Studies have found that about nine out of 10 organisations fail to execute their strategic plans. Strategy execution thus ranks high among the headaches of business leaders across the world.
A study by strategy specialist, Dr David Norton, and Harvard Business School professor Robert Kaplan, traced this to a finding that about 95 per cent of the employees in many organisations were either not aware of or did not understand the strategies in place.
More recent studies have found that as a result, up to 80 per cent of organisations fall short of the targets set in their strategic plans. Kaplan and Norton further argue in their book, The Execution Premium: Linking Strategy to Operations for Competitive Advantage, that such failure exists mostly in organisations that do not have tools to specifically guide the execution of their strategies.
For strategy to be effectively implemented, a tool must exist to make the task a part of the organisation’s work culture, and indeed the central duty of the business leader. The tool, in essence, would be one that measures and manages performance in line with the strategic objectives and the mission and vision of the organisation.
Traditional performance measurement systems dwell on one aspect – the financials, often presented as income statements, profit and loss accounts and balance sheets. However, these ignore the significant contributions of the intangible resources resident in human capital, such as talent, knowledge, culture, and relationships. How can these also be measured so that they too are more objectively and effectively managed?
One tool that has been proven to work well in helping organisations to effectively measure and manage both tangible and intangible drivers to organisational performance is the Balanced Scorecard. Its success is hinged on the balancing it does between the accuracy of numbers as presented through the traditional financial measurement systems, and other crucial drivers of business success such as organisational processes, work ethics and human resource capacity and capability.
Developed and popularised by Kaplan and Norton, the Balanced Scorecard is a framework that helps organisations to translate strategy into operational objectives that drive both behaviour and performance as per the set targets. In other words, it offers a traceable and quantifiable means of translating the organisation’s vision into employees’ actions.
Organisations that have correctly applied the Balanced Scorecard performance management tool have reported positive results, ranging from increased financial returns to greater employee alignment to the overall objectives and vision of the organisation.
Studies show that it is possible to achieve up to 225 per cent growth in shareholder value using the Kaplan-Norton Balanced Scorecard system.