new lines of business
company levels. ● Number of employees
on intranet
(See figures 1 and 2)

* European Foundation for Quality Management


30 Effective Performance Management Case studies

Figure 2
BAE Systems: Performance Measures for the five values (perspectives)

BAE Systems Customer Solutions & Service International Programmes

Core BAE Systems Key Performance Measurement


Values Supported Indicators Methodology
People Recruitment and retention Monthly RAG
Expatriate redeployment Histogram
Personnel development
Reviews completed Monthly RAG
Personnel development
Reviews delivered Cumulative % graph
Employee opinion survey Monthly RAG
Performance Project management Monthly RAG
Prospects/business capture Monthly RAG
Process improvement Monthly RAG
Order intake Cumulative value graph
Operating cash flow Value graph
Sales Cumulative graph
Oil price Histogram
Cash forecasting Monthly RAG
Working capital Monthly RAG
Partnerships Joint venture performance Monthly RAG
Strategic partnership suppliers Monthly RAG
Customer Customer satisfaction index Monthly RAG
Innovation CAFI* nominations Cumulative number
CAFI* awards Gold, silver, bronze awards

* Chairman’s Award for Innovation

Establishing causality within the Cause and effect relationships were


balanced scorecard identified between actions and their
Before BAE Systems developed and outcomes both within and between
implemented the balanced scorecard, the identified scorecard ‘values’,
attention was focused on measuring although, as might be expected, there
and managing according to classic was often a time lag between the two
accounting performance metrics. variables (e.g. performance on projects
Rather than identifying and examining and order intake).
non-financial value drivers, the
company tended to measure what Interestingly, users of the scorecard
could be measured, rather than what noted that:
should be measured. ‘the more you understand the
scorecard and the more you get used
to reading it, the more you see these
connections and the more you
understand that you’ve got a complex
set of connections.’
Effective Performance Management Case studies 31

7.2 Public Sector: Where private companies must give Ensuring ownership of targets
Health Action Zone emphasis to formulating innovative To ensure ownership of performance
Developing and applying a scorecard competitive strategy in order to targets, it was vital that stakeholders
for a Health Action Zone (HAZ) generate sufficient operating profit to shared a common understanding of
(based on ‘A Practitioner’s Approach to sustain and thrive, the strategies of the policy requirements, and the values
the Balanced Scorecard’, by Allan public sector organisations must be that needed to promote their
Mackay) focused on achieving performance attainment.
targets and meeting service delivery
The operating context agreements with stakeholders. This created a shared sense of purpose
Following initiatives of previous and helped participants understand:
governments (Compulsive Competitive Internal Structure
Tendering and the Citizen’s Charter), In this case study, the governing board ● What had to be accomplished;
the best-value regime was introduced, and functional heads of the Health ● Why the work was worthwhile; and
in a framework aimed at improving Action Zone formed a top team ● How the goals could be achieved.
performance management in the (known as the ‘corporate team’) to
public sector by allowing public decide on strategy and their priorities The quadrants and measures in the
authorities to set the level and which were then cascaded down HAZ scorecard had to be relevant to
standards of the service they provided. through the organisation. the employees whose behaviour it was
seeking to change. This was achieved
Where private sector organisations The corporate team took responsibility by constructing a ‘corporate’ scorecard
formulate strategy to seek competitive for translating the bold aspirations of that reflected:
advantage and create value for the policy document into a coherent
shareholders (e.g. by maximising set of performance measures and ● The values and beliefs;
existing opportunities and developing targets, with rigorous performance ● Bold aspirations;
innovative products and processes) the reviews. Project teams were then ● Strategic aims and priorities;
strategic priorities of public sector formed for distinct streams of work, ● Key areas for action; and
organisations are laid out in designed so that those individuals best ● Time required for achievement.
government policy, and cascaded in a placed to ensure delivery of targets
structured process: had real ownership for doing so.

Strategic Priorities
Public Service Agreements

Detailed Aims and Objectives


Detailed Service Delivery agreements

The Organisation’s Strategy


Internal business plans, projects and performance measures

Individual Staff Performance and Accountability Plans


Staff performance development and performance appraisal
32 Effective Performance Management Case studies

Building the ‘corporate’ balanced 1. Gained (senior) executive It was equally important to balance
scorecard – understanding commitment and appointed a the need to develop an appropriate
organisational issues and value drivers scorecard ‘champion’ and relevant scorecard with time
The first critical step in the developing The ‘champion’ was not a member of requirements to avoid delay and a loss
the balanced scorecard was for the the corporate team, but was a strong of commitment. The overarching aim,
corporate team to understand the and influential leader who had a pivotal however, was to attain a true
issues facing the organisation. This is role with influence at all levels in the alignment of strategic objectives
the process of establishing: HAZ. throughout the HAZ.

● The conceptual and operational 2. Selected an implementation team 6. The second workshop
model of the organisation; and The team comprised people from Once the corporate team was
● The narrative that explains how value different departments and functions. confident that it had a robust view of
is created and delivered, based on As well as securing a blend of the HAZ strategy, a second workshop
strategy, stakeholder interests, functional skills this ensured that all was arranged to introduce a wider
ongoing management initiatives and the diverse interests represented were audience into the scorecard
other contemporary frameworks (e.g. involved and had a sense of ownership deployment process. Staff attending
best value). for the project success. divided into working groups to weigh
the identified objectives and measures
Once these issues had been addressed 3. Determined overall scorecard in terms of priorities and timetables.
and agreed, it was necessary to: structure
This step involved holding a workshop 7. Pilot schemes
● Define the scope of the scorecard for the implementation team to To test whether or not the scorecard
project; identify appropriate scorecard concept was worthwhile, a mock-up of
● Understand the strategic issues perspectives. As with many public the balanced scorecard was rolled out
facing the organisation as a whole, sector organisations, the HAZ felt the in the HAZ’s operations management
using whole systems analysis; financial perspective included in Kaplan division. Following the pilot study, the
● Understand higher-level guidelines, and Norton’s generic scorecard to be corporate team again met to establish
policies and strategic priorities; and inappropriate, and instead replaced it a final consensus on the measures and
● Define the scorecard architecture – with a ‘stakeholder’ quadrant. decisions reached, and to consider:
the design principles leading to the
development of a template. At this point, consideration was also ● How rewards and remuneration
given to the feasibility of cascading packages could be aligned with the
This process focused on the critical the scorecard throughout the measurement system; and
business issues (CBIs) – the highest organisation, and its capacity for any ● How to communicate the proposed
priority problems and opportunities potential customisation. innovations and changes to all
that had to be addressed in order for members of the organisation.
the strategic vision to be fulfilled. 4. Undertook a strategy mapping
Strategic mapping was used to identify process Following the above process led to a
the CBIs. To maintain a coherent approach to definition of:
the scorecard development process,
Importantly, the first step identified: the HAZ completed a process of ● A preliminary corporate balanced
strategy mapping – following cause scorecard;
● The key actions to be addressed; and and effect logic to link the desired ● A scorecard template that could be
● The processes needed to include outcomes from the strategy with their deployed in other areas of the HAZ;
stakeholders. drivers. and
● The identification of critical success
The HAZ focused on the tangible 5. Cascaded the scorecard through the factors (CSFs) and their associated
results it needed to achieve, and on organisation measures – key performance
how such results would be Recognising the importance of indicators (KPIs).
demonstrated to an acceptable level. ensuring that employees understood
both organisational strategy and their
Drafting the scorecard role in delivering this, the HAZ
In designing its draft scorecard, the expended resources in creating this
HAZ did the following: understanding through workshops and
the circulation of scorecard bulletins.
Effective Performance Management Case studies 33

The HAZ ‘Corporate’ scorecard

Stakeholder Measures Customers


● Measures relating to key ● Measures of customer perception of
stakeholder groups service effectiveness
● Financial performance measures ● Objective customer measures

Processes Learning
● Measures of process efficiency ● Employee opinion measures
● Competency measures

Identifying and deploying the The process quadrant Using the managed process dimension
scorecard measures For the HAZ, the ‘process’ quadrant facilitated:
The Critical Success Factors (CSFs) are related to the service delivery
the variables that most influence the systems/work streams required for ● The identification and analysis of
organisation’s future performance, and achievement of strategic goals. The work streams; and
one or more was related to a critical HAZ had eight major streams of work, ● Consideration of the viability of
business issue. In defining its KPIs, the and each one needed to be projects.
HAZ considered the following: represented as a process on the
balanced scorecard. Once managed processes were
● Do we have a balanced set of established, the process quadrant
measures covering all dimensions of Where individual work streams focused on outcome/output targets.
the scorecard? (e.g. the project for recuperation and
● Are the measures acceptable and fit rehabilitation of the elderly) were not To evaluate whether the work
for purpose? fulfilling their objectives (not meeting stream/process was managed, the HAZ
● Will the measures encourage staff to the needs of the elderly and putting an addressed the following questions:
do the things we want them to do? unnecessary financial burden on the
● Can each measure be implemented social services budget), work was ● Does the project have a
in a reasonable time frame and at an needed to: value/mission consistent with that of
acceptable cost? the organisation?
● Does each measure have an owner – ● Discover the scope of the problem; ● Have quantifiable output targets
someone accountable for its and been established?
implementation and operation? ● Develop a more co-ordinated and ● Do such targets represent
● Do we have a management process focused response across the various achievement of the values/mission
for reviewing measures and ensuring public sector agents involved. statement, contribute to overall
they stimulate purposeful action? organisational aims, and demonstrate
To become a managed process, the best value?
The HAZ’s scorecard perspectives HAZ had to ensure that each stream ● Are mapped and named processes
explained of work: and sub-processes, allocating roles
and responsibilities documented?
The stakeholder and financial quadrant ● Possessed a mission statement
The focus here was on ‘stakeholder consistent with the organisation’s
relationship management’, and core values;
stewardship and accountability of ● Had a quantifiable outcome target;
public funds. ● Represented best value in resource
allocation;
The HAZ identified its critical business ● Had demonstrable causal links with
issues (CBIs), critical success factors outcome targets;
(CSFs), and key performance indicators ● Had a ‘value chain’, mapped using a
(KPIs). high-level flow-chart technique;
● Named critical sub-processes; and
● Allocated roles and responsibilities
for the performance of the
supporting processes.
34 Effective Performance Management Case studies

The learning quadrant The customers, citizens and service


The HAZ needed a clear understanding recipient quadrant
of current and future performance In shaping the focus of this quadrant,
targets, which in turn necessitated a the HAZ had to take into account the
rigorous and objective audit of current focus of its projects, and:
organisation and performance. To
achieve this, the HAZ used a ● Understand the strategic impact(s) of
whole-systems scanning and analysis each project, and its contribution to
approach to identify and prioritise the achievement of the corporate
environmental challenges which have mission; and
an impact on the achievement of ● Develop KPIs to support each of
strategic objectives and indicate where these impacts.
the organisation needs to work
differently or attain new competencies. By developing this framework the
corporate team was informed by CSFs
An alternative tool is the Business and CBIs relevant to the stakeholder,
Excellence Model, which enables process and learning dimensions.
organisations to self-assess objectively
against recognised criteria and to Thus, following identification of CBIs,
benchmark against relevant best the development of CSFs, and their
practice. associated KPIs, was of primary
importance.
Because of the dynamic environment
in which the HAZ operates, it was Key points
helpful to have an early warning
system (e.g. scenario planning) in place ● For complex organisations with a
to prepare the organisation for range of stakeholders, focus and
conditions not anticipated in the priorities change at different
traditional business planning process. organisational levels, and in different
divisions;

● To ensure ownership of targets, all


stakeholders must have a common
understanding of policy requirements
and the values needed to promote
their attainment;

● CBIs are the highest priorities and


opportunities that must be addressed
if the strategic vision is to be fulfilled;

● CSFs are the variables that will most


influence future performance, and are
normally related to a CBI; and

● Eventual balanced scorecard design


must be readily understood and
accepted by all stakeholders;

● All streams of work need to become


managed processes to achieve their
full potential, and deliver their most
strategic impact.
Effective Performance Management 35

Appendices

Appendix 1: The Value Dynamics Framework at Dell

Physical assets Customer assets

1. Land 1. Customers
2. Buildings 2. Channels
3. Equipment 3. Affiliates
4. Inventory

Organisational assets

1. Leadership
2. Structure
3. Culture
4. Brand
5. Systems
6. Processes
7. Intellectual Property

Financial assets Employee & supplier assets

1. Cash 1. Employees
2. Accounts Receivable 2. Suppliers
3. Debt 3. Partners
4. Investments
5. Equity

Adapted from Cracking the Value Code: How Successful Businesses Are Creating
Wealth in the New Economy by Richard Boulton, Barry Libert and Steve Samek.
36 Effective Performance Management Appendices

Appendix 2 The Business Modelling Approach’s ‘if-then’ matrices

Financial goals
Financial drivers matrix
Y1 Y2
Customer value:
X1 √ √
X2 √ √
Step 8: Prepare ‘Customer Value Drivers’ Matrix

Customer value
Customer value drivers matrix
Y1 Y2
Core/support processes:
X1 √ √
X2 √ √
Step 9: Prepare ‘Process Drivers’ Matrix

Core/support processes
Process drivers matrix
Y1 Y2
Inputs/suppliers:
X1 √ √
X2 √ √
Effective Performance Management Appendices 37

Appendix 3 The Business Modelling Approach’s implementation questionnaire

Panel A: Defining the customer


1. What is our customer value proposition?
2. Which customers are our most profitable and why?
3. Which customers offer the most profitable growth opportunities?
4. Which customers are currently unprofitable and why?
5. Why do customers choose to do business with our competitors rather
than us?

Panel B: Defining the outputs


1. What are our core strategic products and/or services?
2. Why do these core strategic products/services succeed in the
marketplace?
3. What does the next generation of successful products/services look like in
our business?
4. How much revenue are we generating from newly developed
products/services?
5. How many ‘voice of the customer’ improvements have we embedded into
our products/services?

Panel C: Defining the processes


1. What core and support processes are critical to satisfying customers?
2. What are the critical success factors for each of these processes
(e.g. quality, time, flexibility and cost)?
3. What functional departments must collaborate to optimise our core and
support processes?
4. What developing process technologies could threaten our competitive
position?

Panel D: Defining the inputs


1. Which assets per the VDF framework are critical to supporting our key
core and support processes?
2. Which assets are not critical and can we streamline or divest them?
3. Which assets need to be developed to sustain the next generation of our
products/services?

Panel E: Defining the suppliers


1. Which suppliers are critical to our business? Which do we view as
strategic alliances, co-operative partners, or arm’s length suppliers?
2. What competencies do our suppliers need to possess, going forward, to
ensure success?
3. Are our suppliers’ incentives aligned with ours?
4. Are we at risk of over-relying upon one or more suppliers?
38 Effective Performance Management

References and further information sources

Books and articles Johnson, TH and Kaplan, RS (1987) Relevance lost: the rise
and the fall of management accounting,
Ahn, H (2001) Applying the balanced scorecard concept: Harvard Business School Press, Boston, Massachusetts
an experience report, Long Range Planning, Vol. 34
Kaplan, RS and Norton, DP, (1992) Measures that drive
Ashworth, G (1999), Delivering shareholder value – through performance, Harvard Business Review, February
integrated performance management,
UK: Financial Times Kaplan, RS and Norton, DP, (1996) Using the balanced
scorecard as a strategic management system,
Ashworth, G and James, P (2001), Value based management, Harvard Business Review, February
delivering superior shareholder value,
UK: Financial Times Kaplan, RS and Norton, DP, (2000)
Having trouble with your strategy? Then map it,
Brewer, P (2003) Putting strategy into the balanced Harvard Business Review, pp. 167-176, September-October
scorecard, International Federation of Accountants,
Articles of Merit Competition, September. www.ifac.org Kaplan, RS and Norton, DP, (2001)
The strategy focused organisation,
Brewer, P, Albright, T and Davis, S (2004) Harvard Business School Press, Boston, Massachusetts
Security Regional Bank: implementing a balanced scorecard
using the business modelling approach, Kaplan, RS and Norton, DP, (2003) Strategy maps –
Journal of Corporate Accounting and Finance, July/August converting intangible assets into tangible outcomes,
Harvard Business School Press, Boston, Massachusetts
Chenhall RH (2002) Integrative strategic performance
measurement systems: strategy, strategic alignment of Kennerley, M and Neely, A (2002) A framework of the factors
manufacturing, learning and organisational performance, affecting the evolution of performance measurement systems,
3rd Conference on New Directions in Management International Journal of Operations and Production
Accounting: Innovations in Practice and Research, Brussels Management, Vol 22, no.11

Gering, M and Rosmarin, K (2000) Kurtzman, J (1993) Putting the balanced scorecard to work.
Central beating (balanced scorecard), Harvard Business Review, October
Management Accounting, UK, June
Lipe, MG and Salterio, SE (2000) The balanced scorecard:
Hope J and Fraser R (2003) Beyond budgeting, judgemental effects of common and unique performance
Harvard Business School Press, Boston, Massachusetts measures, The Accounting Review, July

Hope J and Fraser R (2003) Who needs budgets? Lawrie, G and Cobbold, I (2004) Third Generation Balanced
Harvard Business Review, February Scorecard: evolution of an effective strategic control tool,
International Journal of Productivity and Performance
Irwin, D (2002) Strategy mapping in the public sector, Management, Vol 53, No 7, pp. 611-623
Long Range Planning, December
Lawrie, G., Cobbold, I. and Marshall, J (2004) Corporate
Ittner, CD and Larcker, DF (1998) Are non-financial measures performance management system in a devolved UK
leading indicators of financial performance? governmental organisation: a case study, International
An analysis of customer satisfaction, Journal of Productivity and Performance Management,
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Ittner, CD and Larcker, DF (2003) Coming up short on non- Lorsch, JW (1995) Empowering the board,
financial performance measurement, Harvard Business Review, February
Harvard Business Review, November
Marr, B (2004) Business Performance Management – the
Johnsen, Å (2001) Balanced scorecard: theoretical State of the Art, Hyperion Solutions and Cranfield School of
perspectives and public management implications, Managerial Management, London
Auditing Journal
Marr, B (2004) Mapping the dynamics of how intangibles
create value, International Journal of Learning and
Intellectual Capital, Vol. 1
Effective Performance Management References and further information sources 39

Marr, B (ed.), (2005) forthcoming Perspectives on intellectual Schneiderman, AM (1999) Why balanced scorecards fail,
capital – interdisciplinary insights into management, Journal of Strategic Performance Measurement, January
measurement and reporting, Elsevier, Boston
Stewart, WE (2001) Balanced scorecard for projects, Project
Marr, B, Schiuma, G and Neely, A (2004) Management Journal, March
The dynamics of value creation – mapping your intellectual
performance drivers, Treacy, M and Wiersema F (1997) The discipline of market
Journal of Intellectual Capital, Vol 5 No 2, pp 312-325 leaders: choose your customers, narrow your focus, dominate
your market, Reading MA; Addison-Wesley
Marr, B and Neely, A (2003) Automating your scorecard: the
balanced scorecard software report, Gartner and Cranfield Walsh, P (2000) Counting for local experience (balanced
School of Management, InfoEdge, Stamford, CT scorecard), Australian CPA, November

Marr, B and Schiuma, G (2001) Wilson, S (2000) This year’s model (performance
Measuring and managing intellectual capital and knowledge management), Financial World, October
assets in new economy organisations,
Handbook of Performance Measurement, Gee, London Wassenhove, LV (2003) Blending environmental and social
issues in financial control systems
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Meyer, C (1994) How the right measures help teams excel. sustainability – examples from literature and practice,
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Morgan RE and Strong CA (2003) Business performance and Zingales, O’Rourke, Orssatto (2003)
dimensions of strategic orientation, Environment and socio-related balanced scorecards:
Journal of Business Research, March exploration of critical issues,
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The performance prism: the scorecard for measuring and Zingales, O’Rourke, Hockerts (2003)
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Neely, A, Richards H, Mills J, Platts K and Bourne M (1997) Useful websites:


Designing performance measures: a structured approach,
International Journal of Operations and production Further information on the balanced scorecard is available
management, MCB University Press from many websites, including:

Norreklit, H (2000) The balance on the balanced scorecard – www.cimaglobal.com


a critical analysis of some of its assumptions, Management www.cimaglobal.com/sem
Accounting Research, Vol. 11, No. 1, pp. 65-88 www.2GC.co.uk
www.insead.edu/discover_INSEAD/
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score? A rhetorical analysis of the balanced scorecard, www.bscol.com
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591-619 www.bam.ac.uk
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competitive strategy, and performance, www.fpm.com
Business Horizons, May-June www.hbsp.harvard.edu/
www.aspiren.com
Pestana, K (1993) Implementing the balanced scorecard at
FMC corporation: an interview with Larry D. Brady,
Harvard Business Review, October
40 Effective Performance Management References and further information sources

CIMA Mastercourses

Information about courses on the balanced scorecard is available from the


CIMA Mastercourses section of CIMA’s website: www.cimaglobal.com

Enterprise Governance

Visitors to CIMA’s website can download a major report ‘Enterprise


Governance: Getting the Balance Right’ recently prepared in conjunction with
the International Federation of Accountants.

Enterprise governance is a term used to describe a framework that covers


both the corporate governance and business management aspects of an
organisation. CIMA is currently developing a Strategic Scorecard as a means
of improving strategic oversight. An executive summary and the full report
are each available at:

www.cimaglobal.com

Effective Performance Management with the Balanced Scorecard

Maximising Shareholder Value: Achieving clarity in decision-making

and David Larcker’s Presentation as CIMA’s 2004 visiting professor titled


Performance Measures: Insights and Challenges
are now available for download at:

www.cimaglobal.com
CIMA (The Chartered Institute of Management Accountants) represents members and supports the wider financial management
and business community. Its key activities relate to business strategy, information strategy and financial strategy. Its focus is to
qualify students, to support both members and employers and to protect the public interest.
INSEAD (www.insead.edu) is one of the world’s largest top-tier graduate business schools, with two comprehensive and fully
connected campuses in Asia (Singapore) and Europe (France). Currently, 144 faculty members from 31 countries teach more than
880 MBA participants, 56 executive MBAs, 6,500 executives and 71 PhD candidates. INSEAD’s unique global perspective and
multicultural diversity are reflected in all aspects of its research and teaching.The INSEAD-Wharton Alliance, announced in May
2001, combines INSEAD’s resources with those of Wharton’s campuses in Philadelphia and San Francisco, to deliver business
education and research across a Global Learning Network.

Dean: Gabriel Hawawini

July 2005

The Chartered Institute


of Management Accountants
26 Chapter Street
London SW1P 4NP
United Kingdom
T. +44 (0)20 7663 5441
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