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    Headquartered in Norway, Statoil is an integrated oil and gas company operating in 32 countries with 25,000 employees. Through 2006, Statoil ran a series of pilot initiatives to become a budget-free enterprise, following in the path of a previous daughter company, Borealis, which was a pioneer of the Beyond Budgeting movement.

    With a clear understanding of extremely dynamic nature of today’s business environment and the limitations of a static budget concept, Statoil realized the need for tools that could help it address the key actions of target setting, forecasting and resource allocation. By focusing internal discussions on the key question of ensuring the best possible performance, the senior team got people to look beyond budgeting. A scorecard user from 1997, Statoil was already convinced about the tool’s strategic management capabilities and had developed over 700 scorecards. This made the Balanced Scorecard the central tool for Statoil’s approach to performance planning and performance management, as it moved to become a budget-free enterprise.

    With the help of the Balanced Scorecard, Statoil has been able to make significant progress in creating an adaptive planning and resource allocation process. Statoil also leverages the Balanced Scorecard’s potential to fully define strategic objectives and, through those strategic objectives, to communicate the strategy and KPI’s. Further, the company has integrated its Strategy Map with the Balanced Scorecard, bringing together strategic objectives, KPI’s and strategic initiatives under a banner it calls Ambition to Action. Statoil also uses the Balanced Scorecard to influence employee behavior and operationalize the company’s values. Thus, Statoil offers key lessons for using the Balanced Scorecard to introduce transformational change in the way businesses manage.

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    A large number of companies successfully use some form of Balanced Scorecard to drive their performance management. One reason for this probably lies in the fact that the bottom line of a company is actually fairly easy to describe.

    However, building and implementing a Balanced Scorecard Management System within a public sector organization presents a challenge that is different from what private sector organizations encounter. For instance, public sector organizations typically need to place ‘customer’ as the top strategic perspective as opposed to ‘financial’.

    The article seeks to describe the key challenges of using the scorecard within a public sector organization. It begins by stating that the Balanced Scorecard was built for the private sector, starting with the research program that led to its development. The rationale driving the development of the Balanced Scorecard was that financial metrics alone were no longer adequate for managing organizations.

    By the 1990s, pioneering public sector organizations, like the city of Charlotte in the US and the city of Brisbane in Australia, began to assess the applicability of the Balanced Scorecard to their own performance requirements and implement balanced scorecard solutions.

    The most important change public sector organizations make to the classic Balanced Scorecard model is to replace the financial strategic perspective with the customer or community perspective. While this resolves part of the problem, public sector organizations face further challenges in using the Balanced Scorecard. Typically, they have to contend with multiple, and often, competing objectives. Finally, given the complex nature of public sector work, another challenge is accurately determining cause and effect between the different initiatives and metrics. Here, the article also examines how public sector agencies have addressed this challenge and customized the use of Strategy Maps to reflect their contexts and needs. 

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    Over the years, a number of business excellence models have been developed to serve as performance management frameworks. Some examples are the Malcolm Baldrige Model, the European Foundation for Quality Management (EFQM) Excellence Model, the Australian Business Excellence Framework and the Singapore Quality Model.

    This article seeks to examine the key question of which framework organizations should use and concludes that organizations should use a combined approach.

    As part of the argument, the article first takes an-depth look at the Malcolm Baldrige Framework, the seven criteria that form part of the framework and organizations that have successfully used the Baldrige model. Then, the article looks at the EFQM Business Excellence Model and looks at successful practitioners.

    Moving on, the article looks at the emergence of hybrid models that combined the Balanced Scorecard and another model, such as the EFQM model. After looking at a sample hybrid model, the article proceeds to examine the potential dangers of using a hybrid model. Then, the article presents its recommendations on how organizations should be using business excellence models and Balanced Scorecard in tandem. It recommends that organizations should use Baldrige, EFQM or similar models to develop a comprehensive assessment of organizational performance and gain a broad understanding of strengths and weaknesses at the process level. Having understood the gaps through the use of such a model, organizations should map their performance gaps to the objectives on the Balanced Scorecard, which is the enterprise performance management framework best suited for defining strategic objectives and launching strategic initiatives. This way, organizations can create a truly powerful performance management process.

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    Businesses and organizations are fundamentally re-evaluating their approach to planning and performance management. As part of this process, many have chosen the Balanced Scorecard as an appropriate strategic management tool for delivering more sustained performance improvements.

    This article examines another powerful emerging idea – Beyond Budgeting – and describes how it is proving to be a superior alternative to the conventional budgeting approach. Leading this paradigm shift is the Beyond Budgeting Round Table, which has brought much clarity to the debate about the value and validity of the budget. In doing so, argues the author, it has generated practical insights for those involved in Balanced Scorecard initiatives. In support of this argument, the author examines the key dimensions of the Beyond Budgeting movement and how organizations are freeing themselves from the limitations of the budget mechanism. Interestingly, many of these aspects find echo in the Balanced Scorecard philosophy. The author summarizes the six external factors of change identified by the Beyond Budgeting Round Table.

    Further, the author sees a Strategy Focused Organization as the opposite of a BFO - Budget Focused Organization - and points out that the Balanced Scorecard has a central role to play in a Strategy Focused Organization. Moving on, the author shows how the Balanced Scorecard and Beyond Budgeting ideas are highly complementary, especially in the areas of leadership and finance-related best practices.

    To illustrate the proposition, the author presents the case of Nordea, a leading financial services group in the Nordic and Baltic Sea region and exemplary scorecard user. The author describes the combination of Balanced Scorecard, rolling financial forecasts, and quarterly strategic review process used by Nordea to identify lessons for other organizations that want to develop a more adaptive performance management model.

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    In this article, Peter Ryan, Corporate Performance Manager for the Christchurch City Council of New Zealand and expert on performance management in the public sector, points out that the science of successful creation and use of the Balanced Scorecard methodology is widely understood in the case of the private sector and government agencies with narrow regulatory fields. However, points out Ryan, government agencies in charge of complex and diverse services have no body of best practices to draw on when they use the Balanced Scorecard. After dwelling on the challenges involved in developing such a body of knowledge, Ryan seeks to fill the gap and point out the differences between a successful and a failed scorecard implementation through an extensive comparative study of the scorecard implementation experiences of two cities – New  Albany (a hypothetical case of failure built around actual scorecard implementations) and Christchurch (a highly successful and much-acclaimed real case).

    The author starts the comparative study with a description of the backgrounds of each city. Following this, the article identifies the crucial differences emerging from the various aspects of the two Balanced Scorecard implementations – the way the two entities perceived the value proposition of the Balanced Scorecard, the role of the IT department, the performance measurement practices and system, KPIs developed, the scorecard structure, and the systems developed for monitoring results. After illustrating the numerous differences between the two cases, the author concludes the comparison with a description of the present state of affairs at the two government agencies and then draws the relevant lessons for public sector agencies.

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    The Balanced Scorecard was introduced in 1992 and has since, given rise to a wealth of material that describes the concept’s preeminence for enterprise performance management (or corporate performance management, as it is also referred to). The material also covers themes like scorecard implementation and cascading the scorecard. However, very little has been written about the roles and responsibilities of the Balanced Scorecard Manager. This article seeks to fill the gap because expertise in strategy management is the most critical prerequisite for success in today’s dynamic business environment. Acknowledging this prerequisite, experts have proposed new concepts like the Office of Strategy Management.

    The article argues that Balanced Scorecard programs eventually wither and die because of a failure to focus attention on scorecard management. Organizations also fail to undertake any succession planning for scorecard management positions. Pointing out that conventional functions like finance and HR have a universal background set of skills and competencies, the articles argues that success depends on how organizations align those common capabilities to their specific performance requirements.

    Anticipating an increasingly key role for Balanced Scorecard Managers in organizational strategy, the article uses an extensive analysis of high-performing Balanced Scorecard Managers in diverse industries and sectors to identify a set of skills, competencies and personal characteristics that make these managers benchmarks in their field. The article classifies findings into groups called Business Skills and Change Management Skills. Some of the capabilities that find inclusion in these two sets of skills are 1) understanding of business, 2) understanding of the science of measurement, 3) an ability for target setting, 4) understanding of data collection processes, 5) understanding of the needs posed by scorecard automation, 6) ability to handle vendor selection, 7) an ability to handle cultural and change  management, and 8) communication.

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    This article examines the challenges of creating effective links between the Balanced Scorecard on the one hand and compensation and incentives on the other hand. Monetary incentives are, in principle, a powerful motivator for aligning employee efforts to Balanced Scorecard objectives. In fact, Robert Kaplan and David Norton, creators of the Balanced Scorecard, recommend the incentive-compensation link as a sub-component of the principle that calls for making strategy everyone’s everyday job. However, establishing a clear incentive-compensation link that actually works is one of the most challenging aspects of a Balanced Scorecard approach to enterprise performance management.

    The article presents expert opinions and different scenarios to examine the pros and cons of the issue further. The article also presents two case studies where organizations actually devised ways and means of linking compensation and incentives to results on the Balanced Scorecard.

    Through the expert voices, scenarios and case studies, the article provides an insight into the challenges that organizations can definitely expect to face when they consider the incentive-compensation link to the financial and non-financial objectives of the Balanced Scorecard, be it is a complete alignment or partial.

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    The world over, demand for performance transparency, responsibility and accountability of organizations is increasing – issues that form the core of corporate governance. This article argues that legislative and regulative interventions are not adequate to improve the corporate governance standards. In fact, a major analysis reveals that lack of compliance with accounting/financial rules and regulations is only a minor cause of poor performance. The analysis finds that strategic failure, such as misjudging consumer demand or competition, is a greater cause – pointing to the fact that corporate governance and corporate performance management are closely linked.

    In this context, organizations should ensure that even the board of directors, should be aligned to strategy. One way of doing this is to create a Scorecard for the Board of Directors, to complement the Enterprise Scorecard.

    The article then presents the case for using the Balanced Scorecard as not just a framework for enterprise performance management but also a governance tool. The Balanced Scorecard provides a framework for aligning strategic management and corporate governance.

    Further, a Balanced Scorecard for the Board enables a clear description of the Board’s roles. As a corporate governance tool, the Balanced Scorecard adds clarity about the way the organization will create value. It also provides a way to manage and monitor the creation and delivery of value. Further, it generates accountability, delivers key information needed by board members to fulfill their responsibilities, enhances visibility for non-financial perspectives, provides pointers to the strategic skills the board must possess, and also a way to clarify and assess the contribution of board executives.

    Finally, the article explains how organizations can go about building a Board Balanced Scorecard within the context of the Board Scorecard System, which has three mutually reinforcing components – the Enterprise Scorecard, the Board Scorecard, and the Executive Scorecard. 

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    The US Postal Service has over 700,000 employees and delivers 212 billion pieces of mail annually to over 144 million destinations. Surprisingly, the strategic performance of such a huge organization is managed through a corporate Balanced Scorecard with only five goals and 10 measures.

    The USPS Strategic Planning team believes that the sheer size of the organization required the articulation of the fewest possible objectives, so that things are kept simple. While this was a great challenge, the USPS had been able to succeed with the help of a balanced performance management framework which drives the strategies of financial stability, customer focus, operational efficiency, and human capital. This way, the USPS is able to deliver on its mission of ‘providing timely, reliable universal delivery of services.’

    The balanced framework has its origins in the USPS’ use of the Malcolm Baldrige criteria, which led to the development of a process called ‘Customer-Perfect’ to align the voice of the employee with voices of the customer and business.

    In 2001, the US President’s Management Agenda introduced a strategy for improving Federal government and focuses on five areas where most progress and improvements can be made: strategic management of human capital, competitive sourcing, improved financial performance, expanded electronic government, and budget and performance integration. This Agenda greatly added to the organization’s challenges. In response, the USPS has devolved its balanced performance management framework all the way down to supervisory levels. Using a number of channels, the USPS has successfully communicated strategic goals all the way down to the frontline. Further, the USPS has also managed to align compensation with performance in its framework of performance management. Factors that have been critical for USPS’ success include support from senior management and an ability to stay focused on balancing all the performance objectives.

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    The Commercial Vehicles Business Unit of India-based Tata Motors manufactures the full range of commercial vehicles and is one of the world’s top 10 truck manufacturers.

    Years of poor financial performance had thrown off-track the Unit’s objective of being among the world’s five most profitable commercial vehicle makers. The CVBU developed a strategy for effecting turnaround, creating sustainable growth and profitability. Earlier studies, using the Malcolm Baldrige model, had highlighted the unit’s weakness in strategy deployment. In response, senior managers chose the Balanced Scorecard as the preferred driver of change and strategy implementation tool.

    Implementation began in 2000. Within two years, the CVBU was able to reduce costs, accelerate revenue growth, and move from losses to profits. In addition, the CVBU’s success with the scorecard extended to a place in the Balanced Scorecard Collaborative’s Hall of Fame.

    The CVBU had a high-level Steering Committee, reporting to the ED, for creating a Strategy Map and Balanced Scorecard. A 5-member team facilitated scorecard creation and deployment. Widespread communication was taken up to devolve the scorecard. Later, the CVBU cascaded the Balanced Scorecard to the lowest working levels in the organization. Strategy mapping workshops were run within plants and functions. A review process was put in place for monitoring and analyzing performance on local Balanced Scorecards, of which over 300 were created. As part of the process, lower level scorecards were linked to the higher level scorecards. This helped align the strategic initiatives to the challenges faced by the Unit.

    Today, the CVBU’s top management shares the company’s vision, mission, future directions and strategies, and conducts scorecard cascading workshops. In fact, the entire Unit’s mechanisms (including internal publications and intranet websites) are leveraged to communicate the Balanced Scorecard as a performance management and strategy implementation tool.

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