The Balanced Scorecard is a great strategy. Now what?

James W. Coaker
Senior vice president, Codes & Standards

Ninety percent of companies fail to successfully execute their strategy because the organizations are not prepared to do so. Sure, ASME's Board of Governors has dutifully developed a strategic plan each year for the organization. However, ASME is a large, complex, consensus-based organization. And rather than becoming a plan for action, those strategies were shelved as ASME focused on operations, until the next year when the strategy was reviewed and the cycle started all over. Like many organizations, ASME has been less than successful in translating strategy into action.

Not that the strategies of the past were perfect. Again, ASME has suffered from a common problem in strategy development: a tendency to be all-encompassing, allowing much while excluding little. This enabled the Society to justify virtually all existing programs, but it crowded out opportunities to implement new directions and made ASME prone to stagnation.

One of the primary goals of the new strategy management system is to develop a more focused strategy in the first place. After strategy development comes implementation, and making the strategy operational. Communication, setting and monitoring performance targets, establishing initiatives, and linking the resource allocation process to the strategy are all critical steps in achieving the strategy.

Overview of the Balanced Scorecard
The Balanced Scorecard is a performance management system that links the strategy, resource allocation and performance appraisal systems. Since its introduction in 1992, the tool has been used by many Fortune 500 companies to successfully translate strategy into operational terms.

Traditionally, performance has been measured by financial performance alone. The advantage of financial measurements is that they are precise and well-known, and easily communicated on a regular basis. The major disadvantage is that financial measures are backward-looking; they tell only how operations have performed. They generally fail to indicate how operations will perform.

In the Balanced Scorecard approach, the financial perspective is supplemented with three others: the customer, internal and organizational. These three perspectives are more forward-looking in that they provide indicators of how operations will perform in the future. For example, achieving strategic objectives within the customer perspective should ultimately provide enhanced financial performance.

Each of the four perspectives is vital if the vision and mission are to be achieved. The interdependent relationship of the perspectives to each other and the vision and mission can be compared to a tree.

The organization learning perspective — which includes the knowledge, skills, systems and tools — are the roots of the tree, stabilizing the organization and providing resources. The internal processes used by ASME to develop value for members, customers and the world serve as the tree trunk. The customer and financial perspectives are the tree branches that support the vision and mission — or the leaves — of the organization. Just as tree leaves respond to their environment, ASME's vision and mission may change over time. But ASME will continue to be supported by a living, dynamic tree that will adapt to its surroundings.

For each of the perspectives, one or more strategic objectives have been established. ASME's Strategy Map, which shows all of the strategic objectives adopted by the Board of Governors, can be found on the Continuity and Change Web site: www.asme.org/change.

Objectives, Measures, Targets, Initiatives
Measurements and targets are established for each of the objectives. Measurements serve as tools to drive desired outcomes and become a strong link to the strategic objectives. Targets quantify each measure and set the level of expected performance. Finally, initiatives are established to achieve the measures and targets, and ultimately ASME's strategic objectives, vision and mission.

Where We Are; Where We're Going
The Balanced Scorecard is not a one-use tool, but a system used in daily operations management. It is monitored and refined in a continuous feedback loop, and ultimately provides an effective tool for developing, communicating, monitoring and managing strategy implementation.

ASME has adopted its first Strategy Map, and is developing the measures, targets and initiatives to achieve the objectives contained within the Strategy Map.

The next step will involve cascading the Balanced Scorecard throughout the organization. Cascading involves the adoption and adaptation of ASME's Society-wide Balanced Scorecard by each unit and individual operating within the organization.

While each unit and individual will adopt the overriding vision, mission and objectives, certain objectives may be more relevant than others, and some may require clarification to be effective tools.

The cascading process will enable each unit and individual to develop their own Balanced Scorecards in support of ASME's overall Balanced Scorecard and will begin shortly after implementation of the new organization plan.

More About the Balanced Scorecard
To learn more about the Balanced Scorecard, visit www.bscol.com. To find out more about the Balanced Scorecard implementation process at ASME, visit ASME's Continuity and Change Web site.

Joseph M. Holm, associate executive director, Finance and Administration, contributed to this story.

 

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