Bridging the Distance - defense program management

Program Manager, Nov, 2000 by Mary-Jo Hall

Using the Balanced Scorecard to Move from Leadership Strategy to Employee Action and Organizational Results

"The tremendous benefits of implementing the Balanced Scorecard far exceed the amount of effort required to create it for your organization. It provides a robust change framework that will help DoD to achieve the Revolution in Business Affairs."

--Michael Hall

APMC 00-2 Graduate

Program Managers are schooled and savvy in a variety of management planning and control tools for projects, i.e. acquisition strategy, risk management, and earned value management. These tools offer a disciplined, structured way of tracking projects or programs from one milestone to another throughout the acquisition process.

Like all tools they have underlying theoretical constructs and implementation techniques. For example, in risk management, the first step is to assess all possible areas of risk within the parameters of cost, schedule, and performance. Once these are identified, they are assessed by two components. The first is the probability of occurrence and the second is the severity of the impact if it does occur.

From this analysis, probabilities are rated as, generally low-, medium-, or high-risk areas. This can be viewed as a form of the cause-and-effect relationship analysis. For both high and medium risks, handling options are identified, generally under the categories of controlling, assigning, avoiding, or transferring.

The next step is monitoring the risk using a variety of metrics. This monitoring of the risk is done using a variety of software programs that allow for easy reporting. While most program offices use the risk management tool to track projects, they do not have a robust tracking system to manage strategic change such as the change needed to meet new customer demands or to improve programs in order to lower costs.

Many organizations around the world have found success with a relatively new mechanism or tool called the Balanced Scorecard (BSC). The value of this tool is that it acts as a bridge in helping an organization get from grand and lofty strategies developed by the leadership to the daily actions of employees.

The Balanced Scorecard -- What Is It?

The Balanced Scorecard (Kaplan and Norton, 1996) is an organizational change framework designed to improve the ability of an organization to focus and improve results. This is accomplished by developing high-priority actions and resources (especially budget) to align with the strategies. The BSC is a mechanism to drive change by measuring future-oriented strategies that are tied to aggressive improvement targets. It builds on the strategic planning process and uses performance measures to track organizational performance. In this way, it bridges the distance between the strategies designed by leadership and the actions taken on a daily basis by employees to produce results for the organization.

The balanced scorecard also promotes increased communications within the organization. The communication process is enhanced because of a unique lexicon and the development of operational definitions.

Corporate performance historically has been measured by financial measures. The balanced scorecard started as a measurement concept, developed in the 1990s, to meet the need to measure organizational performance in both financial and non-financial ways.

The pioneering work on the balanced scorecard was completed under studies sponsored by a dozen or so U.S. companies concerned with success in a global and fast-changing internationally competitive environment (Kaplan and Norton, 1996). The genesis for research was the difficulty organizations have implementing strategic plans and the proclivity to focus on near-term financial results, rather than on the drivers of future growth and performance.

Most organizations have a standard process for developing a strategic plan and do this successfully albeit not without angst and pain. Generally however, these organizations do not have a mechanism to execute the plan or to bridge the distance between strategy and operational processes employees do everyday The organization completes the plan through a grueling off-site process attended by the leadership and a follow-on "catch-ball" approach to create extensive feedback loops for the draft plan. Once the plan is finally developed and communicated, the leadership gets overwhelmed with daily "firefighting," and the plan goes on a shelf. A change in leadership causes another iteration of the planning cycle. This continues on and on ad nauseum without enhancing operational performance.

The extensive research on translating strategy into performance results performed by Robert Kaplan and David Norton at the Harvard Business School was published in a variety of articles and finally with the landmark book, The Balanced Scorecard, in 1996. The Kaplan and Norton approach started with a focus on performance measurement and evolved into a complete management system for translating strategy into action. With further experience, learning, and refinement, it is now a comprehensive organizational change framework with over 500 organizations throughout the world benefiting from its use (www.bscol.com).