Organizations that have made the journey to breakthrough results have taken the necessary steps to gain buy-in, mobilize the executive team to communicate the need for change, and translate the strategy and the vision into a Balanced Scorecard for the organization.

In order to embed the Balanced Scorecard, and its powerful framework to drive results in how the organization operates on a daily basis, it is necessary to begin by reporting back the results to the organization. Change comes with time; starting the process by reporting results represents the critical launch point for future success.

This article examines the critical success factors in this pivotal event, and how your organization can gain an advantage as you implement your Balanced Scorecard reporting structure.

The First Implementation Milestone
For any organization adopting the Balanced Scorecard, publishing the first report is a major milestone that marks the beginning of what should become a monthly or quarterly event: using the scorecard as a tool to analyze performance and make important management decisions about how to improve future results. Yet, this milestone can easily turn out to be an unexpected roadblock to success, for one or more of the following reasons:

• No one takes the lead in establishing a reporting process after the design of the scorecard is complete;
• Leadership encounters organizational resistance to the reporting effort -- measurement is considered too threatening, too difficult, or too time consuming;
• The reporting team encounters difficulty choosing an organizationally-appropriate reporting tool (it’s either too expensive or too time-consuming to implement);
• Leadership complains that the reports are not useful -- they are either too detailed, not detailed enough, arrive too late to make important decisions, or the elements of the report are not located in one place (making it difficult to analyze relationships and correlations between performance); and
• The leadership team never meets to discuss performance

The Reporting Challenge
As anyone who has ever been involved in a strategic reporting project knows, getting the right data and information into the hands of management at the right time can be extremely challenging work. The event can be likened to publishing a newspaper or magazine -- without strict deadlines, central coordination, and input from a broad group of people, there is little chance of success. To simplify the effort involved in generating the reports required to run a business nowadays, many organizations are turning to the power of technology. But technology can’t be expected to fully solve the problem -- if it could, a lot of senior managers would be out of their jobs!

To see evidence of how common and important the reporting challenge is for most organizations today, one need only look at the number of performance management software applications flooding the marketplace. There are already 18 Balanced Scorecard certified applications (see www.bscol.com/certified), and new ones are being added every year. All of them promise pretty much the same thing: real time information at your fingertips. It is no exaggeration to say that when most executives sign-off on a new performance management program they do so because they are sold on the dream of being able to press only a few buttons to understand the health of their organization and the success of their strategy.

The 6 Critical Steps to Establishing a Strategic Reporting Process
In our work with hundreds of organizations establishing scorecard-based strategic management systems, we have found that six steps are involved in establishing a repeatable and reliable reporting process. The steps are the same whether you elect to report manually (using tools such as Excel and PowerPoint) or automate the process with a software application.

Step 1: Complete Scorecard Design
Although this may seem obvious, many organizations embark on a Balanced Scorecard program without articulating their strategy, determining the critical few measures that will indicate performance, or identifying the portfolio of key initiatives that are expected to drive future results. All of these “components” serve as a foundation for the report and help to define the scope of the effort. Holding a leadership team workshop to determine and sign-off on these components is an effective way to “freeze” the scorecard in place so the reporting effort can begin.

Step 2: Select a Reporting Tool
The decision to adopt a certified software application or develop a home-grown solution can be a difficult one. Many companies faced with the choice ultimately come to the conclusion that automating the scorecard is a long-term decision that makes sense once the organization is comfortable with its measures and in the habit of reporting. Moreover, since the vendor selection process can take several months or more to complete, there’s often a strong interest in jump-starting the process with existing tools such as Excel and PowerPoint. These applications generate graphs and text in a format that is easy to customize and therefore have been proven to be sufficiently effective. If you decide to go the manual route either in the short-term or long-term you should start by developing a reporting presentation template that features a balance between quantitative and qualitative display of information -- perhaps even modeling it on the examples that can be found on the software vendor’s websites.

Step 3: Mobilize a Reporting Team
The next step involves mobilizing a cross-functional team to “own” the reporting process. Ideally this group works much like a football team led by its quarterback. Some organizations call this role “Editor-in-Chief” because this leader is charged with publishing reports periodically. Ideally, this person has strong rapport with senior management as well as excellent analytical skills. We typically find that supporting teams range in size from 4-12 people depending on how much content there is to report on. The CEO in one of our client organizations chose over 50 people to be involved in the quarterly reporting process because he wanted as many people to play a role in strategy as possible.
 
Step 4: Gather, Analyze, and Present Data
Collecting and analyzing data is the most critical part of the process because it often involves sorting out the chaff, selecting the most relevant information, and identifying the clearest way to present it. It can also be the most frustrating part as most organizations initially find that they only have 50% of the data for their scorecard measures. Yet, while data for every measure may not exist, 100% of the measures and initiatives can be reported on -- as long as a list of milestones for obtaining data is presented where actual data can not yet be collected. Ultimately, for each measure, the source, frequency, calculation method, and key assumptions should be explicitly listed -- perhaps in a “data dictionary” that can serve as a permanent appendix to all reports.

Step 5: Discuss Performance and Make Key Decisions
For a report to be an effective management tool it must used as a springboard for discussion and decision-making. Whether it’s the first or the 100th reporting meeting, the same guidelines apply -- everyone should review the material in advance, key issues should be highlighted for discussion, and someone (ideally the CEO) should play the role of moderator and facilitator to drive decisions and closure to the most pressing issues. We generally find that the first meeting or two takes about 3-4 hours because of the strong focus on measure development progress. Once the roadblocks to measure development have been removed, the meetings can be shorter and more strategic.
Finally, we have seen that if the scorecard has been designed correctly, it can serve as an agenda for all major management meetings in the organization.

Step 6: Communicate Results to Workforce
Once again, this is a rather obvious step; yet many organizations ignore it! But what happens if after measuring and learning about your performance and deciding to make various course corrections you never explain this to the people who actually execute the strategy and therefore have the most influence on the results? The simple answer is that nothing will change, and you will get similar (or worse) results next time. One effective way to share results is to hold regular "town hall" type meetings, where employees can learn about where the organization is going and the role that they can play in improving future performance.

In most organizations, when the leadership team meets to discuss performance the vast majority of the conversation focuses on financial issues related to the budget. Rarely is much attention paid to how customers are reacting to new products and services, how certain key processes are driving customer value, or how employee skills are developing to excel at value-creating processes. Yet the Balanced Scorecard provides an opportunity to change that and opens the door to more strategy-focused management. A repeatable and reliable reporting program is at the heart of this effort, and if you follow these six steps you should be on your way to deriving the full value that can come from applying the principles of good performance management.

Learn How Companies Have Succeeded in Implementing Balanced Scorecard Reports
For more in-depth information, join Barnaby Donlon in a free NetConference that discusses Balanced Scorecard reporting best practices and the pitfalls to avoid. Register for free. Hear about case examples of how various organizations have executed the steps involved in establishing a strategy-focused reporting process. This best-practice process has been researched, tested, and delivered by Balanced Scorecard Collaborative, home to BSC founders Drs. Robert S. Kaplan and David P. Norton. Gain valuable insight into how you can establish an effective strategic reporting process.

Return to The Balanced Scorecard column page

Provided courtesy of Balanced Scorecard Collaborative, Inc. Join Balanced Scorecard Online free at bscol.com.