MBA Project on Balanced Scorecard: What Challenges Have You Faced in Implementation?

Greetings,

I am an MBA student working on my project on the Balanced Scorecard. If you could share your views and any challenges you have faced in implementing it, it would be very helpful for my project.

I look forward to your response.

Jayavelk,

Hello and thanks for your question.

Let me share with you a sense of history along with the assessment of the Balanced Scorecard model.

Kaplan and Norton, acknowledged as the developers of the Balanced Scorecard, probably offered what I would consider one of the first "holistic" views of managerial competency and efficiency.

When I first began working in the 1970s for a Fortune 500 Corporation, all the focus was put on financial return. The traditional measure of performance was based on profit and ROI—Return on Investment. If a manager did not achieve his budgeted level of profit, he was removed from his/her position. Now, keep in mind that the attainment of ROI is based upon results achieved, not results to be attained—nor can ROI serve as a functional predictor of what may happen in the future.

This 1970s approach gave rise to the old story about sitting in an auditorium with a group of peer managers and being told to look to your left and look to your right—both those people would be gone in two years.

Yes, I actually sat through a meeting like that—once—and decided that the direction this specific company was taking was somewhat akin to being put into a lifeboat off the sinking Titanic, and then shooting a hole in the bottom of the lifeboat...the Titanic was sinking at a speed you could watch, and the lifeboat at a slower speed—which one would you choose?

In retrospect, and to my credit, I argued at the time that critical areas in the management, direction, and oversight of personnel and priorities were being overlooked, but what I was advocating didn't seem to create an impact.

Over the 1980s, the key importance and recognition of "soft skills" in the process of management were identified and became more and more critical in the holistic view of management competency.

Throughout the go-go 1990s, it seemed to me that more emphasis was put on spending the money made by the corporation than in assessing true performance against any specific set of variables...the 90s was a generally profitable time for many/most industries—at least the first part of the 90s—and for the IT industry driven by the rapid growth of the Internet and the evolving growth in computers and the opportunities they created.

Let's focus on today.

If we're to assess managerial performance, we realize now that we have to look at factors other than simply ROI as yardsticks in the performance spectrum. Financial response and return are now augmented by four other factors related to demonstrating the potential for future performance as opposed to simply measuring past performance.

How can these factors be delineated?

Balanced Scorecard focuses on competitive advantage's critical elements:

Efficiency

Quality

Innovation

Customer Responsiveness and Reaction

It's ironic—I just answered a question about the development of Mission, Strategy, and Goals in another forum—but that's exactly what we need to discuss here in relation to these elements.

If we base our focus on Mission and Goals, the strategies which we as Managers create build competitive advantage—and that, my friend, is the key to today's Balanced Scorecard. These four elements are measured against how well they perform in allowing the development of competitive advantage.

How the characteristics of efficiency, quality, innovation, and responsiveness and retention are measured can be tied to a specific industry in a variety of ways—and are generally specific to an individual industry.

Challenges as to implementing it. These can be many, but let me highlight my concerns as a Consultant, in an attempt to assist you.

My first and overriding concern is the Corporate culture in which you find yourself. Even for an old battle-weary and corporately hardened dude like me, it's sometimes difficult to assess the corporate culture and determine whether or not senior management truly is focused on long-term (strategic) or short-term (tactical) results. The best-run companies, in my opinion, balance their views on tactical opportunities—and are best able to capitalize on those tactical approaches—with views on long-term (strategic) objectives. In this way, they are able to stress the short-term financial results with the longer-term competitive advantage opportunity. If a corporation is focused on the development of competitive advantage, the financial results should present themselves nicely. If managers keep the entire scorecard in perspective, I would argue that they are in the best position for the "holistic" or "macro" view of the enterprise. If they focus only on short-term results, the company will find itself unable to address its long-term needs and focus on the Macroworld view of its business—it's doubtful that even an assessment of long-term needs will redefine the corporate culture to present a balanced view of all the "holistic" management disciplines.

All of these elements speak to the issue of strategic control; taking any corrective action necessary, refocusing on goals, redefining direction, etc.

Jayavelk, I hope that my answer has been helpful. Feel free to email any other questions you might have.

Alan Guinn, Managing Director

The Guinn Consultancy Group, Inc.

Hello sir,

I am really happy for the excellent response you gave to my problem. I was seeking a good reply for the past month. This is the first response I got from you. Despite being an MD of a leading consultancy, you replied to me.

Can you also refer me to some of your HR contacts so that I can send this to them, which will be helpful for my project?

If my language above is confusing, I apologize for that. Simply put, I'd like to say thanks.

With warm regards,

Jayavel.k

Jayavel,

Your use of English is fine; I would simply hope that my response was helpful to you. If you will send me an email with your email address, I'll assemble a group of Senior Execs in several industries and ask them to reply to you...no promises, of course, but I have some fair contacts with CEOs, MDs, Consultants, Presidents of Colleges and Universities, etc., who may be willing to offer some insight into their perception and use of Balanced Scorecard if that will be helpful to you.

All the best, Alan Guinn, Managing Director The Guinn Consultancy Group, Inc.

Sreenivasan:

Thanks very much for the comment. I appreciate it very much. I discovered, long ago, the more you are able to assist others, the better the returns you will find in your own life. If I'm able to share even a little knowledge with someone just starting out, and it helps him/her over the rough spots on the career ladder, it's more than enough of a thank you just to know I've helped along the way.

Thanks again...

Alan

Hi Sreenivasan,

The business model is changing worldwide from a top-down business model to one where there is more participation from a variety of employees.

Oh, I know the comments—there will always be a "boss"—but the fastest moving, best-managed groups are the true "orchestration" groups—and that's the way we've built our Consultancy from the start. Only in this way can you address challenges with the best speed to offer the best results possible.

Look around—the top 5 Consultancies in the world are trying to do the same thing. The challenge, in an organization with 25,000 Consultants, is the lack of synergy that can be gained. With that many employees, it's just a big, slow, bureaucratic entity. To your point, there is corporate politics, and fear often supersedes the sharing of knowledge.

Another aspect of our Consultancy that is different is the compensation model—which is driven entirely by the projects on which each Consultant is involved. Compensation is tied directly to performance. In many cases, we take a percentage of the value-added we bring to the table. Negotiating a contract with a client for 2% of the cost savings realized from our actions is much easier than negotiating a contract for $30K per month...and often, much more rewarding to us.

I must tell you, long before the term "orchestration group" came into "vogue" we were running our Consultancy in this way. We have a variety of Consultants in different ventures around the world. Now, Consultants can come and Consultants can go, based upon the various objects with which we're working at any given time. Some Consultants work with us in the Seminar area, some in the Distribution Area, some in the Licensing Area. There may be overlap in some areas, but the Consultants in the Licensing Area may or may not even know the Consultants in the Seminar development/delivery area.

Let me share some examples with you.

I have brought together Consultants from all over the world for a reason; cultural differences and level of expertise in a specific discipline calls for specific opportunity and fulfillment levels.

I find that in part of our contracted Seminar Development—for the World Bank, for example—we manage a variety of Debt Seminars. What is presented within the Seminar is client-defined as to the understanding of the audience. I might have one set of partner-Consultants who present with me in Africa on Stochastic theory or on Sovereign debt, and another set of Consultants—focused on Debt resolution, possibly, who present with me in India. In India, we may cover the Monte Carlo Simulation in a Debt Seminar. In the USA, we may cover the Monte Carlo Simulation in a Restaurant Company Seminar.

All topics presented are not the same, world over. All topics offered are similar, and the Seminars may be named the same name, but a good Consultant gets to know his audience and what must be presented to represent good value for the audience, just as a good HR Manager knows the qualities and capabilities of his/her employees, in a business.

Knowledge Management, and the sharing of this knowledge, is key to success in every venture.

You cannot allow yourself to fear sharing too much knowledge. I have come to the conclusion over the past 30+ years in business that there is no such thing as sharing too much knowledge.

An example of this follows. Tomorrow morning at 9:30 AM, I am addressing a group of retail employees. The objective of the meeting is to assess knowledge levels and begin a process of knowledge transfer.

This will utilize another set of Consultants, who aren't exceptionally good in Finance, but are experts in establishing retail licensing opportunities.

If it means that we're not connected to the client, Sreenivasan, I'm not sure how much "bigger" I want our Consultancy to grow. We currently have just over 100 Consultants who work with us across a variety of disciplines.

It's become extremely difficult for me to identify which set of core competencies I enjoy most, but that—in and of itself—has helped the Consultancy to grow and prosper.

As to working with you, contact me anytime—I'd embrace that opportunity. I'm currently in discussions with a potential Joint Venture partner to do a series of Seminars across India this fall on Entrepreneurship, so our paths may cross then. We've spoken about doing 20+ seminars over a period of two months. I've done road tours previously—and although financially, they are very rewarding—the friends that you make during the Seminars become more than friends—they often become opportunistic business partners and Consultants with my group!

Rest assured, Sreenivasan, I will continue to make contributions to the Forum where appropriate—where I think they may add value. I greatly appreciate your comments and thank you.

All the best,

Alan Guinn, Managing Director

The Guinn Consultancy Group, Inc.

Hi Aguin,

Your insight about your organization has given me more understanding of many things about your organization. Before that, your reply helped me to address a question asked by my professor during one of my project presentations.

You mentioned having a different compensation model based on the consultants' work. How do you determine if a consultant has done good or bad work? What criteria do you use? Could you provide some examples?

Thank you for your reply and for explaining how you work. I have noticed that friends from seminars can become closer and more helpful too.

When you come to India, come to Delhi, and I will come to meet you.

I can help you with the compensation and benefits part by providing you relevant information.

Ekta