Corporate Services
Balanced Scorecards/Strategic Quality Management
It has been reported that between 70% and 90% of organizations fail to properly execute their strategy. Even the best strategy, if improperly executed, will fail to provide the results desired. Balanced scorecards, as initially introduced by Robert Kaplan and David Norton, can substantially improve your ability to successfully develop and deploy your strategy. Their success is evidenced by the fact that balanced scorecards are now in use by over 50% of the Fortune 500.
A balanced scorecard is a representation of an organization’s strategy. Along with the other key elements, it provides a framework for success in the marketplace. Together, these elements describe a company at its highest, or most basic level and include its mission, its vision, including its values, beliefs and norms its strategy, and its ability to execute the strategy. Note that execution is the key. As noted, 70% to 90% of strategies fail, primarily because companies cannot execute the strategic plans that they have so carefully developed. That’s where ISO 9001 comes in…when aligned with the strategy, the organization’s ISO 9001 QMS can help execute and monitor achievement of the companies strategic goals.
Traditionally, strategic performance has been measured using financial indicators, such as return on investment, earnings per share or sales growth. Such financial measures are typically results oriented, lagging, and focus on investors and shareholders. Suffice it to say that financial measures have been and will continue to be a primary measure of how well the organization is performing.
The problem is that financial measures by themselves do not indicate what an organization needs to do in order to achieve these results or its strategic goals. Weaknesses in the use of financial measures alone to gage corporate performance include:
- Financial measures tend to emphasize tangible assets, such as capital equipment and inventory. In today’s business environment, much if not most of an organization’s real worth is tied up in intangible assets such as innovation, competencies and intellectual capital. Financial measures do not adequately account for these intangible assets, and may in fact reward negative actions such as carrying excessive inventories.
- The most successful organizations focus on satisfying their customers, which is measured only indirectly by traditional financial measures. Problems can occur, therefore, when meeting long-term customer needs conflict with short-term shareholder expectations. When using financial measures alone, the shareholder almost always wins out, which can damage the organization’s capability to compete in the long-term.
- Financial measures focus on results, which while important, do not provide insight into the activities that drive these results. This is one of the greatest shortcomings of traditional financial measures, in that by failing to monitor the drivers of performance, they have limited value in predicting, and therefore influencing future performance.
The balanced scorecard overcomes the limitations of financial metrics alone by creating a balanced set of indicators that link the desired performance results with the operational activities that drive these results. In the model given to us by Robert Kaplan and David Norton, the creators of the scorecard, an organization will use a balanced portfolio of measures categorized along four dimensions or perspectives - financial, which we just discussed, customer, internal business processes, and learning and growth. The first two perspectives are primarily results, or lagging indicators, while the last two perspectives are primarily leading indicators, or drivers. Together, the scorecard’s portfolio of financial, internal business process, learning and growth, and customer metrics combine to provide a balanced system of indicators, both leading and lagging, which, if properly developed and deployed, will help the organization accomplish its mission and achieve its vision through the successful implementation of its strategy.
The organization’s ISO 9001, ISO/TS 16949 or Malcolm Baldrige-based QMS can significantly assist in the deployment and monitoring of the balanced scorecard, if it is properly aligned with the companies scorecard and strategy. At Baker College we help you develop a balanced scorecard and align your quality management system to assist in the execution of the strategy. We will identify the realization and support processes that are critical to the attainment of your strategy, and will work with you to develop a unique and focused implementation plan using the appropriate tools and methods.
Seminars and areas of consultation include:
- Balanced Scorecard Development
- Strategy Mapping
- ISO 9001:2000
- ISO/TS 16949:2002
- MBNQA
- Strategic Quality Management
- Process Mapping
For more information about Balanced Scorecards/Strategic Quality Management seminars and areas of consultation, complete the request form or call (810) 766-4242.