Outsorcing Inspiration

InspirationMotivating employees is a key leadership attribute. Hence, when morale is flagging, leaders take to the podium to deliver an inspiring speech and hope for the best. The question one may ask is ‘Is this effective? Are there better ways of inspiring staff?’

An article by Professor Adam Grant(*) suggests that it is often more effective for the leaders to ‘outsource inspiration’ to those people, who benefit from the organisations products and services – the end users. This recognises the power of leaders’ actions to speak louder than their words. By relating to end users, leaders help bring more meaning to the work and employees understand their contributions. Continue reading “Outsorcing Inspiration”

How to Turn Your Strategy into Execution?

Most companies and many IT organisations have a head of strategy development or they hire consultants to help develop the strategy. However, once a strategy is developed many leaders are not clear of their own role in executing the strategy. Often, the execution of the strategy is delegated to the head of strategy. At other times, the leader expects that once the strategy has been agreed upon the direct reports would pick it up and run with it or integrate it into their operation.

Strategy is about making choices on direction and also about agreeing ‘how to’. When organisations make these choices they are also deciding not to do some other activities nor refocus their efforts. This essentially means that there is a change to the status quo. What in fact happens is that direct reports as well as specialised interests view the strategy from the view of preserving their vested interests. They tend to pick up parts that appeal to them or, worse, define existing activities as supporting the strategic initiatives. So in effect, the status quo is preserved and a coordinated approach to strategy execution comes a distant second.

So what can the CEO/ CIOs do to ensure strategy is actually executed? They need to wear the hat of the ‘Chief Execution Officer’. Effective leaders create measurable goals from the strategy they: communicate the strategic intent and goals within the organisations, and to the other stakeholders; establish a measurement and feedback process, and finally link it to the reward and recognition system. Only when the leaders lead the strategy execution process, does it has a chance of success.

Create and Lead the Leadership Team

The first requirement for strategy execution is to have a team around you that is wholeheartedly committed to the strategy. That also means that the right people are in the right roles. When the leader takes ownership of the strategy, s/he can ensure that appropriate cross-functional integration is agreed and then implemented. If individuals are not fully committed to the strategy, they tend to pay lip service and undermine the strategic efforts. In such cases, the leader needs to make some tough choices about who should stay and who should go. When the leaders cannot bring themselves to make these calls, the execution suffers.

Share the Strategy

A strategy needs to be understood by the organisation to be able to be executed. Good strategies guide actions of individuals and teams at each level. A leader must communicate the strategy within the organisation as well as with other internal and external stakeholders to get their understanding and buy-in. Sharing the strategy engages the workforce, and an engaged workforce is vital to strategy execution. Of course, not all details of the strategy can be shared with everyone, but having clarity on the key intent and direction helps direct the effort in the right direction. The strategy narrative needs to be accompanied by measurable goals, which guide behaviours and actions. Talking about the strategy once at the launch is not enough. Leaders need to refer to the strategy in their ongoing communications and explain how actions and investments are aligned to the strategy. Thus, strategy becomes a part of the ongoing business dialogue.

Use the Feedback to Guide Actions

Once the strategy is understood by the workforce and goals have been established, next step is to identify key performance indicators (KPI) that would demonstrate the strategy execution is on track. Most organisations would probably receive too much feedback from different sources on the strategy execution and the outcomes. The trick is to focus on a limited number of performance indicators that are most useful. In the initial stages there may be a greater focus on behaviours and actions as changed outcomes may take some time to become clear. However, as progress is made, measuring the outcomes becomes more important. Sharing this feedback and successes with teams would maintain the engagement and focus. Feedback must guide actions.

Linking to Reward and Recognition

The actions leaders take after receiving the feedback must create a a clear link to reward and recognition. Strategic goals must be linked to individual incentive and promotion measures. Failing to link recognition to the rewards is the single most quoted reason for the failure of strategy execution.

Feedback also lets an individual or team understand how their role is linked to the strategy and how their actions are making a difference. When people from diverse areas such as support, programming, or architecture are able to see how their efforts are contributing to the achievement of the strategic goals, it can become a powerful motivator. A link to the rewards reinforces this message.

Summary

Leaders can ensure that strategy execution is successful by following the four simple-step process. Leaders need to assume the ‘Chief Execution Officer’ role, lead the leadership team, set measurable goals, and communicate the strategy story with their teams. Finally, leaders should use the feedback from the KPIs to guide actions and also to link reward and recognition in the workplace.

Related articles:

10 Barriers to Transformation
Secrets of Strategic Planning Success

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Inspired by an article by R. H. Russell in HBR.ORG

Is your IT Department Under Control?

Controlling IT

Do you know if your IT department is under control? How does one determine if the IT capability is well managed? Is IT well managed if the IT service is in line with service levels? Is IT in control if projects are delivered more or less on time? Or one can say IT is under control when information is secure? What should a CEO or a CIO do to ensure that the technology function is well governed?

What is governance? The term ‘governance’ is derived from the Latin it is derived from the Latin work “gubernare” – the action of steering a ship. Governance provides a structure for setting objectives and monitoring performance to ensure that the objectives are achieved. Essentially, governance defines who makes what decisions, how decisions are made and who is accountable for what.

IT Governance is a part of corporate governance. In current digital economy, the importance of technology within most organizations is increasing. It is becoming important to ensure that IT meets the organizations objectives. While there is usually no debate about the concept of IT governance, there are still many views about of what constitutes IT governance. Some people equate IT governance to IT service management (ITSM), others think it is managing information and security.  But IT governance is all this and more.

Five Focus Areas of IT Governance

At the core IT governance is about two things. How IT delivers value to the business and how well IT risks are mitigated. When there is strategic alignment of business and IT objectives value is delivered.  Embedding accountability in the organisation ensures risk management. These lead to the five focus areas for IT governance. These are:

  1. Strategic alignment,
  2. Resource management,
  3. Performance measurement,
  4. Value delivery and
  5. Risk management

First three areas are the drivers and the last two are the outcomes or the results. These are connected in a continuous governance life-cycle. Strategy alignment is usually the first step. From strategy next step is delivery of expected value through implementation while controlling the risks. Next, results are regularly measured, reported and actioned. Finally, strategy is re-evaluated and adjusted. Resource management decisions are made throughout the governance life cycle. Organisation’s culture, values, mission and vision create the environment within which it operates (value drivers).

Let us look at each of these five governance areas further.

IT Strategic Alignment

What is strategic alignment? Strategic alignment is achieved when the organisations strategic objectives inform building of IT capabilities which are necessary to deliver value to business. It means that IT strategy is aligned to business strategy. But just strategy alignment is not enough. It also means IT operations too are in alignment with the business operations.

For IT to deliver value to the enterprise, there need to be clear linkages between the aims of the business and the direction of IT. Therefore when creating the IT strategy one must consider:

  • the business requirements,
  • the competitive environment,
  • the impact of the current and future technologies and business trends,
  • current capability of IT to be able to deliver the expected levels of service,
  • cost of existing IT and whether it is providing value, and
  • the investments needed to meet expected service levels.

The board or executive level IT steering committee ensures strategy alignment. It checks that:

  • IT strategy is aligned to the business strategy,
  • IT delivers against the strategy (within budget, functionality and outcomes) and
  • IT investments between support and capabilities needed for growth / transformation are balanced.

Effective alignment also requires creating and maintaining awareness of IT’s importance for the business; clarifying role that IT should play (e.g. enable vs. utility vs. transform) and monitoring IT performance and the impact of projects and service operations.

Value Delivery

Value delivery ensures IT investments are generating appropriate return-on-investment. Value delivery means delivering within budget and with right quality that achieves the promised benefits. The benefits may be cost reduction, new capability/ products / services, customer satisfaction or top/ bottom line growth. IT value is also delivered by delivering the infrastructure that allows the business to grow. Off course for the value delivery to be effective, the value must be created in the right areas. This is where alignment is so important.

Value is demonstrated in many different ways. Value-for-money means IT operations and services are being run in a cost-effective manner. Measuring cost and quality of IT services and comparing against peer group (benchmarking) is an accepted method. New business value is created when IT helps make better decisions, transforms processes, improves customer interaction or helps deliver new products. Return on investment can be used to measure this value. (For more on IT value read).

Risk Management

In recent research conducted by Ernst & Young, the top finding was that organizations, that do focus on strategic risks and have integrated their various risk management activities, outperform their peers financially. Managing enterprise risks is the primary driver for governance in many organisations. Amongst the many enterprise risks, IT risks form a part of operational and systemic risks. Since most businesses are heavily dependent on IT for operations and service delivery; how IT risks are managed is important to boards and regulators. Examples of typical IT risks are business continuity, change control, information security, and new technology implementation.

Successful companies:

  • Generate two-way open communications about risk with stakeholders,
  • Provide stakeholders with the relevant information that helps then make informed decisions,
  • Have the board or management committee play a leading role in defining risk management objectives.
  • Adopt and implement a common risk framework across the organization,
  • Assign accountability for the risks to executives.
  • Establish a system of internal controls to manage these risks.

Even when no immediate actions are planned, analysing and being aware of the risks improves decision making.

Resource Management

Resource management aims to optimise IT investment, use of IT assets and resources to improve performance.  Many businesses don’t get the full value from their IT assets and their associated costs. Resource management also includes managing outsourced services so that the service is delivered at acceptable price.

Effective resource management requires that procurement, project management, workforce planning (recruitment, retention and skills development), and work tools and facilities are managed well. Good resource management ensures that IT support services are prioritised in line with needs and importance of business operations. Similarly life cycle of IT assets (hardware, licences and applications) need to be managed to reduce outages, costs and impact of changing technologies. Balancing cost of infrastructure with the quality of service is also important for resource management.

Performance Management

Managing performance of projects and IT services is a focus here. A balanced scorecard approach will allow performance measurement from multiple perspectives, such as Financial, Customer, Internal process and Learning. IT balanced scorecard (IT BSC) is very powerful aid to reporting IT performance and also to achieve business alignment. Balanced scorecards that include a mix of both outcome (what is being done) measures and drivers of performance (how you are doing) are effective for improving performance.

Summary

IT Governance is a key to ensuring IT is under control. Governance requires that all aspects of IT performance and risk are monitored and controlled in a way that improves overall business performance. IT governance is not a one-time activity but a critical management process. Little will be achieved without the support from the top. Organisations that have effective IT governance manage IT costs, risks and performance more effectively and can said to have IT under control.

Fad-free performance management

IT magazine articles and whitepapers regularly publish articles such as, “Building a high performing team”, “Reinventing the workforce”, “Transforming the organisation” and the like. These articles have stories from large (usually overseas) companies where the CIO has turned an under performing organisation around (with the help of a brand name consulting firm with their brand name methodology). Local CIOs and IT managers read these articles and begin to believe they too need a major transformation program in order to turn their IT organisation into a “world-class” “high-performing” organisation.

Amidst all this hype about transformation and reinvention IT organisations forget to check if the organisation is performing the basics of people and performance management effectively. I have seen several IT organisations in which managers and team leaders are unclear about the requirements of their jobs. Apart from the mandatory annual performance review these employees are not given any feedback about how well they are performing their roles. If you ask an employee how their role supports the IT departments goals (or business goals) they often have no idea.

IT managers give many excuses as to why their employees have little understanding of their roles. Firstly, as IT managers come from technical ranks they have no people management training. Secondly, IT managers don’t like to have difficult conversations with their staff. Thirdly, many managers themselves are not clear about the business and IT strategy goals. No matter what the excuse, the end result always leads to the same outcome, an under-performing IT organisation! So what can be done? Here are some thoughts on how CIOs and IT managers can begin to manage performance.

IT managers give many excuses as to why their employees have little understanding of their roles. Firstly, as IT managers come from technical ranks they have no people management training. Secondly, IT managers don’t like to have difficult conversations with their staff. Thirdly, many managers themselves are not clear about the business and IT strategy goals. No matter what the excuse, the end result always leads to the same outcome, an under-performing IT organisation! So what can be done? Here are some thoughts on how CIOs and IT managers can begin to manage performance.

Five fad-free steps

Here are five fad-free steps to get to high performing teams. These are:

  1. Clarify the role,
  2. Understand customer needs,
  3. Improve things you manage
  4. Develop your team and
  5. Perform the role in the right way

1. Clarify the role

Every organisation and role exists to perform a function. At a basic level, the IT group normally exists to enable business by providing effective technology solutions that support business activities. The IT group is also responsible for running the technology operations in a cost effective, reliable and secure manner.  Each function within IT must directly or indirectly support these goals. Some teams focus on understanding business goals and needs; designers design solutions that are fit for purpose, developers build these solutions and operations staff ensure these solutions run reliably. Thus, understanding the role purpose is really not that complicated.

Most organisations have job descriptions of some kind. If they don’t, then the first step is to create one. I believe every job function, especially management roles, should meet the needs of the customers, improve people/process/technologies and work and behave in the ‘right way’ (team work, respect, enthusiasm etc). Sounds obvious don’t it? However, you would be surprised how many people don’t understand these expectations because many job descriptions fail to make these expectations clear.

2. Understand the needs of the customers

Every role has a customer. It exists to serve someone. Even the managing director has to serve the shareholders/ board. Most IT roles have internal customers. However, with the emergence of e-commerce, Internet banking and similar services, IT in fact services ‘real’ business customers. In addition to the direct customer needs, IT roles also need to understand the organisation’s needs. These are typically expressed via strategies, values, standards and architecture/ design principles.

Many IT people can become so inwardly focussed (because of processes, departments and skill-sets) that they forget that their role is to serve the needs of the customers. For infrastructure staff, their customers could be applications teams and for architecture staff, designers. Identifying who the customers are and ensuring that their needs are understood is the key to good performance.

3. Improve ‘things’ that you manage

Every manager is responsible for people, processes that control how the work is done and technology (e.g. applications and infrastructure assets). These elements together determine the effectiveness of service delivery and level of customer satisfaction. Even technicians and developers have systems that they look after, manage, fix, control.

Everyone is expected to improve the assets that they manage. This is fundamental part of a professional’s job and not an optional extra! There are many ways improvements can be made such as keeping applications maintainable, improving flexibility, reducing running costs, streamlining processes and improving service levels.

What if employees don’t have the authority or resources to make these improvements? At the very least, employees are expected to show how ‘things’ are better this year than the last and what they have done to make a difference, given the resources available to them. Ultimately, it is the role of managers to convince the ‘powers-to-be’ that improving the assets they manage is an integral part of the job of each employee and support the employees in this endeavour.

4. Develop your team

Improving their team and the people they manage are arguably the most important outcomes managers should be expected to demonstrate. Helping people grow, helping them improve their skills, giving them opportunities learn, gain more experience and deal with new challenges is not only important for the organisation but also for the manager. It helps the manager do their own job better and make a difference.

Developing people involves balancing individual aspirations and capability with the goals of the organisation as well as seeking development opportunities and empowering staff (i.e. giving them the tools and resources to succeed) where appropriate. The key to successful empowerment is to give staff information about the mission, objectives, strategy and dynamics of the organisation so that they can make the right decisions. Successful empowerment also involves providing support for staff if they fail, so that they can learn from their mistakes.

The key to managing for performance is to identify talent in employees and provide the right opportunities and rewards for these employees to take on more responsibilities. One organisation I knew measured managers on whether they were “exporters” or “importers” of talent.

5. Performing the role in the ‘right way’

Many IT people see their role in as being purely technical because the technical part of the job is what they are most comfortable with. However, customers and others expect more from IT staff than just technical expertise. Customers want better service and better solutions. They want IT staff to be responsive, reliable, collaborative and demonstrate team work. Many job descriptions and managers just assume that their staff know ‘the right way’ and don’t set correct expectations or address customer service in performance feedback discussions. This does not have to be a complicated process. I have seen some managers discuss these issues regularly in team meetings in which key customers and peers are invited to share their expectations. As a result, IT staff is encouraged to develop team values and behaviours.

Managing for performance

Most people want to do a good job. It is the manager’s role to clarify what a ‘good job’ or good performance means and how it would be measured. Clarifying the role expectations is the first step in managing for performance. Putting this into practice involves effort i.e. not just in formal performance reviews, but also in regular interactions with their teams.

Managing for performance need not be difficult. One does not need fads or big transformation programs or big slogans to get it right. People see through these big words when actions on the ground fail to match the slogans and strategies.

Keep it simple and fad-free! Get the basics right and ‘high performing teams’ will emerge.

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Developing high potential leaders

Introduction

What differentiates between success and mediocrity in organisations? Studies show that the high performing leaders are the ones most relied upon to drive the business performance in the years to come. Whether it is the delivery of strategic projects, cost stripping, or managing customer relationships, high performing leaders are the difference between success and mediocrity. High performing employees have a disproportionately higher impact on results. This means that identifying and developing future high performers is a critical priority for any organisation. CIOs have a responsibility to find and nurture these star performers in IT organisations.

While it is easier to name current high performers, identifying high potential future leaders (i.e. stars) is not so easy. Further, once identified, developing and retaining potential leaders is another challenge. This article aims to help CIOs develop  strategies to find and develop future IT leaders.

Future leaders will most probably emerge from today’s high performing employees. Current performance is a predictor of future performance. Indeed 93% of the stars are high performers. Some believe the potential depends on innate ability and the right experience. Leadership skills and ambition to succeed are also seen as indicators of potential. CIO Executive Board conducted a major study in 2006, defining a high potential employee as someone who has a 75% chance of being a top quartile performer at the next level (e.g. junior to middle management or middle to senior management). Only about 8% of the employees have a meaningful chance of being a top performer.

The study found that three indicators of high potential are strong ability, engagement and aspiration to succeed.

  • Ability is a combination of innate and learned skills. These include both technical and interpersonal skills as well as the ability to learn new skills and behaviours. Studies have repeatedly shown that the ability to learn from experience is what differentiates successful from unsuccessful executives.
  • Aspiration indicates to what extent the employee wants to advance and influence, seeks recognition and financial rewards and enjoys the job.
  • Engagement shows the commitment to the organisation, willingness to go the extra mile and intent to stay with the organisation.

Employees who don’t have a good balance of these three attributes tend to fall short. “Unengaged stars” have the ability and aspiration but are not committed to the company (high flight risk). “Dreamers” have aspiration and engagement but lack the ability to succeed at the next level. While “mis-aligned stars” have the ability and engagement but no aspiration to succeed and rise.

Figure 2 – Falling short of the ‘star’ potential

Understanding the profile of current high performing leaders, who are at a higher level in the organisation, on these three dimensions provides a good benchmark profile. Assess how employees on the level below score on these attributes, using feedback from managers, peers and employees. Compare to the benchmark and then make a judgement on how likely these are to be top performers at the next level.

Case for IT leadership development

In a recent Australian IT leadership survey by Donovan Leadership, many opinion leaders said that the professional development of technology leaders was best done within a framework that links performance assessment, and peer and client feedback with the values and leadership behaviours of the company. Opinion leaders believe that many innovative approaches are being used internationally for leadership development.

The changing technology landscape is increasing the need for developing future IT leaders. The major generational shift associated with baby boomers retiring and the exponential rate of technology change is a leadership challenge. Web 2.0, social networking and trends like Software as a service means IT leaders need to give up control and accept a more collaborative leadership style.

Not developing IT leaders will increase the gap between IT and business leaders. We may find people being promoted who don’t have the right people management and commercial skills or understanding of how the business works. Attracting and retaining Gen-Y and other new talent will become even harder.

Development Strategies

Although only about 8% employees are likely to become high potential future leaders, this percentage varies greatly between organisations. Organisation culture (quality, openness, recognition and perseverance) improves employee potential. The quality of an employee’s managers (both present and past) also influences potential.  Improvements in the culture and leadership will increase the proportion of emerging leaders.

Multiple strategies are used for the development of high potential future leaders. These include classroom training, group learning, selected job assignments and coaching / mentoring.

Classroom training and Group learning

  1. Provide training to the emerging leaders in different facets of general business. Understanding finance / accounting, marketing and people management as well as industry specific training on supply chain, credit etc will help them get a fuller understanding of the business dynamics and help learn the language of the business.
  2. Leading graduate universities in Australia and overseas run special management development programs. Depending on your budgets these are great ways to expand horizons, interact with other leaders and obtain new perspectives.
  3. Clarify how senior leaders are expected to behave. Let these leaders see how values and behaviours demonstrated by senior leaders support corporate strategy, culture and priorities. Encourage greater interaction with influential leaders from within and outside. Use guest speakers to educate and challenge.
  4. IT staff are keen to develop their technical skills but don’t show similar interest in their personal development or soft skills. This requires a willingness to take oneself on a realistic personal journey of reflection and learning from the process. IT leadership development programs would need stronger focus on people leadership development.

Selected job Assignments

  1. Involve future leaders in real business challenges involving strategy, values and execution. Being open about the challenges with high potential leaders develops trust and makes them feel involved. Involve them in solutions. They want to see how they can make a difference.
  2. Use “stretch” assignments and task forces to encourage, challenge and take risks. These new experiences will give a rich learning environment. Don’t just think about assignments within IT, consider cross-functional areas to broaden focus and develop relationships outside IT.
  3. Where right consider experiences beyond company boundaries and work with external stakeholders. Industry forums, task forces and secondments may be considered in the development plans.

Coaching and mentoring

  1. Actively involve senior leaders from IT and outside as role models, coaches and mentors to play a role in the development process. Just like elite athletes, high potential employees can benefit from coaching. A good rapport between the employee and the coach is necessary for effective coaching.
  2. Provide support during the inevitable ups and downs. Emerging leaders will experience more changes in roles and assignments than others. These will bring new challenges and at times create self-doubt. High performers have high standards for own performance. Support from managers and a mentor is critical to avoid burnout. Using skip level (next senior manager) reviews is a good way to keep an eye on the issues and barriers in employee development.

Other tips

  1. Assign clear accountability to a senior manager for development of the high potential emerging leaders. Align with corporate programs where possible but don’t delegate all responsibility to the HR department
  2. Focus on junior talent as well as the seniors. Sometimes the seniors get more attention as a part of succession planning and other processes. Create early identification and development opportunities for junior talent. Encourage their upward movement.
  3. Remuneration – show the these employees that they are valued. Give them both recognition and rewards. More frequent performance based pay rises are not unusual. Ensure retention by keeping the remuneration levels higher than others. In tough times, companies have to be more creative with the incentives.

For a detailed discussion and/or information on strategies to develop your high potential future IT Leaders, please contact the author.

Becoming a performance driven organisation with balanced scorecards

Introduction

A lot of effort goes into developing sound strategies for performance improvement and getting them endorsed by the board and the executives. Initially there is a flurry of new activities and initiatives. But a few months down the track, day-to-day operations seem to take over and strategy is relegated to the bottom of the pile.  The bulk of the organisation continues to do what it did before. As a result, the performance of the organisation remains unchanged.

What is typically missing is the process for turning the broad thrust of a strategy into specific measurable performance goals, and assigning accountability right through the organisation. A balanced scorecard turns a strategic plan from a passive document into marching orders for the troops on a daily basis.

Executive Summary

Strategy describes where the organisation now is and where it aspires to be. It also describes the broad initiatives that the organisation plans to take. It may describe key focus areas, process changes or capability-building initiatives or projects that are necessary for the achievement of goals. Strategy execution needs the ability to take a very broad-brush strategy and find, prioritise and carry out the key things that need to be done to put that strategy in practice. A successful execution means that the goals are set, accountability  assigned and the results reviewed.

A balanced scorecard (BSC) is a one-page document that outlines an organisation’s key performance goals and indicators (KPIs), usually covering financials, customers, execution and people.  These KPIs are driven from the company’s strategic intent. A BSC is critical for a performance-driven organisation as it creates a common view of performance across a range of objectives. For the business, KPIs are the “guiding force” that link strategic goals with day-to-day execution. This allows managers to have a better understanding of how to improve the business. Across and down the organisation, business units and teams then define supporting targets and KPIs, which results in a hierarchy of KPIs cascading down from the corporate strategy.

Why balanced scorecards?

  • We all know that ‘what gets measured gets done’. Organisations are faced with multi-dimensioned challenges (e.g. how to improve service and cut costs?). Balanced scorecards cater for many dimensions by allowing for simultaneous focus on multiple performance areas.
  • Organisations expect the strategy execution to happen in parallel with the ongoing service delivery. Merely tracking strategy execution progress can result in too much attention on strategy and not enough on service delivery. Different managers also have different accountability for delivery and strategy execution. BSC enable addressing these competing demands in a rational way.
  • BSCs also give the ability to assign joint accountability to multiple teams in the areas where joint effort is required to achieve results. Silo behaviours result where managers are held accountable for only the direct performance of their internal processes. External service or customer satisfaction outcomes result from end-to-end process execution. BSC makes this clear and enables teams to be jointly held accountable for the overall outcome.
  • In many organisations, scorecards are used only for the senior managers or executives. In fact, scorecards that cascade down many levels of the hierarchy are more effective. Here, the executives’ KPIs are directly linked to the KPIs of their managers and team leaders. There is clearer accountability for results. Cascading KPIs offer better drill down ability, allowing quick diagnosis and action on performance issues.
  • For teams lower down the hierarchy, this linkage shows, how they are contributing to the overall performance and achievement of the strategy. This can result in staff believing that  “my job matters”.

The goal of metrics is to enable managers to get a complete picture of the performance from multiple perspectives, and hence make wiser long-term decisions. As a management system, balanced scorecards enable regular feedback around both internal processes and external outcomes. Good BSCs capture feedback from the customer (or external) perspective and help analyse it with metrics from the internal processes. This encourages continuous monitoring and improvement by the teams as well as improvement in strategic performance across multiple areas.

Figure 1 – Balanced Scorecard Process

Setting the balanced scorecards is a six-step process. The first step is getting the commitment from the executive sponsor. Strategy mapping then identifies the key performance areas/indicators to focus on. The third step, selection of performance metrics, is at the heart of balanced scorecards. Having the right metrics with well-understood definitions is critical for a successful implementation. Fourthly, it is worth investing time to refine the quality of data used in the measurements and assign responsibilities for data collection to impartial staff. The fifth step, regular review, includes checking the quality and effectiveness of the metrics. The last step is to refine the performance indicators as the performance or strategy changes.

Ten Key Lessons for Balanced Scorecard Implementation

  1. Scorecards are most effective when they are linked to pay and performance management. Without this link there is little incentive for staff to take KPIs seriously. Top-level sponsorship is needed in order for this to happen.
  2. Good scorecards are brief; say one page, with around ten measures of what really matters. A business view of performance is more valuable than an internal view.  Ideally, the scores should show expected and superior performance levels. Scores weighting should be used to derive the performance ratings.
  3. Strategy Mapping will show key areas where performance must be lifted. Typically, the areas covered are financials, customers, execution and people.
    1. Financials cover profits, budgets, return on investment as well as key measures of risk.
    2. Customers cover areas that are important from a customer perspective. These could include customer satisfaction, growth/ attrition in customer numbers, number of complaints, etc.
    3. Execution (internal business process or delivery) covers how well the internal processes of the organisation are running in delivering the strategic mission for our customers. It includes key indicators of service delivery, such as service levels, reliability, on-time-performance etc.
    4. People (learning and growth) covers organisational development and ability. IT is a knowledge-worker organisation. Metrics on ‘learning’, ‘sharing’ and ‘retaining’ knowledge can be used. Metrics can cover talent management, training, turnover, and employee engagement. Some organisations also include “social responsibility”, e.g., volunteering, presentation at industry forums etc in this section.
  4. Unclear definitions undermine effectiveness. It is worth spending time in creating common definitions of the key measures. Assign data collection responsibility and review data for consistency and quality.
  5. Avoid seeking perfection with the measures or the scorecard. Measures that are 80% right can still yield valuable performance data. It is important to set up and practice the process of collecting the data, reporting, review and actions than to seek perfection. Focus on getting an acceptable level of quality.  An iterative approach works best allowing all participants to learn and refine. It is also important to remember that trends are usually more valuable than absolute values. Similarly, over reliance on tools or data collection automation at the beginning will detract from getting value from the scorecards.
  6. Meaningful performance results from understanding the desired outcomes and the internal processes that are used to generate these outcomes. Outcomes are measured from the perspective of customers while process metrics are from perspective of process owners. Usually, process metrics are used for teams while outcome measures are used for department/ service managers. Do not confuse output (what we produce) with outcome (what we produce).
  7. Drill down ability is valuable in analysing performance and improving data quality. Without adequate drill down ability, there will be greater subjectivity in interpreting results, which may result in inappropriate corrective actions being taken.
  8. Assign shared accountability to common measures such as customer satisfaction, where many teams have to work together to deliver satisfactory service to the customers. Joint responsibility will avoid silo behaviours being rewarded.
  9. Organisations that openly share the balanced scorecard results and communicate performance (and the challenges) with their teams and peers create greater commitment from their teams. It also helps to show how everyone is contributing to performance and how collective actions can improve the results.
  10. When planning to cascade scorecards through multiple levels of management in the organisation, it is best to tackle one level at a time and use an iterative approach.

For a detailed discussion and/or information on how you can use balanced scorecards to become a performance-driven organisation, please contact the author.