Aligning processes and systems
-By Valerie Gomez

The Balanced Scorecard is one example of strategic planning and management system that can produce excellent results when carefully designed to fit the organization. Each metric serves a purpose, communicating the importance of a strategic objective and driving goals and actions. Performance measurements are also the building blocks for continuous improvement.

However, designing and implementing the measurement system is only two-thirds of the process. Achieving continuous improvement is only possible if the performance culture is developed in which people are held accountable for results. Performance management includes a number of elements, including early and regular feedback, linking rewards to values, integrating performance metrics into decision-making, and increasing transparency. The management focuses on what is important and avoids over complications, creating a results-driven system.

The Balanced Scorecard (BCS) is one framework for value-based management that pursues quality and the greatest outcomes. No matter what framework is used, the ultimate purpose of most is to identify and manage value drivers to achieve the best strategic or competitive advantage. The value drivers underpin organizational performance, so identifying those values enables managers to make decisions that drive desired outcomes.

In the case of the Balanced Scorecard, the goal is also to maintain alignment between the financial and non-financial measures, and to meet the objectives of internal (i.e. leadership, employees) and external stakeholders (shareholders, customers, suppliers). Scorecards with appropriate measures for each set of stakeholder goals define what must be done well to meet those goals and achieve continuous improvement.

Performance management is the process of decision-making for the purpose of realizing desired outcomes. It is concerned with the relationship of actions to outcomes with the scorecards delivering the management information needed to make impactful decisions.

With an understanding of causality, leaders can refine strategies. As operating conditions, markets, customer demands and capabilities change, managers must manage strategies to incorporate the new information and make appropriate revisions. Feedback and feed-forward information is key to becoming a flexible organization. Feedback guides leadership on how it is currently doing and indicates where corrections are needed. Feed-forward information utilizes historical and other data to identify trends in supply chains, costs, customer preferences, sales, markets, technology and anything else of importance to competitiveness.

One of the most important requirements for success is the commitment of leadership to the process. Getting the best outcomes depends on establishing and linking strategies and objectives, all of which are based on the organizational vision and mission.

However, it is just as important to move from performance measurement to performance management in order to achieve the greatest impact. The continuous flow is from actions to measures to monitoring to impact assessment which leads to continued or new actions depending on whether goals are achieved.

Measurement is not an end in itself. It provides a basis for how well the organization is progressing toward objectives, identifies strengths and weaknesses, and provides information as to the next steps. However, the leadership’s effective utilization of the data to make decisions that improve desired outcomes determines the real success of the BSC. In fact, performance measurements themselves are not static.

Managers must regularly make critical decisions concerning adjustments to metrics based on experience to ensure the measures remain relevant and accurate. “Accurate” means that the measures are precisely defined, utilize the appropriate data sources, and involve the right time period. Measurements can include quantitative (staffing, financial, market, etc.) and qualitative measures (customer experiences, supplier surveys, etc.), and the two types together create a clearer picture.

For example, qualitative customer surveys may indicate declining satisfaction, while quantitative data on product availability may pinpoint some of the underlying reasons.

Key aspects include:

• Simplifying reviews
• Training managers and reinforcing corporate values
• Link rewards to values and integrate performance management data into talent decisions
• Aligning components to increase decision making accuracy
• Transparency liking individual and company performance
• Managers should calibrate employee performance by matching talent and tasks, deliver targeted performance feedback and incentivize employee behaviors
• Focus on what matters – don’t over complicate – remove complexity from the way of doing business at all levels, be results driven

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