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This Month's Themec

Achieving Balanced Results

One of the questions we often get asked is whether the EFQM Excellence Model and Balanced
Scorecard can be used together. As the EFQM Excellence Model is a non-prescriptive framework, it is
possible to use any number of different approaches and the Balanced Scorecard is one option that is
commonly used. However, the philosophies that underpin these approaches are different and, from
some perspectives, could be seen as conflicting. For a start, the 4 perspectives used in the Balanced
Scorecard appear different to the 4 result areas in the EFQM Excellence Model. Understanding these
differences can help to ensure your organization focuses on the key results that will ultimately deliver
sustainable excellence.

hat is a Balanced Scorecard?

The development of the Balanced Scorecard is credited to Kaplan & Norton and there are numerous
texts available explaining the concepts and methodology. Here¶s a simple overview to explain the
concept.

In most cases, the scorecard has 4 perspectives: Financial, Customer, Internal / Processes and
Learning & Growth. There should be clear ³cause and effect´ relationships between the different
perspectives, starting at the bottom (Learning & Growth) and leading to the top (Financial Results).
You start by defining the Financial Results the organization needs to achieve. You then define the
Customer Results that you need to achieve to deliver the Financial Results, such as Market Share,
Repurchase Rates, Unit Sales, etc. The next step is to define the Internal Processes that need to be in
place to deliver the defined Customer Results. The final step is to define the Learning & Growth areas;
the investments you need to make in people, resources and technology to enable the internal
processes to operate at the newly defined levels.

Scoring is often represented with traffic lights. If there are red or yellow traffic lights in the Learning &
Growth or Internal Processes, these need to be addressed quickly to avoid them impacting on the
Customers and, ultimately, the finances.

Balancing Stakeholder Needs

One potential issue when implementing the Balanced Scorecard is the stakeholder focus. Depending
on how the Financial Results required are developed, the focus could be on the organization¶s
³shareholders´, rather than understanding and balancing the needs of all stakeholder groups. In most
organizations, the views and desires of the ³shareholders´ are clearly voiced and clearly understood.
The channels for understanding the views of other stakeholders may not be so clearly defined. In
some cases, the different stakeholder groups may not have been identified. These is a simple
technique for doing this, called Stakeholder Mapping, documented in an EFQM User Guide.
 If the Key Results required are based on the needs and expectations of all the relevant stakeholders,
rather than a single group, the Balanced Scorecard can be used effectively within an EFQM
implementation.

ñeporting Timescales
The Balanced Scorecard is normally used by the Management Team to review progress against the
strategic objectives. The reporting timescales therefore need to reflect this role, so it is commonly
updated on a monthly basis, although some measures may be reviewed more frequently (e.g.
operational KPIs) and some less frequently (e.g. perception measures). The objectives and measures
on a Balanced Scorecard are commonly reviewed and refined on an annual basis. This can lead to an
issue when preparing an EFQM assessment that requires annual trends for over 3 years.

Conversely, some organizations hesitate from changing the Key Performance Indicators or the
measurement methodology as they feel they need to have consistent data to ³comply´ with the
requirements of EFQM. This is clearly not the case; in an EFQM assessment, you¶re looking for clear
alignment between the defined strategy and key performance indicators used by the organization to
review their progress. If the strategic goals have changed, you¶d expect the KPIs to be refined and
updated accordingly. However, unless there has been a major shift in the strategic direction, it is
unlikely that ALL the key result areas will have changed.

The method for coping with this issue will depend on the degree of change. So long as changes in
performance, whether real or caused by a change in measure definition or focus, can be explained,
there should not be a problem when reviewing results for an EFQM Assessment.

People & Society ñesults

A criticism of the Balanced Scorecard approach is there is limited focus on ³people results´ and no
specific ³society results´ section. A number of organizations have chosen to add or rename
perspectives to ensure these areas are reflected. However, if the organization¶s people development
and sustainability policies are integrated within the overall strategy, appropriate measures and
initiatives could be included in any of the 4 ³traditional´ perspectives. The key to achieving this
integration would be ensuring the ³top line´ objectives have been based on a balanced set of
stakeholder requirements, as mentioned above.

Conclusions?
It is possible to integrate a Balanced Scorecard approach within the EFQM Excellence Model. As with
any approach, you have to be clear about how it fits together with the other approaches to help
achieve your strategic objectivesc

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