Balancing Your Scorecard via Action Learning

<p>Just hearing the phrase &ldquo;strategic planning&rdquo; tends to trigger apprehension in most executives. Annually, many organizations produce a strategic plan that sits on the shelf for the rest of the year. The problem with most strategic plans is that they encourage the perpetuation of what has worked in the past &mdash; focusing primarily on past financial successes. The balanced scorecard helps break the mold of focusing solely on the financial aspects of a strategic plan and provides an effective vehicle for moving forward. The question remains, how does an organization populate the balanced scorecard without the stress that is typically associated with strategic planning? A process, utilizing action learning, is proving to be both an effective and efficient solution.<br /><br />Typically, strategic planning starts with the vision statement and some long-term objectives. From this, organizations identify desired goals and objectives. Next, the current situation is analyzed and historical information is examined. They follow this with the identification of assumptions that are no longer valid. Next, they dissect the advantages and disadvantages of alternative strategies. From this, they chose one or more alternatives. With each of these, they identify the result (if things go right). Finally, they identify next steps and action items.<br /><br />The problem with this method is that organizations typically do strategic planning on an annual basis. Current methods of strategic planning encourage the continuation of what has worked well in the past. They do not anticipate the rapidly changing environment.<br />A distinct feature of the balanced scorecard that does not exist within other strategy development tool is the inclusion of learning and development. Additionally, the scorecard synergizes three other perspectives with learning and development. These are the financial, customer and internal perspectives. It is an ideal tool for taking the goals set by the senior executives and translating them into what they mean to the front-line employee. This measurement system reports on past operating performance as well as watching what will drive future performance.<br /><br />Success in business can be examined from a variety of different perspectives and the questions they seek to answer. The financial perspective seeks to answer the question, &ldquo;How should we appear to our shareholders?&rdquo; For the customer perspective, the key question is, &ldquo;How should we appear to our customers?&rdquo; The question in terms of internal business processes is, &ldquo;To satisfy our shareholders and customers, in what business processes must we excel?&rdquo; Finally, from the learning and growth perspective, we seek to answer the question, &ldquo;How will we sustain our ability to change and improve?&rdquo;<br /><br />Using the balanced scorecard, a team develops strategic themes incorporating elements of the four perspectives, including the linkages between them. Then, for each objective, they identify measures, targets and initiatives for each theme. Where objectives are what the strategy is trying to achieve; measures are how to evaluate the performance against objectives; targets are the required level of performance or the rate of improvement; and initiatives are an action program to achieve the target.<br /><br />In his 2002 book, Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results, Paul Niven describes a seven-step development process for populating a balanced scorecard. He indicates traditionally this process takes four to 12 months:</p><p>1. Gather and distribute background material.</p><p>2. Develop or confirm mission, values, vision and strategy.</p><p>3. Conduct executive interviews.</p><p>4. Develop objectives and measures in each of the balanced scorecard perspectives.</p><p>5. Develop cause-and-effect linkages.</p><p>6. Establish targets for your measures.</p><p>7. Develop the ongoing balanced scorecard implementation plan.</p><p><strong><br />Action Learning Balances the Scorecard</strong><br />Using action learning to populate the balanced scorecard presents an interesting situation &mdash; the problem is predefined. Because of this, in addition to the role as learning coach, the coach also acts as a guide to populating the balanced scorecard. The coach&rsquo;s primary function is to stay focused on the learning; however, by acting as a guide to populating the scorecard, the coach can accelerate the process. The action learning/balanced scorecard team consists of members who are knowledgeable about the organization&rsquo;s mission, vision, values, operational plans and financial projections.<br /><br />The coach opens the session by guiding the team through defining the strategic themes of the organization. With each theme that is suggested, the coach will ask, &ldquo;How does that relate to our mission, values and vision?&rdquo; By doing this, not only are the team members able to identify valid themes quickly, but they are also able to filter out themes that are not aligned with the strategic direction of the organization. <br /><br />To identify the objectives within each of the four perspectives &mdash; financial, customer, internal processes and learning and growth &mdash; the coach uses this same method. However, rather than simply brainstorming, the objectives are identified using a focused approach. As the team identifies an objective within a perspective, the coach again asks the question, &ldquo;How does that relate to our mission, values and vision?&rdquo; as well as asking, &ldquo;How does it fit within the strategic theme?&rdquo; Rather than allowing brainstorming to take over at this point, the team works to identify objectives in the other perspectives that link to the one already there. This allows the team to develop the linkages as the balanced scorecard is populated. Again, by using the focused approach rather than brainstorming, the team identifies appropriate objectives and filters out inappropriate ones. This technique accelerates the process, because the team does not waste energy on objectives that do not fit within the corporate strategy.<br /><br />While the strategy map is being populated, measures, targets and initiatives that surface that are related to an objective are recorded. During this phase, the team does not make a deliberate effort to fill out these elements; however, the coach writes down any linkages to the strategy map that become apparent. Once the strategy map is fully populated, the team goes back to fill in the remaining measures, targets and initiatives. Where the team needs additional information, individuals are assigned action items to acquire it before the next session.<br /><br />By using the action learning process to populate the balanced scorecard, the teams have seen several positive results. First, the team members truly listen to each other, because participants can make statements only in response to questions. The team members do not just shotgun their ideas without hearing what the other participants are saying; rather, they listen to each other and build on each other&rsquo;s thoughts and themes. <br /><br />Second, valid objectives surface quickly and invalid ones filter out. Because the team does not use brainstorming, they focus on pieces that fit rather than those that do not. This is not to say that new and innovative ideas are discouraged; rather, they are encouraged &mdash; but the team tests the validity of a new theme immediately, rather than firing off random ideas. <br /><br />Third, because the nature of questioning forces people to think outside the usual box, the team generates new and relevant objectives they had not thought of in the past. Finally, because the coach continues to focus on the learning of the team, the process is continually improved. Using this approach, the team documents the objectives, measures, targets and initiatives for a theme in a matter of hours. <br /><br />These sessions are extremely intense. Everyone on the team stays engaged for the entire session. The questioning process does not allow the participants time to zone out. Instead, they remain actively engaged throughout the entire session. Because of this intensity, it is recommended that each session be restricted to four hours. If multiple sessions are scheduled for a single day, a minimum of a two-hour break should be planned between sessions.<br /><br /><strong>The Next Level</strong><br />In today&rsquo;s permanent white water, it is imperative to develop strategies that are both distinctive and flexible. The balanced scorecard is an ideal start to developing plans that encompass all the elements of an effective strategy. However, it falls short in forcing the creative thinking required for the distinctive strategies that will be necessary to survive.</p><p>To take the balanced scorecard to the next level, the creative thinking pervasive in action learning is necessary. The most common remark made by those in these sessions was &ldquo;action learning prevented us from talking over each other.&rdquo; In other words, those who were involved in the session listened to each other; they gave more thought and insight to their responses. They built on each other&rsquo;s remarks and developed a more useful product for guiding and measuring the organization&rsquo;s performance. At the end of the session, no one felt any stress, and they all had a sense of a broader understanding of the elements that would produce a truly powerful strategy. </p>