Sometimes we hear in our consultancy actions that it is not a good moment to start certain projects for a Company as they are undergoing changes: (1) New Board of Directors, (2) Strategic changes, (3) Recent merger, (4) Changes in systems, ...and this is true for many types of projects, except for the Balance Scorecard project.

With a few exceptions, building and finishing a Balance Scorecard during processes of change is a good decision. We can find the reason for this in the current definition of what a Balance Scorecard is and what it is used for:

A Balance Scorecard:

1. Is a management tool

2. It is integrated with strategic planning, with the decision processes and performance analysis of a company.

3. It is used to monitor the execution of strategic and operating plans

4. Through the tracking of key objectives, projects and indicators

The Balance Scorecard contemplates several perspectives of the plan to be carried out: (1) Financial, (2) Market and clients (3) Internal business processes (4), their competences and knowledge (5) Our current business culture (6) Our information systems, (7) The projects necessary for activating the change, (8) The results expected from this change, (9) The partial intermediate objectives during the change.

Therefore, A Balance Scorecard is a tool for executing the change and measuring its progress. We only have to define that the plans the Balance Scorecard manages be precisely the change plans. The definition process of an Balance Scorecard requires following a very methodical and logical structure, where the important key points are set and very healthy discussions are held on the details of the execution, in other words a theoretical plan will be converted into practicable plan for the Company’s present reality.

Strategy maps are diagrams that draw a company or department’s strategy, and we could say that they are the strategy’s “plans”, which like building plans are used to discuss, communicate and check the suitability and adjustment of the strategy before carrying it out.

From the four typical perspectives from the Kaplan and Norton model in a strategy map, the fourth is normally called “Learning and Growth Perspective”, “Impulse Perspective” or “Potentials Perspective” amongst other names and is the most important perspective, as they are foundations on which all the strategy are based on. It is structured in:

I. Human Capital: The team, their skills, motivation, and knowledge and talent we have.

II. Information Capital The information the people have available for working with. Often related to IT and technology.

III. Organizational Capital: The organizational processes we have, leadership, habits, etc.

Well then, it is in the first point “Human Capital” that the competences play an important role. We will first see that it is not necessary to assess the Human Capital of all the company (that will be HR’s job). What we are really interested in is seeing which work post families are relevant for the strategy we are defining. Given a specific strategy, we can normally find 3 or 4 large families, representing the key part of all the available HR. They could be for example: sales team, marketing, customer services and technical service, in a hypothetical customer oriented strategy.

Once the families of strategic posts have been detected, which competences are needed are assessed, either because we do not have them or because we do and must promote them.

What is a competence? Competence management tries to define what behaviours and skills make a person better in their job to obtain business objectives. These behaviours or skills are called competences.

To continue this example, perhaps due to a specific growth strategy, the sales force:

1. Were lacking analytical capacity

2. Did not have a method

3. Did not have communication with other work teams

The second competence (method) is found in a low or inexistent level and we must therefore introduce it. The first and third competences must be promoted, in other words, the competences have levels and we can define: which level currently exists, which level is necessary and therefore the gap that needs to be covered. The grading is typically between 3 and 5 levels, for example: (1) Inexistent (2) low (3) medium (4) good and (5) excellent. It should be pointed out that it is important to describe a competence properly, as well as the different levels we are talking about, with sufficient examples and in writing, so that people are clear about what we expect from them. The way to strengthen competences is different and includes such broad tools as coaching and training.

Competences make people become a member of the strategy and show them that to obtain their objectives they must improve some skills, habits and behaviours . Competence management is a project related to the Balance Scorecard in the sense that it develops strategic competences that are needed to carry out the strategy and it offers very interesting benefits such as communicating to people what is expected from them, help to promote them, creating a defined and positive framework to discuss how to improve, and relates all of this with strategic plans.

When the execution of the strategic plan is specified and subsequently the indicators are detailed captured in an electronic format, we have the first result of the entire project: a Balance Scorecard with indicators calculated depending on the period we are in. Nevertheless, the project does not end here. We could even say that the real project has only just started, as the real objective is to execute the strategy and see how much it has progressed, and it is not merely automating some indicators.

We hear often that one of the risks of this type of projects is that they flag in time, and the Balance Scorecard often becomes just another report in the company’s reporting. It is important to put the Balance Scorecard report in a continuous use and improvement process, fully integrated with other existing processes in the company such as strategic planning, operative planning, reporting and management control, regular operation with board of directors tracking meeting, continuous improvement, etc.

In our case, when we finish the technological implementation, we tackle the consultancy to determine a usage policy that fits the company’s modus operandi. We establish a process with three different phases:

• Analysis phase (understanding)
• Discussion phase (decision approval)
• Improvement (decision execution)

The first phase includes the individual analysis by each head and level, of their Balance Scorecard, looking at trends, red lights and projects with delay. The result is a series of comments on the situation observed and list of improvement actions.

The second phase is the monthly tracking meeting, organised by roles taken on by the attendants during the meeting and a structured improvement presentation and approval process.

The third phase is the planning and execution of the decisions taken, the tracking of which is carried out in the following monthly meeting.

All companies have a strategy, more or less formalized, some with 3-5 year strategic plans, others with management plans and others with operating budgets. In any case, there has been a construction process (formulation) of the strategy, where, probably, more than one person has been involved. Furthermore, the strategy must be communicated to many more persons and from top to bottom, so that it becomes a feasible strategy.

Whether in the strategy formulation process or in the process of communication to the company, a very simple conceptual tool exists to assist in both cases: strategy maps. They are very simple to understand diagrams that draw the strategic objectives and the causal relationships between them, in other words, which objectives we must first promote to then be able to promote other objectives. They are diagrams that effectively communicate the structure of a strategy and furthermore force the team defining the strategy to find answers that prove that the strategy is consistent and realistic.

The strategy map shows strategic objectives such as:

1- Increase sales

2- Increase distributors

3- Efficient visit plan execution

4- Keep target clients

5- Reduce order processing time

6- Efficient execution of the strategic system plan

And these objectives classified in 4 big areas or perspectives on the diagram:

1- At the top, we have the Financial perspective, with the objectives related to the economic results we want to obtain, EBITDAs, Sales, Expenses ... and in some way reflects the economic value we offer the company’s shareholders.

2- Just underneath, we have the Customer perspective, with all the objectives related to client winning, retention, cross-selling, satisfaction,... and furthermore clearly defines the value proposal to the client, in other words, why are they going to buy from us or continue to buy (we have already talked about the value proposal in another bulletin).

3- Underneath, we find the Internal Business Processes perspective, with all the objectives that when attained will realize the client’s perspective. They are internal process objectives such as operations, commercial processes, marketing, R&D…

4- Finally, we have the Learning and Growth perspective that expresses if we have sufficient human capital, information and technology capital, and organizational capital to carry out the previous three perspectives.

Finally, we must add that the strategy map has become one of the most important tools to detail and execute a strategy, and it often forms part of a Balance Scorecard project, where the map is defined first and then its tracking is automated with indicators.

The Steering Committee’s meetings, where high-level executives meet once a month, are one of the classical control, activity tracking and decision making mechanisms in companies.

This type of meeting is more or less structured depending on the company’s business culture and the best use of the time and costs of bringing together executives of this level is a challenge that not all companies manage to do successfully.

One of the most effective mechanisms to structure the content of a steering committee’s meetings is a Balance Scorecard, and below we will see why.

Let us assume a company with an implemented Balance Scorecard. This means that it has a group of strategic objectives defined and assigned to several members of the steering committee, each measurable through one or more indicators and backed up by one or more improvement projects, also called initiatives. For example, the strategic objective “Grow in the occasional tourist market” is assigned to the “Commercial Director”, is measured with the “Sales in the occasional tourist market” and has two initiatives that back up this objective: (1) Study of more innovating promotions in the occasional tourist market (2) Search for 10 products for the occasional tourist market.

In this company, the Balance Scorecard is generated on the 12^th day of every month, and the members of the steering committee receive an email inviting them to analyse that month’s Balance Scorecard (and the annual trend) and to analyse the performance of the strategic objectives each one has assigned. So that each one can prepare the analysis with comments on the situation and the corrective actions they plan to carry out. This individual preparation helps to ease the steering committee meeting that will be held a few days later.

In this example, the company usually holds the steering committee meeting on the third Thursday of every month, between the 16 and 21 of each month. This meeting is carried out in a structured way with the presentation of each of the members of the steering committee on the status of their strategic objectives and the corrective plans they propose. In these meetings, in addition to the presenters who will always have the same order of intervention and have a fixed presentation time, there is usually the formal role of the secretary and president. The secretary mainly has two objectives: (1) Document all the meeting and write the subsequent minutes and (2) Facilitate the compliance of the time periodically, announcing the time left in each intervention. The president, who is normally the Managing Director, is in charge of (1) Understanding and clearing up the situation the strategic objectives are in and (2) Reach a consensus on the corrective actions to be carried out and which are presented by each member of the steering committee, and their priorities.

When it is a large company, it has many decision levels and there may be several Balance Scorecards from top to bottom, for example a main one for the steering committee and a Balance Scorecard for each of the divisions and/or departments. The “Balance Scorecard tracking committee” meetings are therefore held first in each division, in order to subsequently carry out the steering committee tracking meeting. The scaling of problems and decisions from top to bottom is so helped, at the same time as preparing the steering committee even better as each member can have attended the Balance Scorecard tracking meeting with their area previously.

There is no other way to carry out a strategy, and therefore a group of strategic objectives, than making it progress daily, weekly, monthly, and therefore it is necessary that the normal analysis and decision making work be aligned with this strategy. The way for the strategy to represent the company’s reality is for the problems and challenges each member of the steering committee faces to be reflected in it, and for these matters to be treated in a detailed and structured manner every month. This operating model really helps to improve the exploitation of the executive’s time, to make better decisions and develop a culture of commitment-a tremendously satisfactory performance for the people and a high performance for the company.